RLX Technology (RLX) 13 Nov 232023 Q3 Earnings call transcript

Hello, ladies and gentlemen, thank you for standing by for RLX Technology, Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and is expected to last about 40 minutes.

I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Sam. ahead, go Please

earlier much. XXXX and company's earnings were Newswire operational very available been Technology's online. financial to third results services PR through quarter conference released and Hello, you have welcome made everyone, RLX and today Thank call. The

view press CFO, CEO, our can of Wang; visiting our section Lu; release Ms. the and include also You website call at will by IR Chao myself. our ir.relxtech.com. Participants the earnings on today's Kate

will continue, contain may, the typically statements Private of please the note believe, harbor we Securities such Act will, discussion safe today's Before estimate, expressions. intend, under forward-looking potential, that Reform as contain target, words statements made or provisions continue U.S. similar expect, XXXX. of These Litigation other

and information financial forward-looking as non-GAAP press conference the these our except are a cause could projected contains from advisers release undertake inherent and accuracy number unaudited or financial The measures representatives include GAAP RLX's of the this a non-GAAP by do anticipated, required not unaudited involve materially statements factors applicable law. Please under this to company, well impacted unaudited note Technology's that results business and update to call statements of risks press release discussions earnings obligations beyond uncertainties any of measures of many those control. the as affiliates, to The differ Forward-looking risks its our and maybe GAAP RLX actual as that measures. unaudited reconciliation of uncertainties. which measures.

ahead. call over to will Kate the Please Ms. I now go Wang. turn

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

involvement. results, you and our on industry's like briefly I to regulatory into would Before I our quarter macro get third update

been As number bringing most framework of into tenders came know, new effect, regulation of to a has industry. a year the the it since you

adapted authorities the chain and supervision. to new their operations have across adjust the the supply and industry rules including under standardize meet regulations concerns proactively strong us, the longer to pushed the needs. some On businesses have new their side, develop users' players, participants to already This products new no the value compliant who

However, continue with impact market flavored the negative participants of effect industry the products among persistent to adversely and recovery the lingering. order illegal industry's regulatories other disturb

have execution On this survey flow seem impact to broaden and operating off, refine our that loss compliance during related the University during has to our narrowed pleased Standard the but new of awareness strategy. will availability demand that users the to these this say allowed even transition flavored I'm users National We tried now to not most portfolio, legitimate users retailers, and Furthermore, XX% reviewed of Users product. boosted have the [indiscernible] challenging vendors regulations compliant the have take tobacco while are continue quarter. new sell only consumption XX% has regulations products our third efforts regulations, the the we improving concept quarter. products flavored still of new, the but products operational and for reflecting efficiency to less compliant shown products. strong and Jiao of cost Shanghai, use industry's the our Advocating cash this the above side, users share legal slowed that mainly product paid effective of of only effort. Amid changes on pivotal users products. products, new are the is compliant by time the by environment, recovery, easy Tong to regulations. But that of brought e-vapor some of new the that unaware about and that XX% the lack of

just in provide will of also We top those our signs the equivalent, line, CFO, in results our moment. seeing a details recovery are of

share me improvement. bit efforts more a product our progress our portfolio about let the Now and of strategic

X of we power terms points launched versus fifth various devices compliant series, RELX, compliant at an and our price of just Phantom price month, cartridges, X featuring a at offer distinctive Phantom more series Zeus. we addressable than ago. Last Pro Pro now affordable year In and series, Phantom

We flavor quickly in flavors our versus XXXX. expanded now October X distinct XX offerings have available also with tobacco back

demand designed of to wide compliant budget. Our every user's selection products across is sell and taste diverse

refinements to for our We R&D deep and knowledge the industry while feedback leveraging our inform collect market monitor demand will leading the capabilities develop portfolio closely continue and users to accordingly. -- to our product

production our selection. to proposition broad value users far product extended product Our -- beyond

by prioritized higher since capabilities, guarantee product product quality First, control quality quality research, RLX control our safety and and system. we and can supported has strong assessment our inception, safety

problems our products call value this consumption period with must compliant regulatory ] sales or assistance. users they after products, international All obtain meet our market. visit and have services. of fully outstanding greatly standards our [ hitting ingredients the a Furthermore, before can stores approval If our participant, and as Holland for provide we and

