Luckin Coffee Inc

Ladies and gentlemen, welcome to Luckin' Coffee's fourth quarter and full year 2025 earnings conference call. All participants will be in a listen-only mode during management's prepared remarks, and there will be a question and answer session to follow. Please be advised that today's call is being recorded. Now, I'd like to turn the call over to Ms. Nancy Song, Head of Investor Relations at Luckin' Coffee. Nancy, please go ahead.

Thank you, and hello, everyone. Welcome to Locking Coffee's fourth quarter and the full year 2025 earnings conference call. We announced our financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and the value of our services. Today, you will hear from Dr. Bo-Jing Li, co-founder and CEO of Locking Coffee, who will share a strategic overview of our business. Following that, Ms. Anjing, our CFO, will discuss our financial results in greater detail. Afterwards, we will open up the poll for questions. During today's call, we will be making some forward-looking statements regarding future events and expectations. Any statements that are not historical facts, including but not limited to statements about our beliefs and expectations, are forward-looking statements. These statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in our filings with the SBC. In addition, the non-GAAP measures discussed today, the reconciliation information related to those measures can be found in our earnest press release. During today's call, Dr. Guo will speak in Chinese and his comments will be translated into English. Now, I'd like to turn the call over to Dr. Guo Jingyi, co-founder and CEO of Locking Coffee. Dr. Guo, please go ahead.

Hello, everyone.

Welcome to today's earnings conference call. Thank you for your continued interest in and support of Locking Coffee.

2025 is the key year for RuiXin Coffee's long-term development foundation to continue to gain rapid growth. Facing the potential of rapid development in the Chinese coffee market, we have always maintained high focus, flexible adjustment of operation strategy, and key indicators such as door-to-door coverage, customer growth, and product innovation. We continue to advance the core strategy of focusing on the growth of scale, and continue to expand the leading advantage of supply and demand.

2025 marked a year of foundational progress and rapid growth for Locking Coffee. As growth in China's coffee market continued to accelerate, we remained focused on IGEL, consistently executing our scale-focused strategy centered on store extension, customer growth, and product innovation. This approach further reinforced our leadership across both our store footprint and the customer base, while steadily increasing our market share.

Looking back at the past year, we quickly responded to market changes, fully grasped the opportunity for coffee consumption to grow and effectively transform customer demand. Since June 2025, Ruixin's monthly sales number has broken 100 million in five consecutive months, For the whole year, we have added more than 1.1 billion new trading customers. The annual total number of trading customers has surpassed 4.5 billion. The year-round limited product sales have increased by 39%, reaching 4.1 billion cups. The market share rate and the number of people have continued to increase. As a result of the rising market demand, we quickly adjusted the opening plan and accelerated the network layout of stores. Over the past year,

we responded swiftly to market changes and fully capitalized on the expanding demand for coffee consumption, efficiently converting customer demand into meaningful growth. Since June 2025, Locking's average monthly transacting customers have exceeded 100 million for five consecutive months. In addition, we added over 110 million new transacting customers during the year, bringing our cumulative customer base to over 450 million. At the same time, annual sales of freshly brewed beverages increased by 39% year-over-year to 4.1 billion cups, with both our market shares and average cups per customer continuing to rise. Supported by strong demand, we quickly adjusted our

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The continued expansion of the customer size and door-to-door network has promoted a strong growth of performance throughout the year. In 2025, the company's total net income increased by 43%, reaching about 493 billion yuan. The sales of self-employed people have steadily increased, with an annual growth rate of 7.5%. Our operating profit has also been stable, with an increase of 42%, reaching about 5 billion yuan. We believe that with the advanced digitalized business model of RuiHsing, the rapid expansion of supply and demand on both ends has established a more resilient business foundation for the company's long-term development. It also makes us more able to go through various external changes

将数字化运营优势逐渐转化为长期的运营效率和持续的盈利能力。 The continued extension of our customer base and store network drove our strong full-year financial performance. In 2025, our total net revenues increased by 43% year-over-year to around $49.3 billion. SimStore sales for our self-operated stores steadily improved, achieving annual growth of 7.5%. Our operating profit also demonstrated solid momentum, increasing by 42% year-over-year to around 5.1 million. We believe that Locking's advanced digital business model, together with accelerated scale extension across both our store network and the customer base, will create a more resilient foundation for our future development. These advantages position us well to navigate external changes while gradually translating our digital operational capabilities into long-term efficiency gains and continuing profitability.

I will now provide some highlights of our first quarter results and operational progress.

Our CFO, Anjing, will share additional financial details later on this fall.

In the fourth quarter, business growth remained stable. The total net income increased by 33%, reaching about 128 billion yuan. In this quarter, the strength of the foreign trade platform has significantly shrunk in the industry. The foreign trade ratio has dropped, but it is still at a higher level. The above factors, The sales growth rate of 4 billion self-employed companies has fallen to 1.2%. The operating profit rate is about 8.2 billion yuan, which is the same as the communication rate of the previous industry communication meeting. These short-term fluctuations are completely in line with our early expectations in terms of the stage situation in the development stage and the strategic promotion process.

