RLX Technology (RLX) 2 Jun 212020 Q1 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for the RLX Technology Incorporate First Quarter 2021 Earnings Conference Call. At this time, all participants are in listen only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded and is expected to last for about 40 minutes. the to turn host, now will call your over Mr. I of Head of Tsang, the Investor Sam Relations Company. ahead, go Please Sam.

call. and Thank you PR been first conference made Technology welcome Newswire to Company's very much. today Hello, quarter everyone, press release available XXXX and released online. results were operational and earlier RLX The through financials have earnings

Chairperson remarks of strategic Lu, ir.relxtech.com. by section XXXX. of IR and for quarter ended can view our On will call, Officer, Then, Wang, You first-quarter today's through initiative the Ms. also on Chao on the Board Chief first further the us general will visiting our results specific earnings of our Executive a Chief make Co-Founder, achievement website Directors, processes press going at the financial XX, release elaborate Mr. Kate March our and and Financial Officer, take forward. some our

continue, the as of potential, forward-looking statements similar today's expect, please Reform or Act contain discussion XXXX. Before provision that estimates, intent, Private target, Litigation will, continue, expressions. contain U.S. such words Harbor the Safe typically will note Securities we under may, These made belief, statements of

will inherent not may Company as could number risks of The its forward-looking factors The Forward-looking obligations this statements projected the anticipated, except measures of contains Kate turn to Technology's GAAP those the by or control. actual these of information are any required go over our under does statements many financial conference Wang. differ which Ms. uncertainties. note involve results to of be risks a as accuracy cause and and measures. beyond release that I a Please impacted undertake that uncertainties RLX update materially from RLX now call discussions GAAP to financial the reconciliation unaudited earnings unaudited well ahead. Technology's release Please of measures. unaudited non-GAAP applicable and non-GAAP press to the unaudited law. measures press as include

Sam. you, Thanks, your everyone, time today. our making to for join call Thank earnings conference

our January, an the we eventful in Exchange. distribution production, development, listed was more In After and and company on one of industry. a technology, the First-quarter chain research, for product successfully leadership XXXX solid continued for and retail network. supply scientific New York listing, Stock we

Our other net grew revenue the proposal XX% over public comment an quarter a quality seeking guests. the for In advertising authorities the risk quarter the false and to regulations March, and first require supervision among solving and announcement quarter. and problem e-cigarettes at of rules strengthening regarding aimed made safety

protection alcohol at relentless the trusted speed fronts It of yesterday of revised the enacted. tobacco, us corporate on and the values have newly leading to purpose. always underage of market process law the all and use the and inspiration do. pillar a brand in as everything and dynamic is value social industry. Just continue our all Partial the keep key view to to user with choice And of environment for serve most these regulatory we that that, value, we included. of The addresses pioneering force make been upholding e-cigarettes minors with value, a was prevention us in and

meet purchase to ensure their For experience. enhancement seamless development network our distribution creation focus product and best-in-class we value users, through through greater on to needs and their diverse and

and value our in chain. we through creation to While our everyone empower science technology advantage sustainable investing and accomplishing in focus on stakeholders partners, value reinforce and

sales counterfeit To development, our appoint illegal creation of reduction through providing to value quality business marketing with against products through keep safety to minors. For products focus the society, standards and highest and and harm adult against we smokers on we for fighting strengthen pace and as understanding of Mr. our steadily He comprehensive banking developing been our and a Financial brings and industry. quarter, over the Chief talent to healthcare investment decade we Chao a experience attracting In of Lu, first timeless high-caliber have capabilities. Officer. the

We and will will he are for an With turn him addition over Company. more with elaborate that, invaluable us over I go results months two and the than Chao, our Chao, now. pleased believe has the to please more be quarter for on some management the the and financial welcome ahead. during to will team past to initiatives in call He been of who further detail. taken operational go our

Thank the creation has honor value management been all an RLX to team been a the you, Kate, to It of everyone. at center hello, has join advocate and and great initiatives. pleasure our

specifics with some taken we through more Then, the and we the you new also Lite, guidance released for for second I share the our March, known results demand, RELX user financial will affordable as the will I pricing. language] quarter. walk In in quarter initiatives quarter. in a have Next, response first regarding first [Foreign to product our

product enhancing the our We China. to as our we of offerings and serve will in needs keep seek diverse users expanding

the We channels penetrate also and nation networks of across distribution continued e-vapor products further our to among offline retail expansion adult smokers.

