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Luckin Coffee Inc. Announces Unaudited Third Quarter 2019 Financial Results

Net Revenues from Products of RMB1.5 Billion, Exceeding High End of Guidance Range

Store Level Operating Profit Margin of 12.5% for the Quarter

BEIJING, Nov. 13, 2019 (GLOBE NEWSWIRE) -- Luckin Coffee Inc. (“Luckin Coffee” or the “Company”) (LK), a pioneer of a technology-driven new retail model to provide coffee and other products of high quality, high affordability, and high convenience to customers, today announced its unaudited financial results for the third quarter ended September 30, 2019.

THIRD QUARTER 2019 HIGHLIGHTS1

  • Total net revenues from products in the quarter were RMB1,493.2 million (US$208.9 million), representing an increase of 557.6% from RMB227.1 million in the same quarter of 2018.

  • Average monthly total items sold in the quarter were 44.2 million, representing an increase of 470.1% from 7.8 million in the third quarter of 2018. 

  • Cumulative number of transacting customers increased to 30.7 million, representing an increase of 413.4% from 6.0 million as of the end of the third quarter of 2018. During the third quarter of 2019, the Company acquired 7.9 million new transacting customers.
      
  • Average monthly transacting customers in the quarter were 9.3 million, representing an increase of 397.5% from 1.9 million in the third quarter of 2018.
     
  • Total number of stores at the end of the quarter were 3,680 stores, representing an increase of 209.5% from 1,189 stores at the end of the third quarter of 2018.
      
  • Average total net revenues from products per store in the quarter were RMB449.6 thousand (US$62.9 thousand), representing an increase of 79.5% from RMB250.5 thousand in the same quarter of 2018.

  • Store level operating profit in the quarter was RMB186.3 million (US$26.1 million), or 12.5% of net revenues from products, compared to a loss of RMB126.0 million in the third quarter of 2018.

    1 Please refer to the section “KEY DEFINITIONS” on Page 5 for detailed definitions.  

“We are very pleased with our results in the third quarter. We exceeded the high-end of our guidance range, achieved a store level profit margin of 12.5% and experienced continuous growth across all key operating metrics. These achievements follow a clear trend: an increase in volumes, efficiency and, as a result, profitability. During the quarter, product revenue grew at 557.6%, which was 1.2x, 1.4x and 2.7x the growth rate of average monthly items sold, average monthly transacting customers, and number of stores, respectively,” said Ms. Jenny Zhiya Qian, Chief Executive Officer of Luckin Coffee.

“During the third quarter, sales from freshly-brewed coffee drinks continued to maintain very strong growth, and we believe we will reach our goal to become the largest coffee player in China by the end of this year. With our distinguished value proposition of high quality, high affordability and high convenience we believe that Luckin Coffee has become part of more and more Chinese consumers’ daily lives. China’s coffee market remains highly underpenetrated so we are very excited about the growth potential ahead of us,” said Ms. Qian.

Ms. Qian added, “At the same time, we continued to enrich our product offerings during the quarter. We launched Luckin Tea products nationwide in July 2019 and experienced strong incremental demand during the quarter, contributing to an increase in per store revenue and higher customer retention rate. We also started selling cups and other merchandise products and entered into a joint venture agreement with Louis Dreyfus Company to produce and sell co-branded Not From Concentrate juice products.” 

Ms. Qian continued, “We also strategically launched Luckin Tea as an independent brand and developed our new retail partnership model. In addition, we are engaged in ongoing discussions with potential strategic partners to set up joint ventures in markets outside of China. We consider these initiatives as an evolution of our current business model and are part of our strategy to serve more customers.”  

“With our disruptive technology-driven new retail model and our newly-launched retail partnership model, we believe we can rapidly expand into adjacent markets with limited capital expenditures while maintaining a high degree of operational control and efficiency. We are pleased to have taken meaningful steps accomplishing our goals this quarter and remain extremely excited about the future of our business,” concluded Ms. Qian.

THIRD QUARTER 2019 UNAUDITED FINANCIAL RESULTS

Total net revenues were RMB1,541.6 million (US$215.7 million) in the third quarter, representing an increase of 540.2% from RMB240.8 million in the third quarter of 2018. Total net revenues from products were RMB1,493.2 million (US$208.9 million) in the third quarter, representing an increase of 557.6% from RMB227.1 million in the third quarter of 2018. Net revenues from products growth was primarily driven by a significant increase in the number of transacting customers, an increase in effective selling price, and an increase in the number of products sold per transacting customer.

