RLX Technology Inc. Q1 FY2026 earnings call

### Global Regulatory Landscape * The UK's Tobacco and Vaping (formerly Tobacco and Waste) Act, enacted in April 2026, bans combustible cigarette sales to anyone born after 2009 and exempts regulated harm reduction alternatives such as vapes. This reflects a growing global trend of restricting combustible tobacco while preserving regulated pathways for lower-harm nicotine products. * Structurally, this development is a tailwind for compliant, scaled players like RLX, as reduced regulatory uncertainty will clarify the competitive landscape and strengthen the value of RLX's leading position in compliance, quality, and proactive regulatory engagement.

### International Expansion Strategy * Europe is a cornerstone of RLX's global strategy, supported by a maturing regulatory environment and strong demand for high-quality nicotine alternatives. The company uses a dual-engine growth strategy equal prioritizing strategic M&A and organic growth, with a highly selective approach to investments that prioritizes long-term synergy over rapid near-term scale. * RLX entered two new markets in Q1 2026: one in Southeast Asia and one in Europe, with expansion aligned to a segmented approach matching market maturity. In established Asian markets, RLX leverages existing brand equity to efficiently expand into neighboring markets and deepen distribution networks. In Europe, the company focuses on tailored products, local stakeholder partnerships, and compliant long-term growth.

### Operational Updates * RLX's integrated smart manufacturing facility, Nexus, is now fully operational. The hub brings R&D, manufacturing, and commercial operations under one roof, expanding in-house manufacturing capacity, enabling strict high-precision quality control, and creating a closed-loop intellectual property protection system that competitors cannot easily replicate. * Nexus has improved overall operational efficiency, enabling faster decision-making and more agile responses to global market shifts. The company maintains a user-first, localized strategy with trusted regional partners across the value chain to deliver strong product-market fit.

For the first quarter of 2026, RLX Technology reported total net revenues of RMB 1.59 billion, representing a 96.2% year-over-year increase and a 38.9% quarter-over-quarter increase. The international business segment, the company's key growth driver, contributed over 70% of total net revenues for multiple consecutive quarters, with strong organic growth and accretion from the acquired European entity driving this performance. The mainland China business segment demonstrated resilience and stability, contributing the remaining less than 30% of total net revenues. Gross margin for the company expanded to 31.8% in Q1 2026, up from 28.6% in the year-ago period. Non-GAAP operating margin reached 19.6%, up from 13.3% year-over-year; non-GAAP operating income jumped 187.9% year-over-year to RMB 310.3 million, and non-GAAP net income hit RMB 357.3 million, a 41.4% increase year-over-year.

Management did not publish explicit revised numeric full-year guidance in this call, but confirmed the following forward-looking strategic and operational outlook: * The company's immediate strategic focus remains on deepening market penetration and driving tangible growth in already established international regions, primarily Asia and Europe, rather than pursuing entry into new, unproven large markets like the United States in the near term. * RLX expects the UK's new regulatory framework to raise entry barriers, clear non-compliant and black market products from the market, and allow compliant established players like RLX to reclaim and expand market share in the UK. * Once RLX's overseas manufacturing infrastructure for modern oral nicotine products is fully established, the company expects significant uplift in sales volume for this new category. * RLX will only provide updates on potential European M&A opportunities after transactions are finalized, as unannounced projects carry inherent uncertainties and are not included in current guidance.

* Forward-looking statements related to regulatory developments, market expansion, and new category growth are inherently uncertain, and actual results could differ materially from projections due to unforeseen factors outside the company's control. * Potential M&A investments in Europe carry inherent uncertainties, and there is no guarantee that evaluated opportunities will be completed or deliver expected synergies. * Changes to Chinese export policy (cancellation of export tax rebates) created temporary timing shifts in channel orders, though management assesses the long-term impact on cost structure and margins to be minimal. * Regulatory outcomes in unserved markets such as the United States remain uncertain, and there is no visibility on future potential market entry at this time.

Q: What is the current status of the acquired European investment integration, how are UK operations progressing, what are the implications of recent FDA flavored vape approvals in the US for RLX's global strategy, and how does management view easing e-cigarette policies in mainland China? / A: RLX takes a hands-off approach to integration, focused on strategic alignment rather than daily operational interference, to leverage the local team's deep regional market expertise. RLX provides capital and global platform support, including recently funding a new local warehouse to resolve past growth constraints, and will continue supporting downstream expansion to combine global innovation with local execution. RLX currently has no US operations; recent FDA guidance suggests a potential shift toward clearer enforcement that benefits legitimate industry players, but future regulatory outcomes remain uncertain. RLX supports Chinese regulatory efforts to combat illegal products and is prepared for any market changes, but its immediate focus remains on Asia and Europe. (598 characters)

Q: What is the implication of the UK's generational combustible ban for RLX's business, and what is the 2026 growth outlook for RLX's European business? / A: The UK ban is a major milestone for smoke-free policy that positions regulated vapes as the only legal nicotine channel for future generations of adults. Combined with upcoming 2026 vaping duties and HMRC licensing, the new rules will raise entry barriers, clear out non-compliant black market brands, and allow compliant market leaders like RLX to gain market share in the UK. (362 characters)

Q: What is the status of RLX's European investment plans, and what is the strategy for new categories such as oral nicotine and heated tobacco? / A: RLX continues to follow its dual-engine M&A and organic growth strategy, and management has shifted increased focus to European operations, entering new regions and channels this quarter. The team is actively evaluating disciplined, high-synergy M&A opportunities but will not announce updates until deals are finalized. For modern oral products, RLX is steadily scaling production and identifying distribution channels, and expects meaningful sales volume growth once overseas manufacturing is complete. For heated tobacco, RLX holds relevant technical capacity but sees suboptimal market timing for large-scale investment, so there is no immediate launch plan; focus remains on the e-vapor category where near-term growth is strongest. (610 characters)

Q: Will the cancellation of China's export tax rebate increase RLX's production costs? / A: Short-term, the upcoming policy change led to moderate channel order front-loading in Q1 2026, which contributed to the quarter's strong revenue growth, and this front-loading effect is now complete. The policy change only shifts order timing, with no impact on organic end-user demand. The multi-layered supply chain will limit the impact on final retail prices, and any necessary cost pass-through will be implemented; the long-term impact on RLX's cost structure and margins is expected to be minimal. (383 characters)