Luckin Coffee Inc. Announces Second Quarter 2023 Financial Results

By: Alexis Rubinstein, Managing Editor - Coffee Network

Wed, 02 Aug 2023, 11:30

Alexis Rubinstein

Managing Editor

CoffeeNetwork (New York) - Luckin Coffee Inc. (“Luckin Coffee” or the “Company”) (OTC: LKNCY) today announced its unaudited financial results for the three months ended June 30, 2023.

SECOND QUARTER 2023 HIGHLIGHTS

• Total net revenues in the second quarter were RMB6,201.4 million (US$855.2 million), representing an increase of 88.0% from RMB3,298.7 million in the same quarter of 2022.

• Net new store openings during the second quarter was 1,485, including five new store openings in Singapore, resulting in a quarter-over-quarter store unit growth of 15.9% from the number of stores at the end of the first quarter of 2023, ending the second quarter with 10,836 stores which include 7,188 self-operated stores and 3,648 partnership stores.

• Average monthly transacting customers in the second quarter was 43.1 million, representing an increase of 107.9% from 20.7 million in the same quarter of 2022.

• Revenues from self-operated stores2 in the second quarter were RMB4,495.3 million (US$619.9 million), representing an increase of 85.2% from RMB2,427.0 million in the same quarter of 2022.

• Same-store sales growth for self-operated stores in the second quarter was 20.8%, compared to 41.2% in the same quarter of 2022.

• Store level operating profit – self-operated stores2 in the second quarter was RMB1,307.5 million (US$180.3 million) with store level operating profit margin of 29.1%, compared to RMB689.8 million with store level operating profit margin of 28.4% in the same quarter of 2022.

• Revenues from partnership stores in the second quarter were RMB1,485.8 million (US$204.9 million), representing an increase of 91.1% from RMB777.5 million in the same quarter of 2022.

• GAAP operating income in the second quarter was RMB1,172.8 million (US$161.7 million), representing a GAAP operating income margin of 18.9%, compared to RMB241.6 million, or a GAAP operating income margin of 7.3%, in the same quarter of 2022. Non-GAAP operating income in the second quarter, which adjusts for share-based compensation expenses, was RMB1,236.3 million (US$170.5 million), representing a non-GAAP operating income margin of 19.9%, compared to RMB342.6 million, or a non-GAAP operating income margin of 10.4%, in the same quarter of 2022, which illustrates a significant improvement of operating results.

SECOND QUARTER 2023 FINANCIAL RESULTS

• Total net revenues were RMB6,201.4 million (US$855.2 million) in the second quarter of 2023, representing an increase of 88.0% from RMB3,298.7 million in the same quarter of 2022. Net revenues growth was primarily driven by the increase in the number of products sold, the increase in stores in operation and the increase in the number of monthly transacting customers.

• Revenues from product sales were RMB4,715.6 million (US$650.3 million) in the second quarter of 2023, representing an increase of 87.0% from RMB2,521.2 million in the same quarter of 2022.

• Net revenues from freshly brewed drinks were RMB4,235.0 million (US$584.0 million), representing 68.2% of total net revenues in the second quarter of 2023, compared to RMB2,256.8 million, representing 68.4% of total net revenues, in the same quarter of 2022.

• Net revenues from other products were RMB325.7 million (US$44.9 million), representing 5.3% of total net revenues in the second quarter of 2023, compared to RMB148.4 million, representing 4.5% of total net revenues, in the same quarter of 2022.

• Net revenues from others were RMB154.9 million (US$21.4 million), representing 2.5% of total net revenues in the second quarter of 2023, compared to RMB116.0 million, representing 3.5% of total net revenues, in the same quarter of 2022.

• Revenues from partnership stores were RMB1,485.8 million (US$204.9 million), representing 24.0% of total net revenues in the second quarter of 2023, which represents an increase of 91.1% compared to RMB777.5 million, representing 23.6% of total net revenues, in the same quarter of 2022. For the second quarter of 2023, revenues from partnership stores included sales of materials of RMB968.9 million (US$133.6 million), profit sharing of RMB197.1 million (US$27.2 million), sales of equipment of RMB185.6 million (US$25.6 million), delivery service of RMB123.3 million (US$17.0 million) and other services of RMB10.9 million (US$1.5 million).

• Total operating expenses were RMB5,028.6 million (US$693.5 million) in the second quarter of 2023, representing an increase of 64.5% from RMB3,057.1 million in the same quarter of 2022. The increase in total operating expenses was predominantly the result of the Company’s business expansion. Meanwhile, operating expenses as a percentage of net revenues decreased to 81.1% in the second quarter of 2023 from 92.7% in the same quarter of 2022, due to increased economies of scale and the Company’s technology-driven operations.

• Cost of materials were RMB2,461.5 million (US$339.5 million) in the second quarter of 2023, representing an increase of 95.1% from RMB1,261.9 million in the same quarter of 2022, which was generally in line with the increase in the number of products sold and the increase in sales of materials to partnership stores.

