Q2 2024 RLX Technology Inc Earnings Call

August 16, 2024

Speaker Change: Hello ladies and gentlemen. Thank you for standing by for RLX Technology's second quarter 2024 earnings conference call. At this time all participants are in listen-only mode. After management's remarks there will be a question and answer session.

Operator: second quarter 2024 earnings conference call.

Operator: 2nd quarter, 2024, earnings conference call. At this time, all participants are endless and only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded and is expected to last for about 40 minutes.

Operator: At this time all participants are in listen-only mode.

Speaker Change: Today's conference call is being recorded and is expected to last for about 40 minutes.

Sam Tsang: I will now turn the call over to your host, Mr. Tsang Tsang, Head of the Capital Markets for the company.

Speaker Change: I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam.

Sam Tsang: Please go ahead, Sam. Thank you very much.

Operator: After management's remarks there will be a question and answer session.

Sam Tsang: Hello everyone and welcome to our technologies. 2nd quarter, 2020, for earnings conference call. The company's financial and operational results were released through PL and wire services audio today and have been made available online. You can also view the earnings press release by visiting the IOW session of our website at IOW.cs.com.

Sam Tsang: Thank you very much. Hello everyone and welcome to RxTechnologies second quarter 2024 earnings conference call. The company's financial and operational results were released through PR newswire services earlier today and have been made available online.

Sam Tsang: You can also view the earnings press release by visiting the IRL section of our website at irl.relaxedtech.com.

Operator: Today's conference call is being recorded and is expected to last for about 40 minutes.

Sam Tsang: Participants on today's call will include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu, and myself, Sam Tsang, head of the Capital Markets of the company. Before we continue, please note that today's discussion will contain forwarding statements made under the safe harbor provisions of the U.S. Department of Security's notification form we've found as of 1995. These statements typically contain words such as may, will, express, target, estimate, intent, believe, potential, continue, or are similar expressions. For looking statements in more of the inherent risks and uncertainties, the accuracy of these statements may be impact by a number of business weeks and uncertainties that could cost actual results to differ materially from those projects that are anticipated.

Sam Tsang: Participants on today's call include our Chief Executive Officer Ms. Kate Wang, our Chief Financial Officer Mr. Chao Lu, and myself, Sam Tsang, Head of Capital Markets of the company.

Operator: I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company.

Operator: Please go ahead, Sam.

Sam Tsang: Thank you very much.

Speaker Change: Before we continue, please note that today's discussion will contain four looking statements made under the safe harbor provisions of the U.S. Department of Security's Legislation Reform Act of 1995.

Speaker Change: These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential, continue, or other similar expressions.

Speaker Change: poor-looking statements involve inherent risks and uncertainties

Speaker Change: The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated.

Sam Tsang: Many of which factors are beyond our control.

Sam Tsang: The company's is affiliated, advisors, and representatives do not undertake any obligation to update this board of information, except as required under the article below. Please note that our strategies, earnings press release and this conference call for discussions of an audited GAAP financial measures as well as an audited long GAAP financial measures. Our Earnings Press Release contains a reconciliation of the an audited long gap measures to the an audited gap measures.

Speaker Change: many of which factors are beyond our control.

Speaker Change: The companies, its affiliates, advisors, and representatives do not undertake any obligation to update this forward-looking information, except as required under the applicable law.

Sam Tsang: Hello, everyone, and welcome to RLX Technology's second quarter 2024 earnings conference call. The company's financial and operational results were released through PR Newswire Services earlier today and have been made available online.

Iris Technology: Please note that Iris Technology's earnings price relief and this conference call include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures.

Iris Technology: Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.

Sam Tsang: I will now turn the call over to Ms. Kate Wang. Please call ahead.

Sam Tsang: You can also view the earnings press release by visiting the IR section of our website at ir.rlxtech.com, Participants on today's call include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu, and myself, Sam Tsang, Head of Capital Markets of the company.

Iris Technology: I will now turn the call over to Ms. Kate Wang. Please go ahead.

Kate Wang: Thank you, Tim, and thank everyone for making time to join our earnings conference call today. I would like to start with the strategic overview highlighting our key achievements in product innovation in R&D. Following this, our CFO will provide a detailed review of our financial performance. We delivered another solid set of results for the second quarter of 2004, as we deepen our exploration of overseas markets. If it is as diverse and a evolving regulatory environment across the region, we operate in compliance with men's; our top priority in our refining, our localized strategies. for the more varying income and penetration levels necessitated tailored product offering across regions, except R&D and the product design are playing an increasingly vital role in our international expansion.

Sam Tsang: Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Department of Security's Legislation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential, continue, or other similar expressions. Forelooking statements involve inherent risks and uncertainties.

Kate Wang: Thank you, Tim, and thanks to everyone for making time to join our earnings conference call today.

Sam Tsang: The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, many of which factors are beyond our control, The companies, its affiliates, advisors, and representatives do not undertake any obligation to update this forward-looking information, except as required under the applicable law, Please note that RLX Technology's earnings press release and this conference call include discussions of audited GAAP financial measures as well as audited non-GAAP financial measures. Our RLX press release contains a reconciliation of the unaudited non-GAP measures to the unaudited GAP measures.

Sam Tsang: I will now turn the call over to Ms. Kate Wang, please go ahead.

Kate Wang: I would like to start with a strategic overview, highlighting our key achievements in product innovation and R&D.

Speaker Change: Following this, our CFO will provide a detailed review of our financial performance.

Kate Wang: Thank you, Sam, and thanks, everyone, for making time to join our earnings conference call today.

Speaker Change: We delivered another solid set of results for the second quarter of 2024 as we deepen our exploration of overseas markets.

Kate Wang: I would like to start with a strategic overview, highlighting our key achievements.

CFO: Given the diverse and evolving regulatory environment across the region we operate in, compliance remains our top priority in our refining our localized strategy.

Speaker Change: Furthermore, varying income and penetration level.

Speaker Change: necessitate tailored product offerings across regions.

Kate Wang: Product Innovation in R&D.

Speaker Change: As such, R&D and product design are playing an increasingly vital role in our international expansion.

Chao Lu: Following this, our CFO will provide a detailed review of our financial performance.

Kate Wang: Let me walk you through more some details. This quarter we focused on adapting our product design to combine with various regional electric volumes and nicotine level requirements. We also incorporated Chao Luq features that automatically engaged after 10 minutes of inactivity to prevent underage use. This innovation demonstrating our commitment to use protection. The threat represents a significant step forward in our pursuit of 50 and a global component. In terms of the localized product strategies, we continue to research demand trends and economic factors influencing users' consumption habits until it tailored our offering accordingly. The prevailing high inflation environment has prompt many users both domestically and internationally to seek products that offer enhanced value for their money.

