Luckin Coffee (OTC:LKNCY) Q3 2026 Earnings Call

0:00 Ladies and gentlemen, welcome to Luckin Coffee's third quarter 2026 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. Please be advised that today's call is being recorded. Now, I'd like to turn the call over to Ms. Nancy Song, head of investor relations of Luckin Coffee. Nancy, please go ahead.

0:27 Thank you, and hello, everyone. Welcome to Locking Coffee's third quarter 2026 earnings conference call. We announced our financial results earlier today before the US market opened. The earnings release is now available on our IR website and AvailuSware services. Today, you will hear from Dr. Bo Jingyi, co-founder and CEO of Locking Coffee, who will share a strategic overview of our business. Following that, Ms. An Jing, our CFO, will discuss our financial results in greater detail. Afterwards, we will open up the poll for questions. During today's call, we will be making some forward-looking statements regarding future events and expectations.

1:13 Any statements that are not historical facts, including but not limited to statements about our beliefs and expectations, are forward-looking statements. These statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in our findings with the SEC. In addition, for not-get-marrieds discussed today, the reconciliation information related to those matters can be found in our earnings pressure list. During today's call, Dr. Guo will speak in Chinese and his comments will be translated into English. Now, I'd like to turn the call over to Dr. Guo Jingyi, co-founder and CEO of Locking Coffee.

1:59 Dr. Guo, please go ahead.

2:10 Good day, everyone, and welcome to today's earnings conference call. Thank you for your continued interest in and support for Locking Coffee.

2:18 三季度 In the third quarter, our execution of the high-quality scale growth strategy continued to yield positive results. We delivered solid business growth and further improved profitability.

2:51 Nanget Net Profit exceeded RMB 2.1 billion, setting a new post-lay record.

2:58 This quarter, the company's total net income increased by 17%, reaching 17.9 billion yuan. At the demand level, customer consumption continues to show toughness. The number of monthly transactions and the number of customers is rising again. In order to meet the market demand that continues to grow, In this quarter, we continue to maintain the leading opening speed of the industry. The number of stores has increased by nearly 2,600. We continue to improve the network coverage and service capabilities of each county and city. As the delivery channel structure continues to normalize, this quarter's profit and loss level will further improve. The profit and loss of the business is more than 27 billion yuan, which is a 55% increase.

3:44 The profit and loss of the business is 15.4%.

3:50 This quarter, total net revenues grew 17% year-over-year to RMB 17.9 billion. Customer demand for coffee continued to grow, with both average monthly transaction customers and average cost-per-transaction customers reaching new heights. To meet this growing demand, we maintained an industry-leading pace of store expansion, adding nearly 2,600 manual stores during the quarter. This further expanded our store network and improved our ability to serve customers across all city tiers. As the delivery mix continues to normalize, profitability further improves. Operating profits exceeded RMB 2.7 billion, up 55% year-over-year, while operating margins reached 15.4% have nearly four percentage points year-over-year.

5:12 However, we also observed that since July, the trend has been declining and the month has been narrowing, and the trend of improvement has continued to deepen. This is also completely in line with the trend judgment that we communicated before. What is more worth noting is that as the supply and delivery costs have dropped significantly, the profit and loss of self-sufficient stores continues to improve. The profit rate at the store level is not only significantly higher than that of the same period last year, but has also basically returned to the level before the war. To be more specific, compared to the third quarter of 2024, the current delivery ratio is still significantly higher. At the same time, the size of the store is nearly doubled, and the operating profit rate of the local stores in this quarter is almost the same as it was at that time. These financial results further verify the rapid growth pattern and strengthen our confidence in the long-term development of the store. Looking at store performance, last year for delivery subsidies,

6:35 boosted both delivery volume and overall average selling price per cup, creating a high comparison base for the third quarter. As platform subsidies fell sharply this year, third-quarter same-store sales for self-operated stores were significantly impacted, declining 11.1% year-over-year. However, we have also seen the decline narrow month-by-month since July. with the pace of improvement continuing to pick up. This was fully in line with the trend we had previously communicated. More importantly, as delivery subsidies and delivery costs declined significantly, profitability at our self-operated stores continued to improve.

