LKNCY - Earnings call transcript Q4 2024

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Operator

Ladies and gentlemen, welcome to Luckin Coffee's Fourth Quarter and Full Year 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded.

Now I would like to turn the call over to Ms. Nancy Song, Head of Investor Relations of Luckin Coffee. ahead. go please Nancy,

Unknown Executive

website on The our everyone, Today, XXXX Luckin announced Jinyi, earnings we today market the results Hello, and available our Fourth overview CEO, and who full from earlier now opens. U.S. the year us and conference Dr. of a business. hear strategic Dr. [indiscernible]. before release welcome IR our operator. Guo Chairman is Coffee's to quarter will financial earnings will Thanks, share call. our We

Following An results for Ms. up we Jing, that, discuss our call our in will CFO, financial questions. the Afterwards, will greater detail. open

During today's is SEC. and to uncertainties. our statements and beliefs statements some Any that risks statements. call, are forward-looking these other involve risks and not inherent our expectations with statements regarding about are in including, making statements. limited forward-looking future historical These Further events not expectations. the will we regarding filings and facts, included information be but

addition, can be discussed In measures our press earnings to in today information release. related for the found those reconciliation measures non-GAAP

call, Dr. comments English. Chinese, and will be translated During today's into speak will Guo in his

of please Dr. would the Coffee. I turn and call Luckin go Guo, CEO over Jinyi, Now Dr. ahead. to Chairman to like Guo

Jinyi Guo

[Interpreted]

dynamic and call. Hello, year focus, clear pivotal for interest conference Welcome we of everyone. execution. through a a strategic to your expanded XXXX today's growth. strong competitive effectively share marked a at Luckin this Thank continued Luckin In for you market, earnings objectives our in edge robust Coffee. and market support Coffee

shape our to started significant market. development gains. further improve and we with China's have industry-wide innovation achievements X.X strengthened leadership quarter stores same-store Notably, year-over-year our by year, actually the XX% to as drive for total RMB increased full rapidly, continue the billion. XX% efficiency For market increasing to metrics billion RMB XX.X of to profit revenues operating second self-operated of These the coffee net reflecting

year-end. during largest over industry-leading China's net by reinforced total year. stores brand advantage a XX,XXX and Luckin new maintained have product XXXX launched further innovation portfolio, expanded consumption of bringing factor in with coffee count, Coffee our the an popular we products range a store R&D our coffee expansion and capabilities, stores new X,XXX scenarios. We by types successfully for needs scale our all diverse meeting strong chain As dates of Leveraging and store beverage of pace across of opened customers'

saw of XX.X to customers monthly freshly we result, year-over-year [indiscernible] of a number to beverages cupsole million combined average rating with our transaction As by XX% XX% increased [indiscernible]. nearly

By setting the fourth Luckin transaction XXX market. we customers, in end coffee a cumulative new quarter, of million China's consumption over had record for the

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

later Jing on details additional An CFO, financial call. share will Our this

quarter, strong margin year-over-year year-over-year RMB total we XXX% During billion. Operating operating as by X.X points increased while maintained for growth momentum to to surged RMB the [indiscernible], net revenues around percentage XX.X%. reported by [indiscernible] expanded XX% profit

last More narrowing [indiscernible], X% traditionally has achieved as that in call, on positive time, self-operated a the continue quarter, discussed as This negative reporting to growth a measure season earnings the industry. this first to same-store stores been stands double-digit to XX% operating December. current significantly previous pace the in enhanced our sales a we fourth in our the margin For quarter for improve, negative Notably, third efficiency. our low operational the period for strong from quarter.

our operating margins level stores first self-operated the reached store XX.X% quarter. for in addition, In

pillars: advantages people, market increase By will products network Moving on share. further expanding edge on Luckin's to focus competitive scale places. our base and operations. We through strengthened store core across our customer and X

the of expansion to network stay high ahead of store while quality prioritized and growth terms stores, efficiency. industry-leading In operational market and competition, we sustaining capture ensuring opportunities

of the fourth including In X XXX in our stores Hong we quarter, new China, net added the stores first in launch Kong.

count consumers grow reaching China partnership stores coffee that and demand including X,XXX consumption. self-operated habits Our unparalleled terms and our XX,XXX, both lead continues believe market scale to customer per stores. with develop China, consumption We XX,XXX total as in the in coffee in store more capita drinking base steadily will of