various partners adult and quality our XXXX, we In first strengthen XX, distribution with quarter open network. of stores Quality retailers to to efforts China. nationwide, also RELX-branded together our retail working XXXX, partnered capability. branded to with collaborating part diversify to of have expand to with our we XX,XXX we our industry-leading over nationwide, the assurance RELX and smokers control and partner an start further consistent forms our model to been of opened in as we Lab retail Meanwhile, serve business of better branded excited in partner number stores, March of increase willing see us to store are As

exclusive developing production plants and to We third also our our capability. started enhance production second

RELX peer-reviewed cooling our form of of The on lab the WS-XX. terms In of published emphasis research, article site efforts ongoing in scientific study on research. Journal the our Applied agent, journal Technology part scientific

the lab use strengthening long-term by products. to our trusted our profit social of remained principles. dedicated in-house to related clinical ethical psychological research investing adhering product strong evaluation quality in elements, of physiochemistry, safety, e-vapor our will keep brand commitments Keeping to and to Looking ahead, we building and we up consistently responsibility, and and

We peers enacted, combat have were entire study sales the and seized having almost by XXX,XXX products. Shield products, on stakeholders. minors our the the late first April, links, Yesterday, industry delisted call all all. and we to relevant the and investing on over abide participants to counterfeit of to our detailing newly after regulations, first and laws protection revised published law strictly In the our to of among in was commitment thoroughly counterfeit ESG continued online Program program, XXX,XXX Golden we our efforts

performance. coming financial as above We to expectations. our good XXXX Turning momentum with started first-quarter our results

retail distribution first and leverage. our adult will top-line Our robust now growth optimization result enhancing as overview for penetration among key I quarter provide of financial network, implementing the of of user expansion We increased XXXX. driving a operating a our smokers. cost remained brief strategy devoted continued of and the our to results

salaries general of primarily and RMBXXX.X quarter in RMBXXX.X loss tax quarter with and of due compensation quarter increased the the million quarter by the in Share-based in The by in due welfare legal quarter to salaries XXXX. and net primarily Gross in XXXX. RMBXXX.X Our compared and fourth and recognized first fourth of of RMBX.X the expenses. an second, profit The billion Income compensation RMBXXX.X quarter offline the network. the in in XXXX XX.X% in of due first and to the of to million first million fourth distributor, was XX.X% both quarter in in of RMBX.XXX the of first were net primarily XXXX. XXXX, increased consulting increased increase was driven XXXX. the XX.X% from the of by Non-GAAP quarter in to XXXX. benefits; in income. XXXX. RMBXXX.X Operating first, of expenses, of XXXX. the expenses increase billion an ADS and compared revenues were quarter and quarter of RMBXXX.X in quarter million the fourth the the from a net net increase in XXXX. of the XXXX, and Gross driven a and per quarter and XXXX, growth expenses; XX% in to RMBXXX.X development mainly fees. to income offset an of in quarter total quarter expenses million of first net the an the in fourth the Non-GAAP and compared million increase the partially of XXXX. were benefits, compared RMBXXX.X XXXX, compared primarily was in distribution fourth administrative and RMBXXX.X by; in basic the to; million to by million Loss of development an from RMBX.X was administrative GAAP margin in in Research decrease first GAAP welfare in fourth in and increase to decrease in million RMBX.XXX was retail other increased first, RMBXXX.X the RMBXXX benefits; in the XXXX quarter XXXX The shipping quarter quarter was the increased compensation of million fourth quarter expenses, RMBXXX.X quarter RMBXXX of million second, million RMBX.XXX XXXX income from the to diluted by sales share-based XX.X% selling XXXX from offset in of billion in the RMBX.X to salaries in loss revenues first quarter expenses XXXX. million our million operation fourth expenses first ADS first Selling basic material fourth RMBX.XXX fourth which quarter quarter The three, by expenses, XXXX, the expansion of partially expenses RMBXXX.X an branding of quarter both of RMBXXX.X million from two, in fourth reached XXXX in of expenses. expenses expenses; material first increased of to XXXX. XX.X% increase increase of in research with the in XXXX. were compared driven one, in diluted an in fourth to taxable was from first XXXX, first General a decrease quarter increase of quarter in million share-based XXXX compared of and first by; in in the RMBX.XX quarter was RMBXXX.X for XXXX, and to welfare increase net XXXX. expenses million in increase an in first by in quarter RMBXXX.X increase billion with

the restricted Company RMBXX.X XXXX, XX, XXXX. had cash March increase to long-term deposits equivalents, bank As bank and deposits, raised in the and net short-term December primarily short-term XX, IPO as compared RMBX.X of billion investments, was due proceeds January. cash to cash, of The of in Company's billion,

denominated XX, March RMBXX.X XXXX, to of As US$X.XX billion in U.S. dollars. billion, approximately equivalent was

guidance. to turning Now,

including which reflects to and remarks are quarter and Company's currently the conditions, above today. XXXX, second exceed our revenue RMBX.XX and non-GAAP the million. demand, all pandemic, the user prepared to RMBXXX estimate of outlook concludes current those net market to is subject the and income based operating Company conditions change. The preliminary This of related For net billion exceed expects COVID-XX to market the on

the open to Operator, will please call We ahead. questions. go

you. Thank

benefit question-and-answer the begin immediately question ask the call, in all wish please your English. question now you participants if repeat in to will on [Operator session. Chinese, to instructions] For today's management We of your