Kate Wang: We delivered another solid set of results for the second quarter of 2024 as we deepen our exploration of overseas markets. Given the diverse and evolving regulatory environment across the region, we operate in.

Speaker Change: Let me walk you through more some details.

Speaker Change: This quarter, we focused on adapting our product design to comply with various regional e-liquid volume and nicotine level requirements.

Speaker Change: We also incorporated child lock features that automatically engage after 10 minutes of activity to prevent underage use.

Speaker Change: This innovation is demonstrating our commitment to youth protection.

Speaker Change: represents a significant step forward in our pursuit of safety and global compliance.

Kate Wang: Our top priority is refining our localized strategy.

Speaker Change: In terms of localized product strategies, we continue to research demand trends and economic factors influencing users' consumption habits.

Kate Wang: Furthermore, varying income and penetration level.

Kate Wang: Necessities, Tailored Product Offering, across regions.

Speaker Change: and tailored our offerings accordingly.

Kate Wang: As such, R&D and product design are playing an increasingly vital role in our international expansion. Let me walk you through some more details. This quarter, we focused on adapting our product design, to comply with various regional e-liquid volume and nicotine level requirements, presents On The Edge U.

Kate Wang: This innovation is demonstrating our commitment to youth protection, represents a significant step forward in our pursuit of safety and global compliance.

Speaker Change: The prevailing high inflation environment.

Speaker Change: has prompted many users both domestically and internationally.

Speaker Change: to seek products that offer enhanced value for their money.

Kate Wang: In response, we launched the Megazide start chain series in mainland China with 6 ml and 10 ml pods at a low price, lower price than our infinity pods. Internationally, we introduced the relax pod real series, which offers up to 1,000 pods per pod, or nearly double the quantity of our standard pods to provide exceptional value. Our key understanding of consumer trends also keeps us at the forefront of product innovation. A critical factor driving user engagement in these highly competitive industries. Smart features like Bluetooth for usage tracking and device 13 control, as well as screens for monitoring battery and electric status, are becoming standard at every price point.

Kate Wang: In terms of localised product strategies, We continue to research. Demand Trends and Economic Factors Influencing Users' Consumption Habits, and tailored our offerings accordingly, the prevailing high inflation environment has prompted many users, both domestically and internationally, to seek products that offer enhanced value for their money.

Speaker Change: In response, we launched the mega-sized Da Qian series in mainland China.

Kate Wang: In response, we launched the mega-sized Datian series in mainland China, with 6-ML and 10-ML pulse, at a lower price than our Infinity Top.

Speaker Change: with 6 mL and 10 mL pulse at a low price, lower price than our infinity pulse.

Kate Wang: Internationally, we introduced the RELAX Talks Real Series, which offers up to 1,000 tops to pop, or nearly double the quantity of our standard pods to provide exceptional value.

Speaker Change: Internationally, we introduced the Relax Talks Reel Series.

Speaker Change: which offers up to 1,000 tubs per pound.

Kate Wang: Our keen understanding of consumer trends also keeps us at the forefront of product innovation, a critical factor driving user engagement in this highly competitive industry.

Speaker Change: Our keen understanding of consumer trends also keeps us at the forefront of product innovation.

Speaker Change: A critical factor driving user engagement in this highly competitive industry.

Kate Wang: Smart features like Bluetooth for user tracking and device setting control, as well as screens for monitoring battery and e-liquid status, are becoming standard at every price point, as the leading global eBay program with substantial R&D advantages.

Speaker Change: Smart features like Bluetooth for usage tracking and device setting control, as well as screen for monitoring battery and electrostators.

Speaker Change: are becoming standard at every price point.

Kate Wang: As a leading global youth program with substantial R&D and other wantages, we are poised to capitalize on these trends with an exciting pipeline of new products for the rest of the years. This includes an open-system device and a modular closed-system device at a different price point. There's various innovative features to meet a broad range of user needs. Notably, the module provides a lot of users to make a match flavor with batteries and screens to create their own unique waiting experience. It also features an interactive screen for checking battery life, monitoring inhalation duration, and adjusting airflow.

Speaker Change: as the leading global eBay program with substantial R&D and other vantages.

Kate Wang: We are poised to capitalize on this trend with an exciting pipeline of new products for the rest of the year. This includes an open system device and a modular closed system device, at different price points, with various innovative features to meet a broad range of user needs. Notably, the module device allows users to mix and match flavors with batteries and screens to create their own unique vaping experience. It also features an interactive screen for checking battery life, monitoring inhalation duration, and adjusting airflow.

Speaker Change: we are poised to capitalize on these trends with an exciting pipeline of new products for the rest of the year.

Speaker Change: This includes an open system device and a modular closed system device at different price points.

Speaker Change: with various innovative features to meet a broad range of user needs.

Speaker Change: Notably, the module device allows users to mix and match flavors with batteries and screens to create their own unique vaping experience.

Speaker Change: It also features an interactive screen for checking battery life, monitoring inhalation duration, and adjusting air flow.

Kate Wang: I'm also pleased to share that our quality and safety laboratory part the CNAS for confirmation assessment, expansion, and modification assessment. The assessment certified our laboratory capabilities in 10 testing hours based on international battery safety standards, EIEC 62133, and North America electronic cigarette safety standard UL-8139. It's enabling our lab to issue also our third support for 43 monitoring items, including waterproofing, pressure relief 50, and drop stress, based on national and international standards. This milestone achievement will ensure global reclamation of our testing reports, facilitating our entry into new markets worldwide. In short, we are successfully navigating the domestic landscape and our international expansion by remaining alert, IGL, and responsive.

Kate Wang: I'm also pleased to share that our quality and safety laboratory passed the CNAS for conformative assessment expansion and modification assessment.

Speaker Change: I'm also pleased to share that our Quality and Safety Laboratory passed the CNAS for conformity assessment, expansion and modification assessment.

Kate Wang: The assessment certified our laboratory's capabilities in 10 testing areas, based on International Battery Safety Standard IEC 62133 and North America Electronic Cigarette Safety Standard UL 8139, enabling our lab to issue authoritative reports for 43 monitoring items, including waterproofing, pressure relief safety, and drop strength, based on national and international standards.

Speaker Change: i

Speaker Change: The assessment certified our laboratory's capabilities in 10 testing areas based on International Battery Safety Standard IEC 62133 and North America Electronic Cigarette Safety Standard UL 8139.

Speaker Change: enabling our lab to issue authoritative reports for 43 monitoring items.

Speaker Change: including waterproofing, pressure relief safety, and drop strength.

