Q3 2022 Luckin Coffee Inc Earnings Call

November 22, 2022

Operator 2: Ladies and gentlemen, welcome to Luckin Coffee's Q3 2022 Earnings Conference Call. All participants will be in listen only mode during management's prepared remarks, and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Bill Zima at ICR for opening remarks and introductions. Please go ahead, sir.

Operator: Ladies and gentlemen, welcome to Luckin Coffee's Q3 2022 Earnings Conference Call. All participants will be in listen only mode during management's prepared remarks, and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I'd like to turn the call over to Mr. Bill Zima at ICR for opening remarks and introductions. Please go ahead, sir.

Operator: Ladies and gentlemen, welcome to Luckin Coffee’s Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode during management's prepared remarks. And there will be a question-and-answer session to follow. Today's conference is being recorded.

Operator: At this time, I'd like to turn the call over to Mr. Bill Zima at ICR for opening remarks and introductions. Please go ahead, sir.

Bill Zima: Hello, everyone, and thank you for joining us on today's call. Luckin Coffee announced its third quarter 2022 financial results earlier today. A press release is now available on the company's IR website at investor.lkcoffee.com.

Bill Zima: Hello everyone, and thank you for joining us on today's call. Luckin Coffee announced its Q3 2022 financial results earlier today. A press release is now available on the company's IR website at investor.lkcoffee.com. Today you will hear from Jinyi Guo, Chairman and CEO of Luckin Coffee, and Jing An, CFO of Luckin Coffee. After the company's prepared remarks, the management team will conduct a question and answer session based on questions submitted via the company's webcast. This Q&A session will also be joined by Reinout Schakel, CSO of Luckin Coffee. As a reminder, investors can submit questions via the Ask a Question section on the bottom of the webcast during the call. We will be referring to a slide presentation on today's call, which can be found via conference call webcast link as well as on the company's IR website.

This release is now available on the company's IR website at Investor Doc L K coffee dot com.

Bill Zima: Today, you will hear from Jinyi Guo, Chairman and CEO of Luckin Coffee; and Jing An, CFO of Luckin Coffee. After the company's prepared remarks, the management team will conduct a question-and-answer session based on questions submitted via the company's webcast. And this Q&A session will also be joined by Reinout Schakel, CSO of Luckin Coffee.

Bill Zima: As a reminder, investors can submit questions via the Ask a Question section on the bottom of the webcast during the call. We will be referring to a slide presentation on today's call, which can be found via conference call webcast link, as well as on the company's IR website. Again, the IR website link is investor.lkcoffee.com.

Bill Zima: Again, the IR website link is investor.lkcoffee.com. During this call, the company will be making some forward-looking statements regarding future events and results. Statements that are not historical facts, including but not limited to statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in the company's filings with the SEC. With respect to any non-GAAP measure discussed during the call today, the company's reconciliation information related to those measures can be found in the earnings press release issued earlier. During today's call, Dr. Guo will speak in Chinese, and his comments will be translated into English. Now, I would like to turn the call over to Dr. Jinyi Guo, Chairman and CEO of Luckin Coffee. Dr. Guo, please go ahead.

Bill Zima: During this call, the company will be making some forward-looking statements regarding future events and results. Statements are not historical facts, including but not limited to statements about the company's beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in the company's filings with the SEC.

And the company's filings with the SEC.

Bill Zima: With respect to any non-GAAP measure discussed during the call today, the accompanying reconciliation information related to those measures can be found in the earnings press release issued earlier. During today's call, Dr. Guo will speak in Chinese and his comments will be translated into English.

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

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

Jinyi Guo: [Foreign Language]

Jinyi Guo: 大家好，欢迎参加今天的业绩沟通会，也感谢各位对瑞幸咖啡的持续关注和支持。我是瑞幸咖啡的董事长兼CEO郭谨一，很高兴和大家再次见面。三季度尽管受到了各地疫情防控等制约因素的影响，但是我们的营业增长依然非常强劲。再次证明了瑞幸咖啡基础坚实且极具韧性的商业模式，也证明了中国咖啡市场的广阔空间。正如我一直所说，我们坚信中国咖啡市场是有着极高潜力的增量市场。我们将持续聚焦和专注于咖啡赛道，不断强化对消费者洞察的把握。这也是公司的长期发展战略。同时，面对日益激烈的市场竞争，我们非常有信心，通过强大的品牌、供应链、数字化以及门店规模等先发优势，在保持合理利润的基础上，更加关注健康、可持续的业绩增长，持续扩大市场份额和领先优势。

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Interpreter: Hello, everyone, and welcome to today's conference call. Thank you for your continued support of Luckin Coffee. I am Jinyi Guo, Chairman and CEO of Luckin Coffee, and it is my pleasure to be speaking with all of you again.In the third quarter of 2022, despite the negative impact from COVID-19 pandemic related restrictions nationwide, our performance continued its strong momentum, which proved once again our solid and highly resilient business model. And that the Chinese coffee market space continued to expand. As I always said, we firmly believe that the China's coffee market is large with strong growth potential.

Alicia Guo: Hello everyone and welcome to today's conference call. Thank you for your continued support of Luckin Coffee. I am Jinyi Guo, Chairman and CEO of Luckin Coffee, and it is my pleasure to be speaking with all of you again. In Q3 2022, despite the negative impact from COVID-19 pandemic related restrictions nationwide, our performance continued its strong momentum, which proved once again our solid and highly resilient business model and that the Chinese coffee market space continue to expand. As I always said, we firmly believe that China's coffee market is large with strong growth potential. We'll continue to commit to our long-term strategy of focusing on our core business of coffee as well as strengthening our customer insights. At the same time, in the face of increasingly fierce competition, we're confident that our first-mover advantages in terms of branding, supply chain, digitalization, and store presence. We can achieve healthy and sustainable growth as well as increase our market share and strengthen our competitive advantage all while ensuring reasonable profitability.

[Translator]: Hello everyone and welcome to today's conference call. Thank you for your continued support of Luckin Coffee. I am Jinyi Guo, Chairman and CEO of Luckin Coffee, and it is my pleasure to be speaking with all of you again. In Q3 2022, despite the negative impact from COVID-19 pandemic related restrictions nationwide, our performance continued its strong momentum, which proved once again our solid and highly resilient business model and that the Chinese coffee market space continue to expand. As I always said, we firmly believe that China's coffee market is large with strong growth potential. We'll continue to commit to our long-term strategy of focusing on our core business of coffee as well as strengthening our customer insights.

Pandemic related restrictions nationwide. Our performance continued its strong momentum, which proved once again, our solid and highly resilient business model and that the Chinese coffee market space continues to expand.

As I always said, we firmly believe that the China's coffee market is large with strong growth potential.

Interpreter: We'll continue to commit to our long-term strategy of focusing on our core business of coffee, as well as strengthening our customer insights. At the same time, in the face of increasingly fierce competition, we're confident that our first mover advantages in terms of branding, supply chain, digitalization, and store presence, we can achieve healthy and sustainable growth, as well as increase our market share and strengthen our competitive advantage, all while ensuring reasonable profitability.

[Translator]: At the same time, in the face of increasingly fierce competition, we're confident that our first-mover advantages in terms of branding, supply chain, digitalization, and store presence. We can achieve healthy and sustainable growth as well as increase our market share and strengthen our competitive advantage all while ensuring reasonable profitability.

At the same time in the face of increasingly fierce competition, we're confident that our first mover advantages in terms of branding supply chain did utilization and store presence.

We can achieve healthy and sustainable growth as well as increase our market share and strengthen our competitive advantage.

While ensuring reasonable profitability.

Jinyi Guo: [Foreign Language]

Jinyi Guo: 从具体的业绩表现看，三季度继续延续了上半年良好的增长势能，其中总净收入39亿元，同比增长65.7%，营业利润率首次突破双位数，达到了15%。自营门店利润率29.2%，同店销售增长率为19.4%。净增门店数651家，累计消费客户数达到了1.23亿，月均交易客户数达到了2,510万，同比增长71%。对于业绩的具体内容，稍后CFO安靖会和大家做更详细的分享。

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Interpreter: In terms of our performance, the third quarter of 2022 continued our strong growth momentum of the first half year of 2022. Total net revenue was RMB3.9 billion, representing a year-over-year increase of 65.7%. Our operating profit margin achieved a double digit for the first time in our history, reaching 15%. Self-operated stores profit margin was 29.2% and same store sales growth was 19.4%. The number of net new store opening was 651. Cumulative transacting customer reached RMB123 million as the end of the third quarter of 2022. And the average number of monthly transacting customer reached to RMB25.1 million in the third quarter, representing a year-over-year increase of 71%. An Jing, our CFO will share more details on our financial results later during the call.

Alicia Guo: In terms of our performance, Q3 2022 continued our strong growth momentum of H1 2022. Total net revenue was RMB 3.9 billion, representing a year-over-year increase of 65.7%. Our operating profit margin achieved a double-digit for the first time in our history, reaching 15%. Self-operated stores profit margin was 29.2% and same-store sales growth was 19.4%. The number of net new store opening was 651. Cumulative transacting customers reached 123 million at the end of Q3 2022, and the average number of monthly transacting customers reached 25.1 million in Q3, representing a year-over-year increase of 71%. Jing An, our CFO, will share more details on our financial results later during the call.

