Q3 2023 RLX Technology Inc Earnings Call
Speaker 1: Hello ladies and gentlemen, thank you for standing by for RLX Technology Inc. Third quarter 2023 earnings conference call.
Hello, Ladies and gentlemen, thank you for standing by for our L X Technology, Inc. Third quarter 2023 earnings Conference call.
Speaker 1: At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode.
Speaker 1: After management's remarks, there will be a question and answer session.
After management's remarks, there'll be a question and answer session.
Speaker 1: Today's conference call is being recorded and is expected to last about 40 minutes.
Today's conference call is being recorded and is it expected to last about 40 minutes.
Speaker 1: I will now turn the call over to your host, Mr. Sam Fang, head of Capital Markets for the company. Please go ahead, Sam.
I will now turn the call over to your house Mr. Sam Thanks head of capital markets for the company. Please go ahead Sam.
Speaker 2: Thank you very much. Hello everyone and welcome to our technologies. First quarter, 2023 earnings conference call the company's financial and operational results were released for PR on this wire services earlier today and have been made available on.
Thanks, very much Hello, everyone and welcome to ours that Lockheed FERC courtyard finish any free earnings conference call. The company's financial and operational results were released through PR Newswire services earlier today and has been made available online.
Speaker 2: You can also view the earnings press release by visiting the IR session of our website at IR.redecktech.com.
You can also be able to the earnings press release by visiting the IR section of our website at IR Docs were attacked I'll call.
Speaker 2: Participants on today's call will include our CEO , Ms. Kate Wang, our CFOs, Chao Lu and myself.
Participants on today's call will include our CEO, Mr. Wang our CFO shallow and myself.
Speaker 2: Before we continue, please note that today's discussion will contain four looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Before we continue please don't that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act 1995.
Speaker 2: These statements typically contain words such as may, will, expects, targets, estimate, intent, belief, potential, continue, or other similar expressions.
These statements typically contain words, such as May will expect targets estimate in Panther leap potential contango or art or similar expressions.
Speaker 2: Four looking statements involve inherent risks and uncertainties.
Forward looking statements involve inherent risks and uncertainties.
Speaker 2: The accuracy of these statements would maybe impact by a number of business waste and uncertainties that could cause actual results to differ materially from those projects or anticipated. Many of which factors are
The accuracy of these statements may be impacted by a number of business waste and uncertainty that could cause actual results to differ materially from those projected or anticipated.
Many of which factors are beyond our control.
Speaker 2: The company is a place of advisors and representatives to not undertake any applications to update this forward-of-game information. Except as required under...
The company is separate advisers and representatives do not undertake any obligations to update these forward looking information.
Sent masks required unless they are couple law.
Speaker 2: Please note that RLF Technologies earnings price released and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures.
Please note that all Alex Technologies earnings Press release, and this conference call include discussions on audited GAAP financial measures as well as unaudited non-GAAP financial measures.
Speaker 2: Our press release contains a reconciliation of the unaudited on GAAP measures to the unaudited gap measure.
<unk> press release contains a reconciliation of the.
non-GAAP measures.
The GAAP measures.
Speaker 2: I will now turn the call over to Ms. Case 1. Please call ahead.
I will now turn the call over to Mr. Tastes Wang Please go ahead.
Speaker 3: Thank you, Sam, and thanks everyone for making time to join our current call today.
Thank you Sam and thanks, everyone for making time to join our earnings conference call today.
Speaker 3: before I get into our third quarter results.
Before I get into our third quarter results.
Speaker 3: I would like to briefly update you on our industry, Mackle and the regulatory involvement.
I would like to briefly update you on our industry macro and regulatory reform.
As most of you know it has been a year since the new regulation framework can increase that.
Speaker 3: As most of you know, it has been the year since the new regulation framework can be??.
Speaker 3: bringing a number of changes to the industry.
Bringing a number of changes to the industry.
Speaker 3: On the supply side, the new rules have pushed the industry participants across the value chain to adjust their bonuses and standardize their operations. On to the authorities.
On the supply side, the new rooms, how close to industry participants across the value chain to digest. There then that's it.
Standardize their operations under the authorities supervision.
Speaker 3: This no longer concerns some strong players, including us.
There's no longer a concern some strong players quoting more.
Speaker 3: who have already adapted to the new regulations and proactively developed new compliant products to meet the user's needs.
Who have already adapted to the new regulations.
And perhaps who they did that Neil compliant hurdle.
Meet the user's need.
Speaker 3: However, persistence, irregularities among other industry participants continued to deter the market order and add or slay of sex industry's recovery with the netted impact of illegal labor products lingering.
However.
Is that the lapse rates among other industry participant.
<unk> continued.
