RLX Technology (RLX) 17 May 242024 Q1 Earnings call transcript

Hello, ladies and gentlemen, thank you for standing by for RLX Technology, Inc.'s First Quarter 2024 Earnings Conference Call. [Operator Instructions]

Today's conference call is being recorded and is expected to last for 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

earlier much. First very financial and to Newswire welcome operational available been Thank online. XXXX Hello, Earnings Technology's services PR through Quarter were company's and Conference RLX have results made you released everyone, today Call. and The

view and press Wang, Chief our Lu; can Mr. Sam of Ms. visiting Kate section Chief of release Executive the Financial Capital Chao include also You website call at will by Sang, Head IR our Officer, our myself, ir.relxtech.com. Participants the earnings on today's Markets. Officer,

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

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

solid of begin CFO to making an discussion Sam. time you, for followed to products review of will our business before it of start. conference earnings join over off impact our everyone, financials. hand XXXX call I by our overview our today. a a I illicit initiatives, on is for our international with thanks, to Thank a And

to response into in progress introduce and to close keep unique By strategic price later can in we a system international that rising wider in ready tailored expansion is and ], blueprint. in determine and needs. Asia diligently develop with are future you -- for we each RLX Southeast are additional worldwide next running our broadening plan agreement to landscapes and growth offerings we portfolio our market's region. systems, Our terminating of smoothly, environments with a and new competitive are We International premium products updated and we thoroughly offering After portfolio the calls. On needs and operations both we researching to North been our With has cost more spectrum at we're expand living regulatory strategies open broad markets, we'll impacting evaluating starting progressing team Since e-liquid non-compete meet our for November various across the each are product on well. leading plan overseas. and stage. are our expanding users inform markets markets, cater adult diverse diversification, XXXX, additional capture consumer and to our product demand. In regions, our to beyond can capabilities smokers, that we steps and of overseas products, device domestically confident development our [ SKUs our

products are promising subcategories to on well adult pod in these the regarding received, environment recent as other launch disposables Retailers in early Asia shifting markets, initial showing Southeast and bans impact of been new ]. system. Our overseas users has seeing e-liquid such we [ results. regulatory products are from of

present price prime capitalize every point. us and needs on an changes players global marketing of in market to we leading poised our pipelines future increase As with the opportunities products pod smoker effective transition share. compliant to at adult these for regulatory this meet the strategy market, are system that

the products challenge to products impact domestically. Illicit products. to continue of Turning illicit compliant

are enforcement However, Chinese announcement the by on of industry. the and We're actions longer handling, March. round a a in illicit factually down another special on last building crack encouraged focused than This -- we authorities and investigation X-month case improving system of than year's, for spanning [ X-months, initiative ] products year's. longer to month

to are issues, serious though pleased go. long there to still regulatory these see tackling We way authorities is China's a

seeing outcomes. already are some We positive

XX,XXX over X XX,XXX X,XXX than million amount and e-cigarette The XXX in at seized cartridges, successfully Province accessories. counterfeit the were disposable e-cigarettes, in entire and XX goods devices chain X the sealing Zhejiang million X lines, illegal sets total production of dismantled RMB the investigation They supply involving RMB over over product equipment, exceed For and million. to more XX instance, cracked sales. valued a of production case authorities from e-cigarettes manufacturer involved

X million, RMB amount ceasing Additionally, recently authorities uncovered e-cigarette over XXX,XXX and value illegal in enterprise and e-cigarette disposable dismantled of investigation over and the operating exceed illegal X,XXX manufacturing in manufacturing sites X goods XXX X sales with storage total sites, They surpassing scales [ and online. the Province Gansu cartridges. RMB ceased involved million. total ] X.X The shops,

manufacturers well-regulated company, wholesalers $X,XXX Starting fine on is are removed has until on authorities March responsible down it committed leader example, into Florida In product and also applied advocating also increasingly industry products XXXX, RLX the to orderly implemented e-vapor per for daily sell These State the healthy to from with an states regulations the market. socially creating in that for retailers, ship a market. Internationally, prohibit illicit products. that As collaborating cracking and States, face will an a of products these registry and for vapes. distributors United and industry portable Florida. X, regulators remains

