RLX Technology (RLX) 16 Aug 242024 Q2 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for RLX Technology's Second 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. Capital the of Head Tsang, Markets company. for Sam go ahead, Sam. Please

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

website earnings You the by the ir.relxtech.com. press can also IR at visiting release view section of our

and Ms. myself, call will Tsang, Mr. include Kate Officer, Wang; today's Executive Officer, company. our on Capital Participants Chao of Chief Lu; Sam Head the Markets Financial Chief our of

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

or results statements of inherent could control. the number business accuracy and The are undertake information, risks company's Forward-looking and by those beyond law. this these except under statements anticipated, applicable our actual differ as any forward-looking and The that a risks be advisers do impacted not projected required of representatives factors to affiliate, involve uncertainties materially of many to obligation from uncertainties. may cause update which

of release that financial non-GAAP measures. discussions press note unaudited financial Please measures. RLX call measures well Technology's contains non-GAAP unaudited as unaudited GAAP RLX's reconciliation and include measures a conference this the earnings to of release as unaudited the GAAP press

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

highlighting key would call in innovation the join thanks, achievements our you, with in time conference our making product overview, start to and to Sam, Thank strategic like today. I everyone, for R&D. earnings

second performance. We detailed of of will review markets. quarter overseas exploration results CFO delivered XXXX the for provide financial our this, solid we as our set Following deepen of another our of a

localized strategy. Furthermore, evolving tailored across in, top levels, penetration in varying operate our necessities, and compliance across income the product regulatory priority diverse our the our remains refining, and Given environment offerings regions we regions.

are vital playing expansion. such, and As an design in our international role product increasingly R&D

more you through walk me Let some -- details.

designs quarter, on e-liquid This focused comply requirements. volumes our with regional nicotine and to level adapting various we product

features to underage XX engage incorporated use. compliance. our after of This demonstrating that prevent represents step our automatically use commitment protection. of safety activity forward global [indiscernible] pursuit innovation minutes also and We a significant in This to

inflation to In tailored terms enhanced habit economic we that product money. localized of the for users, consumption their has domestically environment and both internationally, and high accordingly. many to strategies, influencing our research and trends offer users' continue prompted offering prevailing value the demand The products factors seek

cost. we In in mL Mainland XX pound series, we Infinity relapsed the value. lower to launched the [indiscernible] response, price exceptional at price, Internationally, size than and with or our low the to X nearly a our pods introduced offers standard provide which pods per up [indiscernible] pods quantity China, of mega mL X,XXX double

these also understanding for forefront innovation, standard point. device highly tracking critical e-liquid [ every for user battery user's as competitive us a ] driving a keen monitoring consumer in and triggers are product Smart screens of the as Bluetooth factor price trends becoming engagement control of Our well like industry. features keeps setting as and at

user broad to system modular the at exciting meet features system substantial of rest and closed products range for pipeline with capitalize device to R&D we a new on with various other This leading includes of brand vantages, needs. an price these points, device with e-vapor and different global poised an innovative As trends, year. of are a open the

checking also match users to rating create battery screen endurance screens their inhalation own ]. life, allows Notably, to It for monitoring module and mix [ addressing with air unique flow. an and device flavors and the batteries duration interactive features

quality modification on assessment hours I'm conformed to safety passed Cigarette the that safety for standard, IEC XXXX, in Standard CNAS expansion and to lab assessment, XX international laboratory The North drop enabling Electronics items, batteries, for testing our certified assessment. based XXXXX UL and on safety issue waterproofing, and our monitoring national authority also XX Safety strength share and pleased standards. laboratory relief based our international America and pressure including report capabilities

This short, of facilitating the landscape international into by recognition expansion successfully our navigating reports, our will testing In new markets ensure domestic and we and alert, milestone global our entry achievement responsive. are remaining agile worldwide.

edge our expand grow invest to competitive continue in to will and R&D globally. we We as maintain

would update. ESG wrap I an I Before up, like to share

We efforts throughout published society, sustainability ESG third and report, our have highlights XXXX. to which welfare contribution recently our

Our Golden proliferation success was the the counterfeit one major products combat of vaping year's Shield Program of to stories.