Ling ahead. Please comes Our Citi. go first from question Lydia from

And for Hi, management Kate, and this hi, Citi. is presentation and here Sam. Hi, thanks the from hi Chao,

I question strong first Would And the first, on questions. result is -- views. your congratulations quarter, to two first share hear in So, on to -- like actually regulation the side. your have the achieved the

in after feedback like opinion the the also at public So, March -- April. the in and and late

timeline the regulatory regulations? your some China this the market. the could on for your like, question view the programs expectation And and -- like the updates for industry the what's on on share current views is you any e-cigarette with for your So, second detailed my what's latest competitive next your like us on and landscape

market your how And changes the aggressive announcement any also, observe in opening you the so has opening first very evolve? observed like And the opinion been observed after share your you. after announcement? did in in the have we so, pushback And the the Thank competitive about March quarter, how the second also and quarter does any you peers?

to Lydia. see Sure. Thank you nice you It's again. much, very

about the is So, first update. the I regulatory on mean, one

So, in response to March on XX. made MIIC the announcement

the have So, we of the submitted regarding XX. before April feedback deadline announcement our

announcements in potential attachment in e-vapor regulate supportive absolutely e-vapor tackle of XX industry issues considerations efficiencies So, the of market. on safety operating the we the and of are some the which the the to March being includes on of mentioned the products

Some situation in past of advertisements kind have been our daily made by operations. focus about some this always participants our market

or regarding authorities. to the have best Regarding timeline regulatory been the there updates updates, the the of according announcement no sites

monitoring regulatory will very the developments We closely. keep

I So, second question competitive side. question -- think is the the on landscape

So, Kate has growth and by remained to and as starting as financial far very year, results. XXXX, mentioned momentum so both on strong Chao, business this our our evidenced by operational

as nationwide development, serve well and also portions production identify So, enhanced in our additional our and chain China network, try expansion, we retail services. alongside technologies to demand as our diversified product better through advanced supply to distribution, and more

So, our knowledge, financial and or according even us from our landscape of operating strategies peers product results mean, major I operational believe the the commercial or weakness or regarding share our beginning the on to reason kept market of have itself, competitive. that year. decline is results most have I the growth in the

creation China. for so So, scientific chain the plan strategies and into lead product underage own the distribution adhere supply importantly, sales to our in etc., in over our investments development, most to market we players opening as market for mentioned protection remarks, research, widen more other to e-vapor of in and

Next question?

Thank you, Sam.

Please comes from question go next Chen China ahead. from Renaissance. The Charlie

or taking color for two would announcement since you have have seen Thanks March the any Number I impacts mean, you, your or consumer behavior be material questions. questions. business XX, management. changes appreciated. anything? is I my one Thank -- on Any on or

capacity Second year? capacity question has for the do have largest be growth your the toward of reserves and your Thank whether sufficient for will you your production rest supplier you. visibilities

announcement, the your for Charlie have own and we first closely and condition, question, your been Thanks, On question. monitoring March environment our since results. market XX operating macro

feedback distributors, retailers, We been through including and partners gathering have also business communication. suppliers from our daily

closely the system. We including inventory and of through operating and levels been own retail value, have our also our frequency metrics, purchases, monitoring sales financial

sustained for support see to business continue users our our development We business from products. and our and partners

not yet have announcement. impact operating experienced on material We a that negative our results since

operating We're and partners the monitoring communication maintaining including active landscape our metrics. regulatory with industry We the will the framework. trusted keep monitoring key

inventory retail formed timeframe achieve fulfilling multiple We goals, of optimal for a while e-vapor for ensure inventory our partners, You and including your products. visibility chain factors, aim users, supply our managing question commercial our sales, in plants delivering plants. be We level at with demand, user and society our various to as we agile on could production based production we distributors with and whole. partners. will our creation and stakeholders, to chain know, a value the user supply the our demand supply second On right, and chain levels capability that regarding to work our production strive capacity

including contain battery, easy, multiple have materials. hundreds currently components quick various And packaging, e-vapor and SKUs. we Our of products

suppliers manufacturers past over We been production discussing the communicating with have needs our and year quarter. our the and and periodically past with

suppliers have our and fulfilled needs volumes. and production capability Our We on manufacturers and effectively. remain actual the -- their our manufacturers' all capacity vigilant suppliers

and think capacity accordingly. expand can adjust that I we or manage

timing be to plans. manufacturers able and to future needs supply our our under expect and suppliers mechanism our We current the expansion chain meet fulfill