[Translator]: In terms of our performance, Q3 2022 continued our strong growth momentum of H1 2022. Total net revenue was RMB 3.9 billion, representing a year-over-year increase of 65.7%. Our operating profit margin achieved a double-digit for the first time in our history, reaching 15%. Self-operated stores profit margin was 29.2% and same-store sales growth was 19.4%. The number of net new store opening was 651. Cumulative transacting customers reached 123 million at the end of Q3 2022, and the average number of monthly transacting customers reached 25.1 million in Q3, representing a year-over-year increase of 71%. Jing An, our CFO, will share more details on our financial results later during the call.

For the first time in our history, reaching 15% self operated stores profit margin was 29.2% and same store sales growth was 19.4%. The number of net new store opening was 661 cumulative transacting customer reached.

123 million at the end of the third quarter of 2022.

And the average number of monthly transacting customer rich to $25 1 million in the third quarter, representing a year over year increase of 71%.

And King our CFO will share more details on our financial results later during the call Jimmy.

Jinyi Guo: 今年我们全面启动了环境、社会与管制，也就是ESG的相关工作，搭建了可持续发展治理架构，全面开展了可持续发展的战略的建设工作。不久前，我们正式发布了变革与重塑瑞幸咖啡2020至2022年公司治理报告，系统性的回顾和总结了过去两年瑞幸咖啡在治理体系、治理机制、文化价值观等层面上根本性的变化。我们希望以此为基础，探索建立一个企业长期治理的典范样本。此外，我们计划在明年上半年正式发布瑞幸可持续发展战略和目标。公司将把可持续发展作为重要基点，持续创造客户价值和社会价值，为瑞幸咖啡的长远发展奠定坚实基础。

Jinyi Guo: [Foreign Language]

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Interpreter: This year we launched our ESG-related work and established a sustainable development governance structure, as well as began to formulate our sustainable development strategies. We recently released our corporate governance report, namely, transformation and reinvention Luckin Coffee 2020 to 2022 corporate governance reports, which provides a systematic review of Luckin Coffee’s transformation over the past two years in terms of our corporate governance as well as our cultural values and other important topics. And we would like to take this as a basis to establish a good example of building long term corporate governance. Furthermore, we plan to officially launch our sustainable development strategies and objectives in the first half year of 2023. We'll take a sustainable development as an important basis to continue to create both customer value and social value and lay a solid foundation for the long term development of Luckin Coffee.

Alicia Guo: This year we launched our ESG related work and established a sustainable development governance structure as well as began to formulate our sustainable development strategies. We recently released our corporate governance report, namely Transformation and Reinvention: Luckin Coffee 2020 to 2022 Corporate Governance Report, which provides a systematic review of Luckin Coffee's transformation over the past two years in terms of our corporate governance as well as our cultural values, and other important topics, and we would like to take this as a basis to establish a good example of building long term corporate governance. Furthermore, we plan to officially launch our sustainable development strategies and objectives in H1 2023. We'll take a sustainable development as an important basis to continue to create both customer value and social value and lay a solid foundation for the long term development of Luckin Coffee.

[Translator]: This year we launched our ESG related work and established a sustainable development governance structure as well as began to formulate our sustainable development strategies. We recently released our corporate governance report, namely Transformation and Reinvention: Luckin Coffee 2020 to 2022 Corporate Governance Report, which provides a systematic review of Luckin Coffee's transformation over the past two years in terms of our corporate governance as well as our cultural values, and other important topics, and we would like to take this as a basis to establish a good example of building long term corporate governance. Furthermore, we plan to officially launch our sustainable development strategies and objectives in H1 2023. We'll take a sustainable development as an important basis to continue to create both customer value and social value and lay a solid foundation for the long term development of Luckin Coffee.

We recently released our corporate governance report, namely transformation and reinvention locking coffee 2022 2022 corporate governance report, which provides a systematic review of locking coffees transformation over the past two years in terms of our corporate governance as well as ours.

Cultural values and other important topics.

And we would like to take this as a basis to establish a good example of building long term corporate governance.

Interpreter: Furthermore, we plan to officially launch our sustainable development strategies and objectives in the first half year of 2023. We'll take a sustainable development as an important basis to continue to create both customer value and social value and lay a solid foundation for the long term development of Luckin Coffee.

We'll take a sustainable development as an important basis to continue to create both customer value and social value and lay a solid foundation for the long term development of locking coffee.

Jinyi Guo: [Foreign Language]

Jinyi Guo: 三季度，我们围绕着人、货、场三支柱，发挥了品牌势能、新品研发、门店布局等方面的优势。人的角度，瑞幸咖啡持续获得消费者青睐。三季度月均交易客户数持续增长，达到两千五百一十万，较二季度增长约四百万。瑞幸咖啡荣获第一财经颁发的「2022中国新消费年度增长力品牌」，刚刚又赢得了第一财经杂志「2022年度国民新国货大奖」。货的角度，年初至今，瑞幸咖啡已经推出了超过一百个新SKU。我们持续强化专业加好喝的产品策略，持续进行产品创新，不断推出爆款产品。这其中既有引发热议的偷心西柚拿铁等创新产品，也有体现专业度的SOE瑰夏系列。瑞幸咖啡豆更是连续五年获得了IIAC金奖。场的角度，截至三季度，我们共计拥有门店七千八百四十六家，净增六百五十一家，持续保持行业领先地位。我们认为中国咖啡市场的空间极为广阔，发展潜力巨大。对于未来各级城市的门店拓展，我们都充满了信心。

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Interpreter: In the third quarter of 2022, our competitive advantages in branding, products R&D and store layout continued to play important roles in terms of the three pillars of people, products and places. From the perspective of people, Luckin Coffee remains popular among consumers with average monthly transacting customers further increasing by 4 million compared to the second quarter, reaching 25.1 million for the third quarter. We also won the Top 50 Emerging Chinese Consumption Brands with Strong Growth of the Year 2022 by CBNData and the Top Chinese Brand of 2022 from YiMagazine. From the perspective of products since the beginning of 2022, we have launched more than 100 new SKUs. We continue to strengthen our product strategy of professionalism and good flavors, insist on product innovation and continuously launched blockbuster products.

Alicia Guo: In the Q3 2022, our competitive advantages in branding, product R&D, and store layout continued to play important roles in terms of the three pillars of people, products, and places. From the perspective of people, Luckin Coffee remains popular among consumers, with average monthly transacting customers further increasing by 4 million compared to the Q2, reaching 25.1 million for the Q3. We also won the top 50 emerging Chinese consumption brands with strong growth of the year 2022 by CBNData and the top Chinese brand of 2022 from Yicai Magazine. From the perspective of products, since the beginning of 2022, we have launched more than 100 new SKUs. We continue to strengthen our product strategy of professionalism and good flavors, insist on product innovation, and continuously launch blockbuster products.

[Translator]: In the Q3 2022, our competitive advantages in branding, product R&D, and store layout continued to play important roles in terms of the three pillars of people, products, and places. From the perspective of people, Luckin Coffee remains popular among consumers, with average monthly transacting customers further increasing by 4 million compared to the Q2, reaching 25.1 million for the Q3. We also won the top 50 emerging Chinese consumption brands with strong growth of the year 2022 by CBNData and the top Chinese brand of 2022 from Yicai Magazine. From the perspective of products, since the beginning of 2022, we have launched more than 100 new SKUs. We continue to strengthen our product strategy of professionalism and good flavors, insist on product innovation, and continuously launch blockbuster products.

From the perspective of people locking coffee remains popular among consumers with average monthly transacting customers further increasing by 4 million compared to the second quarter, reaching $25 1 million for the third quarter.

We also won the top 50 emerging Chinese consumption brands with strong growth for the year 2022 by C V N data and the top Chinese brand of 2022 from EMACS, Inc. From the perspective of product.

Since the beginning of 2022 we have lunched the more than 100, new skus.

We continue to strengthen our product strategy, our professionalism and good flavors.

Insist on product innovation and continuously launch dropbox or products.

Interpreter: Innovative products such as prunes flavored velvet latte and ISO East Asia Series are all well received by the market. Our coffee beans have recently been awarded the IIAC gold medal for the fifth consecutive year. From the perspective of places, as of the end of the third quarter of 2022 we retained our leading position within the industry with 7,846 stores in total. And the number of net new store openings was 651 in the third quarter of 2022. We believe that China's coffee market has substantial upside potential with significant opportunities and we’re full of confidence in our future expansion in the cities at out years.

Alicia Guo: Innovative products such as Prunes Flavored Velvet Latte and SOE Geisha series are all well received by the market. Our coffee beans have recently been awarded the IIAC Gold Medal for the fifth consecutive year. From the perspective of places, as of the end of Q3 2022, we retained our leading position within the industry with 7,846 stores in total, and the number of net new store openings was 651 in Q3 2022. We believe that China's coffee market has substantial upside potential with significant opportunities, and we're full of confidence in our future expansion in the cities at all tiers.

[Translator]: Innovative products such as Prunes Flavored Velvet Latte and SOE Geisha series are all well received by the market. Our coffee beans have recently been awarded the IIAC Gold Medal for the fifth consecutive year. From the perspective of places, as of the end of Q3 2022, we retained our leading position within the industry with 7,846 stores in total, and the number of net new store openings was 651 in Q3 2022. We believe that China's coffee market has substantial upside potential with significant opportunities, and we're full of confidence in our future expansion in the cities at all tiers.