7:25 Store level operating margin was not only notably higher than a year ago, but also largely back to pre-substitial levels. to put this into perspective. Compared with the third quarter of 2024, our delivery mix remains much higher, while our store network has nearly doubled in size. Yet store-level operating margin at our self-operated stores has broadly returned to the same level as in that quarter. These results further validate our scale growth model and give us greater confidence in our long-term growth prospects. Taking into account our financial position and business outlook, and to better reward shareholders, our board has approved a new one-year share repurchase program with a total authorization of US$500 million.

8:19 This also reflects our firm belief in locking long-term value.

8:24 接下来,我将从人货厂三个方面介绍本季度的主要运营进展,稍后CFO安静, will share with you more detailed financial performance.

8:37 Next, I will walk you through our key operating highlights for the quarter across customers, products, and stores. Later, our CFO, An Jing, will share more details on our financial performance.

8:52 In terms of stores, we continue to maintain a competitive and industry-leading opening rhythm. Starting with our store network, we maintained a competitive pace of store expansion, far ahead of the industry. By the end of the third quarter, we had 38,909 stores globally.

9:28 up 33% year-over-year, further strengthening and expanding our industry leadership.

9:35 具体来看,中国市场净增2543家, 门店总数达到38630家, 其中自营25277家, 联营13353家。 客户需求始终是我们开店的核心驱动力, We are also happy to see that In China, we added 2,543 manual stores during the quarter, bringing our total store count to 38,630.

10:54 including 25,277 self-operated stores and 13,353 partnership stores. Customer demand remains the key driver of our store expansion. Leveraging our digital capabilities, we continue to identify diverse needs across different markets and expand our network across cities of all tiers, as well as counties and towns. Our goal is simple, to make locking more accessible to customers, whether they are at work, shopping, relaxing, or on the go. This convenience effectively helps drive customer retention and repeat purchases.

11:39 Importantly, even as our store base continues to grow, stores open this year have maintained healthy operating performance. This gives us a strong foundation for the further network expansion and a long-term market share gain.

11:56 In terms of international markets, there were 56 overseas markets in the past three seasons, with 279 stores in total. Of these, 103 are Singapore-based stores, 22 are US-based stores, and 154 are Malaysian-based stores. With the collapse of Singapore-based stores, Ruixin has become the second largest chain coffee brand in local stores. We are relying on the mature digital operation experience in China to combine the needs and characteristics of local consumers. We continue to optimize localization operation, basically running through the Singapore door-to-door economic model, and continue to improve the performance of single-store operations, brand, product and service experience, and gradually gain the positive recognition of local customers. The achievements of the Singapore market have proven the potential of RuiHsing's business model. also accumulated valuable operating experience for our steady expansion of more international markets.

12:57 In international markets, we added 56 non-new stores in the third quarter, bringing our total overseas account to 279. This includes 103 self-operated stores in Singapore, 22 in the US, and 154 partnership stores in Malaysia. In Singapore, We have now topped the 100 store mark, making Locking the second largest coffee chain in the country by store count. Building on our proven digital operating capabilities in China and adapting to local customer needs and the market conditions, we have continued to optimize our local operations. Our store level economics in Singapore have largely proven out and the store performance continues to improve.

13:50 We are also seeing growing recognition of our brands, products, and service among local customers. Our progress in Singapore demonstrates the potential to replicate our business model in overseas markets. It also gives us valuable experience as we continue to expand internationally at a varied pace.

