Financial Data and Key Metrics Changes - For Q2 2026, total revenue was $20.3 million, down from $41.8 million in Q2 2025, reflecting a strategic shift towards higher-quality nicotine customers [14] - Gross profit decreased to $3.5 million from $7.7 million, with gross margins at 17.1%, slightly down from 18.5% in Q2 2025, primarily due to a change in product mix [15] - Net loss reduced to $6.6 million from $8 million in the same period last year, indicating improved financial stability [16] Business Line Data and Key Metrics Changes - The company has consolidated its customer base to focus on high-quality clients in the nicotine sector, moving away from lower-value cannabis clients [4] - Net accounts receivable improved to $37.9 million from $47 million at the end of fiscal 2025, with cash collected versus revenue for 2025 at 116%, up from 67% in 2024 [6][15] Market Data and Key Metrics Changes - The nicotine sector faced international headwinds, particularly with a decline in e-cigarette volume due to pressure from Chinese manufacturers [5] - The U.S. e-cigarette market is estimated to be nearly $100 billion, with over 90% of it being illicit, highlighting the demand for flavored e-cigarettes [8] Company Strategy and Development Direction - The company is focusing on innovations such as age-gating technology through its joint venture with IQTech and G-Mesh technology for vaping hardware [12][18] - The Malaysian facility is on track to ramp up production, increasing capacity significantly from 6 to 80 production lines [12] Management's Comments on Operating Environment and Future Outlook - Management views Q2 2026 as an inflection point, expecting top-line growth, consistent cash flow, and bottom-line improvement in future quarters [4][18] - The company anticipates continued positive trends in financial metrics and revenue generation as it moves closer to profitability [13] Other Important Information - The company has made significant progress in discussions with regulators globally to institute age-gating technology as a compulsory standard [10] - The FDA's position on age-gating technology is seen as a potential unlock for the flavored e-cigarette market, which is currently dominated by illicit products [9] Q&A Session Summary Question: What impact does Walgreens' resumption of selling vape products have on shelf space allocation? - Management noted that there is tremendous demand for flavored e-cigarettes, and retailers are eager to re-enter the market as regulatory clarity improves [21][23] Question: Can you provide details on the Charlie's partnership and its expected production numbers? - The partnership is expected to produce between 2 million to 3 million chips a month, with a goal of reaching 10 million devices monthly over a year [25][26] Question: What drove the spike in Chinese imports of e-cigarettes? - The surge was driven by anticipated policy changes in China, specifically the introduction of a VAT on e-cigarette exports effective April 1 [30][31] Question: What percentage does the company own of the IKE Tech joint venture, and how will expansion be funded? - The company is providing financial funding for day-to-day operations and expects strong interest from investors for future expansion [36][40] Question: Are there different age-gating technologies being developed? - Management confirmed that while other solutions exist, their technology is considered the most frictionless and secure, using blockchain for verification [42][43] Question: Have any countries implemented age-gating technology? - Currently, no countries have implemented it, but discussions are ongoing with regulators in several regions to push for mandation [49][50]

Financial Data and Key Metrics Changes - For the full year 2024, the company's revenues reached RMB 2.7 billion, representing a 73.3% year-over-year growth, driven by international expansion [19] - In Q4 2024, revenues were RMB 813.5 million, a 56.3% increase year-over-year, positively impacted by seasonal sales during the Christmas holiday [19] - The full-year gross profit margin improved to 26.4%, a two percentage point increase, while Q4 gross profit margin rose by 3.3 percentage points to 27.2% [21] - The company recorded an operating loss of RMB 107 million for 2024, but achieved a non-GAAP operating income of RMB 262.5 million for the year [22] - Operating cash inflow for Q4 2024 was RMB 497 million, up from RMB 305 million in the same quarter of the previous year [24] - Total financial assets as of December 31, 2024, stood at RMB 15.9 billion [25] Business Line Data and Key Metrics Changes - The company launched two new open system e-vapor product series, RLX Prime and Spin Mini, in Southeast Asia, which received positive feedback [12] - The operational strategy involved tailoring product portfolios and business strategies to local markets, enhancing distribution efficiency [13] Market Data and Key Metrics Changes - The company noted a slight slowdown in product innovation as the industry matures, with a shift from blockbuster products to refined operations and product optimization [15][16] - Regulatory shifts across multiple markets were acknowledged, with the company viewing these changes as opportunities to strengthen its competitive position [14] Company Strategy and Development Direction - The company focused on enhancing its organizational structure and business models to support international growth while maintaining stability in the China market [8] - Investment in team upgrades and expertise in FMCG, product development, and regulatory compliance was emphasized as crucial for long-term success [11] - The company aims to return a significant portion of non-GAAP net profits to shareholders through share repurchase and cash dividends [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to thrive amid evolving regulations and market conditions, emphasizing agility in adapting strategies [14][48] - The company anticipates meaningful market share growth in sales volume and moderate revenue growth, with expectations for improved non-GAAP operating margins [16][45] Other Important Information - The company received a double A rating from MSCI in 2024, the highest ESG rating in the global tobacco industry, reflecting its commitment to social responsibility [17] Q&A Session Summary Question: What new initiatives will be implemented to drive market share gains in overseas markets in 2025? - The company plans to tailor product portfolios and business strategies to local market characteristics, focusing on high-potential sales channels and collaborating with knowledgeable distribution partners [32][34] Question: Any updates regarding shareholder return from 2025 onwards? - The company intends to continue returning a significant portion of non-GAAP net profits to shareholders, having returned $332 million cumulatively, including $305 million for share repurchases [37] Question: Could you share your detailed expansion plan for this year and any growth targets? - The company plans to expand to more countries in 2025, with several countries in Asia Pacific and Europe under consideration, while making informed decisions based on macroeconomic and regulatory developments [42] Question: What are your views on potential regulatory changes and how will you address these challenges? - The company is proactively evaluating its product portfolio and adjusting strategies to ensure compliance with evolving regulations, which vary by region [46][48] Question: Will open system e-cigarettes benefit from the ban on disposable e-cigarettes in Europe? - The company believes open system products will see stable demand growth in price-sensitive markets, focusing on user experience and affordability [52] Question: Do you plan to enter the HNB market? - The company currently has no plans to enter the HNB market, prioritizing e-vapor products where it holds a competitive advantage [55]