RLX Technology (RLX) 15 Nov 242024 Q3 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for RLX Technology, Inc.'s Third 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 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 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 Tsang, 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 other expect, information or U.S. continue, may, typically the under please Reduction expressions. harbor targets, that safe estimate, statements discussion Act of words These will intend, the Reform similar Private made contain of as

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

and to everyone developments followed current of strategy today. intellectual our for market, in our and outside the Sam, update the like to conference markets achievements. thriving on for in by call joining and overview begin our you, recent property an review an of with of our Thank China, thank China I would earnings you

review. We in to Finally, XXXX, as rapidly diverse robust I over This excel will landscapes. us in brand performance a hand demonstrating regulatory financial third of to beyond leading our for the China. in our consistently positions ability markets despite a delivered demands evolving a detailed CFO quarter

Following noncompetition last expanded into international we the have year, termination of our agreement successfully multiple markets.

key During emerged period, this overseas industry. X trends e-vapor the have within

products, observed increase various an have against stricter markets. regulations, regulatory new enforcement and policies we across goods. implementing illegal First, disposable Governments activity new in including bans are tax on

changes. they regulatory complicated While to chain, transitions, brands user these and with management dedicated developments industry, also can product lines compliant essential us optimize adapt the across align operations inventory enhance for like create this RLX. This for makes local and foster facilitate within it to to develop sustainable growth strategies, multi-category costs value to

for we user for business integrated trends insights, diverse possess manufacturers expertise different segments. To comprehensively, capabilities solutions a targeted route-to-market success create are demanding model, This as strategies, needs, to several these inflation user group model e-vapor product that have The which supported strategies. by rising adult value some the innovation second seeking [indiscernible] trend consumer where for features for from demand the comprehensive is product our personalization consumers in must empowers tailored refined more local our markets various user brand address talented to money. and functionality paramount. Simultaneously, technology electronic the are supply smokers the chain includes cost-effective engagement and products. enhanced portfolio, other in product daily e-vapor an these and good local growing developed in-house products persists development To akin segments strong are products and offer e-vapor expectations and in advanced countries, different meet Certain markets and user management workforce, focused categories. in sector product and

We conditions. international local in based markets, have in necessary on making refined are model adjustments it and replicating China successfully now this

anticipate years from as to industry over adult an e-vapor teens that more smokers Looking in few ahead, products. the cigarettes will we international e-vapor experience annual transition next rate the growth the

a growing number e-vapor expect from user e-vapor shift exclusive products and to the e-vapor cigarettes we use. Additionally, of users to of

activities Given the integrated increased that user only believe will regulatory with and demand, rising players succeed. model an we leading

to share confident market over capture e-vapor are We coming in our the years. markets international incremental in ability

products to the Turning note in market. continue to developments the e-vapor We that dominate latest China. illegal

fail product Furthermore, products they indicate and tax revenues. products estimates account the be for contribute do internal total subop meet Generally, to that e-vapor of of often these national not to standards XX% China. XX% illegal Our to quality in flavored. market nontobacco consumption

this we actively shutdown are and their effort initiatives, social a from through to regulators committed brand, to targeting on illegal these illegal in and cooperating production remain support. zero-nicotine responsible delisting appreciate including counterfeit illicit various products platforms media, collaborating authorities with and sales combating As compliant with facilities. We e-commerce sales

we to launched have new sales, enhance product illicit addressing our series also competitiveness. While a

This have adult for cost we introduced plan series, this Feedback the been ml the first offer expand launch X XX overwhelmingly ml retailers products. seeking and lower at of from designed to and smokers entry convenience standards. to products line product positive, compared national a implementation volumes cartridge-based disposable nation-wide. users X and since our of quarter, We we disposable [indiscernible] compliant with e-liquid

is domestically a system that the patents, trademarks, e-vapor team to certification, conclusion, which and for system. I'm for research intellectual software Technology RLX and to electronic positioned a production and lead has e-vapor framework development, sales on management management and compliance our property copyrights, encompasses well global intellectual and enterprise Finally, successfully comprehensive and both RLX brand the an in established that technology includes scale. In forming passed announce requirements. exam evolving robust components protection original internationally This designs This signifies landscape. of a property pleased certification has

developing focused smokers to regulatory and As reshape leveraging remain this our adult are on shifts value industry, worldwide. to agile, we model proactive integrated

over and continue environments compliance the to navigate financial Lu, product rising to we will while CFO, compliance, Chao call a to adaptability user company. I strategic forward, growth our for meeting sustainable and will driving review. Moving detailed now prioritize expectations innovation in-house regulatory for turn the

you, And Kate. everyone. hello, Thank

I the all otherwise we please in RMB Before discussion terminating noncompetition stated, substantially expanded detailed with are Relx international have note, our driving financials unless terms. Since today agreement the in will XXXX, our start of presence, growth. present I November Inc. our top line financials,

year-over-year as revenue expand capturing Our we growth. million. sequential international and We market category quarter. and businesses in RMB growth XXX RMB grew net of experienced Both third and incremental the million, from million more to XX% revenues anticipated XX% non-China RMB markets, quarter-over-quarter up XXXX, into this XXX from quarter China from our growth share anticipate continued XXX benefiting