In the first quarter, we delivered a solid growth with total net revenues increasing by 33% year-over-year to around 12.8 billion. During the quarter, food delivery platforms significantly reduced subsidies during the industry's off-peak seasons. While the delivery order mix declined sequentially, it remained at a relatively high level. Against this backdrop, same-store sales growth for self-operated stores moderated to 1.2% in the first quarter, and operating profit amounted to around $820 million, as mentioned in our previous earnings call. These short-term fluctuations reflect the industry's current stage of development and the phased execution of our strategy, fully in line with our earlier expectations.

From a specific point of view, Operationally, centered on our three core pillars of people, products, and places, we continue to scale our business while enhancing product feel and the customer experience.

further reinforcing Lockheed's leading advantages in China's coffee market.

In terms of door stores, we maintain a competitive opening rhythm, steadily advancing the layout of high-end city high-end stores and the expansion of the downstream market. Enhancing the coverage of diverse consumer scenarios has further increased the size of the advantage. Until the fourth quarter, the total number of company door stores reached 31,048, has achieved another important milestone. Our 30,000th branch, YuanChanDi, has officially landed in Shenzhen. The branch has set up YuanChanDi as the global theme, with YuanChanDi Laboratory, Master Interaction Space, branch-specific product selection and special menu, which reflects RuiHsing's leading scale, and further extends the capability of coffee professionalism and upgrade experience.

On the storefront, we maintained a competitive pace of store openings, further strengthening our presence across high-quality locations in high-tier cities while expanding into lower-tier markets. These efforts strengthened our coverage across diverse consumption scenarios and further widened our scale advantage. By the fourth quarter, Our total store count reached 31,048, marking another key milestone. We officially opened our 30,000th store, the Origin Flexion Store in Shenzhen. The store is themed around global origins and features an origin lab, a coffee master space, and the store exclusive selections of premium single origin beans and a curated specialty coffee product menu. This flagship store showcases Lockheed's ability to lead beyond its scale by advancing coffee craftsmanship and elevating the customer experience. We warmly welcome everyone to visit and experience our Origin flagship store.

具体来看四季度的门店进展。 中国市场进增1792家,门店总数达到30888家。 There are 20,144 self-serviced stores and 10,744 joint-serviced stores. So far, we have officially become the first joint-serviced restaurant brand with more than 20,000 self-serviced stores in China. This not only reflects the brand leadership of Ruixin Coffee, but also means that the company has a stronger market response speed, operating control capability, and scale execution efficiency. We will further expand the coverage of the market, focus on market share, and arrange long-term development.

Looking at our store expansion progress in more detail, we added 1,792 new stores in China, bringing our total domestic store count to 30,888, including 20,544 self-operated stores and 10,744 partnership stores. With this milestone, we officially became the first food and beverage chain in China to surpass 20,000 self-operated stores. This is another testament to Lockheed's brand leadership, reflecting our stronger market responsiveness, operational discipline, and skilled execution efficiency. It also reinforces the foundation for long-term win-win collaboration with our partners. Looking ahead, we firmly believe that China's coffee market has significant growth potential. We are confident in our ability to maintain an industry-leading pace of expansion and further broaden market coverage while focusing on market share and driving our long-term growth.

In terms of the international market, our steady pace of expansion has continued to produce positive results. This quarter, the total number of stores has reached 160, including 81 in Singapore, 9 in the U.S., and 70 in Malaysia. By the end of the year, the number of stores in Singapore has reached the top of the local brand. The business model and the single-store model have all received basic verification. We have also established good cooperation with our Malaysian partners, and relied on the successful experience of the Singapore market to help it to advance localization and steadily improve operating performance. The US market is still in the early stage of exploration. We will continue to maintain a stable expansion strategy, focusing on the underlying operating system and model exploration, and continue to accumulate operating experience to further deepen the understanding of local consumers, Internationally, our disciplined and steady extensions continue to yield positive results.

During the quarter, we added 42 new stores, bringing our total overseas store count to 160. including 81 self-operated stores in Singapore, nine self-operated stores in the U.S., and 70 franchise stores in Malaysia. As of year end, our store count in Singapore ranked among the leading coffee brands in the local market, with both our business model and the store unit economics largely validated. We have also built a constructive relationship with our partner in Malaysia. And by leveraging our successful experience in Singapore, we consistently support our partner in enhancing localized operations and improving store performance. In the US, we are still in the early stages of exploration and remain committed to our disciplined expansion strategy. With a focus on refining our underlying operational infrastructure and exploring locally tailored operating models, we will continue to accumulate operational experience and further deepen our local consumer insights. Supported by our great tasting products, seamless customer experience, and compelling value-for-money proposition, we are confident in the long-term growth of our overseas business.

In terms of products, we have a total of 300,000 limited-time drinks and more than 10,000 light meals. We have a total of more than 140 products. In this quarter, we continue to drive product innovation and deepen the professional expression of Ruixin Coffee, which is rich in non-coffee products, to better meet the needs of consumers in diverse flavors and experiences in different scenarios. In December, we launched the Ruixin Brazil theme season, and launched new products such as Samba deep red gourmet, Samba deep red latte, by using Arabica coffee beans from the Baxi core region. Through the self-proclaimed high-temperature slow-baking process, we have further strengthened Ruixin's coffee flavor selection based on its original origin and improved the brand's professionalism. In addition, we have increased the customization of deep-baked beans for 25 types of drinks to better satisfy consumers' needs for professionalism and individualization. In terms of non-coffee, we have launched Ruizhi Matcha, On the product front, we launched 30 new freshly brewed beverages and around a dozen snack items in the first quarter.