Continued to deter the market order and analysts may upsets me mid teens probably.
Next his impact.
Illegal labored paradox lingering.
On the demand side, the new regulations.
Speaker 3: on the demand side. The new regulations seem to have less impact on uses and consumption.
To have less impact on users and consumption.
Speaker 3: Studies have shown that most EVPIR users are still unaware of the changes brought about by the new regulation.
That they have Sean that.
E vapor users.
Oh, one of the changes brought about by the new regulations.
Speaker 3: But so sorry, contact by Shanghai, Zhao Tong University revealed that 40% of users now mainly use national standard of compliance product.
But some survey conduct by Shanghai Jelutong University.
Did that 40% of users now Monday use national standard of compliance products.
Speaker 3: But 17% have now been tried to comply with the product.
That's 17% have now been quite some time.
Speaker 3: Furthermore, only 40% of users said the new legitimate retailers are only allowed to sell tobacco fluid products.
Furthermore, only 40% of users.
The new debt that you can maintain retainers I only want to sell tobacco Cleveland paired up.
Speaker 3: Users lack of awareness of the new regulations, have slowed the transition to compliant products.
He says the lack of awareness of the new regulations.
No just the transition to compliance product.
Speaker 3: as has the easy availability of legal flavored products. Advocating user above the new regulations, combined products for the wantages, and the dangers of elicited products. It's PIV-
It has the easy availability of illegal labor cut it up.
Advocating use here about the new reservation.
Combined paired up sort of warm for Janice.
In the Denver will be lifted pardon.
Its pivot towards to the industry's recovery.
But this will take time and effort.
Yeah.
Speaker 3: Submit this challenging experiment. We continue to refine and broaden our product's top values while improving operational efficiency during the third quarter.
Amid this challenging environment.
We continue to refine and broaden our product portfolio.
Wow, improving operational efficiency during the third quarter.
Speaker 3: I'm pleased to say that these efforts paid off.
I'm pleased to say that these efforts paid off.
Speaker 3: reflecting our strong execution of our effective course strategy. We narrowed our operating laws.
Reflecting our strong execution, that's alright, and satcom cost strategy.
We narrowed our operating loss and.
And boosted cash flow during this quarter.
Speaker 3: They also seen signs of cyclotolins recovery in our top side. Our CFO will provide the details of those results.
We are also seeing signs of secret islands recovery and all the top tier our CFO will provide the details of it.
Those results in just a moment.
Speaker 3: Now let me share a bit more about our strategic efforts in the progress of our product of our guru learning program.
Now, let me share a bit more about our strategic efforts and the progress of our part of California improvement.
And Timna our incomes cartridges now offers five these two pits.
Combined.
Your wife is.
At various price.
Price point once it starts to snow.
Send to learn something for a year ago.
Speaker 3: Let's month we launched a of fifth combined series featuring the adjustable power at more affordable price then sent them for and
Last month, we lunched lately.
They combine theaters featuring.
Featuring a addressable power at more affordable price.
Dan Center in Poland.
He says.
Speaker 3: We have also quickly expanded our flavor offering.
We have also quickly expanded our naval offerings.
Speaker 3: With 17 distinct back of layers now available, was the tube that came up to the 222.
Slide 17, boosting tobacco flavored now available, let's just to back to October 2022.
Speaker 3: or why the selection of compliant product.
Or why this election compliant hurdle.
Speaker 3: As a design that suits you so that we're the most across every user's pace and the budget.
It is designed to fulfill that demand.
Ever uses pace in the budget.
We will continue to closely monitor market demand and the user feedback.
Speaker 3: We will continue to closely monitor market demand and the track user feedback to inform our production assignments for the while leveraging our leading-on decavabilities and DP industry knowledge to develop our portfolio reporting.
Inform our production we find meant for them.
Well, leveraging our leading R&D capabilities.
And deep industry knowledge to develop our portfolio accordingly.
Okay.
Our product value proposition to users extended.
Speaker 3: A product value proposition to users' extenics, fab, young, out-braw production, a product selection.
Bob Young our broad production product collection.
Speaker 3: First, Iox has prioritized quality control and product safety in the inception.
First hi, Alex has prioritized quality control.
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Speaker 3: supported by our strong research quality control and 50 assessment capabilities.
Supported by our strong research quality control and safety assessment capabilities.
Speaker 3: we can guarantee higher product quality and safety.
Can't guarantee higher product quality and his team.
Speaker 3: All of our products in the new greetings must meet international sense.
Paul all or part of an ingredient.
Meet international standards.
Speaker 3: and obtain regulatory approval before hitting them on.
And other pending regulatory approval.
For hitting the market.
Speaker 3: For the more, as a fully-contined participant, we greatly value this consumption current and provide outstanding up-to-date service.