Speaker Change: based on national and international standards.

Kate Wang: This milestone achievement will ensure global recognition of our testing report, facilitating our entry into new markets worldwide.

Speaker Change: i

Speaker Change: This milestone achievement will ensure global recognition of our testing reports, facilitating our entry into new markets worldwide.

Kate Wang: In short, we are successfully navigating the domestic landscape and our international expansion by remaining alert, agile, and responsive. We will continue to invest in R&D to maintain our competitive edge as we grow and expand globally.

Speaker Change: In short, we are successfully navigating the domestic landscape and our international expansion by remaining alert, agile, and responsive.

Kate Wang: We will continue to invest in R&D to maintain our competitive edge as we grow and expand globally.

Speaker Change: We will continue to invest in R&D to maintain our competitive edge as we grow and expand globally.

Kate Wang: Before I wrap up, I would like to share an ESG update. We have recently published our third ESG report, which highlights our contribution to society welfare and sustainability efforts throughout 2023. Our Golden Shield program to combat the proliferation of counterfeit waiting products was one of the year's major success stories. In 2023, we assist the authorities in 187 anti-conversation cases. These are over 16 million counter-effect cartridges and 77,000 devices, substantial increases from 35 cases, 49,000 cartridges and 5,600 devices in 2022. This program not only protects our consumers, but also uphold the integrity of the Wei Ling industry by ensuring that only saves high quality products reach the market.

Kate Wang: Before I wrap up, I would like to share an ESG update. We have recently published our third ESG report, which highlights our contribution to society, welfare, and sustainability efforts throughout 2023, our Golden Shield program to combat the proliferation of counterfeit vaping products, was one of the year's major success stories. In 2023, we assist the authorities in 187 anti-conversation cases, leasing over 16 million counterfeit cartridges and 77,000 devices, potential increases from 35 cases.

Speaker Change: Before I wrap up, I would like to share an ESG update.

Speaker Change: We have recently published our third ESG report.

Operator: Please go ahead, Sam.

Operator: Please go ahead, Sam. Thank you very much.

Speaker Change: which highlights our contribution to society, welfare, and sustainability efforts throughout 2023.

Sam Tsang: Thank you very much.

Sam Tsang: Hello everyone and welcome to our technologies.

Sam Tsang: Hello everyone and welcome to our technologies. 2nd quarter, 2020, for Earnings Conference Call. The company's financial and operational results were released through PL and wire services audio today and have been made available online. You can also view the Earnings Press release, by visiting the IOW Session of our website at IOW.cs.com.

Sam Tsang: 2nd quarter, 2020, for Earnings Conference Call. The company's financial and operational results were released through PL and wire services audio today and have been made available online.

Speaker Change: our Golden Shield Program to combat the proliferation of counterfeit vaping products.

Sam Tsang: You can also view the Earnings Press release, by visiting the IOW Session of our website at IOW.cs.com.

Speaker Change: was one of the year's major success stories.

Speaker Change: In 2023, we assist the authorities in 187 anti-conversation cases.

Sam Tsang: Participants on today's call will include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu, and myself, Sam Tsang, head of the capital markets of the company. Before we continue, please note that today's discussion will contain forwarding statements made under the safe cover provisions of the U.S. Department of Security's notification form we've found as of 1995. These statements typically contain words such as may, will, express, target, estimate, intent, believe, potential, continue, or are similar expressions.

Speaker Change: Leasing over 16 million counterfeit cartridges and 77,000 devices.

Sam Tsang: Before we continue, please note that today's discussion will contain forwarding statements made under the safe cover provisions of the U.S.

Sam Tsang: For looking statements in more of the inherent risks and uncertainties, the accuracy of these statements may be impact by a number of business weeks and uncertainties that could cost actual results to differ materially from those projects that are anticipated. Many of which factors are beyond our control.

Speaker Change: Substantial increases from 35 cases.

Kate Wang: 49,000 cartridges and 5,600 devices in 2022.

Sam Tsang: Department of Security's notification form we've found as of 1995.

Speaker Change: 49,000 cartridges and 5,600 devices in 2022

Sam Tsang: These statements typically contain words such as may, will, express, target, estimate, intent, believe, potential, continue, or are similar expressions.

Kate Wang: This program not only protects our consumers, but also upholds the integrity of the weaving industry, by ensuring that only safe, high-quality products reach the market.

Speaker Change: This program not only protects our consumers, but also upholds the integrity of the wave industry by ensuring that only safe, high-quality products reach the market.

Kate Wang: We also prioritize public health in our SGA first. Investing in technological innovation to minimize the impact of e-vapor products on society. Through our 1.4 research hand, we conduct systematic scientific evaluation and research on harm reduction, efforts that continue to bear fruit in 2020. We partner with renowned academic institutions such as Sun Yi Qian University, Tilo University of Technology in China University to publish studies on harm reduction as well as the impact of smoking and waving on public health in the environment. This research not only contributes to the development of well-informed environmental and health policies, but also guides our targeted smoking prevention strategies and supports our goal of providing safer harm reduction reducing alternatives to traditional progress.

Kate Wang: We also prioritize public health in our ESG efforts.

Speaker Change: We also prioritize public health in our ESG efforts.

Kate Wang: Investing in technological innovation to minimize the impact of e-vapor products on society, through our OnePlus 4 Research Chain.

Sam Tsang: The company's is affiliated, advisors, and representatives do not undertake any obligation to update this board of information, except as required under the article below.

Sam Tsang: The company's is affiliated, advisors, and representatives do not undertake any obligation to update this board of information, except as required under the article below. Please note that our strategies, Earnings Press release and this conference call for discussions of an audited gap financial measures as well as an audited long gap financial measures. Our Earnings Press release contains a reconciliation of the an audited long gap measures to the an audited gap measures.

Speaker Change: Investing in technological innovation to minimize the impact of evaporated products on society.

Kate Wang: We conduct systematic scientific evaluation and research on time reduction, efforts that continue to bear fruit in 2023.

Sam Tsang: Please note that our strategies, Earnings Press release and this conference call for discussions of an audited gap financial measures as well as an audited long gap financial measures. Our Earnings Press release contains a reconciliation of the an audited long gap measures to the an audited gap measures.

Speaker Change: Through our 1 plus 4 research chain, we conduct systematic scientific evaluation and research on harm reduction.

Speaker Change: efforts that continue to bear fruit in 2023.

Kate Wang: We partner with renowned academic institutions such as, 孫益先大學, Hilo University of Technology, and Chang'an University to publish studies on harm reduction, as well as the impact of smoking and vaping on public health and the environment.

Speaker Change: We partner with renowned academic institutions such as

Sam Tsang: I will now turn the call over to Ms. Kate Wang.