Our coffee beans have recently been awarded the I a C code metal for the fifth consecutive year.

From the perspective of places, as of the end of the third quarter of 2022 we retained our leading position within the industry with 7,846 stores in total. And the number of net new store openings was 651 in the third quarter of 2022. We believe that China's coffee market has substantial upside potential with significant opportunities and we’re full of confidence in our future expansion in the cities at out years.

Two we believe that China's coffee market has substantial upside potential with significant opportunities in a world full of confidence in our future expansion and the cities at all tiers.

Jinyi Guo: [Foreign Language]

Jinyi Guo: 在咖啡供应链方面，我们与世界领先的咖啡贸易商持续深化战略合作关系，在埃塞俄比亚、哥伦比亚、巴西等全球知名产区大批量采购高品质咖啡豆。瑞幸咖啡已经成为中国最大的咖啡生豆进口商之一。九月份，瑞幸咖啡与厦门建发股份有限公司、三井物产株式会社以及瑞士ECOM集团达成了采购巴西咖啡豆的战略合作意向，并将在巴西驻华大使馆的支持下，持续在巴西进行咖啡产业合作，分享产业理念与行业实践经验，推动咖啡领域合作走向深入。

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Interpreter: In terms of our supply chain, we continue to deepen our strategic cooperation with the world's leading coffee bean traders and purchase high quality coffee beans in large quantities in world renowned origins such as Ethiopia, Colombia and Brazil among others. We have become one of the largest green coffee bean importers in China. In September 2022, we have reached an understanding for strategic cooperation with Xiamen C&D Corporation, Mitsui and ECOM Agro Industry Corporation Limited of Switzerland to purchase Brazilian coffee beans. With the support of the Brazilian embassy, we will continue to carry out cooperation in the coffee industry in Brazil, share ideas and practical experiences and promote the deepening of cooperation in the coffee industry.

Alicia Guo: In terms of our supply chain, we continue to deepen our strategic cooperation with the world's leading coffee bean traders and purchase high quality coffee beans in large quantities in the world's renowned origins such as Ethiopia, Colombia, and Brazil, among others. We have become one of the largest green coffee bean importers in China. In September 2022, we have reached an understanding for strategic cooperation with Xiamen C&D Group Co., Ltd., Mitsui, and ECOM Agroindustrial Corp. Ltd. of Switzerland to purchase Brazilian coffee beans. With the support of the Brazilian embassy, we will continue to carry out cooperation in the coffee industry in Brazil, share ideas and practical experiences, and promote the deepening of cooperation in the coffee industry.

[Translator]: In terms of our supply chain, we continue to deepen our strategic cooperation with the world's leading coffee bean traders and purchase high quality coffee beans in large quantities in the world's renowned origins such as Ethiopia, Colombia, and Brazil, among others. We have become one of the largest green coffee bean importers in China. In September 2022, we have reached an understanding for strategic cooperation with Xiamen C&D Group Co., Ltd., Mitsui, and ECOM Agroindustrial Corp. Ltd. of Switzerland to purchase Brazilian coffee beans. With the support of the Brazilian embassy, we will continue to carry out cooperation in the coffee industry in Brazil, share ideas and practical experiences, and promote the deepening of cooperation in the coffee industry.

The largest of green coffee bean importers in China in September 'twenty 'twenty. Two we have reached an understanding for a strategic cooperation with Xiaomi and C. N D Corporation me to each and E. C. O M Agro industry Corporation limited of spiritual and to purchase Brazilian coffee beans, with the support of.

The Brazilian embassy, we will continue to carry out corporation and a coffee industry in Brazil share ideas and practical experiences and promotes the deepening of corporation in the coffee industry.

Jinyi Guo: [Foreign Language]

Jinyi Guo: 技术是瑞幸咖啡的核心驱动力。在持续强化全面数字化系统建设的同时，我们也非常重视用户个人隐私信息保护和数据安全。五月份，瑞幸咖啡APP已获得移动互联网应用程序安全认证证书，这也是新零售行业和餐饮行业首批获得该认证的企业应用程序。以上呢，就是三季度业绩的主要情况。下面请CFO安靖向大家介绍财务数据。谢谢。

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Interpreter: IT is the core driving force of our business, while continuing to strengthen the construction of a comprehensive digital system we also attach great importance to the protection of users privacy information and data security. In May 2022 Luckin Coffee’s app has obtained the security certification from the China Cybersecurity Review Technology and Certification Center, which is a real milestone as it is the first batch of enterprise apps in the new retail industry and catering industry to obtain this certification.

Alicia Guo: IT is the core driving force of our business. While continuing to strengthen the construction of a comprehensive digital system, we also attach great importance to the protection of users' privacy information and data security. In May 2022, Luckin Coffee's app has obtained the security certification from the China Cybersecurity Review Technology and Certification Center, which is a real milestone as it is the first batch of enterprise apps in the new retail industry and catering industry to obtain this certification. At this time, I would like to turn the call over to Jing An, our CFO, to discuss details related to our financial performance.

[Translator]: IT is the core driving force of our business. While continuing to strengthen the construction of a comprehensive digital system, we also attach great importance to the protection of users' privacy information and data security. In May 2022, Luckin Coffee's app has obtained the security certification from the China Cybersecurity Review Technology and Certification Center, which is a real milestone as it is the first batch of enterprise apps in the new retail industry and catering industry to obtain this certification. At this time, I would like to turn the call over to Jing An, our CFO, to discuss details related to our financial performance.

Certification from the China, Cyber Security review Technology, and certification center, which is a real milestone as it is the first batch of enterprise apps and the new retail industry and cater industry to obtain this certification.

Interpreter: At this time, I would like to turn the call over to An Jing, our CFO to discuss details related to our financial performance.

Jing An: Thank you very much, Jinyi. Good morning, evening, everyone. My name is An Jing, the CFO of Luckin Coffee. This is my first time [indiscernible] all, and it's my honor to be part of the Luckin management team. Although I've joined Luckin for just over three months, I can already see that this is a unique company with a very professional management team and a corporate culture that stands for innovation, transparency, and a determination to succeed, forged under the leadership of Jinyi.

Jing An: Thank you very much, Jinyi. Good morning, evening, everyone. My name is Jing An, the CFO of Luckin Coffee. This is my first time speaking to all and it's my honor to be part of the Luckin management team. Although I've joined Luckin for just over three months, I can already see that this is a unique company with a very professional management team and a corporate culture that stands for innovation, transparency, and a determination to succeed forward under the leadership of Jinyi. I also was able to witness the company's consistent efforts to continuously launch new high-quality products that are suitable for the Chinese customer, optimize the customer experience by providing convenience and affordability, and further enhancing the Luckin brand, which is already one of the most well-liked brands in China, particularly for younger customers.

Owning evening everyone.

My name is unchanged.

Therefore offer logging coffee.

This is my first time to pinch it all and it's been my honor to be part of the Lucky in that management team.

Although ASP joined unlocking for just over three months.

I can already see that this is a unique company with a very professional management team and our corporate culture that extends for innovation transparency and a determination to succeed forged under the leadership of a tea.

Jing An: I also was able to witness the company's consistent efforts to continuously launch new high quality products that is suitable for the Chinese customer, optimize the customer experience by providing convenience and affordability and further enhancing the Luckin brand, which is already one of the most well liked brands in China, particularly for younger customers. Furthermore, after having worked with the finance team, as well as the various operational teams over the last few months, I believe that our teams are very professional, highly capable and they're well integrated. And I'm very excited to try and help bring our finance team and the functions to the next level under my leadership.

<unk> optimize the customer experience by providing convenience.

And affordability and further enhancing the locking brand, which is already one of the most well like the brands in China, particularly for younger customers.

Jing An: Furthermore, after having worked with the finance team as well as the various operational teams over the last few months, I believe that our team is very professional, highly capable, and they're well integrated. I'm very excited to try and help bring our finance team and the functions to the next level under my leadership. I would also like to thank Reinout, our former CFO, and the current CFO, for a very smooth transition and a close cooperation, and look forward to working with the broader team in achieving our common goals and to create long-term shareholder value. Lastly, I'm very much looking forward to developing a dialogue with all of our investors and communicate more with all of you going forward. Next, please allow me to share more color on our Q3 financial performance.

Furthermore.

After having worked with the finance team as well as the ferrous operational teams over the last few months.

I believe that our teams are very professional highly capable and they will integrated.

And I'm very excited to try and help bring our finance teams and functions to the next level and then my leadership.

Jing An: I would also like to thank Reinout, our former CFO and the current CSO for a very smooth transition and the close cooperation. And I look forward to working with a broader team in achieving our common goals and create a long-term shareholder value. Lastly, I'm very much looking forward to developing a dialogue with all of our investors and then communicate more with all of you going forward.

And I look forward to working with the broader team in achieving all of our Oklahoma goes and to create long term shareholder value.

Lastly, and very much looking forward to developing a dialogue.

With all of our investors and then communicate more with all of you going forward.

Jing An: Next, please allow me to share more color on our third quarter financial performance. As Jinyi mentioned earlier, we continue to be impacted by pandemic-related store closures in various cities throughout China during the third quarter. Although the impact was less severe than in previous quarters, it still had a substantial impact on our operating results.

S T. He mentioned earlier.