  • Net revenues from freshly brewed drinks were RMB1,145.4 million (US$160.2 million), representing 74.3% of total net revenues in the third quarter of 2019, compared to RMB192.7 million, or 80.0% of total net revenues, in the third quarter of 2018.

  • Net revenues from other products were RMB347.8 million (US$48.7 million), representing 22.6% of total net revenues in the third quarter of 2019, compared to RMB34.4 million, or 14.3% of total net revenues, in the third quarter of 2018.

  • Other revenues, which mainly include delivery fees, were RMB48.4 million (US$6.8 million), representing 3.1% of total net revenues in the third quarter of 2019, compared to RMB13.7 million, or 5.7% of total net revenues, in the third quarter of 2018.

Total operating expenses were RMB2,132.5 million (US$298.3 million), representing an increase of 193.6% from RMB726.4 million in the third quarter of 2018. The increase in operating expenses was the result of business expansion. Meanwhile, operating expenses as a percentage of net revenues decreased to 138.3% in the third quarter of 2019 from 301.7% in the third quarter of 2018, mainly driven by increased economies of scale and the Company’s technology-driven operations.

  • Cost of materials were RMB721.1 million (US$100.9 million), representing an increase of 375.5% from RMB151.6 million in the third quarter of 2018, as a result of the increase in sales of products. Cost of materials decreased to 48.3% as a percentage of net revenues from products in the third quarter of 2019 from 66.8% in the third quarter of 2018. 

  • Store rental and other operating costs were RMB477.3 million (US$66.8 million), representing an increase of 176.6% from RMB172.5 million in the third quarter of 2018, mainly due to increases in the number of stores and headcount. Store rental and other operating costs decreased to 32.0% as a percentage of net revenues from products in the third quarter of 2019 from 76.0% in the third quarter of 2018. 

  • Depreciation expenses were RMB108.5 million (US$15.2 million), representing an increase of 275.8% from RMB28.9 million in the third quarter of 2018, mainly as the result of increases in depreciation of leasehold improvements and the increase in the purchases of equipment for operation due to the increased number of stores. Depreciation expenses decreased to 7.3% as a percentage of net revenues from products in the third quarter of 2019 from 12.7% in the third quarter of 2018. 

  • Sales and marketing expenses were RMB557.7 million (US$78.0 million), representing an increase of 147.6% from RMB225.3 million in the third quarter of 2018, mainly due to increases in advertising expenses as the Company launched new marketing initiatives, entered into new cities and launched Luckin Tea as an independent brand. The increase in sales and marketing expenses reflect strategic investments in branding which, management believes, will bring long-term benefits to the Company. All promotions and coupons provided to customers, other than free product promotion expenses, are reflected in net revenues from products and therefore not included in sales and marketing expenses. Sales and marketing expenses decreased to 36.2% as a percentage of net revenues in the third quarter of 2019 from 93.5% in the third quarter of 2018.

  • General and administrative expenses were RMB246.1 million (US$34.4 million), representing an increase of 108.0% from RMB118.3 million in the third quarter of 2018. The increase in general and administrative expenses was mainly driven by business expansion and share-based compensation to senior management. General and administrative expenses decreased to 16.0% as a percentage of net revenues in the third quarter of 2019 from 49.1% in the third quarter of 2018.

  • Store preopening and other expenses were RMB21.8 million (US$3.0 million), representing a decrease of 26.9% from RMB29.8 million in the third quarter of 2018, mainly due to decreased rental costs before opening as a result of improved efficiency for new store openings. Store preopening and other expenses decreased to 1.4% as a percentage of net revenues in the third quarter of 2019 from 12.4% in the third quarter of 2018.

Operating loss was RMB590.9 million (US$82.7 million) compared to RMB485.6 million in the third quarter of 2018. Non-GAAP operating loss was RMB550.1 million (US$77.0 million), representing 35.7% of total net revenues, in the third quarter of 2019, compared to RMB485.6 million, or 201.7% of total net revenues, in the third quarter of 2018. For more information on non-GAAP financial measures, please see the section of “Use of Non-GAAP Financial Measures” and the table captioned “Reconciliation of Non-GAAP Measures to the Most Directly Comparable GAAP Measures” set forth at the end of this press release.