Turning to profitability.

both margins a third million revenue gross quarter RMB also XXXX, profit overall basis, profit year-over-year. diversification. On improved percentage recorded operating in various marking year-over-year. We This XX.X% loss improved in including and to Our changes point product streams X.X margin is primarily improvement favorable of increase this of our like-for-like revenue mix, the a due across gross have quarter. XX channel a total to

quarter RMB and of operating incremental international consecutive share-based from However, by quarter million, effective compensation, excluding at business XX the impact we achieved our contributions sequential driven profit positive reduction non-GAAP our cost of strategy. fourth

operating fluctuate middle our may overall in business expansion. we support expenses operating grow to gross top profit contribution growth. to margin maintaining optimization line consistent cost and expect we than scale are profit as our and pace during variations expected a slower Consequently, margin efforts, while revenue due quarterly our non-GAAP back-office improve While regional to our our at

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

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

cash cash of capital RMB RMB of million driven third enhanced XX XXXX, up terms management. in year, same of achieved inflow XXX the the quarter an in by In flow, working million the and of inventory previous we quarter operating from

a experiencing conversion cycle exceeding cash currently are X we month. Additionally, negative

Our inventory first as stood the XXXX, days days the sharp we from turnover our over in first growing third XXXX, just continuously and at quarter XXX of SKUs in of in slow-moving decrease quarter XXXX XX of a quarter scale. optimize the days days while XX

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

are second to to we IPO, since reaffirming value our shareholders. dividend to pleased delivering commitment our cash announce Finally, our our

at Our dedicated enhancing the over objective net through share remarks is continuing our profit programs to for our sustainable, returns prepared minimum profits repurchase upheld remain non-GAAP and the and growing cash dividends, return years. shareholders. This substantially of all We to generating have today. our we past concludes practice X

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

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

is Lydia Citi. This from

So regarding your here, overseas I questions X business. have

some on overseas so progress. see some we this So and firstly, progress your congratulation year business for actually,

So year-end, the to overseas keen we my year countries will for actually that and be so expansion understand second we your XXXX? And next were be as your year. keen what's those entered understand regions you question already to for actually plans very this -- or for what would plan

Kate gain how target organic you to your in that further mentioned to will So interested also understand And years. drive that just very growth? share as following your you market

what's further for the very to or ahead, marketing be your that And share like and be any market and gain if your would any would color share? target what So strategies market your strategy product helpful. looking

much, Lydia. very Thanks

the other future one questions. X are our growth. is there about So One and organic is the about expansion

last agreement have noncompetition year, international entered into we our markets. of termination the since So multiple

quarter China. marks markets this company of anniversary entry our into the So global outside first of

directly East are Asia the X of of we As X Based third countries terms from of XXXX, in quarter of the revenue Oceania. in system the #X X category. and Asia, e-vapor closed internal countries we brand Southeast in on estimates, our out currently in operate

X leading brands countries. the X of in also are We remaining the

our We In quarter also the more than revenue revenues. overseas third their distributors. XXXX, to that accounted affiliate half business products net non-China sell of of sell for to

in entering we of countries, XXXX, could EMEA America. and to ahead region Looking Central which are be a considering couple

can right candidates of couple and external currently mentioned be ready next enter team in on is we of only stable, will quarter, regulatory year, we built, internal there. We the place a is this have entry model As depend development business factors. may for to we country when our and last its think a but operate

the we and right we mainly focus development gain portfolio deeply fits. We in on the the of route-to-market local market behavior, operating this regulatory strategies. analyze product that environments in, and product new user each creates currently optimal and an including the aspects countries X the preferences regarding share, market changes Together, incremental right market So are user growth to organic market.

volume we markets, we products, preferences user advocates and have ban cartridge-based are leading are in volume of but currently channels. convert will volume disposable share the market users and and towards large soon cartridge-based e-vapor in trending products in a only there we small disposable example, new products, have strong effective our one For become launched therefore, large for

product Regarding behind we usually route-to-market Thank growth may next increase designated to to channels. new as each expected it. we branded show out store launch right path our quarters, the share great the on on track double is store couple for shows strategies, in channels retail by reason X landscape a distributors channels believe the gain a which developing This we further and and development vape has excel, market such have category market series RELX for couple also The user potential digits Each expands. to country we and share. the and these enhancing specific of reaching years, preferences CVS In to market have past further in of we we retail channels been and your mind, X grow channels. or questions. With by we year a focusing category and as e-vapor are you in to retailers. have

