LuckinCoffeeInc.AnnouncesUnauditedThirdQuarter2019FinancialResultsNetRevenuesfromProductsofRMB1Billion,ExceedingHighEndofGuidanceRangeStoreLevelOperatingProfitMarginof12%fortheQuarterBEIJING,China,November13,2019(GLOBENEWSWIRE)–LuckinCoffeeInc.(“LuckinCoffee”orthe“Company”)(NASDAQ:LK),apioneerofatechnology-drivennewretailmodeltoprovidecoffeeandotherproductsofhighquality,highaffordability,andhighconveniencetocustomers,todayannounceditsunauditedfinancialresultsforthethirdquarterendedSeptember30,2019.THIRDQUARTER2019HIGHLIGHTS1TotalnetrevenuesfromproductsinthequarterwereRMB1,493million(US$208million),representinganincreaseof557%fromRMB227millioninthesamequarterof2018.Averagemonthlytotalitemssoldinthequarterwere44million,representinganincreaseof470%from7millioninthethirdquarterof2018.Cumulativenumberoftransactingcustomersincreasedto30million,representinganincreaseof413%from6millionasoftheendofthethirdquarterof2018.Duringthethirdquarterof2019,theCompanyacquired7millionnewtransactingcustomers.Averagemonthlytransactingcustomersinthequarterwere9million,representinganincreaseof397%from1millioninthethirdquarterof2018.Totalnumberofstoresattheendofthequarterwere3,680stores,representinganincreaseof209%from1,1storesattheendofthethirdquarterof2018.AveragetotalnetrevenuesfromproductsperstoreinthequarterwereRMB449thousand(US$62thousand),representinganincreaseof79%fromRMB250thousandinthesamequarterof2018.StoreleveloperatingprofitinthequarterwasRMB186million(US$26million),or12%ofnetrevenuesfromproducts,comparedtoalossofRMB126millioninthethirdquarterof2018Pleaserefertothesection“KEYDEFINITIONS”onfordetaileddefinitions/14“Weareverypleasedwithourresultsinthethirdquarter.Weexceededthehigh-endofourguidancerange,achievedastorelevelprofitmarginof12%andexperiencedcontinuousgrowthacrossallkeyoperatingmetrics.Theseachievementsfollowacleartrend:anincreaseinvolumes,efficiencyand,asaresult,profitability.Duringthequarter,productrevenuegrewat557%,whichwas1x,1xand2xthegrowthrateofaveragemonthlyitemssold,averagemonthlytransactingcustomers,andnumberofstores,respectively,”saidMs.JennyZhiyaQian,ChiefExecutiveOfficerofLuckinCoffee.“Duringthethirdquarter,salesfromfreshly-brewedcoffeedrinkscontinuedtomaintainverystronggrowth,andwebelievewewillreachourgoaltobecomethelargestcoffeeplayerinChinabytheendofthisyear.Withourdistinguishedvaluepropositionofhighquality,highaffordabilityandhighconveniencewebelievethatLuckinCoffeehasbecomepartofmoreandmoreChineseconsumers’dailylives.China’scoffeemarketremainshighlyunderpenetratedsoweareveryexcitedaboutthegrowthpotentialaheadofus,”saidMs.Qian.Ms.Qianadded,“Atthesametime,wecontinuedtoenrichourproductofferingsduringthequarter.WelaunchedLuckinTeaproductsnationwideinJuly2019andexperiencedstrongincrementaldemandduringthequarter,contributingtoanincreaseinperstorerevenueandhighercustomerretentionrate.WealsostartedsellingcupsandothermerchandiseproductsandenteredintoajointventureagreementwithLouisDreyfusCompanytoproduceandsellco-brandedNotFromConcentratejuiceproducts.”Ms.Qiancontinued,“WealsostrategicallylaunchedLuckinTeaasanindependentbrandanddevelopedournewretailpartnershipmodel.Inaddition,weareengagedinongoingdiscussionswithpotentialstrategicpartnerstosetupjointventuresinmarketsoutsideofChina.Weconsidertheseinitiativesasanevolutionofourcurrentbusinessmodelandarepartofourstrategytoservemorecustomers.”