Net loss was RMB531.9 million (US$74.4 million) compared to RMB484.9 million in the third quarter of 2018. Non-GAAP net loss was RMB491.1 million (US$68.7 million), representing 31.9% of total net revenues, in the third quarter of 2019, compared to RMB483.9 million, or 201.0% of total net revenues, in the third quarter of 2018.

Basic and diluted net loss per ADS was RMB2.24 (US$0.32) compared to a loss of RMB3.60 in the third quarter of 2018. Non-GAAP basic and diluted net loss per ADS was RMB2.08 (US$0.32) compared to a loss of RMB3.52 in the third quarter of 2018.

Net cash used in operating activities was RMB122.8 million (US$17.2 million) compared to RMB719.6 million in the third quarter of 2018. The decrease was primarily driven by a reduction of operating loss and a favorable working capital profile. 

Cash and cash equivalents and short-term investments were RMB5,543.9 million (US$775.6 million) as of September 30, 2019, compared to RMB1,761.0 million as of December 31, 2018. The increase was primarily driven by the net proceeds of US$158.8 million from the issuance of Series B-1 convertible redeemable preferred shares in April 2019 to certain investors and the net proceeds of US$657.2 million from the IPO and the concurrent private placement.

KEY OPERATING DATA

  For the three months ended or as of
  Jun 30, 2018 Sep 30, 2018 Dec 31, 2018   Mar 31, 2019 Jun 30, 2019 Sep 30, 2019
Total stores 624 1,189 2,073   2,370 2,963 3,680  
Pick-up stores 356 903 1,811   2,163 2,741 3,433  
Relax stores 22 45 86   109 123 138  
Delivery kitchens 246 241 176   98 99 109  
                 
Cumulative number of transacting customers (in thousands) 2,917.8 5,984.3 12,529.5   16,872.3 22,777.5 30,723.7  
 

Average monthly transacting customers
(in thousands)
1,207.6 1,877.4 4,325.9   4,402.0 6,166.0 9,339.7  
                 
Average monthly total items sold
(in thousands)1

 
4,001.0 7,760.3 17,645.1   16,275.8 27,593.0 44,244.6  
Freshly brewed drinks 3,743.7 6,220.4 13,418.8   13,077.2 21,055.7 34,655.4  
Other products 257.3 1,539.9 4,226.4   3,198.6 6,537.3 9,589.2  


GUIDANCE

For the fourth quarter ending December 31, 2019, the Company expects net revenues from products to be between RMB2.1 billion and RMB2.2 billion. This forecast excludes any revenue generated from stores operated under the new retail partnership model. This forecast reflects the Company’s current and preliminary views, which are subject to change.

KEY DEFINITIONS

  • Net revenues from products. Calculated as the sum of net revenues from freshly brewed drinks and net revenues from other products.

  • Average total net revenues from products per store. Calculated by dividing net revenues from products during the period by the average number of stores during the period.

  • Transacting customers for the period. Refers to a customer who bought at least one item offered on the Company’s mobile apps or through third-party platforms in a given period, regardless of whether the customer paid for the item or merely ordered through the free product marketing initiative. Each unique mobile account is treated as a separate customer for purposes of calculating transacting customer.

  • Cumulative number of transacting customers. The total number of transacting customers since inception.

  • Average monthly transacting customers. The number of average monthly transacting customers in the three months during the quarter.

  • Average monthly total items sold. Calculated by dividing the total number of items sold during the quarter by three.

  • Store level operating profit (loss). Calculated by deducting the cost of materials, store rental and other operating costs, and depreciation expenses from net revenues from products.

  • Store level operating profit (loss) margin. Calculated by dividing store level operating profit (loss) by net revenues from products.

  • Non-GAAP operating loss. Calculated by adjusting operating loss for non-cash share-based compensation expenses.

  • Non-GAAP net loss. Calculated by adjusting net loss for non-cash share-based compensation expenses and change in the fair value of warrant liability.

  • Non-GAAP basic and diluted net loss per share. Calculated as non-GAAP net loss divided by weighted average number of basic and diluted share.

  • Non-GAAP basic and diluted net loss per ADS. Calculated as non-GAAP net loss divided by weighted average number of basic and diluted ADS.