14:15 In terms of products, we insist on using coffee as the core Weiming Zhou, Tian Zang, Weiming Guo, Fei Yang Weiming Zhou, Tian Zang, Jinyi Guo, Fei Yang On the product front,

15:37 Coffee remains at the core of our business. We continue to strengthen our coffee expertise while bringing more innovation and a variety to our product lineup. Our goal is to give customers more reasons to come back and buy more often. In the third quarter, we launched 41 freshly made beverages and more than 20 snack items. In the coffee category, we focused on reinforcing Lockheed's coffee brand identity We introduced our Ethiopian Geisha cold brew, followed by several new cold brew-based products, giving customers more high-quality coffee choices. We also roped out two specialty drinks that received positive feedbacks in our lab stores, making them available nationwide for a limited time and offering customers a more distinctive coffee experience.

16:34 Young Coffee. We continue to expand our product range to meet different customer needs across different day parts and periods. Our new Thai milk tea series launched in August was particularly well received. It sold over 13 million cups in its first week, setting a new sales record for new products launched this year. This highlights the potential of our non-coffee offerings to reach more customers and meet a broader range of consumption needs.

17:08 In terms of customers, we continue to innovate the way we interact with consumers, constantly improving the brand's favorability and attractiveness. Through more convenient door-to-door networks and richer product choices, we transform consumers' love for Rui Xin into one-to-one purchases. to promote customer size and consumption frequency and stable growth. In this quarter, we continue to strengthen the interaction and emotional connection with consumers through sports competitions and multi-level IP alliances, deepening the brand image of healthy, young, and fashionable brands. During the World Cup in July, as sponsors of two national teams in Spain and Portugal, we held a series of brand events, for sharing their moments of happiness with fans around the world.

17:57 We also collaborated with Disney's classic anti-crime series to show the insight of extreme creativity. Combining IT innovation with product innovation, we received a wide range of positive reviews for the customer's experience of participation and curiosity. In terms of specific customer indicators, in the third quarter, the number of new transaction customers exceeded 28 million. At the end of the quarter, the total number of trading customers exceeded 5.2 billion. In the quarter, the total number of trading customers exceeded 1.2 billion. This is a new high. What is even more surprising is that since this year, the number of trading customers has steadily increased, and in the third quarter, it has also reached a new high. The trend of these users continues to improve, indicating that the supply and demand of Chinese coffee has increased, and the trend of frequent growth has started to rotate. Weiming Zhou, Tian Zang, Wenbao Cao, Jing An, Jinyi Guo, Fei Yang

19:17 customers love for locking into more frequent purchases, driving growth in both our customer base and the purchase frequency. During the quarter, we continue to engage with customers through sports events and IP collaborations, strengthening our brand image around wellness, usefulness, and style. During the World Cup in July, as a sponsor of the Spanish and Portuguese national teams, We launched a series of brand campaigns to celebrate lucky moments with football fans. In terms of IT, we launched a collaboration featuring Disney's classic villains, showcasing our creative insights.

20:03 The combination of IT-inspired design with new product launches made the customer experience more fun and engaging, and it was well received by customers. Looking at our customer metrics, we added over 28 million new transacting customers in the third quarter, bringing our cumulative transacting customer base to over 520 million. Average monthly transacting customers exceeded 120 million, reaching another record high. What's even more encouraging is that average cost per transacting customer has continued to increase this year. reaching a new high in third quarter as well.

20:50 These positive customer trends suggest that a virtuous cycle between better coffee offerings and more frequent consumption is starting to take shape. This reinforces our view of long-term coffee demand and gives us a strong foundation to continue growing our business at scale.

21:12 In addition, in terms of development, We always talk about social responsibility to integrate into corporate development. In this season, we focus on promoting public health activities, and pay attention to the health and growth of different groups. In Singapore, we not only serve local consumers, but also actively contribute to social public health. We have cooperated with Singapore Psychiatry College and Banqiao Hospital Charity Fund for many times. and many more. This year, we have established long-term cooperation with the two institutions to further improve public awareness of mental health, so that more people have the opportunity to understand, pay attention, and express themselves. In China, We launched the Guizhou-Pu'an Starlight Project for three years to assist local youth football development. By providing nutrition insurance, training equipment, and organizing exchange activities, we allow more children in the mountains to participate in their favorite sports and gain health, confidence, and growth in sports. In addition, after the disaster of the Nishi River in Gilongkouan, Tibet, We will join together with the China Village Development Fund to donate funds to support

22:43 disaster relief and disaster reconstruction. In the future, with the expansion of Ruixing's business, we hope to not only provide high-quality products to more consumers, but also to respond to the needs of different groups through the implementation of localization that is warm and tolerant, continue to give back to the relevant people in the industry chain to actively create greater social value.