up -- control USD third to for in X,XXX retailers Both on The subsequent and include or vapes will and charge, degree X-years and authorities announce are the first local fines who government nicotine counterfeit authorities cease on border vaping. U.K., face someone the in in punishable Additionally, sells under serves a anyone and measures. cracking down expected including rules third to a and is unlicensed vape product, time could licensing scheme to which prison. In to taxes, new working for by imports XX ban are industry, new unauthorized other disposable products. the for [indiscernible] among regulatory felony

an I turn portfolio, to are call our and industry elaborate initiatives positive We continue confident agile initiatives healthy With remain As more products worldwide. as stage. With will Chao go developments gain ready results, regulations markets, some these future the for future reduction benefiting will who player, and seize contribute quarter's create development. In global setting detail. and product expansion operations to the to actions already deep over yielding our evolve e-vapor expertise, over we success. tool business and now operational a will our last a of positive smokers even legitimate and as to that strategic harm that, for opportunities that conclusion, are stage in will of our outstanding Lu, traction financial we orderly CFO, on our on view adult a further results

and Kate, hello, you, everyone. Thank

the unless Before I present in financials, note, please are all start stated, of the I otherwise RMB today financials will discussion our detailed terms.

net harm continued that this am into increased Total strategic to Southeast deliver RMB expansion has our North First, Asia positive outcomes our I marking quarter. report million, to and revenues fifth to pleased consecutive arising XXX revenue diversification, to from allowed have inherent capitalize of the geographic markets. reduced growth. opportunities us our quarter of on on The benefits international in reduction reliance with along domestic market initiatives

adult from to smokers, cigarettes capturing reduced-risk We transitioning growth are from like increasingly e-vapors. products organic combustible

have financial solid a metrics. our driving will we for our We place, that progress initiatives across expansion are ongoing blueprint continue and in optimistic

provide in continue we competitive market the as and environment. will various details We further landscape assess regulatory to growth quarters potential, coming

domestic profit first margin total impact. has the of XX our the million profit of first efficiency, margin quarter-over-quarter Despite profitability, to product exclusive in improved to manufacturing RMB of having from the on loss gross expanded chain Notably, China, and the efforts excise second quarter supply positive ongoing XX.X% our a plants our the recorded We -- to a of designs overall are increased XX.X%. business enhance XXXX. Turning products quarter. improved year-over-year utilization gross operating e-vapor gross for taxes our for quarter margin since

of However, impact significant XXX the in excluding $XX million marking first second loss a profit compared consecutive marking profitability positive quarter turnaround non-GAAP year-over-year operating [ the share-based represents ], million our our RMB a of first of -- operating quarter non-GAAP non-GAAP level. to at compensation, marking This we achieved our of the operating XXXX. a of sorry, second,

profit, level of first XXXX drivers outside cost our were success. Driven for efforts XX% by RMB income our positive contributions net million. by main reduction XXX in Our quarter from year-over-year turnaround operating China and this quarter's to non-GAAP of increased the profit the

basic X.XXX, ADS net per For was net was diluted the same income our period, RMB X.XXX. and per income RMB ADS non-GAAP non-GAAP

in flow a cash operating cash of operating XXX same strong, flow recorded X remain inflow management. capital last outflow and and quarter cash sheet period RMB Our first million in by enhanced XXXX, of We an from supported the healthy of the balance and inventory RMB meaningful working year. million improvement

the XXX a stood from of just significantly of cash days quarter the Additionally, conversion first days negative quarter we cycle. experiencing over turnover are XX currently XXXX, in Inventory at reduced XXXX. in first days

including track assets, and various the summary, we March right inventories cash RMB of cash As international financial billion. In short-term are XX.X equivalents, are forms total totaled restricted long-term of expansion. and XXXX, XX, and confident deposits that and our cash on with our we

to markets scale as continue efficiency will our optimize operations. costs and new we we forward, Moving enter and

while open remains to value to shareholders. This ahead. call remarks users please concludes I long-term our to today. premium go will Operator, prepared deliver our goal now sustainable products Our questions. for the creating

from the [Operator with Charlie China Instructions] comes Renaissance. first And question Chen