Malaysian our first adding the us we create bringing our international new first X further high-tier for stores and stores a Luckin X there. XX our by in This cities entered Relating to markets. markets, January, into term model, franchise significant total increase officially penetrate will lower opportunities in we're there. market density This Singapore, to the to stores opening

Another key market, we In tailored will international our models the expansion. overseas milestone while new coffee opportunities. continuously in to and flexible build market exploring relatively mature experience adopt out entry our operational overseas

evolving user our and support beverages XXX. new quarter, and [indiscernible], and better customers' also focused we're offerings, create customer full with XX year In product bringing trade deep on insights Along data to for loyal innovation, customers, a and stable the mix. and consumption sellers needs. In we evergreen continue product terms innovative calculate new new unlocking these to new reported introduced With this to potential. to we several best SKUs to of products, launches, meet field our allowing us [indiscernible] experiences continued development greater

became example, #X Latte. September XXXX, launched Milk seller Coconut only signature the in our fourth the product, quickly For late in quarter, [indiscernible] behind best the

of for with launched point well, offering promising loyal build performed fourth in to the tipping co-branded Apple product in our This purchases customers dedicated are this starting Another quarter. delivering [indiscernible] category. also [indiscernible] a group

beverage and with fourth exceeding the has In customers boosted engagement, taking our Through expertly monthly and store great by campaigns engaging appeal million number steadily over strong our transaction consistently co-branded XX portfolio new XX transaction and million, active added accessible increasing new quarter, customers customers. attracted average profit we customers product of supported our the network.

more for demand affordability. growing future than a new our million customer setting foundation more meet growth. quality and record XXX customer solid products customers, to new transaction added positioned of XXXX, well and laying for a high we high are We our Throughout

potential, customer way a growing when our high-quality, strong and market chain capabilities and by paving supply for demand Driven development. sustainable the long-term integration, enhancing

Luckin initiative beans X [indiscernible] stable years. high-quality the years quarter, chain. new During setting secure over to defend the agency, a FX of our the Brazil, allows understanding tons of a upstream to scale the memorandum already a X over strong XXX,XXX promotion coffee production from for global areas, trade cooperation our next metric strategic bean investment building Brazilian with from our supply XXX,XXX tons This we and metric supply fourth procurement expand coffee to

our and drive actively partnership across to well potential development strength capabilities. and partners industry sport. of empower Luckin addition, value material the industry their process, the expansion thematic investment the return subsidies, In raw will chain share in as We holistic as [indiscernible] reduced increasing markups win-win optimized through industry

our with interest responsibility market shared leader while influence highlight partners industry Our corporate a our strengthening leadership. as and

Turning to ESG.

coffee brand, execute chain of brighter As strategy for and actively sustainability being a rapid force China's a consistently future a Luckin business our leading expansion. alongside

preparation leading quality while chain the continuously producing supply deepening multidimensional of regions, with control industry's coffee healthy We global and intelligence process choices. green innovating addressing and transformation are

ESG partner remain In to together volume. sustainable healthy XXXX work more development, sustainable map, in Building energize with upon to In road addition, by awards, social to and our the drive impact our [indiscernible] dedicated long-term future. China-based and on we a for sustainability brighter partners working value are powering a environment value [indiscernible] sustainable growth blocking including development. XXXX, we beverage the actively practices, high-quality respecting creating our

the remain competitive ahead, scale XXXX, driving long-term, Looking will vast Luckin remain edge. potential we focused market. confident expanding is environment, growth market dynamic market believe growth. we we laser coffee of sustainable on high-quality to strategically these positioned this competitive our in China further and share and enhance capture to our and the In In opportunities,

growth well-paced a to and we balanced remain dynamics. will also agile As market adaptive adopt strategy, we and a

terms of core our growth, continuously with Building scale, our focus powerful quality In and our enhance store of aim digitalization economies we operational efficiency. pace on advantage we on competitive through to efficiency a opening capabilities. industry-leading maintain store of