Furthermore.
It's a fully compliant participant.
We greatly value indices consumption Karen.
And her wide all standing up to sale.
Right.
Speaker 3: If users have problems with our products, we can call our whole land to visit our stores for assistance.
If users have problems with Ala carte or you can call our heartland to visit Dallas doors well assistance.
Speaker 3: Our excellent customer service team can respond and address users' issues in a timely manner with professional service and patient solutions.
Our excellent customer service team can respond and address this issue.
Finally manner.
Fashion, so there's and patient solutions.
Speaker 3: We also offer one year warranty on all of our devices and cartridges.
We also offer a one year warranty on all of our devices and the cartridges.
Speaker 3: these unique the wantedors add mayors value to our products.
You may go to one pages.
I'll add no value to our products and provide peace of mind for users.
Speaker 3: and correct piece of mine for user.
Speaker 3: In contrast, legal products are manufactured by online-sense net factories.
In contrast, the legal part of a manufactured by unlicensed factories.
Speaker 3: leading to poor quality, a lack of quality control and potential health and safety.
Leading to poor quality, a lack of quality control and potential health insurance solutions.
Illegal corrupt may have Daniel Lee high nicotine concentration level.
Speaker 3: Relic of products may have dangerous, like high nicotine concentration levels, or cut in levels of nickel or chromium, or exceeding the standards. As well as,
It could turn levels in May.
Coal well chromium all exceeding the standards.
As far as.
The band ingredient.
Speaker 3: Ulysses cartridges also frequently have oversized tanks.
He.
Unless it cartridges also frequently have or what size tanks.
Speaker 3: which can create severe safety hazards when used in conjunction with many compliant hooking devices.
Can create easier six he hasn't when used in conjunction with many compliant voting devices.
Yeah.
Speaker 3: We remain confident that our growing line of quality products will continue to earn more users' recognition and ultimately their loyalty as adult smokers realized our product superiority and developed new habits.
We remain confident that tell a growing lineup of quality product.
Continue to earn more users right to the nation and ultimately their loyalty as adult smokers realized our product superiority and above you have.
Habits.
Speaker 3: Meanwhile, we are trying to enhance users' knowledge of new regulations and collaborating with regulators to combat illegal products to create a healthy and orderly market.
Meanwhile, we are trying to enhance use of nauseous.
New regulation and collaborating with our regulators to come back illegal to create and help you on all the market.
Speaker 3: Before I conclude, I would like to share that our relaxed quality and safe life recently received customer testing facilities certificate approval from your things, technologies.
Before I conclude I.
I like to share that tell her a relaxed called hidden saves map recently received customer testing facility.
So tip of Kate <unk>.
Cool from European technologies.
Speaker 3: becoming the first e-vapor brand in China to gain this certification.
Becoming the first T vapor granting China two game they said.
Covid patients.
Speaker 3: The recognition by the industry leading authority indicates that our lab's capabilities of testing electrochemical time meets a global standard.
The recognition by the industry, leading authority in decade that has our lab capabilities and testing.
For chemical and high mix of global standards.
Speaker 3: qualifying our test results for acceptance by 584 at the ECC member countries and regions worldwide.
Qualifying our casualty down.
Or acceptance side 15, more I think when you see the member countries and regions worldwide.
Speaker 3: And through our ongoing efforts in scientific research and development, we continue to enhance our product safety assessment capabilities.
Through our ongoing efforts, even scientific research and development.
We continue to enhance our products safety assessment capabilities.
And the quality control.
Speaker 3: In conclusion, we continue to forge ahead during the quarter-major challenging months.
In conclusion, we continue to forge ahead during the quarter amid a challenging environment.
Speaker 3: We have made meaningful progress in our recovery over the past year.
We have made meaningful progress in our retiree over the past year.
Speaker 3: with an intense focus on our core strategy to develop our portfolio and enhance efficiency.
The intense focus on our core strategy to develop power pulp volume any house mutations.
Looking ahead, we see external headwinds persisting.
Speaker 3: Looking ahead, we see external halvings persisting.
Speaker 3: especially the lingering negative impact of illegal products.
It's actually the lingering negative impact of illegal hurt us.
Speaker 3: and the uncertainties in the consumption movement.
And the uncertainties.
Consumption of amendment.
As such we view deepen our commitment to offering combines high quality products to adult smokers and educate users on their various benefits.
Speaker 3: As such, we will deepen our commitment to offering compliant, high-quality products to adult smokers and educating users on their various benefits.
Speaker 3: Meanwhile, to catch potential growth opportunities in the international market on November 10th, 2023.
Meanwhile to catch potential growth opportunities in the international market.
November parents Tucson times, usually.
Speaker 3: we terminated an existing non-computation agreement with IELS, Inc.