CONFERENCE CALL

A conference call and webcast to discuss Luckin Coffee’s financial results and guidance will be held at 8:00 a.m. U.S. Eastern Time on November 13, 2019.

Interested parties may listen to the conference call by dialing numbers below:

United States:               +1-845-675-0437

International:                 +65-6713-5090

China Domestic:            400-620-8038

Hong Kong:                  +852-3018-6771

Conference ID:              5550236

The replay will be accessible through November 21, 2019, by dialing the following numbers:

United States:               +1-646-254-3697

International:                 +61-2-8199-0299

Conference ID:              5550236

The webcast will be available at investor.luckincoffee.com and will be archived on the site shortly after the call has concluded.

A presentation to supplement the call and webcast will be available on the Company’s IR website at investor.luckincoffee.com.

USE OF NON-GAAP FINANCIAL MEASURES

In evaluating the business, the Company considers and uses non-GAAP measures, such as non-GAAP operating loss, non-GAAP net loss, non-GAAP basic and diluted net loss per ADS, as supplemental measures to review and assess operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company defines non-GAAP operating loss as operating loss excluding share-based compensation expenses. The Company defines non-GAAP net loss as net loss excluding share-based compensation expenses and change in fair value of warrant liability. The Company defines non-GAAP basic and diluted net loss per ADS as non-GAAP net loss divided by weighted average number of basic and diluted ADS.

The Company presents these non-GAAP financial measures because they are used by management to evaluate operating performance and formulate business plans. The Company believes that the non-GAAP financial measures help identify underlying trends in its business by excluding the impact of share-based compensation expenses, which is a non-cash charge. The Company also believes that the non-GAAP financial measures could provide further information about the Company’s results of operations, enhance the overall understanding of the Company’s past performance and future prospects.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. The Company’s non-GAAP financial measures do not reflect all items of income and expense that affect the Company’s operations and do not represent the residual cash flow available for discretionary expenditures. Further, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating performance. The Company encourages investors to review the Company’s financial information in its entirety and not rely on a single financial measure.

For more information on the non-GAAP financial measures, please see the table captioned “Reconciliation of Non-GAAP Measures to the Most Directly Comparable GAAP Measures” set forth at the end of this press release.

EXCHANGE RATE INFORMATION

This announcement contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB7.1477 to US$1.00, the exchange rate on September 30, 2019 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

SAFE HARBOR STATEMENTS  

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "potential," "continue," "ongoing," "targets," "guidance" and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s growth strategies; its future business development, results of operations and financial condition; its ability to understand buyer needs and provide products and services to attract and retain buyers; its ability to maintain and enhance the recognition and reputation of its brand; its ability to rely on merchants and third-party logistics service providers to provide delivery services to buyers; its ability to maintain and improve quality control policies and measures; its ability to establish and maintain relationships with merchants; trends and competition in China’s e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of China’s e-commerce market; PRC governmental policies and regulations relating to the Company’s industry, and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

STATEMENT REGARDING PRELIMINARY UNAUDITED FINANCIAL INFORMATION

The unaudited financial information set out in this earnings release is preliminary and subject to potential adjustments. Adjustments to the consolidated financial statements may be identified when audit work has been performed for the Company’s year-end audit, which could result in significant differences from this preliminary unaudited financial information.

ABOUT LUCKIN COFFEE INC.

Luckin Coffee Inc. (LK) has pioneered a technology-driven retail network to provide coffee and other products of high quality, high affordability, and high convenience to customers. Empowered by big data analytics, AI, and proprietary technologies, the Company pursues its mission to be part of everyone’s everyday life, starting with coffee. The Company was founded in 2017 and is based in China. For more information, please visit investor.luckincoffee.com.