• Depreciation and amortization expenses were RMB127.7 million (US$17.6 million) in the second quarter of 2023, representing an increase of 31.4% from RMB97.2 million in the same quarter of 2022, mainly due to the increase in amortization of leasehold improvements for the stores and the increase in depreciation expenses of additional equipment put into use in new stores in the second quarter of 2023.

• Delivery expenses were RMB534.1 million (US$73.7 million) in the second quarter of 2023, representing an increase of 69.8% from RMB314.6 million in the same quarter of 2022, mainly due to the increase in the number of delivery orders.

• Sales and marketing expenses were RMB303.6 million (US$41.9 million) in the second quarter of 2023, representing an increase of 135.3% from RMB129.0 million in the same quarter of 2022, mainly driven by the increase in (i) advertising expenses as the Company continued to make strategic investments in its branding through various channels, (ii) commissions to third-party delivery platforms which is in line with the increase in the number of delivery orders and (iii) subcontract service fees to support the Company’s e-commerce business and promotion activities. Sales and marketing expenses amounted to 4.9% of total net revenues in the second quarter of 2023, compared to 3.9% of total net revenues in the same quarter of 2022.

• General and administrative expenses were RMB425.5 million (US$58.7 million) in the second quarter of 2023, representing an increase of 24.6% from RMB341.6 million in the same quarter of 2022. The increase in general and administrative expenses was mainly driven by the increase in (i) payroll costs for headquarter staff, (ii) expenditures for office supplies, (iii) tax surcharges and stamp duty and (iv) research and development expenses, which was offset by the decrease of share-based compensation for restricted share units and options issued to management and employees. General and administrative expenses amounted to 6.9% of total net revenues in the second quarter of 2023, compared to 10.4% of total net revenues in the same quarter of 2022.

• Store preopening and other expenses were RMB18.5 million (US$2.6 million) in the second quarter of 2023, representing an increase of 137.4% from RMB7.8 million in the same quarter of 2022, mainly due to more stores preparing to be opened in the second quarter of 2023 compared to the same quarter of 2022. Store preopening and other expenses amounted to 0.3% of total net revenues in the second quarter of 2023, compared to 0.2% of total net revenues in the same quarter of 2022.

• Losses and expenses related to Fabricated Transactions and Restructuring were RMB4.0 million (US$0.6 million) in the second quarter of 2023, representing a decrease of 80.6% from RMB20.6 million in the same quarter of 2022, as the Company had successfully completed its provisional liquidation in March 2022 and substantially resolved all outstanding litigations. The losses and expenses related to Fabricated Transactions and Restructuring consisted primarily of professional and legal fees for U.S. securities litigations and other advisory service fees. Losses and expenses related to Fabricated Transactions and Restructuring amounted to 0.1% of total net revenues in the second quarter of 2023, compared to 0.6% of total net revenues in the same quarter of 2022.

• Store level operating profit margin - self-operated stores was 29.1% in the second quarter of 2023, compared to 28.4% in the same quarter of 2022, primarily due to the benefits of economies of scale from the increased number of products sold.

• GAAP operating income was RMB1,172.8 million (US$161.7 million) in the second quarter of 2023, representing a GAAP operating income margin of 18.9%, compared to RMB241.6 million, or a GAAP operating income margin of 7.3%, in the same quarter of 2022. Non-GAAP operating income was RMB1,236.3 million (US$170.5 million) in the second quarter of 2023, representing a non-GAAP operating income margin of 19.9%, compared to RMB342.6 million, or a non-GAAP operating income margin of 10.4%, in the same quarter of 2022.

• Net income was RMB998.7 million (US$137.7 million) in the second quarter of 2023, compared to net loss of RMB114.7 million in the same quarter of 2022, which includes a provision for equity litigants of RMB276.8 million. Non-GAAP net income was RMB1,062.2 million (US$146.5 million) in the second quarter of 2023, representing a non-GAAP net income margin of 17.1%, compared to RMB267.5 million, or a non-GAAP net income margin of 8.1%, in the same quarter of 2022.

• Basic and diluted net income per ADS was RMB3.12 (US$0.40) and RMB3.12 (US$0.40) in the second quarter of 2023, respectively, compared to basic and diluted net loss per ADS of RMB0.40 and RMB0.40 in the same quarter of 2022, respectively.

• Non-GAAP basic and diluted net income per ADS was RMB3.36 (US$0.48) and RMB3.36 (US$0.48) in the second quarter of 2023, respectively, compared to non-GAAP basic and diluted net income of RMB0.88 and RMB0.88 in the same quarter of 2022, respectively.

• Net cash provided by operating activities was RMB1,444.4 million (US$199.2 million) in the second quarter of 2023, compared to net cash used in operating activities of RMB553.1 million in the same quarter of 2022, which included the settlement of payable to equity litigants of US$175.0 million (RMB1,172.2 million).

• Cash and cash equivalents, restricted cash, term deposits and short-term investments were RMB5,256.4 million (US$724.9 million) as of June 30, 2023, compared to RMB3,577.9 million as of December 31, 2022. The increase was primarily attributable to operational cash generation.

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