We terminated.
In existing non competition agreements with.
Alex Inc.
Speaker 3: which had been entering to December 16th, 2020.
Which had we entered into December 15th 2020.
Speaker 3: So many things this agreement gives us the flexibility to build an international presence in the future by contacting tobacco, high reduction product business outside China.
Terminating this agreement.
Uh huh.
<unk> ability to build an international presence.
Future.
Conducting tobacco harm reduction part of business outside China.
As we move into 2024, we believe our expansion into international markets and fabricated products strategy.
Speaker 3: As we move into 2024, we believe our expansion to international markets, effective product strategy,
Speaker 3: and resilience models will propel our recovery.
And resilient business model, well, Paul Powell our recovery.
Speaker 3: positioning our earth for long-term goals and sustainable better creation.
Additionally.
Yeah.
Our long term goals and sustainable value creation.
Speaker 3: With that, I will now turn the call over to our CFO , Chao Lu. She will elaborate on some of our last quarter's initiatives and go over our operational and financial results in more detail.
With that now I'll turn the call over to always says Hello Chao Luke she.
Your neighbor right what the home some of all the last quarters the initiatives and go along our operational and financial results.
All details.
Okay.
Speaker 4: Thank you, Kate, and hello, everyone. Before we start the detailed discussions of our financials, please note, unless otherwise stated.
Thank you Kate and Hello, everyone.
Before we start the detailed discussion of our financials. Please note unless otherwise stated.
Speaker 4: All the financials we present today are in RMB terms.
All the financials would present today.
RMB terms.
Speaker 4: I will now provide an overview of our operational and financial results for the third quarter of 2020.
I will now provide an overview of our operational and financial results for the third quarter of 2020.
Speaker 4: Against the challenging backdrop Kate just described, our total revenue was down 59% year-over-year.
Against the challenging backdrop I just described our total revenue was down 59% year over year.
Speaker 4: However, this represents a significant narrowing from last quarter's 83% year-over-year decline.
However.
A significant narrowing.
Last quarter, 83% year over year decline.
Speaker 4: While the sales of our compliance products continue to be impacted by illegal products in the market, we noticed a quarter of a quarter increase in device ships.
While the sales of our compliant products continue to be impacted by the legal products in the market.
We noticed a quarter over quarter increase in device shipments.
Speaker 4: indicating that the demand for e-vapor products is still growing.
Indicating that the demand for E vapor products is still growing.
Speaker 4: On the other hand, cartridge shipments remain low as many users still use illegally compatible flavored cartridges in conjunction with all compliant devices.
On the other hand cartridge shipments remain low menu says.
Illegally.
Compatible playbook cartridges in conjunction with all complete.
Compliant devices.
Speaker 4: We want to remind our users that using illegal cartridges may damage our devices.
We want to remind all users using illegal cartridges damage our devices.
And void the warranty.
Speaker 4: Due to their poor quality illegal cartridges often suffer severe leakage issues that can ruin devices and may cause other safety hazards.
Due to the poor quality illegal cartridges, often suffer severe liquidity issues.
<unk> devices.
Cause other safety hazards.
Speaker 4: as a fully compliant participant in the e-vapor industry, we are dedicated to promoting the industry's recovery and long-term healthy growth.
As a 40 compliant participant in that.
You may print industry.
We're dedicated to promoting the industry recovery and long term healthy growth.
To that end.
Speaker 4: We continue to encourage users to call 12313 if they find anyone selling illegal products.
We continue to encourage users to call 1% to 313.
Find anyone studies and go product.
Speaker 4: We are also conducting user education campaigns to increase awareness of the regulations and the dangers of illegal products.
We're also conducting user education campaigns.
Increased awareness of the regulation and Abengoa.
Illegal product.
Speaker 4: We hope these efforts will effectively reduce the sale and use of illegal products, while better protecting every user.
We hope these efforts will effectively reduce the sale of youth over the Vigo product.
While better protecting everything you said.
Turning now to profitability.
Speaker 4: In the third quarter, our gross profit margin remained stable at around 25% due to the unfavorable change in our revenue mix.
In the third quarter, our gross profit margin remained stable at around 25% due to the unfavorable change in our revenue mix.
Speaker 4: However, on like for like basis, our growth margin, growth profit margin, what our core eBay publicity.
However, on a like for like basis.
Both margin gross profit margin for our core E vapor business.
Speaker 4: to prevent your distributors continue to improve court-held records.
True probing show distributor continued to improve quarter over quarter.
Speaker 4: Thanks to our cost optimization initiative and product design and tools.
Thanks to our cost optimization initiatives.
And product design improvements.
Speaker 4: where constant these efforts will continue to drive improvement in our growth margin.
