May 24, 2022 07:30 ET | Source: Luckin Coffee Inc. Luckin Coffee Inc.
First Quarter Net Revenues Increased 89.5%; Achieved Corporate Level Profitability for First Time
556 Net New Store Openings in First Quarter
BEIJING, May 24, 2022 (GLOBE NEWSWIRE) -- Luckin Coffee Inc. (“Luckin Coffee” or the “Company”) (OTC: LKNCY) today announced its unaudited financial results for the three months ended March 31, 2022.
“Our team continues to execute on our strategic plan, delivering another quarter of improved financial and operational results,” said Dr. Jinyi Guo, Chairman and Chief Executive Officer of Luckin Coffee. “Despite continued pandemic-related headwinds, we reported strong bottom and top-line performance, with net revenue growth of 89.5% and same-store sales growth for our self-operated stores of over 40% from the prior year. We also delivered our first quarterly operating profit since our founding. This is an important milestone and serves as validation of our strategic plan and relentless focus on execution.”
Dr. Guo added, “Our efficient store operations and greater scale and operating leverage generated strong store level margins for our self-operated stores of just over 20%, especially given that historically, the first quarter had been our weakest quarter for our self-operated stores as a result of fewer purchases during the Chinese New Year holidays. We introduced 34 new freshly brewed products during the quarter which contributed materially to our results and that success continued in April when our new “Coconut Cloud Latte” sold over 4.95 million cups in the first week after its launch. We further expanded and had 556 net new store openings to meet the growing demand for our products through a mix of self-operated and partnership stores. Our partnership platform, which is highly complementary to our self-operated store model, was further expanded during the quarter and revenues from our partnership stores represented roughly a quarter of our total first quarter revenues.”
Dr. Guo concluded, “While we expect pandemic-related market pressures to continue having an adverse impact on our business in the near-term, our board of directors and management team are confident in our ability to both meet and drive demand through continued investment in our core initiatives. With our strong financial position, premier brand recognition and operating efficiency and leverage, we believe we are well positioned to capture the significant growth opportunities in the China coffee market while delivering sustainable long-term value for our shareholders.”
The global economy, Chinese markets and the Company’s business have been adversely affected by the COVID-19 pandemic. As cases of the Omicron variant emerged in China and spread to several major cities at the end of 2021, many provinces and municipalities activated the highest response to this public health crisis.
As a result, the Company’s temporary store closures gradually increased during the first quarter of 2022, with March being the most impacted. The Company experienced around 700 daily store closures on average during March 2022. Starting from April 2022, there was a nearly complete lockdown in Shanghai, resulting in a further increase of average daily store closures. For the period between April 1, 2022 and the day prior to this earnings release, the daily average number of temporary store closures was around 950.
While the Company is encouraged by recent government initiatives to introduce measures to support the local economy and has recently seen a partial re-opening in Shanghai, the Company anticipates that its operations will continue to be negatively affected by pandemic-related market pressures for the foreseeable future. The extent of these impacts is difficult to predict given the nature of the COVID-19 pandemic and the severity of the effects on the global economy.
FIRST QUARTER OF 2022 UNAUDITED FINANCIAL RESULTS
Total net revenues were RMB2,404.6 million (US$379.3 million) in the first quarter of 2022, representing an increase of 89.5% from RMB1,268.7 million in the same quarter of 2021. Net revenues growth was primarily driven by the increased number of products sold, the increase in store footprint, the increase in the number of monthly transacting customers and higher average selling price for the Company’s products.
Total operating expenses were RMB2,388.5 million (US$376.8 million) in the first quarter of 2022, representing an increase of 46.3% from RMB1,632.7 million in the same quarter of 2021. The increase in total operating expenses was predominantly the result of the Company’s business expansion. Meanwhile, operating expenses as a percentage of net revenues decreased to 99.3% in the first quarter of 2022 from 128.7% in the same quarter of 2021, mainly driven by a reduction of general and administrative expenses as a percentage of net revenues due to increased economies of scale and the Company’s technology-driven operations and a decrease in losses and expenses related to Fabricated Transactions and Restructuring in the first quarter since the Company had successfully completed dismissal of provisional liquidation in March 2022.
Operating income was RMB16.1 million (US$2.5 million) in the first quarter of 2022, compared to an operating loss of RMB364.0 million in the same quarter of 2021. Non-GAAP operating income was RMB92.1 million (US$14.5 million) in the first quarter of 2022, compared to a non-GAAP operating loss of RMB307.6 million in the same quarter of 2021. For more information on the Company’s non-GAAP financial measures, please see the section “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 earnings release.
Net income was RMB19.8 million (US$3.1 million) in the first quarter of 2022, compared to a net loss of RMB232.5 million in the same quarter of 2021. Non-GAAP net income was RMB99.1 million (US$15.6 million) in the first quarter of 2022, compared to net loss of RMB176.0 million in the same quarter of 2021.
Basic and diluted net income per ADS was RMB0.08 (US$0.00) and RMB0.08 (US$0.00) in the first quarter of 2022, respectively, compared to basic and diluted net loss per ADS of RMB0.88 and RMB0.88 in the same quarter of 2021, respectively.
Non-GAAP basic and diluted net income per ADS was RMB0.32 (US$0.08) and RMB0.32 (US$0.08) in the first quarter of 2022, respectively, compared to basic and diluted net loss of RMB0.72 and RMB0.72 in the same quarter of 2021.
Net cash provided by operating activities was RMB107.7 million (US$17.0 million) in the first quarter of 2022, compared to RMB233.2 million in net cash used in the same quarter of 2021. The improvement was primarily driven by the Company’s improved business operations, enhanced ability to generate revenue and improved profitability.