in assessed safe, consumers, XXXX. the our protects in XX,XXX seizing and upholds market. This only the industry only substantial cartridges XX products we not XXXX, that integrity the vaping In NT devices devices, X,XXX reach compensating program but authorities and of from ensuring cases, high-quality counterfeit XXX million XX cases, cartridges over the also XX,XXX by increases

efforts, bear scientific public the to on innovation [indiscernible] of XXXX. also the conduct fruit Through minimize society. continue in in We prioritized in we efforts impact X+X health in evaluation change, investing our to e-vapor reduction, dramatic that products research our ESG technological on research

supports safer cigarettes. Technology the such publish contributes targeted strategies, the vaping development the as institutions and policies, reducing Yat-sen Qilu health and of harm traditional health as This environmental and of by impact well-informed prevention [ providing and our to harm alternatives renowned as only not University also on University, goal and to environment. of our academic research studies smoking but of well on public University with smoking ] partnered Fuzhou reduction We to Sun

promising and a future thinking shaping vaping ESG compliance, like. In company. forward, sustainability to Going continue commitment we to stakeholders public and our forward well-regulated orderly our for here conclusion, health that our initiatives and will advance industry through initiatives benefit promote company, innovation dedication is an

deliver brand on capitalizing products while continue opportunities As diverse we for compliant on high-quality trusted growth global e-vapor stage. a adult the to will smokers,

I over Lu, financial Chao the review. to call now will our for turn detailed CFO, a

everyone. and hello, Kate, Thank you,

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

of Following presence. non-compete the expanded our agreement international in consistently XXXX, RELX with have November Inc. our we termination

thriving, overseas a Our is line. in resulting significant uptick business in our top

XXX Our and anticipate net first revenues XXXX million of the second our expansion in grew quarter quarter quarter-over-quarter XX% RMB international in XXXX, from quarter of from progresses. the to XXXX. second million RMB the growth continued year-over-year XXX in of up revenue as RMB We million XX% XXX

both go-to-market our plan. Tailoring maximum market refining strategy optimizes and are mentioned, unique route to market as is sustained we strategies in Furthermore, Kate including and continuously for edge each driving dynamics penetration our region's enhances competitive growth. our behavior, to and our consumer regional effectiveness, market

profitability. to Turning

both Our our overall to including for revenue due composition, largely mixes. changes second and margin gross quarter profit down the in XX.X%, product at was year-over-year channel slightly

-- product like-for-like the streams of To strategies supply Over mix practices, have the and efficiencies improvement. revenue chain on basis. gross management optimization implemented mitigate design cost demonstrated proactively several improvement operational the and we hand, the on to of impact a other year-over-year profit including enhance margin key these efficiency changes,

operating second loss total quarter. RMB for of We recorded XX a million the

management quarter impact a from we to the XX of strong non-GAAP RMB profitability, profitable cost share-based market. profit our thanks and of operating third achieved non-GAAP positive international million, of compensation, contribution However, consecutive excluding our

profit confident fluctuate regional overall continue our gross improve, margin our strategic of our during driven that quarterly, operating workforce Although may will expansion. the margin we existing leveraging to profit by are our

at increase much growth. expected to a our are Consequently, operating expenses line top rate than slower

of quarter As year-over-year XXX% the a to increased result, our non-GAAP net second XXX XXXX million. profit RMB for by

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

in cash the an million we year. improvement This the a working second inventory from strategy. of RMB RMB operating primarily capital increase enhanced of to quarter flow, XX of terms recorded same quarter of In management attributed our notable inflow and substantial in previous is the XXXX, cash XXX million

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

our investments cash cash and of equivalents, XX, short-term deposits and and forms restricted of totaled total including RMB and XX.X XXXX, financial assets, As billion. long-term various June

around In summary, operational globe we in built efficiency first a the the half and of XXXX. strong foundation sustained for growth

expansion flourishing, international Our healthy strategic sheet and effective is supported balance by execution. our

shareholders. As remain delivering we our and continue internationally, domestically to value expand our sustained to committed we presence to

remarks prepared our concludes today. This

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

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

Lydia So I'm from Citi.