bringing the total number of new product launches for the year to over 140. During the quarter, we continued to lead in product innovation while further strengthening our positioning as a professional coffee brand. At the same time, we expanded our non-coffee portfolio to better address consumers' diverse tastes and experience needs across different consumption scenarios. In December, we launched Lockin's Brazil Season, introducing new products such as the Samba Dark Roast Americano and the Samba Dark Roast Latte. Featuring Arabic hot beans sourced from core origins in Brazil and roasted using our pro-territory, high temperature, low roasting technique. These new launches further reinforced Latte's origin-oriented flavor selection and strengthened our professional brand perception. In addition, We added dark roast bean options for 25 beverages, better meeting consumers' growing demand for professional quality and personalization. On the non-coffee side, we launched several new products, including Ray Matcha, Healing Gold Savory Milk Tea, and Daily Vitamin Z Fruits and Veggies Tea. continuing to expand beverage offerings across a broader range of leisure occasions and day parts. With the continued enrichment of our product matrix, non-coffee beverages accounted for more than 20% of total cups sold for full year 2025.

In terms of customers, we continue to provide good products and rich emotional connections. to create a consumer experience based on quality and resonance. In this quarter, we will cooperate with popular IPs of national-level mobile games and multi-movie animation films, and provide high-quality, high-performance products and drinks through the joint activities and surroundings. We will further strengthen customer interaction and improve the recognition and connection of consumers to RuiXing brands. In the fourth quarter, we will increase the number of new trading customers to more than 24 million. The total sales growth of our customers has increased by 26%, which is more than 98 million. In the industry, we still maintain the performance of the larger scale. Thanks to RuiHsing's digitized operating capability, we will effectively link product innovation, IP alliance, and refined user operation. At the same time, we will steadily improve the level of high-end users, as well as the overall consumption frequency.

On the customer front, we continue to deliver great tasting products and emotionally relevant brand experiences, creating a consumption journey that combines quality and connection. During the quarter, we partnered with popular IPs from a national blockbuster mobile game and several animated films. Through well-received co-branded campaigns and merchandise, we further enhanced customer engagement strengthening consumers' recognition of and loyalty to our brand, while maintaining our high-quality, high-affordability value proposition. In the fourth quarter, we added over 24 million new transacting customers. Our average monthly transacting customers grew 26% year-over-year to over 98 million, maintaining a level close to 100 million even during the industry's off-peak season. Powered by Lock-in's digital operational capabilities, we integrated product innovation, IT collaborations, and refined user operations to effectively expand our customer base, while steadily increasing the proportion of high-frequency users and overall purchase frequency.

In addition, in ESG, we actively explore the deep integration of corporate social values and people's concerns. will continue to develop the concept and continue to integrate it into daily operations. As the first batch to respond to the Taiwan-China Framework Agreement, it is one of the companies that provide a non-hazardous environment for disabled people. In December, we launched RuiHsing's first non-hazardous design store in Hangzhou, and integrated employment plans for disabled people who are actively promoted and standardized in the country to further improve inclusive work and consumer environment. On the ESG front,

We have been advancing the deep integration of corporate social responsibility and human-centered care, continuously embedding sustainable development principles into our daily operations. As one of the first companies to support the Mossflower Compact by providing barrier-free environments for people with accessibility needs, we opened Locking Coffee's first accessible store in Hangzhou in December. In parallel, we are actively advancing standardized and scalable inclusive employment programs for people with disabilities nationwide, further fostering a more supportive workplace and a consumption environment. In recognition of these sustainability initiatives, we were awarded the 2025 China Best ESG Employers by ION Group in December. marking the third consecutive year we have received this distinction. Guided by our long-term perspective, we will continue to create value for customers, society, and our partners.

总结而言, 经历了2025年的高速发展, 中国咖啡市场在需求加速释放的同时, 竞争格局也愈发多元。 我们始终认为, Limiting coffee as a core business with offline location and comprehensive consumer experience, its competitiveness is not limited to a single dimension, but is based on the systematic advantage of end-to-end, full chain route. With the same digital operation capability of people and factories, we believe that Ruiqing's comprehensive competitiveness in brand newness, customer experience, public chain depth, product innovation, and store management, In summary,

Following a year of rapid growth in 2025, China's coffee market is experiencing accelerated demand along with an increasingly diverse competitive landscape. We have consistently believed that freshly brewed coffee as a business inherently centered on offline physical locations and comprehensive consumer experiences derives its core competitive mode not from any single dimension, but from integrated, end-to-end operational and systematic strengths across the entire value chain. Leveraging our digital operational capabilities across people, products, and places, we are confident that Locking's comprehensive strengths in brand perception, customer experience, supply chain depth, product innovation, and store management form the key advantages that enable us to navigate evolving external environments and capture structural growth opportunities in the coffee market. Looking into 2026, we will remain focused on scale expansion while maintaining the flexibility to adapt to market changes. As we maintain healthy profitability levels, we remain committed to steadily growing our market share, strengthening our industry-leading position, and unlocking long-term growth potential.

Finally, I would like to thank all consumers, partners, and investors for their trust and support. I would also like to thank our 170,000 partners for their hard work and dedication. We will continue to work together to create world-class coffee brands

Finally, we extend our sincere gratitude to our customers, partners, and investors for their continued trust and support, and to our 170,000 Lock-in team members for their dedication and hard work. We will keep moving forward to build a world-class coffee brand make Locking Coffee a part of everyone's daily life, and create long-term value for our customers, partners, and shareholders. Now, I will turn the call over to our CFO Anjing to go through our financial results in detail.