INVESTOR AND MEDIA CONTACTS

Investor Relations:

Luckin Coffee Inc. IR
Email: ir@luckincoffee.com
Bill Zima / Fitzhugh Taylor
ICR, Inc.
Phone: 203 682 8200

Media Relations:

Luckin Coffee Inc. PR
Email: pr@luckincoffee.com
Ed Trissel / Scott Bisang / Jack Kelleher
Joele Frank, Wilkinson Brimmer Katcher
Phone: 212 355 4449

 
FINANCIAL STATEMENTS
LUCKIN COFFEE INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2018 AND UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2019
(Amounts in thousands of RMB and US$, except for number of shares)
 
  As of
  31-Dec-18   30-Sep-19
  RMB   RMB US$
ASSETS
Current assets:
  Cash and cash equivalents 1,630,983   4,513,899 631,518
  Restricted cash -   21,709 3,037
  Short-term investments 130,000   1,030,000 144,102
  Receivables from online payment platforms 4,609   11,073 1,549
  Accounts receivables -   11,429 1,599
  Inventories 150,015   213,225 29,831
  Prepaid expenses and other current assets 365,510   553,171 77,391
  Amount due from a related party 147,559   - -
Total current assets 2,428,676   6,354,506 889,027
  
Non-current assets:
  Property and equipment, net 904,992   1,238,169 173,226
  Restricted cash -   2,004 280
  Other non-current assets 151,408   434,352 60,768
Total non-current assets 1,056,400   1,674,525 234,274
TOTAL ASSETS 3,485,076   8,029,031 1,123,301
  
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’
  (DEFICITS)/ EQUITY
 
Current liabilities:
  Short-term bank borrowings 8,000   10,000 1,399
  Current portion of long-term borrowing 72,787   226,969 31,754
  Capital lease obligation 108,664   29,775 4,166
  Accounts and notes payable 176,704   351,627 49,194
  Accrued expenses and other liabilities 371,017   864,392 120,932
  Amounts due to related parties 24,198   19,306 2,701
  Warrant liability 19,520   - -
Total current liabilities 780,890   1,502,069 210,146
     
Non-current liabilities:    
  Long-term borrowing 226,969   - -
  Deferred revenues 126,469   55,293 7,736
Other non-current liabilities -   37,717 5,277
Total non-current liabilities 353,438   93,010 13,013
Total liabilities 1,134,328   1,595,079 223,159
     


FINANCIAL STATEMENTS

LUCKIN COFFEE INC.

CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2018 AND UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2019 (Continued)

(Amounts in thousands of RMB and US$, except for number of shares)

      As of
  31-Dec-18   30-Sep-19
         
  RMB   RMB US$
Mezzanine equity:        
         
Series A convertible redeemable preferred shares2 2,113,347     -   -  
Series B convertible redeemable preferred shares2 2,164,994     -   -  
Total mezzanine equity 4,278,341     -   -  
         
Shareholders’ (deficits)/equity:        
  Class A ordinary shares3 -     5   1  
  Class B ordinary shares4 -     16   2  
  Ordinary shares5 -     -   -  
  Angel-1 shares6 743,376     -   -  
  Angel-2 shares7 512,812     -   -  
  Additional paid-in capital 65,000     11,900,972   1,665,007  
  Accumulated other comprehensive (loss)/income (2,076 )   98,748   13,815  
  Accumulated deficits (3,246,705 )   (5,565,789 ) (778,683 )
Total shareholders’ (deficits)/equity (1,927,593 )   6,433,952   900,142  
         
TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’
(DEFICITS)/ EQUITY
3,485,076     8,029,031   1,123,301  
         

1. US$0.001 par value; 2,000,000 shares and nil authorized as of December 31, 2018 and September 30, 2019, respectively; 544,688 and nil issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
2. US$0.001 par value; 1,000,000 shares and nil authorized as of December 31, 2018 and September 30, 2019, respectively; 272,343 and nil issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
3. US$0.000002 par value; nil and 20,000,000,000 shares authorized as of December 31, 2018 and September 30, 2019, respectively; nil and 334,734,912 issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
4. US$0.000002 par value; nil and 5,000,000,000 shares authorized as of December 31, 2018 and September 30, 2019, respectively; nil and 1,587,886,000 issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
5. US$0.001 par value; 45,400,000 and nil shares authorized as of December 31, 2018 and September 30, 2019, respectively; 750,000 and nil issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
6. US$0.001 par value; 1,000,000 shares and nil authorized; 915,750 and nil issued and outstanding as of December 31, 2018 and September 30, 2019, respectively.
7. US$0.001 par value; 600,000 shares and nil authorized; 513,000 and nil issued and outstanding as of December 31, 2018 and September 30, 2019, respectively (Angel-1 shares and Angel-2 shares, collectively “Angel Shares”).   