Kate Wang: I will now turn the call over to Ms. Kate Wang. Please call ahead. Thank you, Tim, and thank everyone for making time to join our Earnings conference call today.

Operator: Please call ahead.

Speaker Change: Sun Yixian University

Speaker Change: University of Technology and China University to publish studies on harm reduction as well as the impact of smoking and vaping on public health and the environment.

Kate Wang: Thank you, Tim, and thank everyone for making time to join our Earnings conference call today.

Kate Wang: I would like to start with the strategic overview highlighting our key achievements in product innovation in R&D.

Kate Wang: This research, not only contributes to the development of well-informed environmental and health policies, but also guides our targeted smoking prevention strategies and supports our goal of providing safer, time-reducing alternatives to traditional cigarettes.

Speaker Change: This research

Speaker Change: not only contributes to the development of well-informed environmental and health policies.

Kate Wang: Following this, our CFO will provide a detailed review of our financial performance.

Kate Wang: Following this, our CFO will provide a detailed review of our financial performance. We delivered another solid set of results for the second quarter of 2004, as we deepen our exploration of overseas markets.

Speaker Change: but also guides our targeted smoking prevention strategies and supports our goal of providing safer, harm-reducing alternatives to traditional cigarettes.

Kate Wang: We delivered another solid set of results for the second quarter of 2004, as we deepen our exploration of overseas markets.

Kate Wang: Going forward, we will continue to award public health initiatives and promote and authorize well-regulated living industries through forward-thinking ESD initiatives that benefit our company, stakeholders, and community life. In conclusion, our dedication to compliance, innovation, and sustainability is shaping a promising future for our company. As a trusted e-vapor brand, we will continue to deliver high quality compliance products while capitalizing our school's opportunities on the global stage.

Kate Wang: Going forward, we will continue to advance public health initiatives and promote an orderly, well-regulated vaping industry through forward-thinking ESG initiatives, the benefit of our company, stakeholders, and community life.

Kate Wang: If it is as diverse and a evolving regulatory environment across the region, we operate in compliance with men's, our top priority in our refining, our localized strategies, for the more varying income and penetration levels necessitated tailored product offering across regions, except R&D and the product design are playing an increasingly vital role in our international expansion. Let me walk you through more some details. This quarter we focused on adapting our product design to combine with various regional electric volumes and nicotine level requirements.

Speaker Change: Going forward, we will continue to advance public health initiatives and promote an orderly, well-regulated vaping industry through forward-thinking ESG initiatives.

Speaker Change: the benefit of our company, stakeholders, and community alike.

Kate Wang: In conclusion, our dedication to combine.

Speaker Change: In conclusion,

Kate Wang: Innovation and Sustainability is shaping a promising future for our company, as a trusted e-vapor brand for adult smokers.

Speaker Change: our dedication to combined.

Speaker Change: innovation and sustainability is shaping a promising future for our company.

Kate Wang: We will continue to deliver high-quality, compliant products while capitalizing on diverse growth opportunities on the global stage.

Speaker Change: As a trusted e-vapor brand, we will continue to deliver high-quality, compliant products while capitalizing on diverse growth opportunities on the global stage.

Kate Wang: Let me walk you through more some details.

Kate Wang: This quarter we focused on adapting our product design to combine with various regional electric volumes and nicotine level requirements.

Sam Tsang: I will now turn the call over to our staff, Chao Lu, for details on that. Thank you, Kate.

Kate Wang: I will now turn the call over to our staffer, Chao Lu, for detailed financial review.

Speaker Change: I will now turn the call over to our special Chao Lu for detailed financial review.

Kate Wang: We also incorporated Chao Luq features that automatically engaged after 10 minutes of inactivities to prevent underage use.

Kate Wang: We also incorporated Chao Luq features that automatically engaged after 10 minutes of inactivities to prevent underage use. This innovation demonstrating our commitment to use protection. The threat represents a significant step forward in our pursuit of 50 and a global component. In terms of the localized product strategies, we continue to research demand trends and economic factors influencing users' consumption habits until it tailored our offering accordingly. The prevailing high inflation environment has prompt many users both domestically and internationally to seek products that offer enhanced value for their money.

Chao Lu: Thank you, Kate, and hello, everyone.

Chao Lu: Hello, everyone.

Chao Lu: Before I start the detailed discussion over our financials, please note, unless otherwise stated, all the financials I would present today are in R&B terms. Following the termination of our non-compete agreement with RLX Think in November 2023, we have consistently expanded our international presence. Our overseas business is thriving, resulting in a significant uptick in our top line. Our net revenues grew to R&B 627 million in the second quarter of 2024, up 66% year-over-year from R&B 378 million in the second quarter of 2023. And 14% quarter-over-quarter from R&B 552 million in the first quarter of 2024. We anticipate continued revenue growth as our international expansion progresses.

Chao Lu: Before I start the detailed discussion of our financials, please note, Unless otherwise stated, all the financials I will present today are in RMB terms. Following the termination of our non-compete agreement with RLX, Inc. in November 2023, we have consistently expanded our international presence. Our overseas business is thriving, resulting in a significant uptick in our top line. 我们的利润增长, to RMB627 million in the second quarter of 2024, up 66% year-over-year from RMB 378 million in the second quarter of 2023, and 14% quarter over quarter from RMB 552 million in the first quarter of 2024.

Chao Lu: Thank you, Kate, and hello, everyone.

Chao Lu: Before I start the detailed discussion of our financials, please note, unless otherwise stated, all the financials I will present today are in RMB terms.

Kate Wang: This innovation demonstrating our commitment to use protection.

Kate Wang: The threat represents a significant step forward in our pursuit of 50 and a global component.

Chao Lu: Following the termination of our non-compete agreement with RelaxInc in November 2023, we have consistently expanded our international presence.

Kate Wang: In terms of the localized product strategies, we continue to research demand trends and economic factors influencing users' consumption habits until it tailored our offering accordingly.

Chao Lu: Our overseas business is thriving, resulting in a significant uptick in our top line.

Chao Lu: Our net revenues grew to RMB627 million in the second quarter of 2024.

Kate Wang: The prevailing high inflation environment has prompt many users both domestically and internationally to seek products that offer enhanced value for their money. In response, we launched the Megazide start chain series in mainland China with 6 ml and 10 ml pods at low price, lower price than our infinity pods.

Chao Lu: up 66% year-over-year from RMB 378 million in the second quarter of 2023.

Chao Lu: and 14% quarter over quarter from RMB 552 million in the first quarter of 2024.