question with comes from CICC. next Lyu Peihang The

questions regulation. Peihang This is CICC. Lyu about at are My domestic

recently adding have e-cigarette penalized several for companies We noticed ingredients. being illegal

management the has power the future the do perceive law mentioned there in how the illegal as market? in dominant China, illegal the see Wang a Mrs. in the been domestic enforcement? change products regulation does So count of you and beginning, the or And still

question. your for Thanks very Peihang, much,

So State X regulators. months. the stop produced products illegally Tobacco and manufacturers by brand the website X the been RMB solution release on the manufacturers must last X week, fined news Administrative according total to were X have inconsistent of or official that previously million, brand operating for These formula product a e-vapor with approved

like suspect coolants, participants motivation producing that better for these attract their industry product components by is a noncompliance competitiveness. solution e-vapor can Some increase and increasing that brands' they users

action China. now As future. we years, your And consistently illegal regulatory the regulatory crackdown a regulators compliance the has in collaborated support questions. combating e-vapor for consistent regulatory and in in brand, and X we illicit also with on framework illegal overall strongly been products solutions the actions products noncompliance past Thank you e-vapor against and have over and the

Charlie The Renaissance. with next China Chen comes from question

Chen Charlie have is X This I from here. China questions Renaissance.

one consumer China. in overall first the regarding The market is

sentiment So we rather been with has noticed behavior China, year. this softening that purchasing in consumer conservative consumers' Chinese this

changes is, a of noticed this landscape been the interest So any China's have years. question e-vaping competitive in of or in consumer part you market couple second substantial past year? And your my has in earnings income behavior

with more do interest you U.S. cuts and Federal going Reserve see cuts started So income take taking rate your going how to forward, forward? possibly

for Charlie, questions. you, Thank your

about the U.S. And So confidence Fed the consumers, the the second e-vapor first Chinese of one is cuts. especially one about rate markets. is the

have products. China's in era to by of from And stores has we XX% illegal The e-vapor the XX% stores. compliance estimate about for from has in fallen XX,XXX about pre-regulatory deeply So by first the number years, last X the retail affected industry category declined [indiscernible] XX,XXX era. e-vapor to pre-regulatory the been question, the

category and Plus X span launched as regarding markets. In by quarters, Phantom has stable Approximately the Daqian some XX.X our points. billion. your assets RMB billion since financial remaining series, point money our the This proportion X.X for product. price of of Furthermore, [indiscernible], uptick sales X yuan months. our that cartridge-based in good been question, or higher product the this or been seeking stable. total XX, low these share in and the Chinese relatively e-vapor this start September [indiscernible] and with consumer a denominated, product series has XX% among However, with series company categories of the cartridge-based is approximately last of and the XXXX, currencies. is the have high a second e-vapor User sales with of Phantom high-volume the sales, USD e-liquid number market of been had a XX% have headwind Chinese disposable new total This series, the USD e-vapor volume, economic products other certain year, the affected can demonstrates series. And series X we not value consider to

key market participants, in U.S. Like been mid-September and mid-September April short in medium the Although the the began late Fed are have interest in aware rate up since raise due monitoring and yields of going markets to November, early cut treasury and falling actively the and have movements. events been money other we

Given Thank expecting the interest since slight as in to investment we income, Based XXXX and that XX% second cut. drag yield about rate on minor. current we decline we in income interest expect we due XXXX recent relatively Fed's expect a curve, XXXX, on will and be our your of we financial have assets vehicles not interest investment question. you our believe but for been the down quarter interest the quarter, any long-term of rates do third to come have and of impact

The from Guo Yun with comes next CITIC. question

want future is new about and Securities. know product products. our question is Yun performing is plans? from I how new product -- what the to My CITIC are what This the Guo

your for questions. Yun, Guo Thanks,

materials We more Chinese and may [indiscernible] different products a to core Daqian So all will in of become [indiscernible] have the functionalities, products medium short second and or we in We better also the to for advanced China instead approval market, smokers quarter for series series player products, third regulatory new Daqian cigarettes. adult occasions advocate in components. with quarter. illicit explore use series and to market And hope launched these we in and e-vapor the special other subject term. will the launch

enhance to lineup right us product the Regarding international we product help various comprehensive our will craft which portfolio, continue markets. for local markets, will

from which RELX For in product switch device X instance, RELX minimal and we longer flavors. launched and prices. products X for have and our issues, kit And enjoy is time to They mouthpiece Prime the XX feedback usage favors new have open-system the change with X flavors. their users e-liquid positive Pen, to received leakage allows affordable users

user needs. to will questions. you cater evolving to new for innovate Thank different We to segments' products continue your

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

you today. Thank joining once us again for

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

conference the concludes call. This

may You lines. now disconnect you attending. your for Thank