In business sustaining remain customer evolving to coffee meeting great that with offer committed of terms healthy customers' value high-quality appeal, [indiscernible] growth, investment. we needs and

to like our partners our their to their our our extend for for our help investors to thanks support, the together, also growth Working and to over contribute heartfelt sincere individuals gratitude their express shareholders. customers, to remain for we a for would for world-class Luckin's customers again we Finally, who building hard our like and trust. once operating We XXX,XXX and partners value their long-term work. to brand and committed dedication would

With will in go to to detail. over I turn Jing the through results financial our call An that,

Jing An

not results, our with call. Thank store scale you everyone. our Thank across finished you, with expand Jinyi. and for its did Good the leadership We year solid base. today's customer joining network -- we position expanded our day, only

the efficiency future towards to statement foundation a of notable solid model our for XXXX, and business achieved gains second a also growth. We half robust strong

store total I mainly share by the growth and XX% supported by expanding growth our revenue monthly customers. this network Now driven our billion, in financial more net X.X will sales, quarter, to results. increased details first increased our In year-over-year on by RMB transacting product was

from In by RMB sales to terms increased product revenue of year-over-year components, billion. X.X revenues the XX%

breaking supported of of result by and strong convenient broad growing and needs fulfill store customers' our sales network, through ability diverse streams. X down our a into product appeal to our As delivery the net our enhanced products.

Net XX% others about total reflecting XX% by Revenues revenues. net XXX to million, revenues. of revenues for net XX% of Net expanding RMB RMB network. from from accounted billion, partner our revenues million, of RMB were stores about our RMB total X.X products of partnership X% XXX from X% fairly stores year-over-year net Net billion, partnership This revenues total brewed total drinks net increased about revenues. from were revenues. X were other

encouraged self-operated from XX.X% further our increased provide stores. color to X.X by to growth. year-over-year which RMB our negative notably negative billion. We sales by particularly stores the in improved X.X% on self-operated increased from XX% Now same-store prior were to the Revenues quarter.

XX.X%. profit between operational and X.X operational store growth. year-over-year Our operating our as efficiency by points to as more margin reflect level pace well balanced customer improvements enhanced expanded growth These a percentage store

opened during basis to on quarter. store stores on a new net We XXX this expansion. Moving

more category, stores the Our XX,XXX same-store our years. total into stores quarter at store sustainable industry-leading falling for our stores. self-operated the coming paved sales way partnership With end, network development our and count has XX,XXX X,XXX comprising in was

XX Looking at quarter, the fourth million growth in customers. added new transacting customer we our

acquired transacting Our record million customers record new of China. XXX our year-over-year as around and -- with monthly sustainable in over for habits XXXX, average overall total increased us new base customers year-end. XX Positioning consumption growth a expanded by XXX [indiscernible] future of to million. million With XX% drinking customer [indiscernible] we in coffee to a by over new coffee rises

Turning of will XX% stronger to a materials Cost of supply net same to profitability. highlight our RMB of the gross Cost to I revenues period This total improvement year-over-year about mix. chain percentage materials in advances increased first billion. as as margin a the XX% items. key expensive few X.X resulting expansion. decreased changes from product XX% in from well of resulted in XXXX, as by

orders. did an hand, beans, the On efficiency such could XXXX RMB expecting to XXX delivery But partly by to price item trend due are year-over-year we million, of mitigate see which mainly operational Delivery scale the to cost expenses of increase enhanced and this coffee some negatively in extent. an in upward XX% to we our in the affect increased economies other impact.

delivery percentage total X.X% of XXXX. a in X.X% same net revenue As from increased expenses to of period a as result, the

well platform. the from to as of in total a the Sales Sales by decreased and of as and X% a investment expenses XXXX. delivery net However, orders power paid result increase to RMB marketing of commission continued strategic customers our delivery the revenue brand to increased strengthening marketing mainly among increased XXX X.X% XX% as as scale. percentage food greater million, of fee a period expenses to for expenses third-party in same year-over-year economy due

net RMB to share-based increased our of resulting million enhanced payroll operational G&A revenues compensation partially investment reduced General total costs. as and and of development, XXXX from as period X.X% offset of decreased the by the in from professional a X% fees, year-over-year demonstrating result expenses in a an to scale. larger in research XXX increase expenses efficiency increased administrative by the and XX% increased same percentage

margin and performance. profit Turning to

year-over-year significantly Our GAAP increased margin quarter. margin net a XXX% X.X XXX% efficiency year-over-year XXX X.X operating XX.X%. Net RMB margin by by the increased X.X RMB profit million. points to increased XX.X%, with with X.X% billion, at significantly basis, points to by for percentage percentage Operating expanded to non-GAAP million marking profit by to year-over-year profit gains. XXX Operating significant year-over-year operating On to RMB expanding

increased million year-over-year RMB a at On net non-GAAP margin XXX to profit basis, with X.X%. net

our Finally, cash and flow items looking quarter. in the at sheet balance fourth

Our cash was RMB net X.X inflow operating billion.