Kate Wang: In response, we launched the Megazide start chain series in mainland China with 6 ml and 10 ml pods at low price, lower price than our infinity pods. Internationally, we introduced the relax pod real series which offers up to 1,000 pods per pod, or nearly double the quantity of our standard pods to provide exceptional value. Our key understanding of consumer trends also keeps us as a forefront of product innovation. A critical factor driving user engagement in these highly competitive industries.

Chao Lu: We anticipate continued revenue growth as our international expansion progresses.

Chao Lu: Furthermore, as Paix mentioned, we are continuously refining our regional strategies for maximum effectiveness, including both root-to-market and go-to-market plans. Palering our strategies to each region's unique market dynamics and consumer behaviors optimizes our market penetration and enhances our competitive edge, driving sustained growth.

Chao Lu: Furthermore, as Kate mentioned, we are continuously refining our regional strategies for maximum effectiveness, including both route-to-market and go-to-market plans. Tailoring our strategies to each region's unique market dynamics and consumer behaviors optimizes our market penetration and enhances our competitive edge.

Chao Lu: Furthermore, as Kate mentioned, we are continuously refining our regional strategy for maximum effectiveness.

Kate Wang: Internationally, we introduced the relax pod real series which offers up to 1,000 pods per pod, or nearly double the quantity of our standard pods to provide exceptional value.

Kate Wang: including both route to market and go-to-market plan.

Kate Wang: Tailoring our strategies to each region's unique market dynamics and consumer behaviors optimizes our market penetration and enhances our competitive edge, driving sustained growth.

Kate Wang: Our key understanding of consumer trends also keeps us as a forefront of product innovation.

Chao Lu: Driving Sustained Growth, Turning to profitability, our overall gross profit margin for the second quarter was down slightly year-over-year at 25.2%, largely due to changes in our revenue composition, including both channel and product mixes. Wang Ying, Peihang Lyu, Sam Tsang, Wang Ying, Peihang Lyu, Wei Ling, RLX Technology, The gross profit margins of several key revenue streams demonstrated year-over-year improvement on a like-for-like basis, to mitigate the impact of these mixed changes.

Chao Lu: Turning to profitability, our overall growth profit margin for the second quarter was down slightly year-over-year at 25.2%. Largely due to changes in our revenue composition, including both channel and product mixes. On the other hand, the growth profit margin of several key revenue streams demonstrated year-over-year improvement on a like-for-like basis. To mitigate the impact of these mixed changes, we have proactively implemented strategies to enhance operational efficiency and cost management practices, including product design optimizations and supply chain efficiency improvements.

Speaker Change: Turning to profitability, our overall gross profit margin for the second quarter was down slightly year-over-year at 25.2 percent.

Kate Wang: A critical factor driving user engagement in these highly competitive industries.

Kate Wang: Smart features like Bluetooth for usage tracking and device 13 control as well as screens for monitoring battery and electric status are becoming standard at every price point.

Kate Wang: Smart features like Bluetooth for usage tracking and device 13 control as well as screens for monitoring battery and electric status are becoming standard at every price point. As a leading global youth program with substantial R&D and other wantages, we are poised to capitalize on these trends with an exciting pipeline of new products for the rest of the years. This includes an open-system device and a modular closed-system device at a different price point.

Speaker Change: largely due to changes in our revenue composition, including both channel and product mixes.

Speaker Change: On the other hand...

Speaker Change: The gross profit margins of several key revenue streams demonstrated year-over-year improvement on a like-for-like basis.

Chao Lu: We have proactively implemented strategies to enhance operational efficiencies and cost management practices, including product design optimization and supply chain efficiency improvement.

Speaker Change: To mitigate the impact of these mixed changes, we have proactively implemented strategies to enhance operational efficiencies and cost management practices.

Speaker Change: including product design optimizations and supply chain efficiency improvement.

Chao Lu: We recorded a total operating loss of R&B 33 million for the second quarter. However, excluding the impact of share-based compensation, we achieved a positive non-GAAP operating profit of R&B 45-minute. Our third consecutive quarter of non-GAAP profitability thanks to strong cost management and profitable contribution from our international market. Although our growth profit margin may fluctuate quarterly, we are confident that our overall operating profit margin will continue to improve, driven by the strategic leveraging of our existing workforce during our regional expansion. Consequently, operating expenses are expected to increase at a much slower rate than our top-line growth.

Chao Lu: We recorded a total operating loss of RMB 33 million, for the second quarter. However, excluding the impact of share-based compensation. We achieved a positive non-gap operating profit of RMB45 million, our third consecutive quarter of non-gap profitability thanks to strong cost management and profitable contribution.

Speaker Change: We recorded a total operating loss of RMB 33 million.

Kate Wang: There's various innovative features to meet a broad range of user needs. Notably, the module provides a lot of users to make a match flavor with batteries and screens to create their own unique waiting experience. It also features an interactive screen for checking battery life, monitoring, inhalation, duration, and adjusting airflow.

Speaker Change: for the second quarter.

Speaker Change: However, excluding the impact of share-based compensation.

Kate Wang: Notably, the module provides a lot of users to make a match flavor with batteries and screens to create their own unique waiting experience.

Speaker Change: We achieved a positive non-gap operating profit of RMB 45 million.

Speaker Change: b

Speaker Change: our third consecutive quarter of non-gap profitability thanks to strong cost management and profitable contribution from our international market.

Kate Wang: It also features an interactive screen for checking battery life, monitoring, inhalation, duration, and adjusting airflow.

Chao Lu: 從我們的國際市場, Although our gross profit margin may fluctuate quarterly.

Speaker Change: although our gross profit margin may fluctuate quarterly.

Chao Lu: We are confident that our overall operating profit margin will continue to improve, driven by the strategic leveraging of our existing workforce during our regional expansion. Consequently, operating expenses are expected to increase at a much slower rate than our top-line growth.

Kate Wang: I'm also pleased to share that our quality and safety laboratory part the CNAS for confirmation assessment, expansion and modification assessment.

Kate Wang: I'm also pleased to share that our quality and safety laboratory part the CNAS for confirmation assessment, expansion and modification assessment. The assessment certified our laboratory capabilities in 10 testing hours based on international battery safety standards, EIEC 62133, and North America electronic cigarette safety standard UL-8139. It's enabling our lab to issue also our third support for 43 monitoring items, including waterproofing pressure relief 50 and drop stress, based on national and international standards.

Speaker Change: We are confident that our overall operating profit margin will continue to improve.

Speaker Change: driven by the strategic leveraging of our existing workforce during our regional expansion.

Kate Wang: The assessment certified our laboratory capabilities in 10 testing hours based on international battery safety standards, EIEC 62133, and North America electronic cigarette safety standard UL-8139.