Cash and cash equivalents, restricted cash and short-term investments were RMB5,021.4 million (US$792.1 million) as of March 31, 2022, compared to RMB6,555.3 million as of December 31, 2021. The decrease was primarily attributable to the repayment of senior convertible notes and purchase of property and equipment, offset by the proceeds from the issuance of senior preferred shares and operational cash generation.
USE OF NON-GAAP FINANCIAL MEASURES
In evaluating the business, the Company considers and uses adjusted operating (loss)/income and adjusted net (loss)/income, each a non-GAAP financial measure, in reviewing and assessing the Company’s operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company presents these non-GAAP financial measures because they are used by the Company’s management to evaluate operating performance and formulate business plans. The Company believes that the non-GAAP financial measures help identify underlying trends in the Company’s business, provide further information about the Company’s results of operations and enhance the overall understanding of the Company’s past performance and future prospects.
The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. The Company’s non-GAAP financial measures do not reflect all items of income and expense that affect the Company’s operations and do not represent the residual cash flow available for discretionary expenditures. Furthermore, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company’s performance. The Company encourages investors and others to review the Company’s financial information in its entirety and not rely on a single financial measure.
The Company defines non-GAAP operating (loss)/income as operating loss excluding share-based compensation expenses, non-GAAP net (loss)/income as net (loss)/income excluding recurring item of share-based compensation expenses and non-recurring item of provision for equity litigants and non-GAAP net (loss)/income attributable to the Company’s ordinary shareholders as net (loss)/income attributable to the Company’s ordinary shareholders excluding recurring item of share-based compensation expenses and non-recurring item of provision for equity litigants.
For more information on the non-GAAP financial measures, please see the table captioned “Reconciliation of Non-GAAP Measures to the Most Directly Comparable GAAP Measures” set forth at the end of this earnings release.
This earnings release contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Other than proceeds from the issuance of Series B-1 convertible redeemable preferred shares, IPO, senior preferred shares and the concurrent private placement stated, all translations from RMB to US$ were made at the rate of RMB6.3393 to US$1.00, the exchange rate on March 31, 2022 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
The Company will host a conference call today, on Tuesday, May 24, 2022, at 8:00 am Eastern Time (or Tuesday, May 24, 2022, at 8:00 pm Beijing Time) to discuss the financial results. The Company will not be hosting a Q&A session following the conference call.
Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participant dial-in numbers, a Direct Event passcode and a unique registrant ID by email.
Pre-registration is accessible online at http://apac.directeventreg.com/registration/event/8975287.
In the 10 minutes prior to the call start time, you may use the conference access information provided in the email received at the point of registering. Please note that, due to regional restrictions, some participants may receive operator assistance when joining the conference call and will not be automatically connected.
A replay of the conference call will be accessible through May 27, 2022 by dialing the following numbers:
A live and archived webcast of the conference call will also be available at the Company's investor relations website at investor.lkcoffee.com.
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “potential,” “continue,” “ongoing,” “targets,” “guidance” and similar statements. Luckin Coffee may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about Luckin Coffee’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the expense, timing and outcome of existing or future legal and governmental proceedings, investigations in connection with Luckin Coffee; the outcome and effect of the restructuring of Luckin Coffee’s financial obligations; Luckin Coffee’s growth strategies; its future business development, results of operations and financial condition; the effect of the non-reliance identified in, and the resultant restatement of, certain of Luckin Coffee’s previously issued financial results; the effectiveness of its internal control; its ability to retain and attract its customers; its ability to maintain and enhance the recognition and reputation of its brand; its ability to maintain and improve quality control policies and measures; its ability to establish and maintain relationships with its suppliers and business partners; trends and competition in China’s coffee industry or China’s food and beverage sector in general; changes in its revenues and certain cost or expense items; the expected growth of China’s coffee industry or China’s food and beverage sector in general; PRC governmental policies and regulations relating to Luckin Coffee’s industry; the potential effects of COVID-19; and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties or factors is included in Luckin Coffee’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Luckin Coffee undertakes no obligation to update any forward-looking statement, except as required under applicable law.
STATEMENT REGARDING PRELIMINARY UNAUDITED FINANCIAL INFORMATION
The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited financial information.
Luckin Coffee Inc. (OTC: LKNCY) has pioneered a technology-driven retail network to provide coffee and other products of high quality, high convenience and high affordability to customers. Empowered by proprietary technologies, Luckin Coffee pursues its mission to build a world-class coffee brand and become a part of everyone’s daily life. Luckin Coffee was founded in 2017 and is based in China. For more information, please visit investor.lkcoffee.com.
Investor Relations: Luckin Coffee Inc. IR Email: ir@lkcoffee.com
Bill Zima / Fitzhugh Taylor ICR, Inc. Phone: 646 880 9039
Media Relations: Luckin Coffee Inc. PR Email: pr@lkcoffee.com
Ed Trissel / Jack Kelleher Joele Frank, Wilkinson Brimmer Katcher Phone: 212 355 4449
1 Please refer to the section “KEY DEFINITIONS” for detailed definitions on certain terms used.
* The per ADS indicators are based on rounded results of corresponding per ordinary share indicators, which could have a rounding difference of absolute amount for not more than 0.04 per ADS.
* Differences in the definition of Non-GAAP indicators between this earnings announcement and 2021 Form 20-F are contributable to the items that occurred beyond the reporting periods of this earnings announcement, including accretion to redemption value of convertible redeemable preferred shares, change in the fair value of warrant liability, provision/(reversal) for SEC settlement, and impairment of trust investments. ** The per ADS indicators are based on rounded results of corresponding per ordinary share indicators, which could have a rounding difference of absolute amount for not more than 0.04 per ADS.