23:11 Turning to sustainability, we have always seen social responsibility as an important part of our business. This quarter, we focused on charitable initiatives that support the health, well-being, and personal development of different groups. In Singapore, we are not only committed to serving local customers, but also to giving back to the community. We have worked closely with the Institute of Mental Health and its affiliated charity, the Old Bridge Hospital Charity Fund, to promote mental health awareness and community care. Our efforts have included fundraising through co-branding merchandise, charitable art gift plates in our stores, and other community initiatives.

24:02 This quarter, As we marked the opening of our 100th store in Singapore, we took our partnerships a step further by establishing long-term collaborations with both organizations. Together, we aim to raise public awareness of mental health and help more people in need feel understood, supported, and empowered to express themselves. In China, we launched the Starlight program, a three-year initiative in Fu'an Huizhou to support youth football. Through providing nutritional support, training equipment, and organizing exchange activities, we hope to give more children in rural communities the chance to play the sport they love, stay healthy, build confidence, and grow.

24:55 In addition, following the landslide disaster at Zhilong Port in Qizhou, We work with the China Foundation for Rural Development to promptly make a donation in support of emergency relief and post-disaster reconstruction. Looking ahead, as blocking continues to grow, we want to do more than bring great products to more customers. We also want to stay close to the communities we serve, respond to the needs of different groups, give back to people across our value chain. and Create Greater Social Value through Inclusive Locally Focused Sustainability Initiatives.

25:38 To sum up, the results of the three-meeting have benefited from the continuous growth of coffee consumption demand, and also reflected the systematic ability of Ruixin to grasp market opportunities, expand business scale, and maintain healthy profits. Looking forward to the future, we will continue to focus on high-quality scale growth will continue to maintain the leading expansion rhythm of the industry and actively grasp the long-term growth opportunities of the Chinese coffee market. At the same time, they will continue to strengthen the brand mentality, product innovation, convenient delivery, and comprehensive cost-effectiveness, rely on digitalization ability to improve business efficiency, better meet customer needs, and continue to expand the market share, creating long-term value for shareholders.

26:25 To conclude, our third quarter results were driven by the continual growth in coffee demand and reflects Blocking's ability to capture market opportunities, scale our business, and maintain healthy profitability. Looking ahead, we will stay focused on our high-quality scale growth strategy. We will continue to expand our store network at an industry-leading pace and capitalize on the long-term growth opportunities in China's coffee market. At the same time, we will keep strengthening our brand, bringing new products to customers, making our stores more convenient and offering great value for money. Leveraging our digital capabilities, we will continue to improve operating efficiency, better meet customer needs, gain market share, and create long-term value for our shareholders.

27:24 Finally, I want to thank our customers for their trust and love for the Lockheed brand.

27:55 are partners and investors for their continued support, and especially our more than 220,000 Lock-in team members for their hard work. We will keep working to bring great coffee and a convenient experience to more customers and make Lock-in Coffee a part of more people's daily lives.

28:16 Next, please introduce the detailed financial data.

28:21 Now, I will turn the call over to Anjing to go through our financial results in detail.

28:27 Thank you, Jingyi. Good day, everyone. Thank you for joining today's call. In the third quarter, we delivered solid revenue growth against a high-comparison base from last year's subsidy war. More importantly, we saw a further improvement in profitability. The sell-level operating margin at our self-operated store largely returned to a pre-subsidized world level, where we achieved a record high profit across the board at the group level. These results further show that our high-quality, scaled growth strategy continues to bear fruit. Let's now look at our financial performance in detail.