Speaker Change: Consequently, operating expenses are expected to increase at a much slower rate than our top-line growth.

Chao Lu: As a result, our non-Gap net profit, second quarter of 2024 increased by 147% year-over-year to RMB213 million. For the same period, our non-GAAP basic net income per ADS was RMB 0.171. And non-gas diluted net profit per ADS was RMB 0.164.

Speaker Change: As a result, our non-gap net profit for the second quarter of 2024 increased by 147% year-over-year to RMB213 million.

Kate Wang: It's enabling our lab to issue also our third support for 43 monitoring items, including waterproofing pressure relief 50 and drop stress, based on national and international standards.

Speaker Change: For the same period, our non-GAAP basic net income per ADS was RMB 0.171.

Speaker Change: And non-gap diluted net profit per ADS was RMB 0.164.

Chao Lu: In terms of cash flow, we recorded an operating cash inflow of 197 minutes in the second quarter of 2024. A substantial increase from 41 minutes in the same quarter of the previous year. This notable improvement is primarily attributed to our enhanced working capital and inventory management strategy. Additionally, we are currently experiencing a negative cash conversion cycle. Inventory turnover days do that just 21 days in the second quarter of 2024. Significantly reduced from over 50 days in the second quarter of 2023 and 30 days in the first quarter of 2024.

Chao Lu: 以現金流的角度來看, We recorded an operating cash inflow of $197 million in the second quarter of 2024, a substantial increase from 41 minutes in the same quarter of the previous. This notable improvement is primarily attributed to our enhanced working capital and inventory management strategy.

Speaker Change: In terms of cash flow, we recorded an operating cash inflow of $197 million in the second quarter of 2024.

Kate Wang: This milestone achievement will ensure global reclamation of our testing reports facilitating our entry into new markets worldwide.

Kate Wang: This milestone achievement will ensure global reclamation of our testing reports facilitating our entry into new markets worldwide. In short, we are successfully navigating the domestic landscape and our international expansion by remaining alert, IGL, and responsive. We will continue to invest in R&D to maintain our competitive edge as we grow and expand globally.

Speaker Change: A substantial increase from 41 minutes in the same quarter of the previous year.

Kate Wang: In short, we are successfully navigating the domestic landscape and our international expansion by remaining alert, IGL, and responsive.

Speaker Change: This notable improvement is primarily attributed to our enhanced working capital and inventory management strategy.

Chao Lu: Additionally, we are currently experiencing a negative cash conversion cycle. Inventory turnover days stood at just 21 days in the second quarter of 2024, significantly reduced from over 50 days in the second quarter of 2023, and 30 days in the first quarter of 2021.

Speaker Change: Additionally, we are currently experiencing a negative cash conversion cycle.

Kate Wang: We will continue to invest in R&D to maintain our competitive edge as we grow and expand globally.

Speaker Change: Inventory turnover day stood at just 21 days in the second quarter of 2024.

Speaker Change: So significantly reduced from over 50 days in the second quarter of 2023 and 30 days in the first quarter of 2024.

Kate Wang: Before I wrap up, I would like to share an ESG update.

Kate Wang: Before I wrap up, I would like to share an ESG update. We have recently published our third ESG report which highlights our contribution to society welfare and sustainability efforts throughout 2023. Our Golden Shield program to combat the proliferation of counterfeit waiting products was one of the years major success stories. In 2023, we assist the authorities in 187 anti-conversation cases. These are over 16 million counter-effect cartridges and 77000 devices, substantial increases from 35 cases, 49000 cartridges and 5600 devices in 2022.

Chao Lu: As of June 30, 2024, our total financial asset, including cash and equivalence, restricted cash, and various forms of short-term and long-term deposits and investments, total 14.9 billion RMB. In summary, we built a strong foundation for sustained growth and operational efficiency around the globe in the first half of 2024. Our international expansion is flourishing, supported by our healthy balance sheet and effective strategic execution. As we continue to expand our presence domestically and internationally, we remain committed to delivering sustained value to our shareholders.

Chao Lu: As of June 30, 2024, our total financial assets, including cash and equivalents, Restricted cash and various forms of short-term and long-term deposits and investments. Total $14.9 billion RMB.

Kate Wang: We have recently published our third ESG report which highlights our contribution to society welfare and sustainability efforts throughout 2023.

Speaker Change: As of June 30, 2024, our total financial assets, including cash and equivalent, restricted cash, and various forms of short-term and long-term deposits and investments totaled 14.9 billion RMB.

Kate Wang: Our Golden Shield program to combat the proliferation of counterfeit waiting products was one of the years major success stories.

Chao Lu: In summary, we built a strong foundation for sustained growth and operational efficiency around the globe in the first half of 2024. Our international expansion is flourishing, supported by our healthy, balance sheet, and effective strategic execution. As we continue to expand our presence domestically and internationally, we remain committed to delivering sustained value to our shareholders.

Speaker Change: In summary, we built a strong foundation for sustained growth and operational efficiency around the globe in the first half of 2024.

Kate Wang: In 2023, we assist the authorities in 187 anti-conversation cases. These are over 16 million counter-effect cartridges and 77000 devices, substantial increases from 35 cases, 49000 cartridges and 5600 devices in 2022.

Speaker Change: Our international expansion is flourishing.

Speaker Change: supported by our healthy, balanced, cheap, and effective strategic execution.

Speaker Change: As we continue to expand our presence domestically and internationally, we remain committed to delivering sustained value to our shareholders.

Sam Tsang: This concludes our prepared remarks today. We will now open the call to questions. I'll play it up, please. Go ahead. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster for the benefit of all participants on today's call.

Chao Lu: This concludes our prepared remarks today.

Operator: We will now open the call to questions.

Speaker Change: This concludes our prepared remarks today.

Operator: Operator, please go ahead.

Speaker Change: We will now open the call to questions.

Operator: We will now begin the question and answer session.

Speaker Change: Operator, please go ahead.

Kate Wang: This program not only protects our consumers, but also uphold the integrity of the Wei Ling industry by ensuring that only saves high quality products reach the market.

Kate Wang: This program not only protects our consumers, but also uphold the integrity of the Wei Ling industry by ensuring that only saves high quality products reach the market. We also prioritize public health in our SGA first. Investing in technological innovation to minimize the impact of e-vapor products on society. Through our 1.4 research hand, we conduct systematic scientific evaluation and research on harm reduction, efforts that continue to bear fruit in 2020. We partner with renowned academic institutions such as Sun Yi Qian University, Tilo University of Technology in China University to publish studies on harm reduction as well as the impact of smoking and waving on public health in the environment.

Operator: To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: We will now begin the question and answer session. To ask a question you may press star then 1 on your telephone keypad.