Our excellent service manner and users and customer professional a issues timely in with resolve service team patient address with can solutions.

security habits. enhance users combat as adult products healthy Illegal regulations and In legal warranty and in a the devices using manufactured and unlicensed and advantages working serious factories, remain to legal with ingredients. nickel collaborating We our line concentration cartridges. lack control of nicotine other a high banned leading unique our noises Illicit we to regulators and and all effects and smokers our safety to that immense exceeding growing product realized contained well tanks, at have oversized trying are as recognition to of which also confident or products devices. We chromium, Meanwhile, health as new environment quality of peace create continue with or in market. offer will are earn new standards ultimately, more product issues. for levels, conjunction users mind The also may the compliant product many of frequently about our create dangerously levels quality loyalty create of cartridges products when a contrast, value hazard by users. poor have to to their can on potential quality, X-year of

regions Before like would our approval authority China first certificate share to time testing Eurofins in gain that of Facilities Quality needs certification. received The indicates becoming ahead to the environment. recently for during e-vapor continue and I a from Testing conclusion, In brand ongoing assessment this test quality a global development, Customer that by acceptance our our capabilities industry-leading to to IECEE countries the Safe-Lab product conclude, worldwide. Through Technology, RELX electrochemical results made in standard, member scientific safety efforts and challenging capabilities and and lab research qualifying control. the recognition I quarter we and XX our by enhance forge we continue our

over past year recovery core on intense efficiencies. our strategy in progress meaningful made the our with to develop our focus enhance have the an portfolio We and

illegal lingering external uncertainty of Looking persisting, and the products especially the the headwinds active in consumption environment. impact see ahead, we the

conducting into outside harm an which existing agreement non-competition Relx us we on on terminated will such, various gives by As tobacco we potential business to compliance to to the benefit. Inc., international Terminating deepen reduction November the products smokers our XXXX. an build the catch educating future offering to users high-quality XX, growth this Meanwhile, agreement adult and market, international had flexibility December been product entered XX, XXXX, China. in the in commitment presence opportunities with

international effective model move strategy RLX in resilience expansion As will we recovery, our into growth we positioning for propel XXXX, markets, products and long-term to value sustainable believe creation. our this and

financial on CFO, further Lu, some of With will quarter's to who in will results last that, over elaborate operational go detail. our I and call Chao now initiatives more and turn our the our over

you, and Thank hello, Kate, everyone.

detailed we Kate our now was the challenging XXXX. Against RMB down stated, an terms. Before will I will and all the financials, described, just XX% provide quarter financial total operational for overview of start today results financials our third are of year-over-year. present otherwise discussion our please of unless backdrop, the revenue note, in the

this a narrowing XX% However, decline. last significant from represents quarter's year-over-year

the e-vapor increase of still products illegal products impacted indicating a sales we to is shipments, that device be the growing. noticed by the While products compliant market, for demand our in continue in quarter-over-quarter

conjunction the may void users can that our warranty. other leakage damage shipments the cartridges issues to the quality as remind use want hazards. cartridge cause to may flavored hand, We compatible that On users our ruin and devices. cartridges Due low illegal cartridges suffer illegal and using our poor with many still severe devices safety in devices remained illegally compliant often other

that the encourage participant, illegal end, compliant and they in the selling fully to we e-vapor find a To growth. recovery As healthy we continue to XXXXX dedicated long-term anyone products. if are call users industry, industry's promoting

products illegal efforts the regulation will We of education and to sale are campaigns conducting also while hope user. products. the better awareness We increase reduce effectively these use the and protecting every dangers of of illegal user

remained revenue mix. our to to third our margin profitability. the In the due now stable XX% at quarter, Turning profit in unfavorable around change gross