Jing An: As Jinyi mentioned earlier, we continued to be impacted by pandemic-related store closures in various cities throughout China during Q3. Although the impact was less severe than in previous quarters, it still had a substantial impact on our operating results. As the winter season approached with bouts of COVID-19 cases in recent months, the company experienced around 330 daily store closures on average in September and October 2022. As of the date of this earnings release, the number of daily store closures on average in November 2022 was about 500, and we believe this number may further increase. The lack of visibility from this uncertain and unclear operating environment means we are not providing any forward-looking guidance at this time. We have, however, been able to deliver yet another quarter of outstanding financial and operational results.

But continued to be impacted by pandemic related to store closures in favor cities throughout China during the third quarter.

Although the impact was less severe than in previous quarters.

It is still had a substantial impact on our operating results.

Jing An: As the winter season approached with files of COVID-19 cases in recent months, the company experienced around 330 daily store closures on average in September and October 2022. As of the date of this earnings release, the number of daily store closures on average in November 2022 was about 500 and we believe this number may further increase.

The company experienced around 330 daily store closures on the average in September and October 2022.

As of the date of phase, earning release the number of daily store closures on average in November 2022.

It was about a 500.

And we believe this number may further increase.

Jing An: The lack of visibility from these uncertain and unclear operating environment means we are not providing any forward-looking guidance at this time. We have, however, been able to deliver yet another quarter of outstanding financial and operational results. Let me go through some of the quarterly highlights. We reported RMB3.9 billion of net revenues, an increase of 65.7% compared to the same period last year. Both of our store formats reported a strong top line growth. The net revenue of our self-operated stores reported over 50% year over year growth with SSSG for self-operated stores of close to 20%. Our partnership revenue grew by more than 110% in the third quarter and currently amounts to 23.1% of our total net revenues.

Yes, we are not providing any forward looking guidance at this time.

We have ever been able to deliver yet another quarter of outstanding financial and operational results.

Let me go through some of the quarterly highlights.

Jing An: Let me go through some of the quarterly highlights. We reported RMB 3.9 billion of net revenues, an increase of 65.7% compared to the same period last year. Most of our store formats reported a strong top-line growth. The net revenue of our self-operated stores reported over 50% year-over-year growth, with SSSG for self-operated stores of close to 20%. Our partnership revenue grew by more than 110% in Q3, and currently amounts to 23.1% of our total net revenues. This was the result of a continued progress in customer engagement, of a continued store expansion, and the successful new product launches demonstrated by 25 new flavored SKUs this quarter, including, for example, the Omri Apple Velvet Latte. In terms of our customer engagement, we saw continued growth in transacting customers.

Jing An: We reported RMB3.9 billion of net revenues, an increase of 65.7% compared to the same period last year. Both of our store formats reported a strong top line growth. The net revenue of our self-operated stores reported over 50% year over year growth with SSSG for self-operated stores of close to 20%. Our partnership revenue grew by more than 110% in the third quarter and currently amounts to 23.1% of our total net revenues.

An increase of 65, 7% compared to the same period last year.

First of all of our store formats reported a strong topline grows the net revenue of our self operated stores reported over 50%.

Gross with S. S. S. G. Four self operated stores of close to 20%.

Other partnership revenue grew by more than 110% in the third quarter.

And they're currently amounts to 23, 1% of our total net revenues.

Jing An: This was the result of a continued progress in customer engagement, of a continued store expansion and the successful new product launches, demonstrated by 25 new fairly proven SKU this quarter, including, for example, the Amori Apple, Velvet Latte. In terms of our customer engagement, we saw continued growth in transacting customers. We acquired another $4 million average monthly transaction customers in the quarter and reaches record high of $25 million, an increase of over 70% year on year. And perhaps most notably, as a result of our strong results and the benefits of scale, we recorded an operating profit margin of 15%, which is a further material improvement compared to last year and also last quarter.

Continued store expansion and the successful new product launches.

Most traded by 'twenty five new fairly proved SKU this quarter include.

Including for example, the Henri Apple fill that latte.

Jing An: In terms of our customer engagement, we saw continued growth in transacting customers. We acquired another $4 million average monthly transaction customers in the quarter and reaches record high of $25 million, an increase of over 70% year on year. And perhaps most notably, as a result of our strong results and the benefits of scale, we recorded an operating profit margin of 15%, which is a further material improvement compared to last year and also last quarter.

We saw continued growth in transacting customers.

Jing An: We acquired another 4 million average monthly transacting customers in the quarter, and it reaches a record high of 25 million, an increase of over 70% year-on-year. Perhaps most notably, as a result of our strong results and the benefits of a scale, we recorded an operating profit margin of 15%, which is a further material improvement compared to last year, and also last quarter. We are very pleased with our result, as this clearly demonstrated our strong momentum and overall progress towards achieving our key strategic objectives. In terms of the store growth, we opened 651 net new stores, an acceleration compared to Q2 to meet the ever-growing demand for our products.

We acquired another 4 million average monthly transacting customers in the quarter and the reaches a record high of $25 million, an increase of over 70% year.

And perhaps most notably as a result of our strong results and the benefits of scale.

We recorded an operating profit margin of 15%.

A further material improvement compared to last year and also last quarter.

Jing An: We are very pleased with our result as this clearly demonstrated our strong momentum and overall progress towards achieving our key strategic objectives. In terms of the store growth, we opened 651 net new stores and accelerations compared to the second quarter to meet the ever growing demand for our products. The net new store growth is the strongest since 2020. We now have a nationwide footprint of close to 7,900 stores as of September 30, 2022, which provides us with significant benefit of scale.

As they've clearly demonstrated our strong momentum and overall progress towards achieving our key strategy objective.

In terms of his stock Rose, we opened 651 net new stores.

And that acceleration compared to the second quarter.

To meet the ever growing demand for our products.

And that new store growth is the strongest since 2020.

Jing An: The net new store growth is the strongest since 2020. We now have a nationwide footprint of close to 7,900 stores as of 30 September 2022, which provides us with significant benefit of scale. In terms of the store mix, we opened 405 net new self-operated stores this quarter. For our partnership stores, we opened 246 net new stores and enter into 2 new lower tier cities. This is in line with our strategy of increasing store intensity in tier 1 and 2 cities while rapidly penetrating lower tier cities to further improve store coverage and better meet customer needs. During Q3, we saw a further material improvement in our profitability profile. Specifically, our reported operating margin reached a record high of 15% as a result of our strong results.

We now have a nationwide footprint of <unk>.

Close to 7900 stores as of September 32022.

Which provides us with significant from the benefit of scale.

Jing An: In terms of the store mix, we opened 405 net new self-operated stores this quarter for our partnership stores. We opened 246 net new stores and entered into two new lower tier cities. This is in line with our strategy of increasing store intensity in Tier 1 and 2 cities. We will rapidly penetrate in lower tier cities to further improve store coverage and better meet customer needs. During the third quarter, we saw a further material improvement in our profitability profile. Specifically, our reported operating margin reached a record high of 15% as a result of our strong results, relentless focus on efficiency and a cost of control, as well as benefits of scale.

For our partnership stores.

We opened 246 net new stores and enter into two new lower tier cities.

This is in line with our strategy of increasing store intensity in tier one and two cities.

We are rapidly penetrate in lower tier cities to further improve still coverage.

Better meet our customer needs.

During the third quarter, we saw a further material improvement in all of our profitability profile.

That's exactly our reported operating margin reached a record high of 15% as a result of our strong with us.

Jing An: Relentless focus on efficiency and cost control, as well as benefits of scale. Store level profit margin of self-operated stores continued to stay at a high level close to 30% and a notable improvement compared to the 25% achieved in same period last year. For our partnership stores, we do not disclose any metrics on profitability. However, as can be seen from our partnership store revenue breakdown in the earnings release filed earlier today, revenue contribution from profit sharing, one of the contributors to partnership revenue, and the profit almost double year-on-year to RMB 145 million during the quarter. We see our overhead expenses ratio continued to improve during the quarter. Our general and administrative expenses increased by RMB 62 million year-on-year, which reflects our continuing investments in our business.

And that says the focus on efficiency and cost control after the ASP benefits of scale.

Jing An: Store level profit margin of self-operated stores continued to stay at a high level close to 30% and a notable improvement compared to the 25% achieved in the same period last year. For our partnership stores, we do not disclose any metrics on profitability. However, as can be seen from our partnerships store revenue breakdown in the earnings release filed earlier today. Revenue contribution from profit sharing, one of the contributors of partnership revenue and profit almost doubled year on year to RMB145 million during the quarter. We see our overhead expenses ratio continued to improve during the quarter. Our general and administrative expenses increased by RMB62 million year-on-year, which reflects our continued investments in our business.

For a a partnership stores.

We do not disclose any metrics on profitability.

However, as can be seen from our partnership store revenue breakdown in the earnings release filed earlier today.

Revenue contribution from the profit sharing one of the contributors of our partnership revenue and the profit.

Almost double year on year to RMB 145 million during the quarter.

We see other overhead expenses ratio continued to improve during the quarter.

Our general and administrative expenses increased by RMB 62 million L. Yeah.

Flex offer continued investments in our business.

Jing An: The G&A expenses as a percentage of revenue decreased from 13.7% in Q3 last year to 9.8% this quarter, thanks to the benefit of scale. The sales and marketing expenses ratio is relatively flattish at 4.1% compared with the same period last year, and a slight increase compared to last quarter of three point nine percent. Compared to last year, we spend more on advertising expenses as company continued strategic investment in our branding through various channels. The expenses as related to the fabricated transaction and the restructuring has decreased by RMB 11 million compared with the Q2 since the professional liquidations of the company in the Cayman Islands was completed in H1 2022.