Operator: If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Kate Wang: We also prioritize public health in our SGA first.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Operator: At this time, we will pause momentarily to assemble our roster, for the benefit of all participants on today's call.

Kate Wang: Investing in technological innovation to minimize the impact of e-vapor products on society.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Operator: If you wish to ask your question to management in Chinese, Please immediately repeat your question in English.

Sam Tsang: If you wish to ask your questions to management in Chinese, please immediately repeat your question in English.

Speaker Change: For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English.

Kate Wang: Through our 1.4 research hand, we conduct systematic scientific evaluation and research on harm reduction, efforts that continue to bear fruit in 2020.

Lydia Ling: The first question comes from Lydia Ling with City; please go ahead.

Operator: The first question comes from Lydia Ling with Citi.

Operator: Please go ahead.

Speaker Change: The first question comes from Lydia Ling with City. Please go ahead.

Lydia Ling: Thanks, management.

Lydia Ling: Thanks management, so Lydia from City. So here I have two questions at your meeting related to your overseas business. So the first one, if we look at your first half results, we just see that your company entry may some progress in the overseas market. So could you share with us now to what the biggest challenge is that you might face during your entry or overseas expansion. And also looking into the second half, how would you actually facilitate your extension in the overseas market? Is there any detail target that you may share with us, such as light work countries or regions that you target to enter in the second half or consolidate in the second half.

Lydia Ling: I'm Lydia from Citi. So here I have two questions actually mainly related to your overseas business. So the first one, if we look at your first half results, we did see that your company actually made some progress in the overseas market. So could you share with us like what's the biggest challenges that you might face during your actually overseas expansion? And also looking into the second half, how would you actually facilitate your expansion in the overseas market? Is there any detailed targets that you may share with us such as like what countries or regions that you target to enter in the second half or consolidate in the second half?

Kate Wang: We partner with renowned academic institutions such as Sun Yi Qian University, Tilo University of Technology in China University to publish studies on harm reduction as well as the impact of smoking and waving on public health in the environment.

Kate Wang: This research not only contributes to the development of well-informed environmental and health policies, but also guides our targeted smoking prevention strategies and supports our goal of providing safer harm reduction reducing alternatives to traditional progress. Going forward, we will continue to award public health initiatives and promote and authorize well-regulated living industries through forward-thinking ESD initiatives that benefit our company, stakeholders, and community life.

Lydia Ling: And my second question is for the market that you already entered for the overseas market. And so what could be the growth target that management is thinking about or target, how to further drive the market share in those light countries. And also, if any color on the product or light channel strategy that you are targeting for or planning for the looking forward, that would be very helpful. Thank you.

Speaker Change: and others.

Speaker Change: And my second question is, for the markets that you already entered, for the overseas market, and so what could be the growth targets that management is thinking about or target? How to further drive the market share in those light countries?

Speaker Change: and also if any color on the product or like the channel strategies that you target for or planning for the looking forward that will be very helpful. Thank you.

Kate Wang: Thank you very much, Lydia, for your question. So in certain cases, in regulatory environments, remains our primary challenge. So one significant concern is the upcoming plan on disposable products in certain countries. So some nations, such as Poland, have proposed the implementation of this plan. It was originally scheduled for start of summer, but it has been delayed until early 2025. The regulatory changes in local markets require us to frequently adjust our product development and infantry management plans. And our challenge is how to learn to conduct business locally. So far, consumer brands like us, we need to expand beyond our home markets.

Lydia Ling: So, I'm Lydia from Citi.

Lydia Ling: So, here I have two questions actually mainly related to your overseas business.

Speaker Change: Thank you very much Lydia for your question. So uncertainties in regulatory environments remains our primary challenge.

Speaker Change: So one significant concern is the upcoming ban on disposable products in certain countries. So some nations, such as Poland, have proposed the implementation of this ban. It was originally scheduled for the start of summer, but it has been delayed until early 2025.

Kate Wang: In conclusion, our dedication to compliance, innovation, and sustainability is shaping a promising future for our company.

Kate Wang: In conclusion, our dedication to compliance, innovation, and sustainability is shaping a promising future for our company. As a trusted e-vapor brand, we will continue to deliver high quality compliance products while capitalizing our school's opportunities on the global stage.

Kate Wang: As a trusted e-vapor brand, we will continue to deliver high quality compliance products while capitalizing our school's opportunities on the global stage.

Speaker Change: Regulatory changes in local markets require us to frequently adjust our product development and infantry management plans.

Speaker Change: And our challenge is how to learn to conduct business locally.

Lydia Ling: So, the first one, if we look at your first half result, we did see that your company actually made some progress in the overseas market.

Speaker Change: So far, consumer brands like us, we need to expand beyond our home markets.

Kate Wang: Such challenge includes identifying specific products, design, and flavors that resonates with consumers in different regions to cater to local demand. Despite these two major challenges, we have prepared a series of products for launch in various markets. And we are confident that we can earn the trust of adult smokers across different countries.

Chao Lu: I will now turn the call over to our staff, Chao Lu, for details on that.

Chao Lu: I will now turn the call over to our staff, Chao Lu, for details on that. Thank you, Kate. Hello, everyone.

Lydia Ling: So, could you share with us that what's the biggest challenges that you might face during your actually overseas expansion?

Speaker Change: Such challenge includes identifying specific products, design, and flavors that resonate with consumers in different regions to cater to local demand.

Chao Lu: Thank you, Kate.

Chao Lu: Hello, everyone.

Lydia Ling: And also, looking into the second half, how would you actually facilitate your expansion in the overseas market?

Chao Lu: Before I start the detailed discussion over our financials, please note, unless otherwise stated, all the financials I would present today are in R&B terms. Following the termination of our non-complete agreement with RLX Think in November 2023, we have consistently expanded our international presence. Our overseas business is thriving, resulting in a significant uptick in our top line. Our net revenues grew to R&B 627 million in the second quarter of 2024, up 66% year-over-year from R&B 378 million in the second quarter of 2023.

Speaker Change: Despite these two major challenges, we have prepared a series of products for launch in various markets, and we are confident that we can earn the trust of adult smokers across different countries.

Kate Wang: We are on track to miss the targets we set at the beginning of the year. Regarding the country stats, we plan to enter for the rest of the year. We will continue to focus on expanding in Asia, where we first started our international expansion before gradually entering into other continents.

Lydia Ling: Is there any detailed target that you may share with us such as like what countries or regions that you target to enter in the like the second half or consolidate in the second half?

Speaker Change: We are on track to meet the targets we set at the beginning of the year. Regarding the countries that we plan to enter for the rest of the year, we will continue to focus on expanding in Asia, where we first started our international expansion, before gradually entering into other continents.