However, on to gross a product distributors cost to improvements. design gross e-vapor improve provincial to our continue quarter-over-quarter. initiatives margin business profit margin Thanks optimization for like-for-like and our basis, -- our core

our last by XXX last worth operating expense continue Since basis. happy XX regulation reduced we RMB million the businesses been stringent year. Moreover, the as the confident non-GAAP noting streamlining decreased our to RMB implementing with control in margin. net will loss XX% non-GAAP new actively and of are quarter introduction efforts I'm period also by in on result, and that XXXX expenses a XX% operating a It's to and million quarterly We gross operating from these improvement our agility. same greater drive million compared XX to that of decreased overall of adjusting just framework, our quarter. have first the RMB report we our non-GAAP expenses

was ADS enhance that same income we non-GAAP strive the upcoming X.XXX rise profitability remain of and to our basic for confident net will quarters and mainly second maintained positive our continue income per ADS third quarter operating chain Our working cash as quarter XXXX, to capital improved operational of non-GAAP diluted operating and to X.XXX inventory. Encouragingly, net supply for management the was in inflow period. We with we million due the of flow our RMB XX the in consecutive cash efficiency. per

Our position remains strong. cash

As equivalents, net billion. and of XXXX, deposits totaling cash, short-term RMB securities restricted net September XX.X investment cash long-term net cash bank XX, long-term net and have deposits, we short-term investments, bank

to enhancements us achieve dynamics. and cost aim Our market strong accelerate additional savings cash in efficiency the support to our will We recovery. position navigating to continue

pleased report cash Board approved share to ordinary holders are X.XX of and Directors of Lastly, X.XX holders ADS per USD USD dividend ADS. per or shares we of that our has a ordinary very to of

today. remarks prepared our concludes This

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

Citi. [Operator Instructions] Lydia today from with first comes question Ling The

is from This Lydia Citi.

your Relx a non-competition terminated regarding have mentioned, is question with development, first my overseas agreement you just you So as Inc.

do works it the So what's considered your your us? like for export overseas business second the how business there the expand could our -- And plan declaration. or to that overseas this to have cash is expansion to to how upside And with at rationale you company? the my about happy by potential target detailed question. And dividend you think company? first this parent do And is share see So with question overseas you the also any point? existing

So consider the ratio? the what's policy how And payout do dividend you looking forward?

Lydia. very Thanks much,

on question first And the international the is second on one dividend. the the So is expansion.

changed regulatory IPO. So that our relatively years, X last witnessed it in China, to we the was have business positive when the low is overseas uncertainties X in market in social our only acceptance only and operator to a developments e-vapor globally decision. But due

established have attractive framework leading and this an and a to and presence. category First, develop countries stable compliance enter many markets becoming brand for and stable the encouraging for regulatory

a in global penetration as by products adult are perceiving effective two increasingly evidenced have growing many mainstream e-vapor reduction external highly smokers encouraging. alternative developments user nicotine regions. harm been These Second,

to growth China. non-competition China. and mission, adequate To our itself, opportunities decided organizational with in us Relx Internally, national seize with markets our franchise the global our to a franchise expand areas and we our international enable leadership. outside a significant our agreement RLX we household with resources have become to capabilities clear For market outside upgraded to name achieve terminate presence establish has which capabilities Incorporation,

on share coming expansion international more details our the We will quarter. in

our So regarding question your dividend second is policy. on

a stock adequate in volatilities USD our robust indicated The in and that to with the shareholders program our commitments our cash announced flows building on share to earnings support. capital our Despite payout grow international our in our and our and policy or confident volatility macro per highly short-term our share demonstrates earnings. per and steady we generation, buyback plan ADS reserve. As X.XX dividends uncertainties, despite Board of shareholders' the future maintain profit ordinary continuous are market. consistent We in prospects confidence release, to cash cash dividend our and returning expansion, franchise our dividend value reward sustainable progressively approved operating first may

The next from with Charlie Chen comes question China Renaissance.