Jing An: The G&A expenses as a percentage of revenue decreased from 13.7% in Q3 last year to 9.8% this quarter. Thanks to the benefit of scale. The sales and marketing expenses threshold is relatively flattish at 4.1% compared with the same period last year and a slight increase compared to last quarter of 3.9% Compared to last year, we spent more on advertising expenses as company continued strategy investment in our branding through various channels. The expenses as related to the fabricated transaction and the restructuring has decreased by RMB11 million compared with the Q2, since the professional liquidations of the company [indiscernible] was completed in the first half of 2022.

To that 0.8% this quarter.

Thanks to the benefit of scale.

The sales and the marketing expenses ratio.

It's a relatively flattish at four 1% compared with the same period of last year, and a slight increase compared to last quarter up three 9%.

Compared to last year, we're spending more on advertising expenses as company continued its strategy investment fundings.

Trending through various channels.

The expenses related to the fabricated transaction.

The restructuring has decreased by RMB 11 mainland.

Compared with the Q2 things the professional liquidation of the company is a camera lens was completed in the first half of 'twenty to 'twenty two.

Jing An: With majority of the company's historical issues being resolved, I believe the expenses related to the fabricated transaction will further decrease over time. During the third quarter, we had a positive operating cash flow of RMB470 million, which included a settlement of payable to equity litigants of RMB385.2 million. If we exclude the payment to equity litigants, the operating cash flow increased to RMB802.1 million in the third quarter of 2022 compared to RMB8.3 million in the same quarter of 2021.

Jing An: With the majority of the company's historical issues being resolved, I believe the expenses related to the fabricated transaction will further decrease over time. During Q3, we had an operating cash flow of RMB +470 million, which included a settlement of payables to equity litigants of RMB 385.2 million. If we exclude the payment to equity litigants, the operating cash flow increased to RMB 802.1 million in Q3 2022, compared to RMB 8.3 million in the same quarter of 2021. In terms of our balance sheet, as of the end of Q3, we had no interest-bearing debts since we have fully redeemed the Series B senior notes for an amount of $110.6 million on 26 August.

I believe like expenses related to the fabricated transaction will further decrease overtime.

During the third quarter.

We had a positive operating cash flow of RMB 470 billion.

It included a settlement of a payable to accurately litigants of RMB $385 2 million.

If I exclude the payment to accurate litigants.

The operating cash flow increased to RMB $802 1 million in the third quarter of 2022.

Compared to RMB eight 3 million in the same quarter after 2021.

Jing An: In terms of our balance sheet, as of the end of the third quarter, we had no interest in bearing debts since we have fully redeemed the senior notes fee for the amount of our $110.6 million U.S. on August 26.

For the month of all U S dollar $110 6 million on August 26.

Jing An: As of September 30, 2022, after payments of the equity litigant settlement and the redemption of note fee, our cash position remains very strong with close to RMB4 billion of cash and cash equivalents. We have a healthy balance sheet and we'll continue to review our liquidity requirements on an ongoing basis to ensure that we can meet all of our business needs and to continue to further optimize our capital structure. I will now turn it over to Jinyi for concluding remarks, followed by Q&A.

Jing An: As of 30 September 2022, after payments of the equity litigants settlement and the redemption of note B, our cash position remains very strong with close to RMB 4 billion of cash and cash equivalents. We have a healthy balance sheet, and we'll continue to review our liquidity requirements on an ongoing basis to ensure that we can meet all of our business needs, and we continue to further optimize our capital structure. I will now turn it over to Jinyi for concluding remarks followed by Q&A.

After payments of the academic it against settlement.

<unk> of note fee.

Of our cash position remains very strong with close to RMB 4 billion of cash and a cash equivalents.

We have a healthy balance sheet.

And we will continue to review all of our liquidity requirements on an ongoing basis to ensure that we can meet all of our business needs.

And they're continuing to further optimize our capital structure.

I'll now turn it over to Jamie.

For concluding remarks, followed by Q&A.

Jinyi Guo: [Foreign Language]

Jinyi Guo: Lastly, I would like to thank all of our stakeholders again for their long-term support of Luckin Coffee. Now we would like to open the floor to questions.

Jinyi Guo: [Foreign Language]

I think that they're losing confidence in Guangzhou Chongqing to ship.

I want to open up on you.

Yeah.

Interpreter: Lastly, I would like to thank all of our stakeholders again for their long term support of Luckin Coffee. Now, we would like to open the floor to questions.

[Translator]: Lastly, I would like to thank all of our stakeholders again for their long-term support of Luckin Coffee. Now we would like to open the floor to questions.

Bill Zima: Ladies and gentlemen, we will now begin the Q&A session. I will now turn the call over to Alicia Guo at Luckin Coffee, who will moderate today's Q&A session.

Operator 2: Ladies and gentlemen, we will now begin the Q&A session. I will now turn the call over to Alicia Guo at Luckin Coffee, who will moderate today's Q&A session.

Operator: Ladies and gentlemen, we will now begin the Q&A session. I will now turn the call over to Alicia Guo at Luckin Coffee, who will moderate today's Q&A session.

Alicia Guo: Thank you. Now we would like to open the floor to questions. The first question.

Alicia Guo: Thank you. Now we would like to open the floor to questions. The first question. Luckin continues to expand its footprint rapidly in Q3. Could you let us know whether the store expansion is within your expectations? Can you provide us with any guidance on your store expansion plans for the next few years?

Alicia Guo: Thank you. Now we would like to open the floor to questions. The first question, Luckin continues to expand its footprint rapidly in the third quarter. Could you let us know whether the store expansion is within your expectations? And can you provide us with any guidance on your store expansion plans for the next few years?

The first question.

Alicia Guo: Luckin continues to expand its footprint rapidly in Q3. Could you let us know whether the store expansion is within your expectations? Can you provide us with any guidance on your store expansion plans for the next few years?

King continues to expand its footprint rapidly in the third quarter could you, let us know whether the store expansion is within your expectations and can you provide us with any guidance on your store expansion plans for the next few years.

Jinyi Guo: 感谢提问。根据行业公开信息，瑞幸已经成为中国门店数量最多的连锁咖啡品牌之一。截至三季度，我们共计拥有门店7,846家，覆盖超过230个城市。净增651家，增长速度符合预期。从新增门店构成看，自营门店405家，主要集中在一二线城市。联营门店246家，主要覆盖低线城市。两种模式高度互补。过去两年，我们构建了一套行业领先的数字化选址和门店拓展管理系统。经过系统分析和研判，我们认为，无论是一二线城市还是低线城市，能够达到瑞幸选址要求的可选位置仍然非常多，市场空间远远没有达到饱和。并且随着中国咖啡消费的加速普及推广，开店数量的空间还在持续扩大，我们对未来的门店拓展充满了信心。今年所表现出来的开店速度对瑞幸来说只是一项基础能力。我们会密切关注市场变化，持续保持有强大竞争力的开店节奏，不断提高瑞幸咖啡的门店覆盖密度，更好地满足消费者需求。另外，对于联营门店，我们将在今年的12月份放开新一轮下沉市场联营合伙人名额，也欢迎大家关注我们的官方信息。谢谢。

Jinyi Guo: [Foreign Language]

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What you don't finish if William Pate, one was in the what was the yard Samsung Sir how.

How should these young ship mingle with other regional trends it goes without question on Belgium.

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Interpreter: Thank you for your question. Based on publicly available information, Luckin Coffee has become one of the largest coffee chain brands in China in terms of store counts. As of the end of the third quarter, we had 7,846 stores in total, covering over 230 cities with 651 stores newly opened during the third quarter. This growth is in line with our expectation. Our two store models are highly complementary to each other, with the newly opened 405 self-operated stores mainly operated in Tier 1 and Tier 2 cities, while the newly opened 246 partnership stores mainly operated in lower tier cities.

Alicia Guo: Thank you for your question. Based on publicly available information, Luckin Coffee has become one of the largest coffee chain brands in China in terms of store counts. As of the end of Q3, we had 7,846 stores in total, covering over 230 cities with 651 stores newly opened during Q3. This growth is in line with our expectation. Our two store models are highly complementary to each other, with the newly opened 405 self-operated stores mainly operated in Tier 1 and Tier 2 cities, while the newly opened 246 partnership stores mainly operated in lower-tier cities. In the past two years, we have built an industry-leading digital site selection and store expansion management system.

[Translator]: Thank you for your question. Based on publicly available information, Luckin Coffee has become one of the largest coffee chain brands in China in terms of store counts. As of the end of Q3, we had 7,846 stores in total, covering over 230 cities with 651 stores newly opened during Q3. This growth is in line with our expectation. Our two store models are highly complementary to each other, with the newly opened 405 self-operated stores mainly operated in Tier 1 and Tier 2 cities, while the newly opened 246 partnership stores mainly operated in lower-tier cities. In the past two years, we have built an industry-leading digital site selection and store expansion management system.

As of the end of the third quarter, we had 7846 stores in total covering over 230 cities with 651 stores newly opened during the third quarter.

This growth is in line with our expectations are to store models are highly complementary to each other but the newly opened 405 self operated stores, mainly operated in tier one and tier two cities, while the newly opened 246 partnership stories, mainly operate in lower tier cities.

