RLX Technology Inc. Q3 FY2025 earnings call

• Robust results in challenging global environment with net revenue up 49% Y/Y to RMB 1,129 million and non-GAAP operating profit at RMB 188 million.
• Mainland China: Regulatory enforcement strengthened but unregulated listed e-vapor market remains a headwind; revenue recovery modest, advocating for strict enforcement and regulatory adjustments on tobacco flavor formulation.
• International: 70%-80% of revenues from international markets; Asia Pacific franchise retail model driving same-store sales growth; new product launch in East Asia spurring category growth; expansion into adjacent categories with modern oral product; Europe as critical growth market with strategic equity investment in European EV firm; adaptability in UK despite disposable product ban.
• Profitability: Gross profit margin expanded, non-GAAP operating profit margin up 6 ppt Y/Y, eighth consecutive quarter of positive non-GAAP operating profit.

Net revenue surged 49% year-over-year to RMB 1,129 million. Mainland China revenue stands at RMB 320 million this quarter, approximately 13% of Q2 2021 level. International revenues now account for 70% to 80% of total revenues. Non-GAAP operating profit reached RMB 188 million. Gross profit margin expanded by 4 percentage points year-over-year and 3.7 percentage points quarter-over-quarter. Cash flow from operating activities surged to RMB 358 million in Q3, up from RMB 157 million in the same period last year. Total financial assets stood at RMB 15.4 billion as of September 30, 2025.

• 2026 revenue outlook is based on regulatory clarity and market readiness, with disciplined strategic approach to be shared in coming quarters.
• International growth in Q3 2025 was driven by robust organic growth in Asia Pacific region.
• European invested e-vapor company maintained operational stability despite challenges, with anticipation of scaling as market integration advances.

• Persistence of unregulated listed e-vapor market in Mainland China distorting competition and restraining volume recovery.
• Regulatory challenges internationally, such as the UK disposable product ban impacting operations.

Q: Could you share revenue outlook for 2026 and breakdown of international business organic growth in Q3, and performance of invested European e-vapor business?

A: Regarding 2026 revenue outlook, it's based on regulatory clarity and market readiness with disciplined approach. International revenue grew steadily in Q3 2025, outpaced industry averages due to Asia Pacific organic growth. Invested European e-vapor company maintained stability despite UK ban, with optimism about synergies and scaling.

Q: What areas are prioritized in R&D to sustain growth and differentiation?

A: Focus on enhancing core user experiences in flavor authenticity, device ergonomics, and aesthetic design; optimizing product performance via technological refinements; localized flavor portfolio for regional market responsiveness; breakthrough product launched in East Asia this quarter.

Q: Elaborate on channel innovation in select Asian market?

A: Channel innovation centers on franchise model providing renovation subsidies to upgrade independent vape stores under unified branding, engaging over 450 partners in an East Asian country this year, driving revenue growth and brand presence.

Q: Update on UK company integration and Europe further expansion strategy?

A: Early stages of integration prioritizing brand equity and operational strength; strategy to transform UK operations into multi-rand retail distribution platform, leveraging supply chain and capital advantages; leveraging local expertise for channel development and product localization across Europe, open to strategic investments for diversification.

Q: Current expansion status of modern oral business and subsequent promotional strategies?

A: Modern oral is a fast-growing segment; ultra-thin fast absorbent products launched in INTERTEC Germany, plan to roll out in phases starting this quarter with prudent near-term revenue expectations as market data and adoption are built.