here. questions two have I

The industry. the see actually first one about by quarter-on-quarter. the can roughly company I or XX% like grow is revenue so

past of kind quarters, So few et e-cigarette the illegal the resurrection of regulators has China's crackdown, in the think I cetera. experienced et industry cetera, products,

wanted normalized forward? be think the Or the this that's future kind have to So of do the Or question. growth to say? industry? you will I first just have So too going color, some growth is of of industry that early you setup pattern what the

those EBIT loss is cost-saving company's margin with narrowed has question quarter-on-quarter. second we non-GAAP my all has And your efforts see can

margin guided fourth to in EBIT management or the breaking originally, non-GAAP So that recall in even aimed the have quarter. past, we

target So on think do this achievable current still circumstances? based is you

first industry. one And on of So is of second growth the the the the our our on profitability question company. is

National think I to you overall special demand user crackdown on mentioned before XXXX initiate March products a the what compared So improved for have regulators the product. illegal in Standard

our waves secretive. will more challenges illegal products on this faced products At the of beginning have industry from However, as of shelves. special action become the retailers illegal the after illegal year, display publicly sales ended,

they the demand difficult action, to for are the sell the products users National estimate they need predict category with. for and Now it's special Therefore, after products. to this these Standard only accurately the familiar

products enforcement gradually in National medium regulators' are term. will We use our believe long and Standard confident users the more in and

conference cost So regarding quarters. earnings our as question, we second I significantly our discussed optimized your streamlined in quarter second call, over operations and think have past our structure X the

cost and absolute improved of profit September. for topline the we result, quarter-over-quarter, quarter-over-quarter amount gross our With our non-GAAP recovery the XX% realized by X% XX% decreased a year-over-year. efforts, expenses by operating reduction quarter and our third non-GAAP and in positive As profit operating

remain positive fourth non-GAAP quarter our this We month. with significantly our to change topline operating in structure expect and cost profit in next the don't or

been cash XX the X quickly. inflow quarter to an has RMB outflow first second the the a abilities XXXX, flow third achieved cash of of consecutive quarter our in operating inflow in million operating positive industry million development XX our In compared cash Furthermore, for adapt million in and to a quarter, and to RMB the quarters. we XXX changes demonstrating macro RMB

with The CICC. next question comes from Peihang Lyu

This is have CICC. questions I two Peihang here. at

second the what of and about in product. the of for some And how third and recent your outlets? after situation retail The you Could most us the first sales on my your product? channel, And the color is each license is one the the And give the of the question profitability updated operating your sales approved proportion major products how GB domestic renewal from is about number perspective? is is quarter?

And first the on new we the products. our that have. on is second orders retail the is So question question

we Language] actually shows becoming in user more available our question, first these months October, flavors are our of series flavors first [Foreign that users. launched contribution of popular survey sè two X ago, couple mid-teens. These chéng now among at nationwide. are for stores the Relx And the a reached the already So has to Phantom increasingly flavors that

launched leading By are we than October, anticipate XX in and ] device, series, than which sè series compatible of Additionally have end continue And series but that the #X rise. launched cartridge the [Foreign our [Foreign more Net affordable is October, We sè our more provinces. Language] [ contribution behind Phantom its we also chéng flavors. ranks [indiscernible], likely our cartridges. with fifth Zeus in among Relx of our will Promoter best-selling just now chéng to sales Score Relx the Language]

more few begun second regarding number special is And Furthermore, orders down remained users orders. past stable products. months, cracking in the your question about products. following -- illegal has retail of retail regulator in have -- crackdown compliance of products illegal Number our trying on the

our only legally. were of last cartridges after we year, XX% participants sell could only As aware October that explained in tobacco-flavored remarks, retailers opening

of regulations of that the interested e-liquids be ingredients national Standards, our standard products. their launches on assurance in improve new As gradually retail such the will before enhance effectivity, will more product and benefit all and the more required are as the approvals the right lease, increasingly aware users become This and they National using in products profitability.

level started self-operated been operational Our past profitability in reflect the to on sales the stores could the stores These and they profits profitability. have overall has quarter-over-quarter couple increasing of months. profitability turn

over Due the I would turn the remarks. like to closing to time to back constraints, for company call now

joining us for today. again once you Thank

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

conference the call. concludes This

You may your now disconnect you. Thank lines.