Thank you, Jingyi. Good day, everyone. Thank you for joining today's call. We closed 2025 on a strong note, as our scale-focused strategy drove robust full-year revenue growth, along with solid profit performance. Recorded customer additions strengthened the foundation for our long-term success. We accelerated store openings, underscored our ongoing investments to capture rising customer demand, Let's now look at our financial performance in detail. In the fourth quarter, total net revenue increased by 33% year-over-year to RMB 12.8 billion, primarily driven by a 33% year-over-year increase in GMV to RMB 14.8 billion. This growth was mainly driven by higher cup volumes across our self-operated and partnership stores, reflecting ongoing store expansion and growth in transecting customers. Revenues from productive sales increased by 31% year-over-year to RMB 9.9 billion, primarily driven by enhanced sales performance in our self-operated stores. breaking down our product sales into three streams. Net revenues from freshly brewed drinks were RMB 9.2 billion, representing about 72% of total net revenues. Net revenues from other products were RMB 605 million, or about 5% of total net revenues. Net revenues from others were RMB 174 million, or roughly 1% of a total net revenues. Looking at the productive sales from the perspective of company-owned stores, revenues from self-operated stores increased by 32% year over year to RMB 9.5 billion. Thin-store sales growth was 1.2% for this quarter, mainly driven by volume growth. store-level operating profit remained largely flat year-over-year at RMB 1.4 billion, with self-operated store-level operating margin of 15%. Revenues from partnership store increased by 39% year-over-year to RMB 2.8 billion, accounting for 22% of total net revenues. This growth mainly came from increased sales of materials, higher contribution from profitable partnership stores, and increased delivery service fees driven by rising delivery volumes. Cost of materials as a percentage of total net revenues remains stable year over year at 40%. In absolute terms, cost of a material increased by 33% year-over-year to RMB 5.1 billion, in line with our business expansion. So rental and other operating costs as a percentage of total net revenue was 25%, relatively flat compared with the same period of 2024. In absolute terms, Space expenses increased by 33% year-over-year to RMB 3.2 billion, driven by higher payroll costs associated with cost volume growth and increased rental expenses from continued store expansion. Delivery expenses increased by 94% year-over-year to RMB 1.6 billion, driven by a substantial increase in delivery orders through food delivery platforms. As a result, delivery expenses as a percentage of a total net revenue increased to 13% from 9% in the same period of 2024. However, on a per-order basis, delivery costs declined year over year, reflecting improved operational efficiency driven by our scale expansion. Sales and marketing expenses as a percentage of total net revenue was 86%, remaining stable from the same period of 2024. In absolute terms, sales and marketing expenses rose 32% year over year to RMB 756 million, largely due to higher commission fees paid to food delivery platforms as delivery volumes increased. General and administrative expenses as a percentage of the total net revenue remains stable year-over-year at 7%. In absolute terms, G&A expenses rose 33% year-over-year to RMB 846 million, money driven by higher payroll costs and share-based compensation, as well as increased investment in research and development. Our gap operating profit was RMB 821 million with an operating margin of 6.4% compared to RMB 1 billion at 10.5% in the prior year period, mainly reflecting higher delivery-related expenses as the delivery volume increased. On an ungapped basis, operating profit was RMB 946 million with a margin of 7.5%. Net profit, whereas at RMB 518 million with a net margin of 4.1%, compared to RMB 851 million and 8.8% in the five-year period. Managed to a higher effective tax rate on a net gap basis, net profit was RMB 699 million with net margin at 5.5%. Finally, looking at our balance sheet and cash flow, we generated around RMB 565 million in net operating cash during the fourth quarter of 2025. As of the year end, our total cash precision, which included cash and cash equivalents, restricted cash, term deposits, and short-term investments, was about RMB 9 billion, compared to RMB 5.9 billion at the end of 2024. Our strong cash position and the continued cash generation provide us with a solid financial foundation, giving us the flexibility to pace our investments and expansion in line with market conditions. Before we begin the Q&A portion of the course, I will briefly touch on the full year of 2025 financial highlights. Compared to 2024, total net revenues increased by 43% to RMB 49.3 billion. Gap operating profit increased by 42% to RMB 5.1 billion, with operating margin at 10.3%. Non-gap operating profit increased by 43% to RMB 5.6 billion, with non-gap operating margin at 11.5%. Net profit increased by 22% to RMB 3.6 billion with net margin at 7.3%. Net gap net profit increased by 27% to RMB 4.2 billion with net gap net margin at an 8.5%. In closing, our full year results have placed us on a stronger footing we remain well-positioned to execute our long-term growth strategy with a continued focus on discipline to cost management and ongoing efforts to optimize operating performance. With that, we'll open the call for questions. Operator, please go ahead.

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone, and to remove yourself from queue, please press star then 2. Our first question today comes from Jessie Xu at JPMorgan. Please go ahead.