As and cash X.X as we RMB had compared in short-term and equivalents, term deposits December restricted X.X including billion XXXX. XX, cash, billion of around XXXX, December XX, cash RMB cash, to investments of

to strong the flexibility preservice strategy sheet, disciplined environment to our and opportunities. Our the capture and cash effectively and reserves, business swiftly as navigate us strength balance macro allowing well as dynamic of market

billion, XX.X Compared a XXXX, briefly margin the to Non-GAAP with non-GAAP I total RMB Before call, XX.X%. XX% portion begin increased by profit to at operating financial increased RMB X.X by with margin we tailwinds. full profit operating billion, touch GAAP on will operating operating revenues Q&A XXXX XX% increased RMB to RMB of XX.X%. net the billion. to few at year X.X of XX% by

increased X.X we profit by non-GAAP at Net closing, by margin net In fourth at encouraged X% results. full billion are net net X% our profit X.X%. by X.X quarter and margin increased to RMB with billion to with Non-GAAP X.X%. year RMB

the laser our provide ahead, in growth confidence our strong future and us Looking years greater forecast in the strategy sustained come. to execution with

please? will the we that, for With open questions. call Operator,

Operator

question [Operator of from go And Wang ahead. CLSA. Ethan Instructions] Please first our come will

Yushen Wang

highlight and result on on for of in improving think growth question and already So based second growth, the results. sales [Interpreted] quarter this December. my same-store the congratulations achieved positive I the And is the

if So if Thank very growth. management's . what break it look be help into we down on is sales management to can and same-store XXXX, longer, that you. view current And volume, us would price for helpful. our

Jinyi Guo

[Interpreted]

have between in your Thank you breakdown detail An regarding price explain further volume. I and will question. to Jing the for

we you fluctuations think we the of As level -- we first think gave some comments on metrics. of SSG and how high why the macro of

[indiscernible] expectations. metrics SSG and with as past for these great Overall attention So large is were speaking, line very metric over fluctuation our We few in enterprise. its well operating the crucial quarters a to closely monitor to metrics. very

also also Our rapidly, in is along. we consistent continued improvement the to market coffee been intensify. been growing XXXX, while what with Since competition has fourth the to quarter China's has begun communicating have market

Therefore, expansion industry-leading market and standout trends, pace, and these at Looking potential from great the and share for strategically advantages. we effectively saw market our effectively with store accelerate demand. standing driving gaining our customer we scale -- sure out compensation of

line stores So consumption some time develop our takes and expectations. and well as our volatility, in experienced habits which time SSG judgment short-term our to to mature with is strategic require the customer

advantages leadership, looking and into scale, So as evident. strengthen continue XXXX, industry of to our and expand our cost efficiency we become economy more have

new a give stage in us will development. business We our

to healthy remain -- committed deeply As we remain sustainable will and we will maintain rapid growth, our we operations.

our to SSG further enhance in confident are performance. we our So ability

shorter want very drivers improvements the Yes. to behind about long-term you the the know also and drivers. SSG We guys know I

the will its leverage and covers different short choices our that at drinks innovation consumption as [indiscernible] product implement emotional scenarios expansion as store extensive looking a very marketing and value. term, through more [indiscernible] So well of acceptable our we campaign to customers great-tasting offer and network

customers sales more and across attract to stores. performance our us help will approach this believe We improve cost

relatively one characteristics at long consumption early of to for still China, increasing the potential So consumption for key is is the coffee coffee stage. In term, frequent. mid- of its the its

drinking per consumption. for will habits growth in significant to a capita rise, frequency continue coffee divest, coffee as naturally So role consumption coffee leaving

the mean, our this will give for driver growth. SSD future I So us,

more Jing the will have An SSG I quarter performance. details So on fourth give

Jing An

in the strategy. Thanks, Guo. from our expansion of strong The Dr. execution our quarter continued improvement fourth SSSG case resulted [indiscernible]