We're confident these efforts will continue to drive improvement.
Gross margin.
Speaker 4: Since the introduction of the new regulation framework, we have been actively adjusting and streaming lining our businesses and implement a stringent expense control for greater overall agility.
Since the introduction of the new regulation framework, we have been actively adjusting and streamline our businesses and implemented stringent expense control for greater overall agility.
I'm happy to report that as a result, our non-GAAP operating expenses decreased by 27%.
Speaker 4: I'm happy to report that as a result, our non-gap operating expenses decreased by 27% on a quarterly basis.
Quarterly basis.
Speaker 4: It's also worth noting that our non-gab operating expenses decreased by 48% compared with the same period last year.
It's also worth noting that our non-GAAP operating expenses decreased by 48% compared with the same period last year.
Speaker 4: Moreover, we reduced our non-dap net operating loss to just 10 minutes.
Moreover, we reduced our non-GAAP net operating loss to just 10 minutes.
Speaker 4: from 133 men in the first quarter of 2023 and 67 men in last quarter.
433 million in the first quarter of 2023.
And 67 million last quarter.
Speaker 4: Our non-gap basic net income per ADS was 0.149, and non-gap diluted net income per ADS was 0.146 for the same period.
Our non-GAAP basic net income per ADR, or 0.1, 49, and non-GAAP diluted net income per ads.
It was 0.146 for the same period.
We remain confident that our profitability will continue to rise in the upcoming quarters as we strive to enhance our supply chain and operational efficiency.
Speaker 4: We remain confident that our profitability will continue to rise in the upcoming quarters as we strive to enhance our supply chain and operational decisions.
Speaker 4: In current genie, we maintained positive operating cash flow for the second consecutive quarter.
Encouragingly.
We maintained a positive operating cash flow for the second consecutive quarter.
Speaker 4: with operating cash inflow of 67 minutes in the third quarter of 2023.
With operating cash inflow of 67 million in the third quarter of 2023.
Speaker 4: Immediately you can qualitatively improve the management of a Walton capital and inventory.
Mainly due to improved management of our working capital and inventory.
Speaker 4: Our cash position remains strong. As of September 30, 2023, we have cash and cash equivalent, restricted cash, short term bank deposits, net, short term investments, long term bank deposits, net, and net long term investment securities. Net totaling 15.1 billion.
Our cash position remains strong.
As of September 32023, we had cash and cash equivalents restricted cash and short term bank deposit net short term investment.
Long term bank deposits.
Got it.
Net long term investment securities.
Totaling $15 1 billion.
Speaker 4: Our strong cash position will continue to support us, enabling it in market-based dynamics.
Our strong cash position will continue to support us.
Navigate in that market those dynamics.
Speaker 4: We aim to achieve additional cost savings and efficiency enhancements to accelerate our recovery.
We aim to achieve additional cost savings and efficiency enhancements to accelerate our recovery.
Lastly, we are very pleased to report that our board of directors has approved a cash dividend of U S. Dollar Bill point is there one.
Speaker 4: Lastly, we are very pleased to report that our Board of Directors has approved the cash dividend of US$0.01 for ordinary shares or US$0.01 per ADS to holders of ordinary shares and holders of ADS. Let's conclude our prepared remarks today.
Our ordinary shares.
Our U S dollar the airplanes they will want.
To holders of ordinary shares and holders of ABS is.
This concludes our prepared remarks today.
We will now open the call to questions.
Operator, Please go ahead.
Speaker 1: Thank you. We will now begin the question and answer session.
Thank you.
We will now begin the question and answer session.
Speaker 1: To ask a question, you may press star than one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker 1: If it any time your question has been addressed and you would like to withdraw your question, please press star then two.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker 1: for the benefit of all participants on today's call. If you wish to ask your question to the management in Chinese, please immediately repeat your question in English.
For the benefit of all participants on today's call. If you wish to ask your question to the management in Chinese.
Immediately repeat your question in English.
Speaker 1: At this time, we'll pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Speaker 1: The first question today comes from Lydia Ling with City. Please go ahead.
The first question today comes from linear Wang with Citi. Please go ahead.
Oh, Hi, My name's members of media from City National gave me the opportunity to ask questions. So my first question is regarding your overseas development as just a nascent yeah terminate and non competition agreements with rescuing so what's the rush of nose dive computer to extent like explored overseas attention.
Speaker 5: Oh hi, I'm not recommended to leave you from three. Thanks for giving me that.
Speaker 5: So my first question is regarding your overseas development as just a match on the terminated non-competition agreement with RISKING. So what's the rationale there, consider to expand a lot, explore the overseas ascension at this point, and how it works with the existing overseas business by your parent company. And do you have any detail to play our target for overseas business that you could share to us, and also how do you think about the potential upside to your company? So this is my first question. And the same question is having to see the cash dividend decoration. So how do you consider the pay-out ratio and what's the dividend policy looking forward? Thank you.
