Home > Global Industry > Luckin Coffee: Unaudited Q2-2019 Financial Results

Luckin Coffee: Unaudited Q2-2019 Financial Results

Beijing / CN. (lci) Luckin Coffee Inc., a pioneer of a technology-driven new retail model to provide coffee and other products of high quality, high affordability, and high convenience to customers, announced its unaudited financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

  • Total net revenues from products in the quarter were RMB 870.0 million (USD 126.7 million), representing an increase of 698.4 percent from RMB 109.0 million in the same quarter of 2018.
  • Cumulative number of transacting customers increased to 22.8 million from 2.9 million as of the end of the second quarter of 2018. During the second quarter of 2019, the Company acquired 5.9 million new transacting customers.
  • Average monthly transacting customers in the quarter were 6.2 million, representing an increase of 410.6 percent from 1.2 million in the second quarter of 2018.
  • Average monthly total items sold in the quarter were 27.6 million, representing an increase of 589.7 percent from 4.0 million in the second quarter of 2018.
  • Total number of stores at the end of the quarter were 2,963 stores, representing an increase of 374.8 percent from 624 stores at the end of the second quarter of 2018.
  • Store level operating loss in the quarter was RMB 55.8 million (USD 8.1 million), decreasing from a loss of RMB 81.7 million in the second quarter of 2018.

«We are pleased with the performance of our business as we continue to execute against our long-term growth plan,» said Jenny Zhiya Qian, Chief Executive Officer of Luckin Coffee. «Total net revenues from products sold increased 698.4 percent year-over-year, driven by a significant increase in transacting customers, an increase in the average number of items purchased by our transacting customers and higher effective selling prices. We believe this is the result of our distinguished value proposition of delivering our customers high quality, high convenience and high affordability.»

Qian continued, «At the same time we have substantially reduced our store operating loss as a percentage of net revenues as a result of benefits of scale and increased bargaining power, operating efficiency from technology, and higher store throughput, and we are on track to reach our store level break-even point during the third quarter of 2019.»

«Furthermore, we opened 593 net new Luckin stores during the quarter, providing enhanced convenience to our customers, and strategically launched our new freshly-brewed tea drinks ‘Luckin Tea’ to capture different consumption moments and benefit from strong demand for freshly-brewed tea drinks in China. We also strengthened our supply chain and continued to invest in our brand and our technology. Finally, we remain on track to become the largest coffee network in China in terms of number of stores by the end of 2019,» concluded Qian.

Second Quarter 2019 Unaudited Financial Results

Total net revenues were RMB 909.1 million (USD 132.4 million) in the second quarter, representing an increase of 648.2 percent from RMB 121.5 million in the second quarter of 2018. Net revenues growth was primarily driven by a significant increase in the number of transacting customers, an increase in effective selling prices, and the number of products sold.

  • Net revenues from freshly brewed drinks were RMB 659.2 million (USD 96.0 million), representing 72.5 percent of total net revenues in the second quarter of 2019, compared to RMB 100.5 million, or 82.7 percent of total net revenues, in the second quarter of 2018.
  • Net revenues from other products were RMB 210.8 million (USD 30.7 million), representing 23.2 percent of total net revenues in the second quarter of 2019, compared to RMB 8.4 million, or 7.0 percent of total net revenues, in the second quarter of 2018.
  • Other revenues, which mainly include delivery fees, were RMB 39.1 million (USD 5.7 million), representing 4.3 percent of total net revenues in the second quarter of 2019, compared to RMB 12.5 million, or 10.3 percent of total net revenues, in the second quarter of 2018.

Total operating expenses were RMB 1,598.8 million (USD 232.9 million), representing an increase of 243.9 percent from RMB 465.0 million in the second quarter of 2018. The increase in operating expenses was in line with business expansion. Meanwhile, operating expenses as a percentage of net revenues decreased to 175.9 percent in the second quarter of 2019 from 382.7 percent in the second quarter of 2018, mainly driven by increased economies of scale and the Company’s technology-driven operations.

  • Cost of materials were RMB 465.8 million (USD 67.9 million), representing an increase of 514.8 percent from RMB 75.8 million in the second quarter of 2018, in line with the increase in sales of products.
  • Store rental and other operating costs were RMB 371.5 million (USD 54.1 million), representing an increase of 271.7 percent from RMB 99.9 million in the second quarter of 2018, mainly due to increases in the number of stores and headcount.
  • Depreciation expenses were RMB 88.5 million (USD 12.9 million), representing an increase of 491.0 percent from RMB 15.0 million in the second quarter of 2018, mainly due to increases in depreciation of leasehold improvements and purchases of operating equipment.
  • Sales and marketing expenses were RMB 390.1 million (USD 56.8 million), representing an increase of 119.1 percent from RMB 178.1 million in the second quarter of 2018, mainly due to increases in advertising expenses and delivery expenses as the Company launched new marketing initiatives and entered into new cities. Furthermore, free product promotion expenses increased in line with the growth of new transacting customers.
  • General and administrative expenses were RMB 265.8 million (USD 38.7 million), representing an increase of 254.8 percent from RMB 74.9 million in the second quarter of 2018. The increase in general and administrative expenses was mainly driven by business expansion, costs related to the Company’s Initial Public Offering («IPO»), and share-based compensation to senior management.
  • Store preopening and other expenses were RMB 17.2 million (USD 2.5 million), representing a decrease of 19.4 percent from RMB 21.3 million in the second quarter of 2018, mainly due to decreased rental costs before opening as a result of improved efficiency for new store openings.