Thank you. 郭总,安总,Nancy, 晚上好。谢谢接受我的提问。 我是摩根大通的分析师Jesse Xu。 很高兴第一次在业绩电话会上跟郭总安总交流。 作为消费者,我们感受到去年这一年是非常精彩。 作为分析师也是同样感觉到行业变化之快。 Every day, there are new questions. I feel that in a fast-tracking industry, I am very happy and have a sense of accomplishment. From the performance of our fourth quarter, the competition of more than 8,000 stores is much higher than expected. I believe this fully explains our strong mid- and back-end and landing execution capabilities. China's direct sales market is almost unique. This is very respectful. We also know that opportunities usually come with challenges. The growth of 4G is not as expected. Can you help us understand the logic behind this? More importantly, what do you think of 2026? At this time, how should we promote the future of power? Let me translate it. Thanks for taking my questions, Jessie Xu from JP Morgan. 2025 has been quite volatile with many more moving factors in the industry. Very excited to be in the fast-growing sector. It's very dynamic and very interesting. For the fourth quarter 2025, store expansion is definitely a strong beat. a net opening of over 8,000 stores fully demonstrates the competitive edges and strong execution, which is very rare in the whole China retail market. But at the same time, we also noticed that same-store sales performance seemed to be weaker than expected. So could you first maybe elaborate a little bit more to help us understand the rationales behind the numbers? And more importantly, how should we think about the outlook or trend for 26, including new store opening pace, same store sales trend and margins on both store level and company level. What's your strategy to cope with the fluid situation this year? Any guidance or colors would be great. Thank you.

谢谢,非常感谢您的提问。 这可能是大家都非常关注的一个问题。 As I mentioned earlier, the performance of the previous quarter's share and profit have been affected by the change in seasonality, including the change in the platform subsidy strategy, as well as a series of comprehensive factors such as the entire supply chain structure. However, this situation is also basically in our overall prediction of the entire performance business.

Great. Thank you for your question. And this is also a question that by investors. As mentioned earlier, our first quarter same-store sales performance and profit performance were affected by a combination of factors, including seasonality, changes in food delivery platforms, their subsidy dynamics, and also cup volume mix. So, all of these factors are actually in line with our expectations.

For the long-term development plans for the company in 2026, as I have repeatedly emphasized at several industry conferences, I would like to once again express that the Chinese coffee market is still in the development phase of rapid growth. The supply and demand activities of the food delivery platform in 2025 have greatly accelerated the cultivation of Chinese coffee consumption. As the demand elasticity of the coffee industry is restricted, and the rapid release of consumer potential. All of these confirm our strategic judgment. Therefore, the acquisition of market share is still a key part of the company's strategic plan. In terms of operation, we will maintain a stable and flexible development rhythm in the face of a complex market environment that restricts the drink industry. From the opening of stores, to low prices, and so on,

So looking into 2026 and our long-term development strategy, so as emphasized in our previous earnings calls, I'd like to reaffirm again that China's coffee market remains in a rapid growth phase with significant structural opportunities ahead. So in 2025, For their platform, their subsidy campaigns significantly accelerated coffee adoption among Chinese consumers. So, accordingly, we saw strong demand and the fast-growing coffee consumption, which further validated our strategic view. So, therefore, getting market share remains our top strategic priority and the focus. For 2026, in a complex and dynamic market environment, we will maintain a disciplined yet agile development approach, focusing on key areas, for example, stores, cups, and press levels, to drive healthy business performance.

In terms of the door chain, we will rely on RuiHsing's unique, and of course, the industry's leading, digitized virtualization system, to adopt a refined opening strategy, and maintain an efficient and competitive opening rhythm to meet the market demand for rapid growth. At the same time, we will continue to pay attention to the quality of our stores to ensure that our stores have a reasonable growth cycle.

So in terms of store extension, we will leverage our unique and also industry-leading digital site selection and planning system to implement a refined strategy, maintaining an efficient and competitive pace to capture the fast-growing market demand. And at the same time, we'll continue to closely track store performance to make sure that we have a healthy ramp-up and a maturation cycle.

For Baylor, from the supply side, we will focus on customer demand, continue to do product innovation, enrich product structure, and further expand the scene coverage of people and consumption. From the demand side, we will continue to play the digital operation advantage, and use the marketing method of integrating users and the market to strengthen brand innovation, to convey emotional value to customers, to strengthen user contact and conversion efficiency,

So in terms of volume, on the supply side, centered around customer needs, we'll continue to drive product innovation and enrich our product portfolio to reach more customers, as well as to cover more consumption scenarios. On the demand side, we'll leverage our digital capabilities to implement more targeted and market-relevant marketing strategies. All these efforts will allow us to strengthen emotional connection through brand innovation and improve customer reach and conversion efficiency, ultimately contribute to retention and purchase frequency.

In terms of price, we will always maintain a competitive price level. At the same time, we will focus on broadening the price range of products, further improve the price system, and flexible market requirements. At the same time, it will continue to enrich and upgrade the consumer experience, such as introducing a more diverse set of combinations and richer technological options. This also includes more professional coffee bean flavor choices, which will provide good support for overall price performance and financial development.

And our pricing will maintain competitive price levels while broadening our price range to optimize our overall pricing architecture and flexibly address diverse market needs. And at the same time, we'll continue to enhance the consumption experience to support our overall pricing and operating performance. For example, we will introduce more diversified combo offerings, more customization options, as well as professional coffee bean flavor selections.