have business. mainly I to here, related actually X overseas So your questions

market. your we company if look at So first we in see the progress overseas the made one, did actually some that has half first results, your

expansion? like your share overseas you the face you might could So with challenges us biggest what's during that actually

or overseas countries? growth strategy And the market? how second that Is actually product into detailed any target the half on as with the how the the second overseas market like channel like forward, would the for further planning facilitate be the And my you looking management to half. And consolidated there expansion or second in if such share the those to the the targets regions already helpful. is so second you also, the countries you the light any for what also be could that for us, that target target may looking that lighter or entered thinking very share work target market, you markets enter half, about for question that in drive color you in your then that or -- in is would or

Thanks very much, your questions. Lydia, for

uncertainties primary remains So our in environment challenge. regulatory

certain significant disposable So ban in on upcoming concern is countries. one the products

originally some been scheduled proposed ban. as implementation until it has nations early delayed of XXXX. this have of the start such It Poland So for summer, but was

management require locally. Regulatory inventory changes to And and learn markets to conduct business product our the adjust is in to local plans. how developments us our frequently challenge

beyond And so us, expand we markets. like consumer need to our brands far, home

So demand. in challenge to includes identifying and design specific local regions that to flavors with consumers resonate cater different products,

have a and we the for countries. can are various X we earn challenges, confident major these we in across Despite of of different products prepared adult trust series markets, that smokers launch

track set are beginning the meet to we on We the year. at of targets the

international in stats the continue we before of first into started country we for to other enter plan our the to rest we the expansion, continents. entering expanding where year, Regarding focus gradually on Asia, will

So market. how share the regarding about grow is to local in market your second question overseas

we in world. penetration. China, our base point new So compared and have to opportunities significant we of sales established still are share, the expand where market many to user of presents parts relatively Mainland This

vape specialty primary distribution main channels, channels potential The discussed our for previous to products convenience the consumers. stores, category supermarkets including As will and more modern availability call, of increasingly our earnings shops. trade be in focus our remain reach

pillar in different pipeline have which the you soon. Thank X your market products you We will in for the see these for questions. much channels, very

CICC. next The question Peihang from with comes Lyu

have This questions is X Peihang here. CICC. I from

first is about The overseas one competition.

brands overseas How currently noticed advantages system like [indiscernible] among have does your entering are categories. competitors? We perceive the company X-in-X the aggressively other product and pod

the the enforcement And share how has with second and GB question in what is is products enhancing changed for of the and of China, products second status what my the regard in market And regulatory illegal new current to domestic approval progress? with of is quarter? along the market, submitted approval

for Thank questions. your you much, Peihang, very

So our the about overseas competition. first question is

months since category in the have leader I we China. inception, pod in system mean, So Mainland the been after our

continue that adult primarily our of our will reputable one as We equity products, competitive trust for So expand confident long-established can Compared other system pod other leverage brand we our key are worldwide. win also of with disposable e-vapor is this products into advantages. a as we brand. smokers to brands, countries, the

manufacturing us since advantage Furthermore, have pod significant of capabilities developing been and with apart. quickly industry-leading e-vapor our set behavior allow to consumer in-house second-generation system and independently capabilities. to products, Alpha, we and R&D collaborate have and e-liquid respond team other and changing closely increasingly our that us the RELX insights products the These release we user

of well our as national second your as market regarding in share of question illegal is the products. status products about So current China

submitting a on products So quarters, in as we basis. are new mentioned previous rolling

end seeing XXXX, product XX series, of regulators. To are products have as received by newly-launched an XX our year, of We approval, give idea approved. being of we And you June more had [indiscernible]. including the flavors as of over approved last flavors the progress,

of the significantly the compliance products, understand regarding in China. concerns prevalence of illegal Mainland the market recovery which We flatten products

in for become share China. market of compliance tracking And your for increasingly discretely. a However, been illegal illegal shift products questions. transactions products are majority and mean, Thanks sales on significant stable market our amongst still I has online account difficult, healthy. more as has products our conducted and of on-the-ground sales assessment, Based the share more course,

Guo from comes question next ] The [ Citic ]. with Yun [

questions from This ]. [ here. [indiscernible] is have X Citic I

showing which question in current What that, first momentum contribution The to overseas is the markets? products product disposable overseas of strong categories are revenue? growth

since a in been question takes second the quarter plan disposable this the the opportunities does simulation. in Europe How surge there And product my is ban before that effect? market second has capture year, to company