FINANCIAL STATEMENTS

LUCKIN COFFEE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

 LOSS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

  For the three months ended September 30,   For the nine months ended September 30,
  2018   2019     2018 2019  
  RMB RMB US$   RMB RMB US$
Net revenues:              
  Freshly brewed drinks 192,666   1,145,358   160,241     302,759   2,165,614   302,981  
  Other products 34,397   347,847   48,666     44,249   642,662   89,912  
  Others 13,736   48,386   6,769     28,254   120,940   16,920  
Total net revenues 240,799   1,541,591   215,676     375,262   2,929,216   409,813  
               
  Cost of materials (151,648 ) (721,129 ) (100,890 )   (236,838 ) (1,462,763 ) (204,648 )
  Store rental and other operating costs (172,547 ) (477,305 ) (66,777 )   (292,710 ) (1,131,136 ) (158,252 )
  Depreciation expenses (28,873 ) (108,515 ) (15,182 )   (47,811 ) (280,979 ) (39,310 )
  Sales and marketing expenses (225,255 ) (557,665 ) (78,020 )   (457,728 ) (1,115,872 ) (156,116 )
  General and administrative expenses (118,298 ) (246,093 ) (34,430 )   (232,236 ) (684,836 ) (95,812 )
  Store preopening and other expenses (29,793 ) (21,773 ) (3,046 )   (62,174 ) (61,318 ) (8,579 )
Total operating expenses (726,414 ) (2,132,480 ) (298,345 )   (1,329,497 ) (4,736,904 ) (662,717 )
Operating loss (485,615 ) (590,889 ) (82,669 )   (954,235 ) (1,807,688 ) (252,904 )
               
Interest income 3,519   31,853   4,456     3,716   47,538   6,651  
Interest and financing expenses (7,428 ) (7,665 ) (1,072 )   (7,982 ) (24,098 ) (3,371 )
Foreign exchange gain, net 8,392   32,797   4,588     15,627   29,741   4,161  
Other expenses (2,804 ) 2,048   287     (6,288 ) (2,092 ) (293 )
Change in the fair value of warrant liability (991 ) -   -     (991 ) (8,322 ) (1,164 )
               
Net loss before income taxes (484,927 ) (531,856 ) (74,410 )   (950,153 ) (1,764,921 ) (246,920 )
Income tax expense -   -   -     -   -   -  
Net loss (484,927 ) (531,856 ) (74,410 )   (950,153 ) (1,764,921 ) (246,920 )
               
Add: accretion to redemption value of convertible redeemable preferred shares -   -   -     (793,992 ) (552,036 ) (77,233 )
Add: deemed distribution to a certain holder of Series B convertible redeemable preferred shares -   -   -     -   (2,127 ) (298 )
Net loss attributable to Ordinary Shareholders (484,927 ) (531,856 ) (74,410 )   (1,744,145 ) (2,319,084 ) (324,451 )
               
               



FINANCIAL STATEMENTS

LUCKIN COFFEE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

 LOSS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019 (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)
 
  For the three months ended September 30,   For the nine months ended September 30,  
  2018   2019     2018   2019  
  RMB RMB US$   RMB RMB US$
               
Loss per share3:
- Basic and diluted
(0.45 ) (0.28 ) (0.04 )   (2.81 ) (1.54 ) (0.22 )
Loss per ADS (8 Ordinary
   Shares per ADS):

- Basic and diluted
(3.60 ) (2.24 ) (0.32 )   (22.48 ) (12.32 ) (1.76 )
Weighted average shares
outstanding used in
calculating basic and diluted
loss per share1:

- Basic and diluted
1,089,375,000   1,922,620,912   1,922,620,912     620,975,275   1,502,999,505   1,502,999,505  
Other comprehensive
  (loss)/gain, net of tax of
  nil:
             
Foreign currency translation
  difference, net of tax of nil
(18,974 ) 103,121   14,427     7,732   100,824   14,106  
Total comprehensive loss (503,901 ) (428,735 ) (59,983 )   (1,736,413 ) (2,218,260 ) (310,345 )

 

1 Loss per share for the three and nine months ended September 30, 2019 is computed using the weighted-average number of Ordinary Shares outstanding as of September 30, 2019 included the automatic conversion of all of the Company’s Angel-1 shares, Angel-2 shares, Series A convertible redeemable preferred shares, Series B convertible redeemable preferred shares and Series B-1 convertible redeemable preferred shares into Ordinary Shares immediately prior to the completion of the IPO at the conversion ratio of 1:1 and after 1:500 share split. Upon the completion of the IPO, Ordinary Shares included Class A and Class ordinary shares.  Prior to the completion of the IPO, the outstanding Ordinary Shares consisted of Ordinary shares and Angel-1 and Angel-2 shares.  Basic and diluted loss per share are not reported separately for different classes of Ordinary Shares as each class of shares had the same rights to profits and losses.

