Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RLX Technology Inc (RLX, Financial) reported a significant year-over-year revenue growth of 66%, reaching RMB627 million in Q2 2024.
- The company has successfully expanded its international presence, particularly in Asia, and is planning further global expansion.
- RLX Technology Inc (RLX) has introduced innovative products, such as the mega-sized Daqian series and the RELX Pod Pro series, to cater to diverse market needs.
- The company's quality and safety laboratory passed the CNAS assessment, enhancing its global recognition and market entry capabilities.
- RLX Technology Inc (RLX) has shown strong ESG commitment, with significant achievements in anti-counterfeiting efforts and public health initiatives.
Negative Points
- The gross profit margin for Q2 2024 was slightly down year-over-year at 25.2%, due to changes in revenue composition.
- The company recorded an operating loss of RMB33 million for the second quarter, despite achieving a positive non-GAAP operating profit.
- Regulatory uncertainties, such as the upcoming ban on disposable products in certain countries, pose significant challenges for the company's international expansion.
- The prevalence of illegal products in the Chinese market continues to impact the recovery of compliance products.
- Tracking the market share of illegal products has become increasingly difficult, complicating the assessment of market dynamics.
Q & A Highlights
Q: What are the biggest challenges RLX Technology faces during its overseas expansion, and what are the plans for the second half of the year?
A: Regulatory uncertainties remain the primary challenge, including upcoming bans on disposable products in certain countries. RLX is focusing on adapting product development and inventory management to local regulations. The company plans to continue expanding in Asia and gradually enter other continents. The main strategy involves increasing product availability in modern trade channels like convenience stores and specialty vape shops.
Q: How does RLX Technology perceive its product advantages among overseas competitors, and what is the status of new GB products in China?
A: RLX leverages its long-established brand equity and in-house R&D capabilities to stay competitive. The company has been independently developing e-vape products and has a strong consumer insights team. In China, RLX has over 30 flavors approved as of June 2024, and the market share of illegal products remains significant despite regulatory efforts.
Q: Which product categories are showing strong growth in overseas markets, and how does RLX plan to capture market opportunities in Europe before the disposable ban?
A: High e-liquid volume disposable products are popular in markets where they are still permitted. In countries anticipating a ban, pod and open systems are gaining market share. RLX plans to launch open system products and leverage its brand equity in pod systems to attract users migrating from disposables.
Q: What is the current status of the e-vaping market in China, including market size, penetration rate, and product pricing?
A: The overall penetration rate has slightly declined due to regulatory restrictions, but compliance product usage is gradually returning to previous levels. Non-compliance products still dominate the market. The average selling price for compliance products has remained stable, and RLX has not made any price adjustments in the past year.
Q: How should we think about RLX Technology's gross margin and cost of goods sold going forward?
A: RLX has maintained a stable gross profit margin by enhancing supply chain efficiency and improving product design. The company adjusts pricing to address external challenges like excise taxes, aiming to maintain a sustainable and stable gross profit margin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