Interpreter: In the past two years, we have built an industry leading digital site selection and store expansion management system. Based on our analysis, we believe there are still plenty of locations in both higher tier and lower tier cities that meet our site selection requirements. And the market is far from being saturated. And we believe the China's coffee market size will further expand, driven by the accelerated promotion of coffee consumption. And we're confident of our future store expansion.

Alicia Guo: Based on our analysis, we believe there are still plenty of locations in both higher tier and lower tier cities that meet our site selection requirements. The market is far from being saturated. We believe China's coffee market size will further expand, driven by the accelerated promotion of coffee consumption. We're confident of our future store expansion. The pace of our store opening this year well demonstrated our ability to expand, and we will closely monitor the relevant developments in the market, maintain a strong and competitive expanding pace of store openings to further increase our presence and better meet consumer needs. Regarding the partnership store model, we will reopen the recruiting channel for partners in lower tier cities from this December. Please stay tuned for further official announcements. Thank you, Dr. Guo. Let's move on to the next question.

[Translator]: Based on our analysis, we believe there are still plenty of locations in both higher tier and lower tier cities that meet our site selection requirements. The market is far from being saturated. We believe China's coffee market size will further expand, driven by the accelerated promotion of coffee consumption. We're confident of our future store expansion. The pace of our store opening this year well demonstrated our ability to expand, and we will closely monitor the relevant developments in the market, maintain a strong and competitive expanding pace of store openings to further increase our presence and better meet consumer needs. Regarding the partnership store model, we will reopen the recruiting channel for partners in lower tier cities from this December. Please stay tuned for further official announcements.

Based on our analysis, we believe there are still plenty of locations in both higher tier and lower tier cities that meet our site selection requirements and the market is far from being saturated.

And we believe the China's coffee market size will further expand driven by the accelerated promotion of coffee consumption.

And we're confident of our future store expansion.

Interpreter: The pace of our store opening this year well demonstrated our ability to expand and we will closely monitor the relevant developments in the market. Maintain a strong and competitive expanding pace of store openings to further increase our presence and better meet consumer needs. Regarding the partnership store model, we will reopen the recruiting channel for partners in lower tier cities from this December. Please stay tuned for further official announcements.

Maintaining a strong and competitive extending pace of store openings to further increase our presence and better meet consumer needs.

Regarding the partnership store model, we will reopen their recruiting channel for partners in lower tier cities from this December please stay tuned for further official announcements.

Alicia Guo: Thank you, Dr. Guo. Let's move on to the next question. In the second quarter of 2022, Luckin has announced the launching of the sustainability development strategy. And recently, the corporate governance report has been issued. Why company decided to start to focus on the sustainability develop at current time point? And what does this mean to the company? Also, could you please share more color on the corporate governance report?

Alicia Guo: Thank you, Dr. Guo. Let's move on to the next question. In Q2 2022, Luckin has announced the launching of the sustainable development strategy, and recently the corporate governance report has been issued. Why did the company decide to start to focus on the sustainable development at current time point? What does this mean to the company? Also, could you please share more color on the corporate governance report?

Alicia Guo: In Q2 2022, Luckin has announced the launching of the sustainable development strategy, and recently the corporate governance report has been issued. Why did the company decide to start to focus on the sustainable development at current time point? What does this mean to the company? Also, could you please share more color on the corporate governance report?

In the second quarter of 2022, lacking has announced their launching of the sustainability development strategy and originally the corporate governance report has been issued why company decided to start to focus on the sustainability development at current time point and what does this mean to the company also could you. Please.

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Jinyi Guo: [Foreign Language]

Jinyi Guo: 感谢提问。今年是瑞幸咖啡创立五周年。七月份经董事会批准，瑞幸可持续发展委员会正式成立，这标志着可持续发展战略的正式启动，也代表着我们更着眼未来，追求长期价值，积极主动地承担社会责任。在过去四个多月的时间里，我们完成了可持续发展架构的系统性建设，树立了业务与可持续发展高度协同的价值导向。近期，我们将完成瑞幸的首次利益关联方调研工作，广泛听取消费者、供应商、员工、伙伴、股东、监管机构以及行业与媒体朋友的建议，加快建立科学全面的可持续发展策略。作为战略的落地，这份报告选择从公司治理入手，是因为创建可持续商业模式的前提是公司治理，这也是承担环境与社会责任的起点和坚实基础。报告以瑞幸五大价值观：求真务实、品质至上、持续创新、非我莫属和互信共赢为篇章，阐述了我们在过去两年多的时间里，在全新的价值观引领下，主动承担责任，完成历史切割，重塑价值体系，优化治理结构，并通过内控强化

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Alicia Guo: Thank you for your question. This year marks the fifth anniversary of Luckin Coffee. In July 2022, with the approval of our board of directors, the Sustainable Development Committee was formally established. This marks the official launch of our sustainable development strategy, and it also means that going forward, we'll pursue long-term value and will more proactively address social responsibility. In the past four months, we have systematically constructed our sustainable development governance structure, forming the value orientation of high degree of synergy between business growth and sustainability. We're now gathering suggestions from all stakeholders, including consumers, suppliers, employees, and partners, shareholders, regulators, and friends from industry and media by conducting a survey, which is estimated to be completed in the near future. We believe this will help us establish our sustainable development strategy in a more constructive and comprehensive way.

When we see them on somewhat of a bogo jumped out I can tell you Oh Gee accretion GW now yes. Shimon installation that see that she's doing post sanction pad, which is awful. <unk> could you just find out <unk> told me, while I'm CFO Coca Cola Hawkeye Dr. So of embargo Jones, whom we usually coffee quad, who father he did want tons all conform court judges that were. What it was in carpet sushi coaches Alba, Jeff AGA, Sasha can answer that. Thank you.

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Thank you.

Interpreter: Thank you for your question. This year marks the fifth anniversary of Luckin Coffee. In July 2022 with the approval of our Board of Directors, The Sustainable Development Committee was formally established. This marks the official launch of our Sustainable Development Strategy and it also means that going forward, we'll pursue long term value and we'll more proactively address social responsibility.

[Translator]: Thank you for your question. This year marks the fifth anniversary of Luckin Coffee. In July 2022, with the approval of our board of directors, the Sustainable Development Committee was formally established. This marks the official launch of our sustainable development strategy, and it also means that going forward, we'll pursue long-term value and will more proactively address social responsibility. In the past four months, we have systematically constructed our sustainable development governance structure, forming the value orientation of high degree of synergy between business growth and sustainability. We're now gathering suggestions from all stakeholders, including consumers, suppliers, employees, and partners, shareholders, regulators, and friends from industry and media by conducting a survey, which is estimated to be completed in the near future. We believe this will help us establish our sustainable development strategy in a more constructive and comprehensive way.

This marks the official launch of our sustainable development strategy and it also means that going forward, we will pursue long term value and well more proactively address social responsibility.

Interpreter: In the past four months, we have systematically constructed our sustainable development governance structure, forming the value orientation of high degree of synergy between business growth and sustainability. We're now gathering suggestions from all stakeholders, including consumers, suppliers, employees and partners, shareholders, regulators, and friends from industry and media by conducting a survey, which is estimated to be completed in the near future. We believe this will help us establish our sustainable development strategy in a more constructive and comprehensive way.

<unk> shareholders regulators and friends from industry and media by conducting a survey, which is estimated to be completed in the near future. We believe this will help us establish our sustainable development strategy and a more constructive and comprehensive way.

Alicia Guo: We choose to start with corporate governance because we believe a sound corporate governance is not only the precondition to building a sustainable business model, but a good starting point and solid foundation for carrying out environmental and social responsibility. Our corporate governance report consists of five parts based on our core values, namely integrity, craftsmanship, innovation, ownership, and cooperation. This report gives a thoughtful review of our journey over the past two years to get back on track, and the efforts we have made in taking responsibility led by our new core values. By fully resolving the historical problem, reshaping our corporate culture and values, optimizing our governance structure, implementing a strategy of enhancing internal control and empowering technology, continuously enhancing talent development, and incentive mechanism.

[Translator]: We choose to start with corporate governance because we believe a sound corporate governance is not only the precondition to building a sustainable business model, but a good starting point and solid foundation for carrying out environmental and social responsibility. Our corporate governance report consists of five parts based on our core values, namely integrity, craftsmanship, innovation, ownership, and cooperation. This report gives a thoughtful review of our journey over the past two years to get back on track, and the efforts we have made in taking responsibility led by our new core values. By fully resolving the historical problem, reshaping our corporate culture and values, optimizing our governance structure, implementing a strategy of enhancing internal control and empowering technology, continuously enhancing talent development, and incentive mechanism.

Interpreter: We choose to start with corporate governance, because we believe a sound corporate governance is not only the precondition to building a sustainable business model, but a good starting point and solid foundation for carrying out environmental and social responsibility. Our corporate governance report consists of five parts based on our core values, namely, integrity, craftsmanship, innovation, ownership and corporation. This report gives a thoughtful review of our journey over the past two years to get back on track and the efforts we have made in taking responsibility, led by our new core values. By fully resolving the historical problem, reshaping our corporate culture and values, optimizing our governance structure, implementing a strategy of enhancing internal control and empowering technology continuously, enhancing talent development and incentive mechanism.