Thank much. very you

Chen go Our question ahead. next from CICC. from comes Haofei Please

two management. Thanks, I questions. have Haofei from Chen Okay. CICC. I'm

increase question had had and affects the the your on Company's such components up, material helps the what's membership cost? electronic members number second upstream effects the The price the first raw especially is the does question operation? Company's price industry's as some the -- cost the will chips is, latest And of what's system go Company's

to Nice Haofei. you Chen Sure, again. to talk

two the are the One one membership and cost there system the on So on questions. is other increase. is macro

membership system and reward means which users our development system serve XXXX the better membership enhance our experience. to with side, on own So, our since

can I best user the membership product. the how our system our deliver we needs also possible So improve of and for us, can mean, understanding

we some basis, updated on locations, have can So, members our where we them and membership our system our scientific of also services. of our introduction offers keep XX currently, registered over store product, information, a mil on in

the bid will alternatives. improve want a in harm we continue So approach we to products tried to e-vapor and serve, system as membership using and a we reduction enhance members, safe as better our in

a on the pricing level. raw material on on is the So, second question macro

So, are economic still raw an electronic in trend. having indeed of that industry a challenging we situation. has aware upward materials there chips been like Prices have global

of part experienced in the as an this, supply we of of in have some increase part that suppliers costs process. So see our also chain

experienced our in of adverse raw However, far, not change materials. the from have any price so costs the material impact

a continue the throughout mean, our be financial operating the brand monitor I for issues us. So or manufacturer, supply us, by faced some we'll so that could as to closely chain latest of and developments

increase, costs products on operating active mitigate for so or So, of if solutions do do to seek we the results. our potential our financial impact any very

comes The Lam Haitong Stephanie Please from next from go question International. ahead.

Hi, have the questions you congratulations taking my strong management. I Thank on two and questions. for result.

noticed the some in regarding accelerating opening is China. have your opening that the one store target. peers been of First We store

This we on want any to our current opening first have just check is question. if plans? So adjustment my store

the great the progress The of Could if second positioning site. you. you future Thank be testing is and can It price sixth-generation sales you to products? our also question products? product share vape low-price talk related our the about would new of

Thanks Sure. Stephanie. much, very

So plan, logic I this. of explain opening so the can for store

and it in enough a intact, or on So there users for is area for are operating logic of given potential of stuff, products kind district. likely our whether remains our model dependent branded

open of monitor more of the site decide there. looking operating would Early our model are we or our implementation stores past. where area each factors instead evaluate district kind out to branded So or there what's be has combination whether needed with of of achieved great and stuff branded in have other macro stuff, productivity in success we to for micro kind the

We March have XX,XXX nationwide offered of finally stuff year. of branded XX this as kind

been openings of set the including a of store. of existing based theme we on consistently store participation metrics So, have monitoring comprehensive

the we of us, for based of expand So our network on with continue careful topic. potential criteria will measurements to use above

among close very cannibalization a pay of stores enforcing most also region. will distance for attention the to avoid We requirements by

the opening accordance and competitors adjust plan So our we first it on one well. store the how as is in with

second So latest the also [Foreign product our and one is the pricing language].

I for industry really the the us, depends feedback. on strategy dynamic. mean, So, together product commercial user in has pricing actual with penetration been It

We of will a to of continue to different price, range seek we various smokers. adult offer needs at types differentiated as of products fulfill

For types other one for this example, the for lower-end affordable. features our for various really of smokers to product and products of cost make to high-end manage

Regarding testing conducting the cities. have [indiscernible] path of sixth-generation times the products, been multiple we the in

are from such of more users properly the such still evaluate our to feedback We will and performance partners. business preliminary require decide and products. products process the for us of time and the scale collecting It in availability of better

very for much thanks So your question.

you. Thank

question-and-answer conference further like are for concludes This questions. to back management There turn closing to session. any remarks. no over the I'd our

us again for today. joining Thanks

or contact If Investor Relations. through you website further our information Relations on questions, contact our to feel TPG Investor have the any team RLX free please provided Technology's

the concludes conference This call.

disconnect your may You line.