29:12 In the third quarter, total net revenues increased by 11%. increased by 17% year-over-year to RMB 17.9 billion, supported by a 20% year-over-year increase in GMB to RMB 20.7 billion. This growth was driven by higher cup volumes across both self-operating stores and the partnership stores, supported by a large store network and a growth in monthly transacting customers. Revenues from productive sales increased by 90% year-over-year to RMB 13.6 billion, when it reflected solid performance of our self-operated stores, breaking down our productive sales into straight straighters.

30:01 Net revenues from freshly brewed drinks were RMB 12.4%. Pardon me everyone, this is the conference operator. It does appear that we've lost the speaker line audio. If you can please stand by, we will reconnect the lines. Please remain on the line. Thank you. Thank you. Thank you for watching!

31:46 and everyone we thank you for holding we have reconnected the speaker line please proceed with your presentation thank you

31:56 Net revenues from freshly brewed drinks were RMB 12.4 billion, or about 69% of the total net revenues. Net revenues from other products were RMB 1.1 billion, or about 6% of the total net revenues. Net revenues from others were RMB 158 million, or roughly 1% of the total net revenues. For our self-operated stores, revenues increased up by 17% year-over-year to RMB 12.9 billion. Same-store sales growth was negative 11.1% for this quarter, mainly reflecting the high conversion rate from last year's heavy subsidies.

32:41 Store-level operating profits increased up by 56% year-over-year to RMB 3 billion, with the store-level operating margins of 23.3%, up 5.8 percentage points from the prior year period. Revenues from partnership stores increased by 12% year-over-year to RMB 4.2 billion, or 24% of the total net revenues. These groups were mainly driven by higher cup volumes at partnership stores, partially offset by reduced delivery service fees due to a lower delivery mix. selling for materials remained the largest contributor, followed by a delivery service fee, and a profit sharing, and a relative fee.

33:29 Cost of materials as a percentage of total net revenue was 38%, compared to 36% in the same period of last year, mainly due to changes in average selling sizes, resulting from the shifts in deliveries. In absolute terms, cost of materials increased by 24% year-over-year to RMB 6.9 billion, mainly due to higher crop volumes at self-operated stores and the higher sales of materials to partnership stores. The rest of the other operating costs as a percentage of the total net revenue was 22%, compared to 20% in the same period of 2025.

34:14 The difference mainly reflects the growth the greater economies of scale in the prior year period, when overall volumes were boosted by the subsidy war. In absolute terms, these expenses increased by 27% year-over-year to RMB 3.9 billion, many reflecting higher payroll and rental expenses associated with continuous store expansion and increase of cost volumes. Delivery expenses as a percentage of total net revenues decreased to 10% from 19% in the same period of 2025, reflecting a significant shift from delivery toward pick-up orders. In actual terms, delivery expenses decreased by 38% year-over-year to RMB 1.8 billion.

35:06 Sales and marketing expenses as a percentage of total net revenue was 5.5% compared to 4.9% in the same period of 2025. In actual terms, sales and marketing expenses increased by 30% year-over-year to RMB 976 million, mainly due to higher traffic-related investments following the suffrage war. General and administrative expenses as a percentage of total net revenues were 6%, compared to around 5% in the same quarter of 2025. The difference was mainly due to higher share-based compensation expenses as a percentage of revenue. In absolute terms, DNA expenses rose 36% year-over-year to RMB $1.1 billion, mainly due to higher share-based compensation and payroll costs, together with increased RMB investments.

36:02 Our GAAP operating profits increased by 55% year-over-year to RMB $2.8 billion. with operating margin expanding by 3.8% to 15.4%. On a non-GAAP basis, operating profits increased by 58% year-over-year to RMB 3 billion, with non-GAAP operating margin expanding by 4.4% to 11%. Net profit increased by 45% year-over-year to RMB 1.9 billion, with net margin expanded by 2% to 10.4%. On a net gap basis, net profit increased by 51% to RMB 2.1 billion, setting a new causative record with net gap net margin expanded by 2.7% to 12%.