At this point and how it works with your existing.
Existing overseas business by our parent company on do we have any detailed a chat or targeted for overseas business that you could share to us and also how do we think about the potential upside to our company. So this is my first question and the same question is happy to see the cash dividend deterioration. So how do you can see that the payout.
Sure and what our dividend policy looking forward. Thank you.
Speaker 2: Thank you very much. Lydia. So the first question is on the international expansion and the second one is on the
Thank you very much Libya.
First question is on the international expansion and the second one is on the dividend.
Speaker 2: So ours only operated is e-babe business only in China, due to regulatory uncertainties and a relatively low social acceptance in the overseas markets when it was its IPO. But in the last two to three years, we have witnessed positive development globally. That's changed our decision.
So RF only operator, you've able piece to us only in China due to regulatory uncertainties and a relatively low social acceptance in the overseas markets.
When it is earmarked this IPO.
In the last two to three years, we have witnessed positive developments globally, that's changed our decision.
Speaker 2: First, many countries have established an encouraging and stable regulatory framework for this category, becoming a crack-tiff and stable market for leading and compliance brand to enter and develop a presence.
First many countries have established and encouraging and stable regulatory frameworks for the Sky club category, becoming attractive and stable markets for leading and compliance brand to enter and develop a presence.
Speaker 2: Second, global adult smokers are increasingly perceiving evaport products as a mainstream, effective, harm reduction, equity, or alternative, accidents by growing those penetration in many regions.
Second global adult smokers are increasingly perceiving E vapor products as a mainstream effective harm reduction liquidity alternative evidenced by growing the penetration in many regions.
Speaker 2: These two external developments have been highly encouraged.
These two external developments have been highly encouraging.
Four hours itself, our franchise has become a household name with clear national market leadership.
Speaker 2: For our Earth itself, our friend Triceps become a household name with clear national market leaders.
Speaker 2: Internally, we have upgraded our organizational capabilities with adequate capabilities and resources to expand our franchise to areas outside China.
Internally, we have upgraded our organizational capabilities with adequate capabilities and resources.
Our franchise to areas outside of China.
To achieve our mission, we decided to terminate our non competition agreements with with Axiom Corporation, which enable us to seize growth opportunities in the international markets.
Speaker 2: To achieve our mission, we decided to terminate our non-competition agreements with Relaxing Corporation, which enable us to seize growth opportunities in the international markets and establish a significant global presence outside China.
And establish a significant global presence outside China.
Speaker 2: We will share more details on our international expansion in the coming quarter.
We will share more details on our international expansion in the coming quarter.
Speaker 2: So regarding your second question is on our different policy. As indicated in our earnings release, our board approved our first cash difference of one-cent US followers per ordinary share or per ABS to reward our value shareholder's continuous support.
So regarding your second question is on our dividend policy.
In the paper in our earnings release.
Third approved of course.
Cash dividends of one U S dollar per ordinary share or per avs to reward our shareholders continuous support.
Speaker 2: Despite macro-votercies and uncertainties, we are highly confident in our franchise future, building on our international expansion, steady profit generation, robust operating cash rolls, and adequate capital issues.
Despite macro cookies and uncertainties, we are highly confident in our franchise future building.
Building on our international expansion.
Profit generation robust operating cash flows and adequate capital research.
Speaker 2: The cash dividend and our announced share by that program demonstrated our confidence in our prospects and commitments to returning shareholders despite the short-term workers in the stock market.
The cash dividend amount announced share buyback program demonstrates our confidence in our prospects and commitments to returning shareholders.
<unk> the short term volatility in the stock markets.
Speaker 2: We plan to maintain a consistent and sustainable dividend policy that may grow progressively with our earnings. Thank you for our questions.
We plan to maintain a consistent and.
And sustainable dividend payout policy that may grow progressive fleet with our earnings. Thank you for questions.
Thank you.
Speaker 1: The next question comes from Charlie Chen with China Renaissance. Please go ahead.
The next question comes from Charlie Chen with China Renaissance. Please go ahead.
Thank you management G. Taking my questions I have two questions here. The first one is about the industry.
Speaker 6: Thank you, Manager Bamsichu. Take my questions. I have two questions here. The first one is about the industry. I can see the company actually grow revenue by roughly 10% or so, quote-unquote, or so I think in the past a few quarters, China's e-seagalette industry experience.
The company actually grow.
Revenue by roughly 10% or so quarter on quarter. So I think in the past few quarters Chinas E cigarette industry experienced kind of regulators crack down which direction of vehicle products et cetera. So just wanted you have some color.
