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RLX Technology(RLX) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue decreased by 59% year-over-year, but this represents a significant narrowing from last quarter's 83% year-over-year decline [15][18] - Non-GAAP net operating loss reduced to RMB15 million from RMB133 million in Q1 2023 and RMB67 million last quarter [18] - Non-GAAP basic net income per ADS was 0.149 and non-GAAP diluted net income per ADS was 0.146 for the same period [18] - Operating cash inflow of RMB67 million in Q3 2023, compared to RMB41 million inflow in Q2 and RMB231 million cash outflow in Q1 [29] Business Line Data and Key Metrics Changes - Device shipments showed a quarter-over-quarter increase, indicating growing demand for e-vapor products [15] - Cartridge shipments remained low as many users still use illegally compatible flavored cartridges [16] - Gross profit margin remained stable at around 25%, with improvements in the core e-vapor business to provincial distributors [17] Market Data and Key Metrics Changes - A survey revealed that 40% of users now mainly use national standard compliant products, but only 17% have tried compliant products [6] - Users' lack of awareness of new regulations has slowed the transition to compliant products [7] - The number of retail outlets has remained stable, with more users beginning to try compliant products [33] Company Strategy and Development Direction - The company is focused on refining and broadening its product portfolio while improving operational efficiency [7] - Plans to expand internationally were highlighted, with the termination of a non-competition agreement to seize growth opportunities outside China [13][23] - The company aims to maintain a consistent and sustainable dividend payout policy that may grow progressively with earnings [24] Management's Comments on Operating Environment and Future Outlook - The company acknowledges external headwinds, particularly the lingering negative impact of illegal products and uncertainties in the consumption environment [13] - Management is confident in the gradual transition of users to national standard products in the medium to long term [27] - Positive operating cash flow for two consecutive quarters indicates the company's ability to adapt to changes in the macro and industry environment [29] Other Important Information - The company launched LEILI, a new series of compliant devices, and expanded its flavor offerings significantly [8][12] - The company received customer testing facilities certificate approval from European technologies, becoming the first e-vapor brand in China to gain this certification [12] Q&A Session Summary Question: Overseas development and dividend policy - Management explained the rationale for international expansion due to positive global regulatory developments and increasing acceptance of e-vapor products [22][24] - The cash dividend of US$0.01 per ordinary share reflects confidence in future prospects and a commitment to returning value to shareholders [24] Question: Industry growth and profitability targets - Management noted that user demand for national standard products has improved, but challenges from illegal products persist [27] - The company remains optimistic about achieving positive non-GAAP operating profit in Q4 if current trends continue [28] Question: Product sales and retail outlets - Recent approved flavors have gained popularity, contributing significantly to sales [32] - Retail outlet profitability has been increasing, with self-operated stores starting to turn profits at the operational level [33]