36:59 Generally, looking at our balance sheet and cash flow, we generated RMB 4.1 billion in net cash from operating activities during the third quarter of 2016. As of September 30, 2016, our total cash position, which includes cash and cash equivalents, which is cash, some deposits, and a short-term investment, was RMB 14.3 billion. compared to RMB 9 billion at December 31, 2025. Our net cash position remains strong at RMB 11.1 billion. This leaves us well-placed to invest in our business expansion and continue to deliver shareholder returns.

37:45 As of September 30, 2086, we have repurchased about 96 million cross-day auditor shares or 12 million medias. for a total consideration of $391 million under the $500 million authorization that is in place. As you mentioned earlier, we have announced a new one-year sharing purchase program of $500 million to reinforce our commitment to long-term value creation. The new program will take effect once our existing $500 million program has been fully utilized. In closing, we are pleased with our resilient core results, but even more encouraged by our healthy customer trends, which positioned us well to gain market share in the years ahead. We will stay focused on executing our core strategy, maintaining gorgeous cost discipline, and deliver high-quality growth at scale. With that, we will open the call for questions.

38:51 Operator, please go ahead. Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. To remove yourself from queue, please press star then two. Our first question today comes from Michelle Chang at Goldman Sachs. Please come.

39:14 Hello, Mr. Guo and Ms. An. Thank you for the opportunity to ask this question. Congratulations to the company for delivering a very good performance again. My question here is about the opening space. How do we look at the long-term opening space in the future in China? Because Mr. Guo and Ms. An just mentioned that the opening rhythm is much faster than the whole market. Based on the current scale, how do we look at the next opening rhythm? Thank you for management taking my questions and congrats for the good results. My question is about the store opening upside. How should we think about the domestic market, the long-term store opening upside? And given our current already very large scale, how should we think about the pace of the store opening? Thank you.

40:03 Thank you for your question. We always think that The core of the long-term opening space of Ruixin depends on the potential growth of the demand for Chinese coffee consumption, rather than a static number of stores. As I have repeatedly emphasized before, domestic coffee consumption in China is still in a stage of development. The development process of coffee, which is representative of urban countries, has a huge room for improvement in terms of both the penetration rate of the population and the consumption frequency. With the gradual development of coffee consumption habits, Thank you for your questions.

40:51 The way we look at it, Lock-in's long-term potential for store expansion is really driven by China's coffee demand growth instead of a fixed number of stores. As I mentioned before, coffee consumption habits are still developing in China. If you look at more mature coffee markets, there is still significant room for growth in China, both in terms of how many people drink coffee and how often they drink it. And as more people form the habit of drinking coffee and overall demand continues to grow, there will be more room for us to open new stores with healthy unit economics.

41:32 From the perspective of Rui Hsing's experience, the overall scale of customers is expanding steadily. The number of trading customers has also continued to break new records. What is especially important to note and point out is that while we continue to attract a large number of new customers, the overall number of people is steadily increasing. These positive indicators have further confirmed our judgment on the long-term consumption demand, which also makes us more confident in the continued opening of stores.

42:02 So looking at Lock-In's own business, our customer base continues to grow and average monthly transaction customers have been reaching new highs. What's more encouraging is that even as we continue to bring a large number of new customers, average cups per customer continue to increase steadily. These trends further support our view of a long-term growth in coffee demand and give us greater confidence in our ability to keep expanding our store network.

42:35 And our confidence does not only come from our long-term judgment of the industry, but also from our actual grasp of the opportunity to open a coffee shop. Over the years, Ruixin has established a strong coffee brand mentality, Weiming Zhou, Tian Zang, Weiming Zhou, Tian Zang, Our confidence comes not only from the long-term growth potential of the market, but also from our own ability to identify and capture store extension opportunities.

43:44 Over the years, Locking has built a very strong coffee brand. We've always focused on customer needs, bringing them innovative products, convenient store network, and a great value for money. This has helped us attract and serve more customers. At the same time, we continue to expand our product range to meet customer needs across more occasions at different times of the day, supporting further store expansion. With our predominantly self-operated model and well-established store development and operating systems, we can plan our store network based on overall customer demand, identify suitable locations where demand exists, and open new stores efficiently.