Finally, to sum up, considering the continuous change in the strategy of the whole delivery platform supplement, the supply chain structure gradually returns to the topic. It does need a process. At the same time, considering the high-level numbers of large-scale supplementation in 2025, in 2026, There may indeed be certain stages of fluctuations and challenges in the power and profit performance. This is also in line with the objective rules. But we believe that these short-term fluctuations will not change the long-term growth logic. With the help of RISC digitalization and scale advantages, we can continue to strengthen the competitive advantage brought to us at both ends of the supply chain, and the improvement of the operating system brought about by the improvement in efficiency.

In conclusion, overall, given the evolving food delivery platform, the subsidy dynamics and the time required for order mix to gradually shift back to pickup, and on top of that, also considering the high base created by large-scale subsidies, in 2025, we may continue to see some near-term volatility and the challenges in the same store performance and the profitability in 2026, which is also consistent with such market dynamics. However, we believe these short-term fluctuations don't change the underlying drivers of our long-term growth. And with our digital infrastructure and our strength in the competitive advantages across both store scale and the customer base, along with our operating infrastructure that continuously improves efficiency, we are confident in the long-term outlook for same-store performance and profitability. Thank you.

Thank you. And our next question today comes from Becky Kai at Macquarie. Please go ahead.

Hello, Mr. Guo and Ms. Nancy. I'm Becky from MegaLegend. My question is about the competition pattern in the industry. I see more and more competition in the coffee industry. For example, we are making more non-coffee products, and some food brands are also making coffee. 所以就想請教一下您怎麼看待目前的這個競爭格局的演變以及會對就是內心會有什麼樣的影響 那我翻譯一下 My question is regarding the market competition So the coffee market is getting way more diverse So for example like we see more cross-category competition between tea and coffee brands How do you see the current competition evolving and what does it mean for Lock-in? Thank you.

Thank you for your question. Competition is a question that everyone is very concerned about and we are also concerned about. First of all, we always think that the Chinese coffee industry is still in a relatively early stage of development. Whether it is from the penetration rate of the coffee population, or from the level of the people, there is still a lot of room for development in the mature market. Therefore, the coffee industry is one of the few in China that has a long-term development track, with a wide range of opportunities. With the continuous training of consumers, more players are participating. This is a natural process for the development of the industry, and it also helps to deepen market education and penetration, to further promote the expansion of the overall market.

Thank you for your question. So we are also very closely monitoring the evolving competitive dynamics. But first of all, we strongly believe that China's coffee industry remains at a relatively early stage of development. So there is still substantial headroom in both consumer penetration and the per capita consumption compared with the mature markets. So the freshly brewed sector stand out as one of the few industries in China with significant long-term structural opportunities and also a long runway for growth. So when consumers' habits continue to develop, it's natural to see more players entering the market. But more importantly, increased participation also contributes to broader consumer education and a deeper market penetration, so will further expand the overall market size.

From the perspective of long-term development in the industry, the competitiveness of the industry is changing. Since the establishment of Ruixin, the Chinese coffee industry and consumer habits have experienced rapid change. limited coffee brands are no longer able to win by price, or by a single product, or by a certain marketing activity. Brand mentality, customer experience, emotional value, including product development systems, door-to-door network coverage, and other multi-dimensional, all-round experiences, we believe are the key to winning the competition. And all of this cannot be separated from the strong support of the digital operating system and the advantage of leading scale.

From a long-term perspective, the basis of competition in the industry is also evolving. So since Lockheed's inception, both China's coffee industry and the consumer's behavior have transformed rapidly. So today, freshly brewed coffee brands can no longer rely solely on pricing individual hit product or single marketing campaigns to achieve lasting success. Instead, this long-term competitiveness increasingly depends on an integrated set of capabilities. For example, brand perception, customer experience, emotional connection, product development capabilities. and store coverage. So ultimately, delivering a comprehensive experience across these dimensions is what will define our long-term success, which also requires the support of a very powerful digital operations and the scale advantage. And after five years of development, we believe that Lockheed has begun to build the systematic competitive advantages across all the mentioned dimensions.

professional, young, fashionable, healthy positioning and tone for brand construction, and continue to strengthen the brand idea of luck. From product innovation to customer experience, to brand activities and IP cooperation one after another, we continue to strengthen consumers' awareness of Ruixin Coffee. We believe that this long-term trend of new products is also an important advantage for us.

And coffee is a well-established category with strong consumer recognition. So as a dedicated coffee brand, Locking has consistently positioned ourselves around professionalism, youthfulness, fashion, and wellness, while continuing to strengthen our brand concept, Locking Hands. We continuously reinforce our coffee identity through product innovation, customer experience, brand campaigns, and IP collaborations. All these efforts have stiffened consumers' brand recognition of Locking Coffee. This deeply established brand perception forms a key competitive advantage for us.

On this basis, Raytheon has established a direct, high-quality and efficient connection with customers through a digitalized system. We can understand customers more deeply, grasp the consumption trends such as taste bias, carry out targeted product innovation, marketing activities, and reach out to users. As I mentioned earlier, from June to October of 2025, RuiHsing's monthly and monthly active users have reached 100 million users in five consecutive months. This is the most intuitive representation of high-efficiency connection operating capabilities. This kind of product and brand innovation driven by data and the operating capabilities of users are a core basis for RuiHsing to maintain important assistance in the high-end brand market and support long-term growth.

