Core Insights - The company reported a significant revenue decline but emphasized a strategic shift towards higher-quality nicotine customers, marking an "inflection point" in its operations [5][4] - Cost reductions were a major focus, with operating expenses decreasing and net loss narrowing compared to the previous year [1][4] Financial Performance - Total revenue for the fiscal second quarter was $20.3 million, down from $41.8 million in the prior-year quarter [4] - Operating expenses declined to $10.3 million from $15.1 million in the second quarter of fiscal 2025 [1] - Gross profit for the quarter was $3.5 million, with gross margins at 17.1%, slightly below 18.5% from the year-ago quarter [2] Customer Strategy - The company consolidated its customer base to focus on "high-quality clients," moving away from slower-paying customers [3] - Net accounts receivable improved to $37.9 million at December 31, 2025, down from $47.0 million at the end of fiscal 2025 [6] Cash Flow and Operating Metrics - Cash collected versus revenue for calendar 2025 was 116%, compared to 67% in calendar 2024, indicating improved cash collection performance [7] - The company burned only $1 million in operating cash from April 2025 through the end of calendar 2025, reflecting effective cost discipline [7] Strategic Initiatives - The IKE Tech joint venture is gaining traction, with increased interest from major U.S. tobacco companies due to the FDA's stance on age-gating technology [10] - The company is expanding its manufacturing capacity in Malaysia, with plans to increase production lines from 6 to 80 [17] Future Outlook - Management anticipates future quarters will show top-line growth, improved cash flow consistency, and better bottom-line performance as cost reductions and customer quality initiatives continue [18]

Performance Highlights RLX TECH Second Quarter 2025 Earnings Presentation Contents Financial Highlights Performance Highlights Appendix Operational Highlights RLX TECH Contents Financial Highlights Revenues Gross Profit Non-GAAP Operating Expenses Profitability Capital Resources Operational Highlights Product Portfolio Domestic Products International Products Regulation and Compliance Appendix Key Ratios Income Statements Balance Sheets Statements of Cash Flows E-cigarettes Product Overview Vaping Myths and ...

Financial Data and Key Metrics Changes - In 2024, revenue was RMB 13.4 billion, up 5.3% year on year, with a better growth rate in the second half of the year compared to the first half [32] - Gross margin decreased to 37.4% from 38.7% in 2023, attributed to lower gross margin in ODM yield growth [33] - Profit before tax was RMB 1.655 billion, down 14.5%, while after-tax profit decreased by 4.8% [36] - Comprehensive income for the year was RMB 1.416 billion, with earnings per share at RMB 21.42 and a final dividend of RMB 5, resulting in a payout ratio of 40.2% [38] Business Line Data and Key Metrics Changes - Self-branded business revenue was RMB 2.48 billion, increasing its share of total revenue from 16.5% in 2023 to 21% in 2024 [39] - ODM business revenue was RMB 9.32 billion, accounting for 70% of total revenue, with a slight decline of 0.3% year on year [40] - The self-branded business saw a 30% growth in the first half of the year but only 13.3% in the second half due to a higher base [41] Market Data and Key Metrics Changes - In the U.S. market, revenue was RMB 402 million, with significant contributions from Europe and other overseas markets [42] - The China market generated RMB 30 million in revenue, primarily from beauty atomization products launched in the first half of the year [43] - ODM business in Europe saw a slight increase of 0.3%, while the U.S. market experienced a small decline of 2.4% due to cash flow pressures faced by some customers [46] Company Strategy and Development Direction - The company aims to solidify its position in the atomization industry, focusing on e-cigarettes, H&B, beauty, inhalation therapy, and special purpose atomization [20][22] - The management emphasizes the importance of R&D and technology as the main engine for development, with a commitment to innovation and long-term operation [24][25] - The company is optimistic about the future, expecting growth in various segments, particularly in H&B and beauty optimization products [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about growth amidst stability in the e-cigarette market, with expectations for a turning point in 2025 [18][21] - The company is focused on enhancing management quality and productivity to prepare for future high-speed growth [30] - The management highlighted the importance of compliance and adapting to regulatory changes in key markets like the U.S. and Europe [67][116] Other Important Information - The company has invested significantly in R&D, with expenses increasing from RMB 1.48 billion to RMB 1.57 billion in 2024 [35] - The beauty atomization product, Moyo, launched in 2024, has received positive feedback and is expected to perform better in 2025 [75] - The company is exploring new markets and product categories, including inhalation therapy and beauty atomization, to diversify its offerings [54][75] Q&A Session Summary Question: What are the considerations behind the stock incentive plan linked to market cap? - The management emphasized the alignment of the incentive plan with shareholder interests and the confidence in achieving the set market cap goals [81][83] Question: How is customer feedback on new HMB products and their global launch progress? - The management reported positive feedback from trial sales, highlighting improvements in convenience and flavor, with plans for a proactive global rollout [92][95][96] Question: How is the company adapting to changes in consumer behavior and regulations in Europe? - The management noted a shift towards pod-based and open system products, with a focus on compliance and product innovation to meet market demands [99][103] Question: What is the expected timeline for H&B product development and market launch? - The management indicated that the R&D process for H&B products took ten years, and they are now focused on empowering customers to expedite market entry [106][108] Question: What is the impact of new regulations on product pricing and profits in Europe? - The management expressed optimism about stable growth in Europe, driven by compliance and product iteration, which is expected to enhance revenue and profits [116]