“Withourdisruptivetechnology-drivennewretailmodelandournewly-launchedretailpartnershipmodel,webelievewecanrapidlyexpandintoadjacentmarketswithlimitedcapitalexpenditureswhilemaintainingahighdegreeofoperationalcontrolandefficiency.Wearepleasedtohavetakenmeaningfulstepsaccomplishingourgoalsthisquarterandremainextremelyexcitedaboutthefutureofourbusiness,”concludedMs.Qian.THIRDQUARTER2019UNAUDITEDFINANCIALRESULTSTotalnetrevenueswereRMB1,541million(US$215million)inthethirdquarter,representinganincreaseof540%fromRMB240millioninthethirdquarterof2018.TotalnetrevenuesfromproductswereRMB1,493million(US$208million)inthethirdquarter,representinganincreaseof557%fromRMB227millioninthethirdquarterof2018.Netrevenuesfromproductsgrowthwasprimarilydrivenbyasignificantincreaseinthenumberoftransactingcustomers,anincreaseineffectivesellingprice,andanincreaseinthenumberofproductssoldpertransactingcustomer.NetrevenuesfromfreshlybreweddrinkswereRMB1,145million(US$160million),representing74%oftotalnetrevenuesinthethirdquarterof2019,comparedtoRMB192million,or80%oftotalnetrevenues,inthethirdquarterof2018.NetrevenuesfromotherproductswereRMB347million(US$48million),representing22%oftotalnetrevenuesinthethirdquarterof2019,comparedtoRMB34million,or14%oftotalnetrevenues,inthethirdquarterof2018.Otherrevenues,whichmainlyincludedeliveryfees,wereRMB48million(US$6million),representing3%oftotalnetrevenuesinthethirdquarterof2019,comparedtoRMB13million,or5%oftotalnetrevenues,inthethirdquarterof2018/14TotaloperatingexpenseswereRMB2,132million(US$298million),representinganincreaseof193%fromRMB726millioninthethirdquarterof2018.Theincreaseinoperatingexpenseswastheresultofbusinessexpansion.Meanwhile,operatingexpensesasapercentageofnetrevenuesdecreasedto138%inthethirdquarterof2019from301%inthethirdquarterof2018,mainlydrivenbyincreasedeconomiesofscaleandtheCompany’stechnology-drivenoperations.CostofmaterialswereRMB721million(US$100million),representinganincreaseof375%fromRMB151millioninthethirdquarterof2018,asaresultoftheincreaseinsalesofproducts.Costofmaterialsdecreasedto48%asapercentageofnetrevenuesfromproductsinthethirdquarterof2019from66%inthethirdquarterof2018.StorerentalandotheroperatingcostswereRMB477million(US$66million),representinganincreaseof176%fromRMB172millioninthethirdquarterof2018,mainlyduetoincreasesinthenumberofstoresandheadcount.Storerentalandotheroperatingcostsdecreasedto32%asapercentageofnetrevenuesfromproductsinthethirdquarterof2019from76%inthethirdquarterof2018.DepreciationexpenseswereRMB108million(US$15million),representinganincreaseof275%fromRMB28millioninthethirdquarterof2018,mainlyastheresultofincreasesindepreciationofleaseholdimprovementsandtheincreaseinthepurchasesofequipmentforoperationduetotheincreasednumberofstores.Depreciationexpensesdecreasedto7%asapercentageofnetrevenuesfromproductsinthethirdquarterof2019from12%inthethirdquarterof2018.SalesandmarketingexpenseswereRMB557million(US$78million),representinganincreaseof147%fromRMB225millioninthethirdquarterof2018,mainlyduetoincreasesinadvertisingexpensesastheCompanylaunchednewmarketinginitiatives,enteredintonewcitiesandlaunchedLuckinTeaasanindependentbrand.Theincreaseinsalesandmarketingexpensesreflectstrategicinvestmentsinbrandingwhich,managementbelieves,willbringlong-termbenefitstotheCompany.Allpromotionsandcouponsprovidedtocustomers,otherthanfreeproductpromotionexpenses,arereflectedinnetrevenuesfromproductsandthereforenotincludedinsalesandmarketingexpenses.Salesandmarketingexpensesdecreasedto36%asapercentageofnetrevenuesinthethirdquarterof2019from93%inthethirdquarterof2018.GeneralandadministrativeexpenseswereRMB246million(US$34million),representinganincreaseof108%fromRMB118millioninthethirdquarterof2018.Theincreaseingeneralandadministrativeexpenseswasmainlydrivenbybusinessexpansionandshare-basedcompensationtoseniormanagement.Generalandadministrativeexpensesdecreasedto16%asapercentageofnetrevenuesinthethirdquarterof2019from49%inthethirdquarterof2018.StorepreopeningandotherexpenseswereRMB21million(US$3million),representingadecreaseof26%fromRMB29millioninthethirdquarterof2018,mainlyduetodecreasedrentalcostsbeforeopeningasaresultofimprovedefficiencyfornewstoreopenings.Storepreopeningandotherexpensesdecreasedto1%asapercentageofnetrevenuesinthethirdquarterof2019from12%inthethirdquarterof2018.OperatinglosswasRMB590million(US$82million)comparedtoRMB485millioninthethirdquarterof2018.Non-GAAPoperatinglosswasRMB550million(US$77million),representing35%oftotalnetrevenues,inthethirdquarterof2019,comparedtoRMB485million,or201%oftotalnetrevenues,inthethirdquarterof2018.Formoreinformationonnon-GAAPfinancialmeasures,pleaseseethesectionof“UseofNon-GAAPFinancialMeasures”andthetablecaptioned“ReconciliationofNon-GAAPMeasurestotheMostDirectlyComparableGAAPMeasures”setforthattheendofthispressrelease/14NetlosswasRMB531million(US$74million)comparedtoRMB484millioninthethirdquarterof2018.Non-GAAPnetlosswasRMB491million(US$68million),representing31%oftotalnetrevenues,inthethirdquarterof2019,comparedtoRMB483million,or201%oftotalnetrevenues,inthethirdquarterof2018.BasicanddilutednetlossperADSwasRMB2(US$0)comparedtoalossofRMB3inthethirdquarterof2018.Non-GAAPbasicanddilutednetlossperADSwasRMB2(US$0)comparedtoalossofRMB3inthethirdquarterof2018.NetcashusedinoperatingactivitieswasRMB122million(US$17million)comparedtoRMB719millioninthethirdquarterof2018.Thedecreasewasprimarilydrivenbyareductionofoperatinglossandafavorableworkingcapitalprofile.Cashandcashequivalentsandshort-terminvestmentswereRMB5,543million(US$775million)asofSeptember30,2019,comparedtoRMB1,761millionasofDecember31,2018.TheincreasewasprimarilydrivenbythenetproceedsofUS$158millionfromtheissuanceofSeriesB-1convertibleredeemablepreferredsharesinApril2019tocertaininvestorsandthenetproceedsofUS$657millionfromtheIPOandtheconcurrentprivateplacement.KEYOPERATINGDATATotalstoresPick-upstoresRelaxstoresDeliverykitchensCumulativenumberoftransactingcustomers(inthousands)Averagemonthlytransactingcustomers(inthousands)Averagemonthlytotalitemssold(inthousands)FreshlybreweddrinksOtherproductsForthethreemonthsendedorasofJun30,2018Sep30,2018Dec31,2018624356222461,1903452412,0731,81186176Mar31,20192,3702,16310998Jun30,20192,9632,74112399Sep30,20193,6803,4331381092,917,984,529,872,777,723,207,877,325,402,166,339,001,760,5,275,593,244,743,220,539,418,226,077,198,055,537,655,5GUIDANCEForthefourthquarterendingDecember31,2019,theCompanyexpectsnetrevenuesfromproductstobebetweenRMB2billionandRMB2billion.Thisforecastexcludesanyrevenuegeneratedfromstoresoperatedunderthenewretailpartnershipmodel.ThisforecastreflectstheCompany’scurrentandpreliminaryviews,whicharesubjecttochange/14KEYDEFINITIONSNetrevenuesfromproducts.Calculatedasthesumofnetrevenuesfromfreshlybreweddrinksandnetrevenuesfromotherproducts.Averagetotalnetrevenuesfromproductsperstore.Calculatedbydividingnetrevenuesfromproductsduringtheperiodbytheaveragenumberofstoresduringtheperiod.Transactingcustomersfortheperiod.ReferstoacustomerwhoboughtatleastoneitemofferedontheCompany’smobileappsorthroughthird-partyplatformsinagivenperiod,regardlessofwhetherthecustomerpaidfortheitemormerelyorderedthroughthefreeproductmarketinginitiative.Eachuniquemobileaccountistreatedasaseparatecustomerforpurposesofcalculatingtransactingcustomer.Cumulativenumberoftransactingcustomers.Thetotalnumberoftransactingcustomerssinceinception.Averagemonthlytransactingcustomers.Thenumberofaveragemonthlytransactingcustomersinthethreemonthsduringthequarter.Averagemonthlytotalitemssold.Calculatedbydividingthetotalnumberofitemssoldduringthequarterbythree.Storeleveloperatingprofit(loss).Calculatedbydeductingthecostofmaterials,storerentalandotheroperatingcosts,anddepreciationexpensesfromnetrevenuesfromproducts.Storeleveloperatingprofit(loss)margin.Calculatedbydividingstoreleveloperatingprofit(loss)bynetrevenuesfromproducts.Non-GAAPoperatingloss.Calculatedbyadjustingoperatinglossfornon-cashshare-basedcompensationexpenses.Non-GAAPnetloss.Calculatedbyadjustingnetlossfornon-cashshare-basedcompensationexpensesandchangeinthefairvalueofwarrantliability.Non-GAAPbasicanddilutednetlosspershare.Calculatedasnon-GAAPnetlossdividedbyweightedaveragenumberofbasicanddilutedshare.Non-GAAPbasicanddilutednetlossperADS.Calculatedasnon-GAAPnetlossdividedbyweightedaveragenumberofbasicanddilutedADS/14