Speaker 6: kind of the regulators crack down resurrection of the legal products, etc., etc. So just want you to have some color. What do you think will be the normalized industry grows going forward? Or is that too early to say or you have kind of see a set up pattern of the future growth of the industry? That's your first question. And my second question is.
What do you think will be normalized industry growth going forward or is that too early to say are you.
Kind of see set up pattern. After she took rose up to see industry. So that's the first question.
And my second question is.
Speaker 6: With all those cost saving efforts, we can see your company's non-gap EB margin has lost, has narrowed quarter. So originally in the past, we recalled that management guided or aimed to have breaking even non-gap EB.
With all those cost saving that Fortunately have some of your companies.
non-GAAP EBIT margin has loss has narrowed.
Quarter. So originally in the past we record management.
Sure.
Aims to have breaking even.
non-GAAP EPS.
Speaker 6: in the margin in the fourth quarter. So do you still think this target is attribable based on current circumstances? Thank you very much.
The margin in the fourth quarter. So do you still think this target is achievable based upon Congress stances. Thank you very much.
Speaker 2: Thank you very much, Charlie. So the first question is on the growth of our industry. And the second one is on the profitability of our company.
Thank you very much Charlie so the first question is on the growth of our industry and the second one is on the profitability of our company.
Speaker 2: So I think the user demand for national standard products have improved overall compared what you mentioned in March 20th century before the regulators initiated a special crackdown on illegal products
So I think that goes hockey mom for National standard products have improved overall compared what you mentioned in March attention inquiry before directly to initiate a special crackdown on illegal products.
Speaker 2: However, after the special action ended, our industry faced ways of changes from illegal products as their illegal cells have become more secret.
However, after the special session ended in.
Yes, we faced waves of triangles from illegal products.
It enables health have become more secrets here.
Speaker 2: At the beginning of this year, retailers would perfectly display illegal products on shelves. Now, after the special action, they only sell these products to users they are familiar with. Therefore, it's difficult to accuracy estimate the demand for this category and predict the need for the National Standard Product.
At the beginning of this year, we tell us whats publicly display legal products on shelves now.
Now after the special session. They only sell these products to use us they're familiar with.
Therefore, it's difficult to accurately estimate the demand for this category and predict the need for the national standard products.
Speaker 2: We are confident in our regulators' enforcement and believe more users will gradually use national standard products in the medium and long term.
We are confident in Iraq latest enforcement and belief module system gradually use Metro center products in the medium and long term.
Speaker 2: So regarding your second question, I think as discussed, second quarter earnings conference call, we have significantly optimized our cost structure and streamline our operations over the past three quarters.
So regarding your second question.
I think as discussed.
Second quarter earnings conference call, Oh, we have significantly optimize our cost structure and streamline our operations over the past few quarters.
Speaker 2: As a result, the absolute amount of our thrust profit improved by 7% quarter-over-quarter and our non-gap operating expenses for the third quarter decreased by 27% quarter-over-quarter and split percent over year.
As a result, the absolute amount of gross profit improved by 7% quarter over quarter, and our non-GAAP operating expenses for the third quarter decreased by 27% quarter over quarter and 38% year over year.
Speaker 2: with our top nine recovery and cost reduction efforts. We realized positive non-gap operating profits in September .
With our top line recovery and cost reduction efforts, we realized positive non-GAAP operating profit in September.
Speaker 2: We expect our non-gap operating property to remain positive in the 4x4. If our top line and cost structure don't change significantly in these or next month.
We expect our non-GAAP operating profit to remain positive in the fourth quarter, if our top line and cost structure don't change.
You can see in this or next month.
Speaker 2: Furthermore, our operating cash flow has been positive for two consecutive quarters.
Furthermore, our operating cash flow has been positive for two consecutive quarters.
Speaker 2: In the third quarter of 2023, we achieved an operating cash inflow of RMB 67 million compared to a 41 million inflow in the second quarter and a 231 million cash outflow in the first quarter.
In the first quarter of 2023 we achieved an operating cash inflow of RMB $67 million compared to a $41 million inflow in the second quarter and a 241 million cash outflow in the first quarter.
Speaker 2: Demonstration optimal policies to adapt to the changes in macro and industry development quickly. Thank you for your question.
Demonstrating the optimal place piece to adapt to the changes in macro and industry developments quickly.
Two quick questions.
The next question comes from pay hang loose with CIBC. Please go ahead.
Speaker 1: The next question comes from Payhang Loot with CICC. Please go ahead.
Speaker 7: Thank you, Monkman. This is Pei Hang at CICC. I have two questions here. The first one is about a product. Could you give us some color on the sales of the recent approved GB products in the third quarter? And how is the sales proportion for each major product?
