RLX Technology, Inc. Q4 FY2024 earnings call

• 2024 was a pivotal year for international expansion after the non-compete agreement with RLX Inc. in November 2023.
• Optimized organizational structure and invested in upgrading the team with experts in FMCG, product development, and regulatory compliance.
• Tailored product portfolio to local markets, e.g., launched RLX Prime and Spin Mini in Southeast Asia in February 2024, which received positive feedback.
• Refined route-to-market strategy by optimizing distribution channels based on market characteristics.
• ESG efforts recognized with a MSCI double A rating in 2024, the highest in the global tobacco industry for three consecutive years.

For the full year 2024, revenues were RMB 2.7 billion, growing 73.3% year over year. In the fourth quarter, revenues were RMB 813.5 million, a 56.3% year-over-year increase. The full-year gross profit margin was 26.4%, and the fourth-quarter gross profit margin was 27.2%. In 2024, an operating loss of RMB 107 million was recorded, but excluding stock-based compensation, non-GAAP operating income for the full year was RMB 262.5 million. The fourth quarter alone had a non-GAAP operating profit of RMB 112.6 million, marking the fifth consecutive quarter of sequential rise in non-GAAP operating profitability.

• Expect further improvement in non-GAAP operating margin as the business scales.
• Management is carefully managing headcount in middle and back office functions, expecting operating expenses to grow more slowly than revenue, enhancing profitability.
• Intend to continue returning a significant portion of non-GAAP net profits to shareholders through share repurchase programs and cash dividends.

• Regulatory shifts across multiple markets presented challenges but also opportunities; need to adapt to evolving regulations proactively.
• Closely monitor existing products and channel inventory levels while building a robust product pool to react to unexpected regulatory changes.

Q: What new initiatives will be implemented to further drive market share gains in the overseas market in 2025?

A: Design product portfolio and business strategies to align with market characteristics, analyze local preferences for tailored flavor portfolios and product formats, adopt dynamic route-to-market strategies, identify high-potential sales channels, collaborate with local distribution partners, and use data-driven insights.

Q: Any updates regarding shareholder return from 2025 onwards?

A: Intend to continue returning a significant portion of non-GAAP net profits to shareholders through share repurchase and cash dividends, having cumulatively returned $332 million to shareholders as of December, including $305 million for share repurchases and $27 million for dividends.

Q: Could you share detailed expansion plan for 2025 and growth targets? Any insights on industry product evolution and regulatory challenges?

A: Plan to expand to more countries in 2025, likely in the second half, considering Asia Pacific and Europe; innovation cycle in e-vapor: from disposables to high-power innovations, expected to stabilize in 2025; regulatory landscape varies by region, proactively evaluate and adjust strategies to ensure compliance, monitor inventory and collaborate with partners to adapt to changes.

Q: Will open system e-cigarettes benefit from the ban on disposable e-cigarettes in Europe? Opinion on open system interface and HNB entry?

A: Open system e-vapor products will have stable demand growth in price-sensitive markets. RLX's open systems like RLX Prime and Spin Mini are designed for affordability and convenience. No plans to enter HNB market as e-vapor has stronger competitive advantage currently.