Building on all these foundations, Locking has leveraged our digital capabilities to establish direct, frequent, and efficient interactions with our customers. This enables us to gain deeper consumer insights, better understand evolving tips and preferences, and execute more targeted product launches, marketing campaigns, and customer engagement initiatives. And as mentioned earlier, our average monthly transaction customers have exceeded 400 million for five consecutive months from June to October last year. This is also the most direct testament to this highly efficient interaction and our operational capabilities. and our data-driven approach to product innovation, brand building, and user operations help us sustain our strong brand momentum and support our long-term growth.

For products, we always focus on customer needs, and continue to promote innovation around coffee, improving coffee's professionalism and flavor experience. High-end products are not only a simple expansion of SKU, It is also a comprehensive representation of the flexibility and product development capabilities of the public chain. This includes the choice of players, the ability of baking, the design of the formula, the expression of the flavor, and the choice of customization, and so on. RuiHsing goes from the deep-rooting of global origin to building the largest baking base network in China, and then to a professional coffee master team. These are all based on the underlying infrastructure,

And in terms of products guided by our customer needs, we continue to drive product innovation with a strong focus on elevating coffee expertise and the flavor experience. Our frequent new product launches aren't simply an expansion of excuse, but rather reflect the strength of our supply chain elasticity and the product development capabilities. including bean sourcing, roasting capabilities, recipe formulation, flavor expression, and the customization. From expanding our global origin footprint to building China's largest in-housing roasting network, all the way to assembling professional coffee master teams, we have built a robust infrastructure that supports our long-term competitiveness.

The commercial nature of limited coffee is a consumer product based on door-to-door convenience. The wide coverage of the door-to-door network, whether the door-to-door location can approach the customer to the maximum extent directly determines the transfer efficiency of demand. More than 30,000 door-to-door stores are used by RuiHsing, widely covering cities and towns from high-line to low-line in China. This is a significant advantage in terms of size, so that we are more able to meet the demand for continuous growth.

The freshly brewed coffee is fundamentally a category that relies on convenient locations and efficient customer fulfillment. The breadth of consumption scenario coverage and the store proximity to customers are key to converting this demand into actual sales. So with our 30,000 stores nationwide, we have broad coverage across cities and townships from high tier to lower tier markets. Our clear-scale advantage better positions us to capture this sustained demand growth.

Finally, the digital operating capability that penetrates the front-line business scene is an important differentiating advantage of Raytheon. Following the arrival of the AI era, we will continue to expand our international investment, actively embrace new technologies, and actively explore and promote intelligent upgrade. In terms of customers, Through AI algorithm, we accelerate the increase of opportunity for the company. In terms of product, from user survey to product development, to public chain management, we create a product and public chain system that is more accurate, efficient, and cost-effective. In terms of door chains, from selection planning, construction, to AIOT Internet, we rebuild the door chain working model, and continue to improve the operating efficiency of smart door chains. We believe that this series of fundamental layout

And finally, our end-to-end digital capabilities across all businesses are a key competitive differentiator for us. As the era of AI arrives, we continue to increase our technology investment, exploring ways to adopt new technologies and advance our intelligent upgrades. On the customer side, we leverage AI-driven algorithms to unlock more opportunities across both private and public channels. And on the product side, we are building a more efficient and cost-effective product and supply chain infrastructure across consumer insights, product development, and supply chain management. On the store side, we apply AI across site selection, store construction, and AIoT-enabled store operations to continuously enhance efficiency. All these initiatives will support our long-term operational efficiency and reinforce our competitive edge.

Overall, with more industry participants entering, the competition in the coffee industry has indeed become more diverse. But we believe The scale and system advantages that RuiXing has established in the above section will allow us to further expand, consolidate, and improve the leading position of the market in the process of continuous high-speed development in the Chinese coffee industry. In the long term, it will also turn into a continuous increase in kinetic energy and profit potential.

So overall, as more players enter the market, competition is becoming increasingly multifaceted. We firmly believe that the scale and the structural advantages we have built across these key areas will allow us to further expand, consolidate, and strengthen our market-leading position as China's coffee industry continues to grow rapidly. So over the long term, This will also translate into sustained growth momentum and long-term profitability. Thank you.

Thank you. And our next question today comes from Siji Lin with CICC. Please go ahead.

Thank you, Mr. Guo, Ms. An, and Nancy. I'm Lin Cijie, a central analyst. After talking about China, I'd like to ask you a question about internationalization. Our internationalization department has been working on it for a while. How do you assess the current overseas expansion and how do you view the future of these plans? Thank you, Mr. Guo, Ms. An, and Nancy. I'm Cijie from TCC. I have a question on globalization. Our globalization, our global expansion has been underway for some time now. So how should we evaluate the current progress of overseas expansion? And what's the strategy and plan for the future? Thank you.

Thank you for your question. The development vision of Ruixin Coffee is to create a world-class coffee brand. Internationalization is an important part of Ruixin's long-term strategy. It is also a must-see for us to create a world-class coffee brand. We will continue to pay attention to and steadily promote the overseas layout of Ruixin. Of course, compared to the existing market for overseas coffee consumption, mainland China is still the world's largest coffee market with the most growth potential. It is also the core base of Ruixin's development. We believe that Ruixin's complex competitive environment in China has created a digitalized comprehensive advantage and business model Pardon me, everyone.

This is the operator. It looks like we're having a connection issue again with the main speaker line here. Please let me reconnect them, and we will continue to answer in just one moment.