Our corporate governance report consists of five parts based on our core values, namely integrity craftsmanship innovation ownership and incorporation.

This report gives a thoughtful review of our journey over the past two years to get back on track and the efforts we have made in taking responsibility.

By our new core values.

By fully resolving the historical problem reshaping, our corporate culture and values optimizing our governance structure.

Implementing a strategy of enhancing internal control and empowering technology continuously enhancing talent development and incentive mechanism I.

Alicia Guo: I hope this report can help all of you to better understand our positive changes, and we would like to take this as a new starting point to remain prudent and pragmatic, to promote our sustainable development work in a transparent, virtuous, and scientific manner. This report is an important cornerstone for Luckin Coffee to enter a new stage of sustainable development and create broader value and lay a solid foundation for our continued high quality and sustainable development. Thank you, Dr. Guo. The next question is: what are the main factors driving your SSSG growth in Q3? How much of this is the result from the introduction of new products, and is that sustainable? How should we think about your store capacity? Is there a limit to how far we can further increase items sold per store per day? How should we think about that?

[Translator]: I hope this report can help all of you to better understand our positive changes, and we would like to take this as a new starting point to remain prudent and pragmatic, to promote our sustainable development work in a transparent, virtuous, and scientific manner. This report is an important cornerstone for Luckin Coffee to enter a new stage of sustainable development and create broader value and lay a solid foundation for our continued high quality and sustainable development.

Interpreter: I hope this report can help all of you to better understand our positive changes. And we would like to take this as a new starting point to remain prudent and pragmatic to promote our sustainable development work in a transparent, virtuous, and scientific manner. This report is an important cornerstone for Luckin Coffee to enter a new stage of sustainable development and create broader value and lay a solid foundation for our continued high quality and sustainable development.

And we would like to take this as a new starting point to remain prudent and pragmatic to promote our sustainable development work in a transparent virtuous and scientific manner.

This report is an important cornerstone for locking coffee to enter a new stage of sustainable development and create broader value and lay a solid foundation for our continued high quality and sustainable development.

Alicia Guo: Thank you, Dr. Guo. The next question is, what are the main factors driving your SSSG growth in the third quarter? How much of this is the result from the introduction of new products? And is that sustainable? How should we think about your store capacity? Is there a limit to how far we can further increase items sold per store per day? And how should we think about that?

Alicia Guo: Thank you, Dr. Guo. The next question is: what are the main factors driving your SSSG growth in Q3? How much of this is the result from the introduction of new products, and is that sustainable? How should we think about your store capacity? Is there a limit to how far we can further increase items sold per store per day? How should we think about that?

Items sold per store per day, and how should we think about that.

Jing An: Thank you for the questions. We anticipated a further normalization of SSSG for self-operated store compared to the last six quarters. I would expect that trend to continue going forward. The key driver of the items sold per store per day included an incremental sales from the launch of new products and ongoing strong performance of our blockbuster products. In Q3, we have launched a series of new products such as Amare Apple Velvet Latte, which have sold 2.2 million cups within the first week since launch. Our ongoing blockbuster products such as Raw Coconut Latte, Coconut Milk Latte, Coconut Cloud Latte, etc., continue to rank in the top 10 of the best-selling products, contribute substantially to sales, and enhance the branding power from increasing store presence and marketing initiatives.

Jing An: Thank you for the questions. We anticipated that further normalization of SSSG for self-operated store compared to the last six quarters. And I would expect that trend to continue going forward. The key driver of the items sold per store per day included an incremental sales from the launch of new products and ongoing strong performance of our blockbuster products.

We anticipated a further normalization of a S. S. S. G for our self operated a store compared to the last six quarters.

And I would have expected that trend to continue going forward.

The key driver of the items sold per store per day included in.

Incremental sales from the launch of new products and ongoing strong performance of our blockbuster products.

Jing An: In Q3, we have launched a series of new products such as Amori Apple, Velvet Latte, which have sold 2.2 million cups within the first week since launch. Our ongoing blockbuster product such as the newer latte, Coconut Milk Latte, Coconut Cloud Latte, et cetera, continue to rank in the top ten of the best-selling products and contribute substantially to sales and enhanced the branding power from increasing store presence and marketing initiatives.

We have launched a series of new products, such as Amani alcohol well Lucky.

We have sold 2.2 million covered lives in the first week since launch.

Over ongoing blockbusters products, such as our newer latte.

Coco not the new lot tea cocoa, another club Lockheed et cetera continue to rank in the top 10 of the best selling products.

The contribute substantially to sales.

And he has some burning power from the increase in store presence and our marketing initiatives.

Jing An: As coffee become essential to more and more Chinese customers, we gradually experience the benefits of scale and the strengths of our brand as we open more store nationwide. And in terms of the selling of the items sold per store per day, it basically depends on the store efficiency and the traffic. Our overall goal is to satisfy all the needs from customers, the store efficiency and our IT facilities and system [indiscernible] will help us to continually optimize and standardize the operation and increase the efficiency.

Jing An: As coffee become essential to more and more Chinese customers, we gradually experience the benefits of scale, and the strength of our brand as we open more store nationwide. In terms of the selling of the items sold per store per day, it basically depends on the store efficiency and the traffic. Our overall goal is to satisfy all the need from customers. The store efficiency and our IT facilities and system attestation will help us to continually optimize and standardize the operation and increase the efficiency. The traffic, as our footprint covered more area and our brand awareness keeping strengthening, we will attract more customers in the future. In terms of pricing strategy, our affordability proposition is an important differentiator.

We gradually experience the benefits of our scale.

And then the strengths of our brand as we open more store national wide.

And in terms of the setting of items sold per store per day.

And it is basically it depends how the store efficiency and of the traffic.

Our overall goal is to satisfy all the needs from customers the store efficiency.

And all of our facilities and our system without taxation will help us to continually optimize and standardize the operation.

And increases in efficiency.

Jing An: The traffic, as our footprint covered more area and our brand awareness keeps strengthening, we will attract more customers in the future. In terms of pricing strategy, our affordability proposition is an important differentiator. We are profitable at this price as demonstrated by our store level margins during the third quarter and do not anticipate any major changes in our pricing strategy.

As our sort of trying to cover the war every year and all of our brand awareness keeping strengthening we will attract more customers in the future.

In terms of our pricing strategy over a photo ability proposition is an important differentiator.

We are profitable as the surprise a stimulus traded by our store level margins during the third quarter.

Jing An: We are profitable at this price, as demonstrated by our store level margins during Q3, and do not anticipate any major changes in our pricing strategy.

And do not anticipate any major changes in all of our pricing strategy.

Alicia Guo: Thank you, Jing An. The next question is: the average monthly transaction customers reached over 25 million in Q3, a notable increase compared to last year and also last quarter. What are the key drivers behind this, and what is your strategy both for attracting new customers and retaining existing customers going forward?

Alicia Guo: Thank you, Ms. An. The next question is, the average monthly transaction customers reached over 25 million in the third quarter, a notable increase compared to last year and also last quarter. What are the key drivers behind this? And what is your strategy, both for attracting new customers and retaining existing customers going forward?

Jing An: Thank you for the question. I believe this is due to our scale. This quarter we newly opened 651 stores and entered into two new cities, which enabled us to reach to the new customers in the new markets out there and fulfill their needs. There's a strength of our products, professional, and a good taste. In Q3, we have launched a series of popular products and like Asia SOE series, which is also the important driver of the new customers. At the same time, our ongoing blockbuster products continue perform well, which plays a critical role in helping us retain the customers. And actually, these popular products have already been featured as the basic menu of the customer in long term of our branding power.

Jing An: Thank you for the question. I believe this is due to our scale. This quarter, we newly opened 651 stores and entered into 2 new cities, which enabled us to reach to the new customers in the new markets area and fulfill their needs. There's a strength of our products, professional and the good taste. In Q3, we have launched a series of popular products and the Geisha SOE series, which is also the important driver of the new customers. At the same time, our ongoing blockbuster products continue to perform well, which plays a critical role in helping us retain the customers. Actually, those popular products have already been featured as the basic menu of the customer in long term, of our branding powers.

Our scale.

This corner, we annuity all patent the 651 stores.

And entered into two new cities.

Which enabled us to reach to the new customers in the new markets are there and fulfill their needs.

And there's a chance off all of our products professional and they're good taste.

In Q3, we have launched our fears of a park popular for dogs and does that geisha S. E cigarettes, which is also the important driver of the new customers.

Jing An: At the same time, our ongoing blockbuster products continue perform well, which plays a critical role in helping us retain the customers. And actually, these popular products have already been featured as the basic menu of the customer in long term of our branding power.

Which play a critical role in helping us reach tens of customers.

Actually this popular products that have already been a few dare to ask the basic value of the customary and long term.

Our branding powers, Inc.

Jing An: In Q3, we have launched some marketing initiatives along with the new products and the new packaging, such as the Chinese Valentine's Day and the first cup of coffee in autumn. Those topics are popular among the young generation, and attracted them to try our new product. Our tech team refined the customer operation, which also played an important role in retaining the existing customer. Empowered by the technology, we could better understand the customer needs and have a more efficient and accurate interactions and communication with customers without bothering them. In addition, our CNY 9.9 coffee initiative in Shanghai also helped to reactivate the existing customers and drives the increasing in the number of new customers. In the long run, we will continue our marketing strategy with the idea of living young, looking old.