Thank you management. This is Pei hung I see I see I have two questions here. The first one is about the product could you give us some color on the sales of the recently approved <unk> products in the third quarter and how is the sale of propulsion for each major pro that and my second question is about the channel.
Speaker 7: And my second question is about the channel, after the renewal of retail license, and what is the most updated member of domestic outlets, and how is their profitability and their operating situation from your perspective? Thank you.
After the renewal of retail license and what is the most updated number of domestic all of that and how is their profitability and their operate consideration from your perspective. Thank you.
Speaker 2: Thank you Mr. Payhound. So the first question is on our new products and the second question is on the retail all the steps we have. So for the first question, our users for the SHO's tax tool flavors that we launched a couple of months ago, Xiang Shui Renxing and Yao Jiu Qingwu are becoming increasingly popular among users.
Thanks, very much for Paypal. So the first question is on our new products.
Second question is on the retail all the steps we have.
So far the first question Oh. This is survey shows types two flavors that we launched a couple of months ago, Shanghai Wrenching en route your tools are becoming increasingly popular among users.
Speaker 2: These flavors are now available at most stars nationwide.
These flavors are now available at most stores nationwide.
Speaker 2: And in October , the first contribution of these two flavors to our Phantom series had already reached the mid-team.
And in October the first contribution of these two flavors to our Phantom Sirius had already reached the mid teens.
Speaker 2: Additionally, Shan Shui Renzi, Macromotor's court now runs number three among our Phantom series, just slightly behind our best selling Lu Shan Yi and Wang Jiang Yul team flavor.
Additionally, Shan Shan Grimacing macro motor score now ranked number three among all Phantom serious just slightly behind our best selling really shining and washingtonians team flavors.
Speaker 2: We anticipate that the South's contribution of Shanshae Rimsin and Nareldry Qingwu will continue to rise.
We anticipate the sales contribution of Shaanxi, <unk> and Roger Cheng will continue to rise.
And in October we also launched our fifth cartridge cereals Lady push is coming.
Speaker 2: And in October , we also launched a fifth-cardage serious lady, which is come to this device, but are more affordable than its cardage.
Device, but are more affordable than his cartridges.
Speaker 2: By the end of October , we have launched a lazy series in more than 17,000 province.
By the end of October we have launched the Lady serious Morten 17 provinces.
Speaker 2: And regarding your second question is about the number of retail others. Number of retail others has remained stable in the past few months. Following regulators special crackdown in cracking down our legal products on illegal products.
And regarding your second question is about the number up with how others.
Number of retail outlets has remained stable in the past few months following regulator special crackdown cracking down on illegal products on eco products.
Speaker 2: Furthermore, more users have begun trying compliance products.
Furthermore, more users have become prime compliance products.
Speaker 2: As we explained in an open-air box, only 40% of participants were aware that after October last year, retailers could only sell tobacco flavor to cartridges legal.
As we explained in the opening of a box only 40% of participants we're aware of that's after October last year retailers could only sell tobacco flavored cartridges legally.
Speaker 2: As more and more users gradually become aware of the new regulations and the benefits of national standards, such as required approvals before product launches and the assurance that all ingredients in the illiquids are on the right place.
As more and more users gradually become aware of the new regulations and the benefits of national centers, such as required a proposed before product launches and the assurance that all ingredients in the illiquid or on a white piece they will.
Speaker 2: They will be increasingly interested in using national kind of product.
B increasingly interested in using national type of products.
Speaker 2: they should improve regional ro WHIP proof enhanced their preferred
This will improve our retail as part of the staticity enhance their profitability.
Speaker 2: Our self-operated stores' profitability could reflect the overall style's profitability.
Our self operated stores profitability reflects the overall sales and profitability.
Speaker 2: These stores, the ability has been increasing quarter over quarter and they have started to turn profits on the operational level in the past couple of months.
Stores profitability has been increasing quarter over quarter and they have started turn to profits on the operational level in the past couple of months. Thank.
Thank you for a question.
Speaker 1: Due to time constraints, now I would like to turn the call back over to the company for closing remarks.
Due to time constraints now I would like to turn the call back over to the company for closing remarks.
Speaker 2: Thank you once again for joining us today. If you have further questions, please feel free to contact our Eric Technologies in Master Relations team through the contact information provided on our website, our TPG Investor Relations. Thank you.
Thank you once again for joining US today. If you have further questions. Please feel free to contact our ex technologies Investor Relations team through the contact information provided on our website or TPG Investor relations. Thank you.
Sure.
Speaker 1: This concludes the conference call. You may now attend this connector line. Thank you.
This concludes the conference call you May now disconnect. Your line. Thank you.
Okay.
Yeah.
Speaker 8: The.
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