[Interpreted] questions market. I've regarding got domestic X the

marginal And full with current question. us can bit can any for with momentum all, guidance So of in market? changes you share also year? sales on the have domestic more there based sales Is of new like that's rate, share run the first So the that you first target on or see monthly little us? do new any and month-over-month a you

terms requirements, X Can directions or more the requirements with you technology new from in et flavor, a bit color regulators the packaging about is pipeline. and second And on domestic little management us cetera? product heard of that share

question. Thanks Charlie, your much, for very

the as question So monthly internally. our well is first trend targets as sales our about

our has stable. relatively the been monthly So of sales business China

Chinese each changed. and So effects, to be New -- change [indiscernible] not sales example, public holidays has trend subject and overall Year could overall for month the

may hope concludes. initiative this that action led authorities has So there aware, and Chinese as ongoing, emerge positive be been a as the will by you is we special trends

products also compete to are launching with effectively working characteristics on with and We design products. illicit new new

our meet demands. to We are user offerings innovating and expanding our

new share our will more We details once launch. product

So new effect we market enter track overall, our expectations on actions our business targets, and with annual as remains products about the the our market. the and China optimistic take and remain regulatory

about, is requirements. question second like is there your change, any other So or especially regulatory flavors regarding

papers regulators. in Chinese few So so published are late a the draft being April, there by consultation

change about first is approval. the concerns So -- product the

So technical you an have stated new versions to review did compared include marketing such regulators with investigation the assess activities, illegal previous related early e-cigarette under not change in the second an exports that XXXX, mainly clauses will the applicant if draft is the Also, campaigns. published certain epicene concerned of for the application. And suspected the not is products.

applicable regulation. on violate activities National and be marketing the registered must all Transaction So not Platform

aimed industry we the you consultation promote orderly your questions. for a So are papers Thank believe healthier draft development. to and

question from comes with Citi. Lydia Ling next the And

this Lydia Ling from Can Citi. you Management, me? is hear

Yes, you. we hear can

Citi. Lydia -- Management so from

questions. And X so here, have I

macro know already X and that is like also that have to share could growth on step. consumption. market, understand if the this seen and category entered you if overseas that your weak impact enter know any want from new trend to market The And that that we we you for the first I this the by year-to-date market you you step want on

the in to is consolidated want And check first quarter. actually if market the be quarter? new your would expansion I what second in plan any So

first on market. So question this the is my overseas

the market. And second on is then China question my

mentioned also just you ongoing illegal the measures China market. As products that the against in

the the second So to to know trend improving trend ] sales in that, expected? could second should wanted be it's quarter in China? up [ ] be So what the like quarter [ actually rest through

your questions. much, for very Lydia, Thanks

So regarding international your is about the markets. question first

North and So yet we our strengthening progress in Asia first Southeast made significant have in in to the new markets have and presence quarter. enter

Holy to So weather this despite Southeast Month business our maintained and of non-China due Asia. traditionally has low quarter the affected growth being traffic steady Ramadan first the primarily store season category, a for in

alternatives more also value the rising nicotine of penetration. the living products. of encourages and for of international clear adult has accelerate to So reduction switching we The e-cigarettes to e-vapor like aware markets. money costs cost are nicotine help living cigarettes from weak switch macro smokers the harm trend rise consider could in the The been user like also and products

Our expansion for second strategy markets new and entries calculated the quarter. calls prudent into in

countries expanding We certain with to in are working Asia. on quarter, this starting

we growth positive are of international potential market in our by this capturing overall, share and beyond. optimistic to growth our markets quarter drive So increasing

what's So the second impact about quarter. towards regarding action your the question the second and also special

inspection of the performance our year. action year's products industry. of This for illegal more to all month thorough chain than special extended multiple aspects, focuses and with comply positive fully year's a that entities of So value cracking action The developments entities. This and down on more against a and in inspection for evaluation, period retail. the from special action ensuring are with regulations the wholesale comprehensive China unlicensed last manufacturing special on allows is longer