Thanks, [indiscernible], questions. for your

about So the first product second disposable category. the the one question of is ban. is subcategory the potential And about our European

of So to restrictions. regulations, varies countries, largely subcategories different including for countries cassation the and and depend product popularity on from first question, the is local

e-liquid on So nicotine are disposable the in seeing still content, permitted, volume. markets high strong we where products among restrictions traction with products are

which such In of sales. a popularity smart feature now continue are screens, markets, disposables portion some these gaining to disposables display as contribute Bluetooth users. and among significant Additionally, technologies

open where countries This products, gaining is trend, this ], driven RELX open distributors is pair our are on announced open this partly users systems and retailers we for migrating our disposable disposables on which share. or systems [ and with reducing system changes. will by to a to market Prime their inventories pod month, and or In anticipated, upcoming perfectly pod solutions. ban shift are To actively e-liquid capitalize regulatory prepare launching

second about your regarding European So question flavor the ban.

demand. our product is have can with will insights Accordingly, than pipeline. [indiscernible] leading enable rapidly capabilities, previously, to our several consumer in our work products us mentioned and we development Europe as So new the that product quickly in coupled identify Asia. presence cater develop products in to emerging This trends team, smaller

from users our focus [indiscernible] So to we as migrate competitors, categories. share on gaining market from disposables

questions. leverage significant plays our a them. migration to will presents We systems our Thank in us. equity your attract to you strength brand and This pod opportunity to for

comes Renaissance. The Chen with Charlie from next China question

I have X questions.

one first operations. one China is The is about about the market second and

I one, So take overall for and the back a the see first just size. to step Chinese market want

changes market year, the in of the in past in So there lot a are China. e-vaping

So market between non-GB penetration China I And the kind e-vaping Chinese rate? of just in GB as products how is at well as best the adult still growing share your based what how the know, on smokers in is or products. to growth rate want estimate, and change is also, market is

paying I product little mean overall you can Chinese does Also, or that e-vaping? Is a of the down comment for bit on how much price, including increasing are because consumers tax? going competition?

in the quarter. So I some second operations. gross your this noticed question volatility that is about in are margin there

-- So sold of as about going well your do margin products? forward, think how the gross we the goods as we of cost how should

Charlie. questions, your for you Thank

sizing, So market is the domestic one et first cetera. market, about the

is So for first, to note think I data that it's market track. the user the changing important the

fluctuations there mentioned, adjustments accurate be stable, to in as remain are channel inventory. which So segment products in demand for occasional compliance to relatively capture sales though is due occur difficult tend pickers. this more consumed, to The

market. So noncompliance still the products dominate currently,

overall due market the decline penetration penetration, has before is noncompliance slightly products combined, the because flavor to users rate, and regulations. e-vapor products to discontinuing period the including regarding of using compliance the compared restrictions. This some in So declined the life primarily

In fully have recovered gradually per capita which contrast, previously have not their consumption which returned recovered. product usage of fully -- to not been previous level, compliance

has fully. products yet noncompliance and compliance between share market the So to stabilize

despite the is regulatory but gradually previously efforts. products overall dynamics. prevalence The of noncompliance share As the of market influence the remain stabilizing segment discussed, noncompliance product high compliance

has price So remained activities. partially brand have regulatory for of measures stable year, past promotional average compliance the limited selling as for pricing, over products because the

make We yet have to past year. in adjustments the price any also

is the products the of products per e-liquid the stable increase. our more remain selling like these may [indiscernible] sales if price [indiscernible], time, decrease However, average slightly. unit the product selling increase to price average series of with At same likely or per

outlook gross regarding of the So overall the margin.

profit So gross stable. remained impressively margin our level has

each supply packaging design enhance boost have So SKU efficiency for chain profitability. continuously to improve product and to we and

To sustainable to have accordingly you certain pricing perspective. vape on introduced external excise gross annual much we reporting margin adjust a and our from very maintain questions. Thank conduct challenges, regions profit typically Also, your address rate a products stable tax and these for adjustments.

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

again us Thank for you once joining today.

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

call. This concludes conference the

disconnect now you. your may You line. Thank