As gains. store performance with customer efficiency improve demand steadily is continues along our growing, to

to largely the Looking at XXXX. in our stable pricing, of our stores compared comparable quarter in remained fourth the of terms same quarter price

terms in sold driving seen exceed daily quarter month. quarter, levels demand With positive for SSSG In fourth returning drove December our cup personal of XXXX December customer same almost sales the the in cup cups in consistent XXXX. that cup Notably, in performance. sales rising of sales, the postal to XXXX improvement daily of those

half the to compared year. at last to we price per to year, this Looking stable expect remain

our of of engaging and high-quality stores a turn more This Thanks. the wider will our we self-operated As reach selections are SSSG experiences. maturity, expecting coffee improvement. sold, number store grading in of by increase [indiscernible] year-over-year drive overall cups further coffees supported daily

Operator

comes from next question The [indiscernible].

Unknown Analyst

[Interpreted]

we've rise for strong recently one significant [indiscernible] a that from the price. results. in beans I seen Congrats have question CICC. coffee

So impact will this measures what And us? address taken how to on issue. should be we evaluate the

For you. example, the mitigate to will Thank we consider to impact. risk price

Jinyi Guo

[Interpreted]

Thank you for your questions.

rising great the the coffee industry So attention broader market. from and of draw indeed bean coffee prices

So behind give thinking. color more I will you what our

this will overall, such robust competitive our supply leveraging by So investments. value chain pressure, have the through full we our we most partially built expect but create some impact chain cost and mitigate to

can us such So our enhanced pressure. scale advantage give buffer to and efficiency absorb some

So therefore, we impact the this is of for manageable bean us largely moment. rising prices the coffee think for

to chain have coffee As the investing see, actually we you been upstream industry sales. may value end from sources across

down We rate, regions, producing to [indiscernible] operations. covers import procurement export have spend, retail full from processing to built and all our value which and the up way

spending As over to [ years. coffee with MOU deepened next earlier, Apex purchase new last I X of November, XXX,XXX mentioned Brazil, ] beans we tons cooperation a our metric the

this help advantages high-quality cofee . will chain significant us. creating stable beans, will a of provide upstream us supply for supply -- this with So with us

last [indiscernible] year. which and operation [indiscernible] started as [indiscernible] set to including existing year our our benefiting from our is which as this So facility. plant, own facilities, roasting launch our plant, well

XXX,XXX year-end. us money this roasting by and have will are [indiscernible] value will expecting beans. of for So we supply of This capacity annual high quality [indiscernible] a stable an we high give coffee

So beverage of companies few recently. we also several key IPOs see a

in intensify. market So implementation the beverage could freshly further industry [indiscernible]

potentially posing advantages. to market So challenges our penetration

So to and market maintain strengthening we efforts continue branding our our marketing leadership. will

this bean So prices customer-centric we mission coffee market rising our to in face values. and the dedicated the of and the remain compensation, will

conveniently back customers. plans question, [indiscernible] don't our will continue selling currently, to increase to to become to part coffee prices. high-quality our aim Furthermore, available consumption coffee to our everyone's to enjoy prices, coffee coffee competitive daily more customers promotion a to cultivating experience very we be currently, will make And have life. we strive habits, consistently reward while allow at of We customers, high-quality your

you. finally, and want upstream we to positive prices well, I impacts leverage allowing this on leader So as [indiscernible] a address industry, trade the downstream pass while in from across rising a benefit to success will development coffee promoting to as industry. marketing partners coffee trend ultimately long-term Thank sustainable to our driving entire bean a coffee with and this these healthy farmers of

Operator

This I turn concludes question-and-answer conference closing remarks. any management our to for back session. over the would to like

Unknown Executive

joining everyone, call for you, Thank our today.

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

Operator

you and conference Thank concluded. disconnect. you may for now presentation, now The has today's attending

on were transcript are spoken present [Portions of call.] interpreter marked this that an [Interpreted] the live by

Luckin Coffee (LKNCY) 20 Feb 252024 Q4 Earnings call transcript