RLX Technology, Inc. Q1 FY2025 earnings call

Global Regulatory and Market Trends

• The e-vapor industry faced growing global scrutiny and stringent regulations in 2025, with exports from China decreasing. Bans, taxes, and enforcement in countries like the U.K., New Zealand, Spain, Mexico, Vietnam, and Kazakhstan impacted the industry.

Big Puff Trend

• Big Puff Vapes, rechargeable with larger e-liquid volumes, gained popularity but lowered per milliliter average selling price, stunting industry revenue growth in 2025. Industry expects dollar value growth to return to normal in 2026.

RLX's Responses

• RLX has advanced product development capabilities, launching large capacity Big Puff products. It has a robust inventory management system and operates in multiple global markets to mitigate risks. It focuses on creating market-specific compliant products and staying ahead of trends.

In the first quarter of 2025, RLX Technology achieved a 47% year-over-year increase in net revenues to RMB808 million. The gross profit margin improved to 28.6%, a 2.7 percentage point increase year-over-year. Non-GAAP operating profit reached RMB106 million. The strategic emphasis on international markets drove the revenue growth, but quarter-over-quarter growth was subdued due to seasonal factors.

Forward-Looking Statements

• RLX is confident in achieving positive dollar growth in 2025 while the industry experiences negative growth. It anticipates industry dollar value growth will align with e-liquid consumption and return to normal growth trajectory from 2026 onwards.

Risks

• Evolving regulations and market trends present operational challenges. Smaller players without robust product development and supply chain capabilities may struggle. Regulatory changes in various regions (Southeast Asia, North Asia, Europe, Oceania) create uncertainties.

Q: Could you share latest updates on overseas expansion and plan to enter/consolidate new markets?

A: RLX has been prudent in expanding new markets, considering regulatory shifts, and expects to evaluate further expansion in 1-2 quarters.

Q: How to assess potential impact of evolving regulations on business and how to address challenges?

A: Regulations evolve rapidly; in Southeast Asia, clearer guidelines; North Asia reviews/considers standards; Europe/Oceania focus on environmental concerns. RLX uses in-house product development to adapt offerings.

Q: Progress of Europe's transition to Big Puff products and future product trends?

A: In the U.K., demand for Big Puff products is increasing with users migrating from Small Puff disposables. Future trends may slow as current products reach user convenience limits.

Q: Strategies to capture market share and competitive advantages?

A: Customized strategies by market, focusing on product development (optimizing portfolio) and channel strategy (localized distribution, franchise models). Competitive advantages include agile supply chain, flexible organization, and compliance-driven approach.

Q: Overseas market category conversion in Europe competitive landscape and domestic business outlook?

A: RLX is well-positioned with comprehensive product portfolio and agile supply chain. In Mainland China, regulatory framework stable, made commercial progress but limited by illegal products; expects stable or modest growth if no significant changes.