44:32 So looking forward to the future, we always believe that the ceiling of Chinese coffee shops is still very high. Thank you.

45:02 So looking ahead, we continue to believe that there is still significant room for more coffee stores in China, and this opportunity will keep growing as consumer demand increases. So we are confident that we can maintain a competitive pace of store expansion. We'll continue to let customers demand where we open stores while making sure store economics remain healthy. This will allow us to keep extending our store network and gaining market share over the long term.

45:31 Thank you. Thank you. And our next question today comes from Jessie Xu at JPMorgan. Please go ahead.

45:52 Hi, Mr. An, Nancy, good evening. Thank you for accepting my question. I'm Morgan Datong, and this is Jessie Xu. Can you hear me?

46:03 Yes, we can. Thank you.

46:06 Can you hear me? Yes, we can. Thank you. First of all, congratulations, Mr. Guan. In the third quarter, you gave us a bright result. Weiming Zhou, Tian Zang, Weiming Zhou, Tian Zang I think the first question that most investors are concerned about is the trend of the third quarter. Although the third quarter is a decline, due to the high interest rates, I don't know if there are any trends or details in the management layer that can be shared with you. Thanks for taking my questions. Jessie Xu from JP Morgan.

46:51 Congratulations on a very strong set of third quarter results. Given the high base for a young year comparison, the decline in theme store sales was kind of expected. Within all the incoming questions from investors, I think the first question would always be same store sales trend. With third quarter performance broadly in line with expectations, can we understand more about the driver or any colors that you can share? More importantly, how should we think about the trend from here as the impact of the delivery subsidy gradually fades?

47:42 And how should we think about the same-store sales trend into 4Q and beyond? Thank you.

47:49 Thank you. Let me answer this question. Thank you very much for your question. First of all, let's look back at July to August last year. It was a peak period of the trade war. Therefore, the impact of high-end technology on the copper chain in the third quarter of this year is more obvious. With the rapid decline in the supply of foreign trade platforms this year, the volume of foreign trade with higher single-carrier prices has also dropped significantly. Although the volume of self-published products has risen, from the whole price range, copper chain sales have still been greatly affected. But as we just said, the trend of copper chain has continued to improve within the quarter, and has gradually narrowed from July to September. and many more. What we think is more important is that as customers gradually return to themselves, RuiHsing's overall supply structure is also healthier, which is more conducive to RuiHsing's advantage in offline store network and operating efficiency.

48:50 Thank you for your question. First, July and August of last year marked the peak of the food delivery subsidy wall, so the high comparison base had a greater impact on our third-quarter same-store sales this year. As platform subsidies came off sharply this year, delivery volume, which typically carries a higher average selling price per cup, also dropped significantly. While pickup volume recovered, the overall impact continued to weigh on the same-store sales in terms of both cup volume and per cup average selling prices. But as we mentioned earlier, same-store sales trends improved throughout the quarter, with a decline narrowing month by month from July to September.

49:36 As we move into the fourth quarter, the pace of improvement has picked up further. More importantly, as customers gradually shift back to kick-off, our overall cup mix is becoming healthier, allowing us to better leverage our strength in store network coverage and operational efficiency.

49:56 Because this is a very important issue, I would like to share with you some of our observations and opinions on copper electricity. Comprehensive growth indicators have always been a key focus of the industry. But at different stages of development, we believe that their significance is also different. For relatively mature businesses and industries, comprehensive growth is undoubtedly an important source of income and profit growth. As for the industry that has just begun to develop, such as Chinese coffee consumption, and Ruixin, which is still in the rapid expansion stage, The growth of our business is not only due to existing stores, but also due to the continuous expansion of the store network and the improvement of overall operating efficiency.

50:45 Therefore, we will not only look at the same-sided indicators in a static way, but we will also focus on the growth rhythm and quality of the overall business for a longer period of time.