Operating loss was RMB 689.7 million (USD 100.5 million) compared to RMB 343.4 million in the second quarter of 2018. Non-GAAP operating loss was RMB 619.3 million (USD 90.2 million) compared to RMB 343.4 million in the second quarter of 2018. For more information on non-GAAP financial measures, please see the section of «Use of Non-GAAP Financial Measures» and the table captioned «Reconciliation of Non-GAAP Measures to the Most Directly Comparable GAAP Measures» set forth at the end of this press release.

Net loss was RMB 681.3 million (USD 99.2 million) compared to RMB 333.0 million in the second quarter of 2018. Non-GAAP net loss was RMB 610.8 million (USD 89.0 million) compared to RMB 333.0 million in the second quarter of 2018.

Basic and diluted net loss per ADS was RMB 6.56 (USD 0.96) compared to a loss of RMB 23.04 in the second quarter of 2018. Non-GAAP basic and diluted net loss per ADS was RMB 3.28 (USD 0.48) compared to a loss of RMB 6.80 in the second quarter of 2018.

Net cash used in operating activities was RMB 375.2 million (USD 54.7 million) compared to RMB 196.0 million in the second quarter of 2018. The increase was primarily driven by an increase in operating expenses as a result of expansion of the Company’s business operations.

Cash and cash equivalents and short-term investments were RMB 6,051.2 million (USD 881.5 million) as of June 30, 2019, compared to RMB 1,761.0 million as of December 31, 2018. The increase was primarily driven by the net proceeds of USD 158.8 million from the issuance of Series B-1 convertible redeemable preferred shares in April 2019 to certain investors and the net proceeds of USD 657.2 million from the IPO and the concurrent private placement.

Key Operating Data

For the three months ended or as of … 2018-06-30 2018-09-30 2018-12-31 2019-03-31 2019-06-30
Total stores 624 1,189 2,073 2,370 2,963
Pick-up stores 356 903 1,811 2,163 2,741
Relax stores 22 45 86 109 123
Delivery kitchens 246 241 176 98 99
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Cumulative number of transacting customers (in thousands) 2,917.8 5,984.3 12,529.5 16,872.3 22,777.5
Average monthly transacting customers (in thousands) 1,207.6 1,877.4 4,325.9 4,402.0 6,166.0
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Average monthly total items sold (in thousands) 4,001.0 7,760.3 17,645.1 16,275.8 27,593.0
Freshly brewed drinks 3,743.7 6,220.4 13,418.8 13,077.2 21,055.7
Other products 257.3 1,539.9 4,226.4 3,198.6 6,537.3

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Guidance

For the third quarter ending 30 September 2019, the Company expects net revenues from products to be between RMB 1.35 billion and RMB 1.45 billion. This forecast reflects the Company’s current and preliminary views, which are subject to change.

Subsequent Events

On July 22, 2019 the Company signed a Memorandum of Understanding with Kuwait Food Company Americana K.S.C.C («Americana Group»), the largest integrated food product company in the Middle East, to establish a joint venture to launch a new retail coffee business in the Greater Middle East and India.

Key Definitions

  • Net revenues from products. Calculated as the sum of net revenues from freshly brewed drinks and net revenues from other products.
  • Transacting customers for the period. Refers to a customer who bought at least one item we offer on our mobile apps or through third-party platforms in a given period, regardless of whether the customer paid for the item or merely ordered through our free product marketing initiative. Each unique mobile account is treated as a separate customer for purposes of calculating transacting customer.
  • Cumulative number of transacting customers. The total number of transacting customers since our inception.
  • Average monthly transacting customers. The number of average monthly transacting customers in the three months during the quarter.
  • Average monthly total items sold. Calculated by dividing the total number of items sold during the quarter by three.
  • Store level operating profit (loss). Calculated by deducting the cost of materials, store rental and other operating costs, and depreciation expenses from net revenues from products.
  • Non-GAAP operating loss. Calculated by adjusting operating loss for non-cash share-based compensation expenses.
  • Non-GAAP net loss. Calculated by adjusting net loss for non-cash share-based compensation expenses and change in the fair value of warrant liability.
  • Non-GAAP basic and diluted net loss per share. Calculated as non-GAAP net loss divided by weighted average number of basic and diluted share.
  • Non-GAAP basic and diluted net loss per ADS. Calculated as non-GAAP net loss divided by weighted average number of basic and diluted ADS.