us, our pursue departments quality violations. systems. Also, assurance this authorities with identify complying shut down for activities, and like robust with standards operational manufacturers ] such unlicensed to and production entities illegal requires collaborates product and [ operations legal responsibility For

are So promotes to to for Chinese their address support e-vapor efforts these and and thankful issues we industry. a fully authorities well-regulated the

our efforts we our the stabilize achieve actions and support for help that optimistic remain the can expect markets So goals. and second these quarter, growth these can

to towards the questions. outcomes for predict your quarter. early still specific second a you bit it's Thank Although

with And Lyu the CICC. next question from Peihang comes

on share is from is how market? first what the here. My questions Peihang in I company And the current also level This perceive CICC. market is domestic the X your does the have question in have And is share ASP noticed that market, we competition the the given unit pressure of this question second in the year. product intensifying the legitimate market? overseas increasing

company the view So your how its the and competition on impact does industry of the business? price

Thank your questions. you very Peihang, much, for

markets first the illegal the in So question China. about is

So that the market. post in we great continues do see challenges the to China illicit market

new transactions platforms, estimates of market and that size. tracking Regulators difficult account These are down market adult black the suggest are products market and will market better hope we actions on mentioned illicit are in share. activities in to media the ongoing. product is through trade. illegal X the the launches the reduce illicit for opening majority remarks, still which industry, cases monitor conducted including We Some special the enforcement social and

leading market market our a the we and in of months. stable terms share the In legal markets, over a are XX share maintaining brand last

We user meet quality expensive and brand that have and products equity our provide needs. can strong

our competitions. international second your about question market So is

with driven market while complying the Unlike industry So the are meet related evolving than primarily we think demand regulatory brands categories, innovation, innovation markets by product the is to competitions users' pricing. just our product could requirements. rather other consumer growth in of that movements and among e-vapor share

e-vapor directive than X-millimeter to These more millimeter. like emerged. For region response the contain to subsiding innovation, as cuts brand X for different would This product requirements. Also, ] provide X products, demand value seek EU without more limits with points. we while puffs, this provide for diversified ensure to brands, cater cartridges various introduced not in but at e-liquid. we cottages cartridge equity. segments money needs products offered including more instance, requires users convenience have Product who Overall, user new no the are offering products harm the Many no the see user competing us, of [ in to more have diversification each and capacity products user price tobacco meet X-in-X compliant can market e-liquid preferences can of for pricing. in In than can options. EU price options product

areas. cater of the As to the and category products our we the your grow launching share and to grow, penetration can that with we by use market for questions. e-vapor industry continues you increase Thank believe

[ Securities. And ] from Fang the question with CITIC Xing comes next

This from ] here. CITIC have And I is question Pooja Securities. [ X

decline Could that rather please experienced products. observed March. exports to disposable is whether U.K. share significant ban this you downturn the have on a in related cigarette We

insight sales the markets how driving are you you how some could has currently disposable in for And growth Additionally, future into trend? been product view provide the market? this measure like, overseas do company's which

Thank could chain early as you take in very observed XXXX. in preparing The We the much, [ decline Pooja e-cigarettes which March April anticipated for as ]. attributed disposable products, the is exports players the partially U.K. on change. across the value trends are ban indicating that effective to

already focus a launched system For pod and instance, have brands significant their on disposables with products. some promoted

Some users pod other to and open subcategories disposable also existing such are converting system products. retailers as system

Waka, relatively our our they Disposable primarily gained growth disposable products convenience regarding have and sell disposables as where popularity products due affordable have products disposable So to we allowed. markets our its well. are in or experienced a pricing, and

So the regulatory of different to solutions products can on banned subcategories, local certain question. users while given we such developments. as largely Thank we each a as markets, well. depends are offering future leader system in pod for market you your regarding If in certain other is it that situation disposables, trend e-liquid convert markets disposable are in

comments. back would the constraints now, to time company call the I like turn to any over due And to closing for

you joining again once Thank today. for us

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

call. this concludes Thank you. conference This

[Interpreted] are call.] Thank spoken you. [Portions live present interpreter by You may of disconnect your on now an the that lines. were transcript this marked