50:57 So this is a very important topic, so I want to take this opportunity to share how we think about since your sales growth. So this is an important metric in the restaurant industry, but we believe its significance varies depending on a company's stage of development. For more mature restaurant business, same-store sales growth is a key driver of revenue and profit growth. But for a coffee market like China, where consumption is still in early stages of development, and for a company like Lucky, which is still scaling rapidly. Growth comes actually not only from the existing stores, but also from new store openings and the improvements in overall operating efficiency.

51:45 So we don't look at same-store sales growth in isolation or as an aesthetic measure. We take a longer view and focus on the pace and quality of growth across the business as a whole.

51:59 In combination with the situation of the company in the past few years, we believe that in the process of rapid development, the rate may present a wave-like copper power indicator change. After a relatively intense and rapid power opening stage, copper power may be under certain short-term pressure. As the power opening rhythm decreases steadily, consumption needs continue to grow, copper power is also expected to recover gradually. For example, In the second half of 2023 to the first half of 2024, we accelerated the opening of the store. The same store was temporarily closed. In the second half of 2024, the opening of the store was relatively slowed down. The same store's performance quickly recovered and turned positive at the end of the year.

52:47 The same store's health condition continued before the trade war in 2025.

52:52 Looking at our own performance over the past few years, we believe Lock-in's theme store sales performance may follow a wave-like pattern as we continue to grow rapidly. When competition is intense and we are opening stores at a fast pace, theme store sales may come under some short-term pressure. But as the pace of store openings moderates, and the consumer demand continues to grow, we would expect same-store sales growth to quickly improve. We have seen this before. For example, from the second half of 2003 to the first half of 2024, we accelerated store openings, which put some pressure on the same-store sales performance. Then in the second half of 2024, as the pace of store expansion moderated, same-store sales growth quickly improved and turned positive by year-end. This healthy trend continued into 2005 before the subsidy war started.

53:55 Back to the third quarter of this year, although the demand for high-tech and supplementary services has fluctuated, the overall demand for consumption remains good. The number of our monthly sales customers and the number of people in the crowd are rising again. The growth of copper chains continues to improve. At the same time, the profitability of the door-to-door stores is steadily recovering. As I said, the profit rate of the door-to-door stores is also greatly improved. It has basically recovered to the level before the trade war. This also means that we cannot judge the growth quality of the company only by short-term copper chain fluctuations, but from the long-term development perspective of the Chinese coffee industry, and Ruixin Business Model's underlying operational logic, combining user indicators, business scale, and profit performance to conduct a comprehensive analysis and judgment.

54:55 Coming back to the third quarter, while same-store sales growth was affected by the high comparison base and reduced platform subsidies, overall consumer demand remained healthy. Both average monthly transaction customers and average cups per customer reached new highs, while same-store sales performance is improving. At the same time, store-level profitability continued to improve, As I mentioned earlier, operating margins at our self-operating stores improved significantly year-over-year and largely returned to where it was before the subsidy war. This shows why we shouldn't judge the quality of our growth based on short-term same-store sales movements alone.

55:42 Instead, we need to take a longer-term view of China's coffee market and understand how Locking's business model works while looking at customer metrics, business scale, and probability to get a more complete picture.

55:57 To sum up, for Rui Xin, the growth of the same-store Thank you.

56:32 So we're lucky to conclude with the same store sales performance as an important management metric that helps us dynamically adjust the pace of store expansion based on market opportunities, competition, and customer demands. We take this metric seriously and are confident that we can continue to improve it. In the meantime, our top priority remains growing market share over the long term while maintaining healthy store economics. This is how we aim to achieve healthy, sustainable growth across the business. Thank you. Thank you. Due to time constraints, no further questions will be taken at this time.

57:17 This concludes the question and answer session. I'd like to turn the call back to management team for any closing remarks.

57:27 Thank you everyone for joining our call today. If you have any further questions, please feel free to contact our IR team. This concludes today's call. We look forward to speaking with you again next quarter. Thank you. Thank you. That does conclude today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.