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And pardon me, everyone. I've reconnected the speaker line. Please proceed with your answer. Thank you.

Okay, thank you. Therefore, for the development of internationalization, we will always stick to a long-term perspective Steadily and steadily, step by step. This leads to the creation of a repeatable overseas operating model.

Apologies, we were experiencing some interruptions. Now we are back online. And I will translate this question from the beginning. So thank you for your question. Lock-In Coffee's vision is to build a world-class coffee brand. So international expansion is a key part of Lock-In's long-term strategy and a necessary step in fulfilling our vision. Therefore, we will continue to evaluate and steadily advance our overseas expansion. Compared with the overseas markets where coffee consumption is very mature and stable, mainland China's coffee market remains the most attractive globally in terms of growth and upside potential. And it continues to be the core foundation of our business. And Lock-In has built our comprehensive advantages and proven business model on digitalization and scale in China's complex and intense competitive dynamics, which we believe will also form the core advantages for Lock-In's overseas expansion. Therefore, we are advancing our international extension with a long-term perspective and a merit approach as we remain committed to building a sustainable and replicable operating model.

In general, the development of RuiXin overseas has achieved initial results. Singapore, as the first international market with RuiXin as its leading model, has accumulated more than 80 stores across the world after three years of exploration. to become the second-largest coffee chain in Singapore. Based on RuiHsing's innovative product flavors, convenient digital services, and high-cost comprehensive experience, we need to expand our local user size. RuiHsing's volume and price have achieved a double growth. Since the second half of last year, RuiHsing's level has achieved stable profit. The business model has basically run smoothly. This has also temporarily verified the functionality of the RuiHsing model in overseas markets.

Overall, Lockheed's overseas development has delivered encouraging early results. In Singapore, which is our first international market with a self-operated model, after three years of exploration and operational build-out, we had over 80 stores there by the first quarter, making us Singapore's second largest coffee chain by store count. With our innovative product offerings, convenient digital services, and strong value-for-money propositions, we've been extending our customer base while achieving growth in both cup volume and ASP. Since the second half of last year, we've achieved stable store-level profitability with business model largely validated. Also, this demonstrates the viability of Lockheed's model in the overseas market.

Thanks to the brand influence established by the Singapore market, in 2025, we entered Malaysia in the form of brand authorization. Up to the end of the year, we opened 70 stores and achieved our first-year opening goal. With the mature experience of Singapore, we guided and assisted our local partners to build a precise localized operating system that covers user operation, product strategy, marketing and promotion, etc., and steadily improves market performance. has entered a stage of rapid expansion. Both sides are full of confidence in the development army. This is also provided by the authorization of more country brands to be mass-produced in the future.

But building on the brand influence established in Singapore, we entered Malaysia in 2025 through a master franchise model. By year end, we had opened 70 stores there, achieving our first year store opening target as we planned. Leveraging our proven experience in Singapore, we guide and help our local partners to build a highly localized operating infrastructure covering customer operations, product selection, and marketing methodology, which has steadily strengthened market performance. As our Malaysian business enters a phase of accelerated expansion, both us and our local partner remain fully confident in our future development. This also provided a strong reference case for future franchise opportunities in more international markets.

At the end of 2025, we also started to test the American market. At the end of the year, we have opened nine stores, As one of the largest and most mature coffee markets in the world, the U.S. is an important long-term opportunity for us. Therefore, we will be patient enough to expand the U.S. market. We are well prepared for long-term preparation in product, public chain, user survey, customer experience, and organization construction. In the early stage of exploration, we are still focusing on model verification and operating experience accumulation, focus on optimizing the product logic and user experience. At the same time, the basic components such as processing and supply chain are based on the subsequent scale expansion.

In mid-2035, we began exploring the U.S. market, and now we had opened nine stores by year-end. As one of the world's largest and most mature coffee markets, the U.S. represents one of our important long-term opportunities. So we are expanding our U.S. business with great patience and discipline, focusing on building strong foundations across products, supply chain, consumer insights, customer experience, and organizational capabilities for the long run. So at this very early stage, our priority remains on validating our business model and building operational experience. We are focused on refining fundamental capabilities such as product R&D methodology, user experience, and the supply chain optimization to establish a solid foundation for future skilled expansion.

To sum up, in general, we are full of confidence in the internationalization of RuiHsing, and we have enough patience. In the future, we will maintain a stable expansion strategy and deepen localization operations. On the one hand, we have to insist on RuiHsing's core advantages, and we have to question the local situation to create a differentiated innovative product and user experience, and polish the door-to-door model to make it more flexible and more in line with the local situation. Thank you.

So overall, we have both confidence and patience in our international expansion. Going forward, we'll continue to follow a disciplined approach to deepening localized operations. We remain committed to maximizing lock-in support strengths while adopting flexible locally tailored models to deliver differentiated and innovative product offerings as well as customer experiences and refine our store model. As we build overseas operational experience, we aim to expand into more international markets over time and dedicate ourselves to building Lockheed into a world-class coffee brand. Thanks.

Thank you. Due to time constraints, no further questions will be taken at this time. This concludes the question and answer session. I'd like to turn the call back to the management team for any closing remarks.

Thank you, everyone, for joining our call today. If you have any further questions, please feel free to contact our IR team. This concludes today's call. We look forward to speaking with you again next quarter. Thank you.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. We look forward to speaking with you again next quarter, and have a great day.