LUCKIN COFFEE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND SEPTEMBER 30, 2019

(Amounts in thousands of RMB and US$)

  For the three months ended
September 30,
  For the nine months ended
September 30,
  2018   2019     2018   2019  
  RMB RMB US$   RMB RMB US$
Net cash used in operating activities (719,647 )  (122,799 )  (17,180 )   (1,039,248 )  (1,125,671 )  (157,487 )
Net cash (used in)/provided by investing activities (1,297,174 ) 682,663   95,508     (1,609,786 ) (1,605,672 ) (224,642 )
Net cash provided by/(used in) financing activities  


  1,066,846    (159,710 )  

(22,344


)
  2,558,819    

5,491,826
   

768,335
 
Effect of foreign exchange rate changes on cash and cash equivalents 9,608   124,994   17,487     18,885   122,433   17,129  
               
Net (decrease)/increase in cash and cash
  equivalents
(940,367 ) 525,148   73,471     (71,330 ) 2,882,916   403,335  
Cash and cash equivalents at beginning of the
  period
1,088,133   3,988,751   558,047     219,096   1,630,983   228,183  
               
Cash and cash equivalents at end of the period 147,766   4,513,899   631,518     147,766   4,513,899   631,518  


 
LUCKIN COFFEE INC.
RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES
(Unaudited, amounts in thousands of RMB and US$, except for number of shares and per share data)
 
 

 
For the three months ended September 30,             For the nine months ended September 30,  
  2018   2019     2018   2019  
  RMB RMB US$   RMB RMB US$
  (Amounts in thousands of RMB and US$, except for share and per share data)  
A.  Non-GAAP operating loss              
  Operating loss (485,615 ) (590,889 ) (82,669 )   (954,235 ) (1,807,688 ) (252,904 )
  Adjusted for:              
    Share-based compensation expenses -   40,754   5,702     -   111,210   15,559  
Non-GAAP operating loss (485,615 ) (550,135 ) (76,967 )   (954,235 ) (1,696,478 ) (237,345 )
                 
B.  Non-GAAP net loss                
  Net loss (484,927 ) (531,856 ) (74,410 )   (950,153 )   (1,764,921 ) (246,920 )
  Adjusted for:                
    Share-based compensation expenses -   40,754   5,702     -      111,210    15,559  
    Change in the fair value of warrant
       liability
991   -   -     991      8,322    1,164  
Non-GAAP net loss (483,936 ) (491,102 ) (68,708 )   (949,162 )   (1,645,389 ) (230,197 )
                 
C.  Non-GAAP net loss per share – basic and diluted                
Net loss attributable to the Company’s
    Ordinary Shareholders
(484,927 ) (531,856 ) (74,410 )   (1,744,145 )   (2,319,084 ) (324,451 )
Add:                
Accretion to redemption value
  of convertible redeemable preferred
  shares
-   -   -     793,992      552,036    77,233  
Share-based compensation expenses -   40,754   5,702     -      111,210    15,559  
Change in the fair value of warrant
   liability
991   -   -     991      8,322    1,164  
Non-GAAP net loss attributable to the Company's Ordinary Shareholders (483,936 ) (491,102 ) (68,708 )   (949,162 )   (1,647,516 ) (230,495 )
                 
Weighted average number of Ordinary
  Shares in issue- basic and diluted
1,089,375,000   1,922,620,912   1,922,620,912     620,975,275      1,502,999,505    1,502,999,505  
Non-GAAP net loss per share
– Basic and diluted
(0.44 ) (0.26 ) (0.04 )   (1.53 )   (1.10 ) (0.15 )
                 
Non-GAAP net loss per ADS
– Basic and diluted
(3.52 ) (2.08 ) (0.32 )   (12.24 )   (8.80 ) (1.20 )