Jing An: In Q3, we have launched some marketing initiatives along with the new projects and new packaging such as the Chinese Valentine's Day and the first cup of coffee in autumn. And those topics are popular among the young generation and they attracted them to try our new product and other textures and refine the customer operation, which also played an important role in retaining the existing customer. Empowered by the technology, we could better understand the customer needs and have a more efficient and accurate interactions and communication with customers without bothering them.

Such as the Chinese Valentine's day.

And the first Chicago for coffee in autumn.

And those topics are popular among the young generation and attracted them to try our new project.

Other textures and refined customer operation.

Which also played an important role in returning the existing customer.

Empowered by the technology.

To better understand our customer needs.

And have a more efficient and accurate interactions and our communications with touch Amish are without bothering them.

Jing An: In addition, our RMB9.9 coffee initiative in Shanghai also help to reactivate the existing customers and drive the increase in the number of new customers. In the long run, we will continue our marketing strategy with the idea of living young, Luckin hold, using different marketing and the branding initiatives to build our brand as the representative of a professional, young, fashion and awareness. Covering the good quality coffee with creativity, the young customer favored, embracing the young generation and gradually building their brand loyalty.

Also help to really activate to the existing customers and that drives the increase in the number of new customers.

Yeah.

In the long run we will continue our marketing strategy with the idea of a living y'all logging all.

Jing An: Using different marketing and the branding initiatives to build our brand as the representative of a professional, young, fashion, and awareness. Combining the good quality coffee with the creativity the young customer favored, embracing the young generation, and gradually building their brand loyalty.

Using different in marketing and our friend and initiatives to build all of our friend as the representative of a professional <unk> session and awareness.

Harming the good quality coffee.

So creativity at the young customer favored embraced.

Embracing the young generation and gradually building their brand loyalty.

Alicia Guo: Thank you, Jing An. The last question is: can you please give us an update on the overall status of the restructuring and the overall capital market strategy? Any further relevant developments? Also, noticed that you early repaid the outstanding debt. Why did you decide to do that?

Alicia Guo: Thank you, Ms. An. The last question is, can you please give us an update on the overall status of the restructuring and the overall capital market strategy? Any further relevant developments? Also, I notice that you early repaid the outstanding debt. Why did you decide to do that?

Reinout Schakel: Thanks for your question, and I'm happy to take this opportunity today to address that to the extent I can. As mentioned in our Q2 earnings call, the provisional liquidation of the company in the Cayman Islands was completed in H1 2022, and we reported that we had made substantial progress in resolving the outstanding US securities litigation, including receiving final approval of the $175 million settlement of the federal class action. I am pleased to be able to share some additional information today regarding our progress on the remaining US securities litigation. Firstly, on 7 October 2022, the New York State court preliminarily approved a $7 million settlement with a class of investors who purchased our January 2020 convertible bonds, but were not included as creditors in our Cayman scheme.

As mentioned in our Q2 earnings call the visual liquidation of the company and the Cayman Islands was completed in the first half of 2022, and we reported that we have made substantial progress in resolving the outstanding U S Securities litigation, including receiving final approval of the 175 million dollar sediments of the federal class action.

Reinout Schakel: I am pleased to be able to share some additional information today regarding our progress on the remaining U.S. securities litigation. Firstly, on October 7, 2022, the New York State Core preliminary approved a $7 million settlement with a class of investors who purchased our January 2020 convertible bonds, but were not included as creditors in our Cayman scheme. The settlement is still contingent upon final approval of the court and we expect the court to hold a hearing on final approval in Q1 2023.

Firstly on October seven 2022, the New York State Court preliminary approved a $7 million settlement with the class of investors, who purchased our January 2020 convertible bonds, but were not included this creditors in our Cayman scheme.

Reinout Schakel: The settlement is still contingent upon final approval of the court, and we expect the court to hold a hearing on final approval in Q1 2023. Secondly, there were three securities lawsuits filed by investors in our ADS who opted out of the federal class settlement. We have reached agreement to resolve all three actions. One of the actions has already been dismissed pursuant to the terms of the settlement, and we expect the other two to be dismissed upon the company's satisfaction of the terms of those settlements, which should occur in Q4 2022, and Q1 2023. Finally, we currently expect that all lawsuits filed due to our historical accounting issues will be dismissed by the end of Q1 2023. Now, let me turn to the repayment of our debts, the key rationale.

The sentiment is still contingent upon final approval of the court and we expect the core to hold a hearing on final approval in Q1 2023.

Reinout Schakel: Secondly, there were three securities lawsuits filed by investors in our ADS, who opted out of the Federal Class settlement. We have reached agreements to resolve all three actions. One of the actions has already been dismissed, pursuant to the terms of the settlement and we expect the other two to be dismissed on the company's satisfaction of the terms of those settlements, which should occur in Q4, 2022 and Q1 2023. Finally, we currently expect that all lawsuits filed due to our historical accounting issues will be dismissed by the end of Q1 2023. But let me turn to the repayment of our debt, the key rationale. On August 26, we announced a full redemption of our only outstanding offshore debt securities of $109.9 million dollars of 9% Series B senior secured notes due 2027. A key reason is for the early redemption. First and foremost, to optimize our capital structure. We have a very healthy liquidity position, a business that is profitable and generate substantial free cash flow, while the debt was relatively expensive at 9% interest. From a corporate finance perspective, it was therefore a relatively easy decision for the company.

One of the actions have already been dismissed pursuant to the terms of the settlement and we expect the attitude to be dismissed from the company's satisfaction of the terms of those settlements, which should occur in Q4 2022 in Q1 'twenty two 'twenty three.

Finally, we currently expect that all lawsuits filed due to our historical accounting issues will be dismissed by the end of Q1 2023. Now, let me turn to the repayment of our debt the key rationale. On August 26, we announced the full redemption of our only outstanding offshore debt securities of $109 9 million U S dollars of 9% series B Senior secured notes due 2027 are.

Now, let me turn to the repayment of our debt the key rationale.

Reinout Schakel: On 26 August, we announced the full redemption of our only outstanding offshore debt securities of $109.9 million 9% Series B senior secured notes due 2027. A key reason for the early redemption first and foremost to optimize our capital structure. We have a very healthy liquidity position, a business that is profitable and generates substantial free cash flow, while the debt was relatively expensive at 9% interest. From a corporate finance perspective, it was therefore a relatively easy decision for the company. Secondly, the early redemption means the company has currently no offshore debt obligations, which provides us with additional operational flexibility. Lastly, it allowed us to return fully back to normal by terminating the role of the scheme supervisors as defined under the restructuring support agreement.

On August 26, we announced the full redemption of our only outstanding offshore debt securities of $109 9 million U S dollars of 9% series B Senior secured notes due 2027 are.

A key reason for the early redemption.

And foremost to optimize our capital structure, we have a very healthy liquidity position a business that is profitable and generate substantial free cash flow, while the debt was relatively expensive at 9% interest.

From a corporate finance perspective, it was therefore, a relatively easy decision for the company.

Reinout Schakel: Secondly, the early redemption means the company has currently no offshore debt obligations, which provides us with additional operational flexibility. And lastly, it allowed us to return fully back to normal by terminating the role of the scheme supervisors as defined under the restructuring support agreement.

And lastly, it allowed us to return fully back to normal by terminating the wall of the scheme supervisors as defined under the restructuring support agreement.

Reinout Schakel: Now my answer to the capital market strategy question is consistent with my previous response. The priority for us is providing sustainable long-term value for our shareholders by executing on our business strategies, by delivering outstanding products and services to our customers, maintaining strong internal controls over our financial reporting, to ensure we operate with the highest level of integrity and expand our ESG efforts. We remain committed to the U.S. capital markets and are closely monitoring all relevant developments and take actions we believe are in the best interest of the company and all our stakeholders. We will share further updates if and when appropriate.

Reinout Schakel: Now, my answer to the capital market strategy question is consistent with my previous response. The priority for us is providing sustainable long-term value for our shareholders by executing on our business strategies, by delivering outstanding products and services to our customers, maintaining strong internal controls over our financial reporting to ensure we operate with the highest level of integrity, and expand our ESG efforts. We remain committed to the US capital markets and are closely monitoring all relevant developments and take actions we believe are in the best interest of the company and all our stakeholders. We will share further updates if and when appropriate.

The priority for us is to providing sustainable long term value for our shareholders by executing on our business strategies by delivering outstanding products and services to our customers maintaining strong internal controls over financial reporting to ensure we operate with the highest level of integrity and expand our ESG efforts, we remain committed to the U S cable.

The markets and are closely monitoring all relevant developments and take actions. We believe are in the best interest of the company and all our stakeholders. We will we will share further updates if and when appropriate.

Alicia Guo: Thank you, Dr. Guo, Jing An, and Reinout. This is all the time we have for today's earnings conference call. We thank you for your participation on today's call. We look forward to providing you with regular business updates and look forward to speaking with you again next quarter.

Multiple speakers: [Alicia Guo] Thank you, Dr. Guo, Ms. An, and Reinout. This is all the time we have for today's earnings conference call. We thank you for your participation on today's call. We look forward to providing you with regular business updates and look forward to speaking with you again next quarter. [Bill Zima] This concludes our call today. You may now disconnect.

Operator 2: This concludes our call today. You may now disconnect.

Operator: This concludes our call today. You may now disconnect.

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Q3 2022 Luckin Coffee Inc Earnings Call

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