Kate Wang: So regarding your second question, it's about how to grow the local market share in the overseas market. So compared to mainland China, where we have established market share, we are still relatively new in many parts of the world. This presents significant opportunities to expand our user base and part of sales penetration. As discussed in previous earnings calls, our primary focus will be increasingly the availability of our products to reach more potential consumers. The main distribution channels for our category remain more than three channels, including convenience stores, supermarkets, and specialty-based shops. We have different products in the pipeline cater for these channels, which you will see in the market soon.

Lydia Ling: And then my second question is, for the markets that you already entered for the overseas market, and so what could be the growth targets that management is thinking about or target?

Chao Lu: Our net revenues grew to R&B 627 million in the second quarter of 2024, up 66% year-over-year from R&B 378 million in the second quarter of 2023. And 14% quarter-over-quarter from R&B 552 million in the first quarter of 2024. We anticipate continued revenue growth as our international expansion progresses.

Speaker Change: So regarding your second question, it's about how to grow the local market share in overseas markets.

Lydia Ling: How to further drive the market share in those like the countries?

Speaker Change: So compared to mainland China, where we have an established market share, we are still relatively new in many parts of the world.

Speaker Change: This presents significant opportunities to expand our user base and point of sales penetration.

Chao Lu: And 14% quarter-over-quarter from R&B 552 million in the first quarter of 2024. We anticipate continued revenue growth as our international expansion progresses. Furthermore, as Paix mentioned, we are continuously refining our regional strategies for maximum effectiveness, including both root-to-market and go-to-market plans. Palering our strategies to each region's unique market dynamics and consumer behaviors optimizes our market penetration and enhances our competitive edge, driving sustained growth. Turning to profitability, our overall growth profit margin for the second quarter was down slightly year-over-year at 25.2%.

Lydia Ling: And also, if any color on the product or like the channel strategies that you target for or planning for the looking forward, that will be very helpful.

Speaker Change: As discussed in previous earnings call, our primary focus will be increasingly on the

Lydia Ling: Thank you.

Speaker Change: The availability of our products to reach more potential consumers.

Sam Tsang: Thank you very much, Lydia, for your question.

Speaker Change: The main distribution channels for our category remain modern trade channels, including convenience stores,

Speaker Change: supermarkets, and specialty wave shops.

Speaker Change: We have different products in the pipeline tailored for these channels, which you will see in the market soon. Thank you very much for your two questions.

Lydia Ling: Thank you very much for our two questions.

Lydia Ling: Thank you.

Peihang Lyu: The next question comes from Peihang Lyu with CICC. Please go ahead. Okay, thank you, Management. This is Peihang from CICC. I have two questions here.

Speaker Change: i

Speaker Change: Thank you. Good night.

Speaker Change: The next question comes from Pei-Heng Liu with CICC. Please go ahead.

Sam Tsang: So uncertainties in regulatory environments remains our primary challenge.

Peihang Lyu: The first one is about overseas competition. We have noticed currently overseas brands like Imerico, LFR, and Jik-Web are aggressively entering the top system and four in one categories. How does the company proceed your product advantages among other competitors?

Pei-Heng Liu: Okay, thank you, management. This is Pei Hong from CICC. I have two questions here. The first one is about overseas competition. We have noticed currently overseas brands like iMiracle or Elphar and GigBabe are aggressively entering the POS system and 4-in-1 categories. How does the company perceive your product advantages among other competitors?

Chao Lu: Largely due to changes in our revenue composition, including both channel and product mixes. On the other hand, the growth profit margin of several key revenue streams demonstrated year-over-year improvement on a like-for-like basis. To mitigate the impact of these mixed changes, we have proactively implemented strategies to enhance operational efficiency and cost management practices, including product design optimizations and supply chain efficiency improvements. We recorded a total operating loss of R&B 33 million for the second quarter.

Peihang Lyu: And my second question is with regard to the domestic market. What is the current status of new GB products submitted for approval in China? And what is the approval progress? And how does the market share of illegal products change, along with enhancing regulatory enforcement in the second quarter? Thank you. Thank you very much, Peihang, for our questions.

Pei-Heng Liu: And my second question is with regard to the domestic market. What is the current status of new GB products submitted for approval in China? And what is the approval progress?

Pei-Heng Liu: And how has the market share of illegal products changed along with enhancing of regulatory enforcement in the second quarter? Thank you.

Kate Wang: So the first question is about the overseas competition. So I mean, since months after our inception, we have been the leader in the part-system category in mainland China. So as we expand into other countries, we are confident that our part-system products will continue to win the trust of adult smokers worldwide. We can also leverage our long-established brand equity as a reputable eWave brand. Compared with other brands, primarily the own part is possible products. This is one of our key competitive advantages. Furthermore, we have been increasingly and independently developing eWave products since the release of our second-generation post-system products, less alpha.

Sam Tsang: So one significant concern is the upcoming ban on disposable products in certain countries.

Sam Tsang: So some nations, such as Poland, have proposed the implementation of this ban.

Sam Tsang: It was originally scheduled for the start of summer, but it has been delayed until early 2020.

Speaker Change: Thank you very much, Pei-Hung, for your questions. So first question is about the overseas competition.

Sam Tsang: Regulatory changes in local markets require us to frequently adjust our product development and infantry management plan.

Sam Tsang: And our challenge is how to learn to conduct business locally.

Speaker Change: So, I mean, since months after our inception, we have been the leader in the pot system category in Mainland China, so as we expand into other countries, we are confident that our pot system products will continue to win the trust of adult smokers worldwide.

Sam Tsang: So far, consumer brands like us, we need to expand beyond our home market. So challenge includes identifying specific products, design, and flavors that resonate with consumers in different regions to cater to local demands.

Sam Tsang: Despite these two major challenges, we have prepared a series of products for launch in various markets, and we are confident that we can earn the trust of adult smokers across different countries.

Sam Tsang: We are on track to meet the targets we set at the beginning of the year.

Sam Tsang: Regarding the country stats we plan to enter for the rest of the year, we will continue to focus on expanding in Asia, where we first started our international expansion, before gradually entering into other continents.

Chao Lu: We recorded a total operating loss of R&B 33 million for the second quarter.

Speaker Change: We can also leverage our long-established brand equity as a reputable UAPR brand. Compared with other brands primarily known for disposable products, this is one of our key competitive advantages.

Chao Lu: However, excluding the impact of share-based compensation, we achieved a positive non-gap operating profit of R&B 45-minute. Our third consecutive quarter of non-gap profitability thanks to strong cost management and profitable contribution from our international market. Although our growth profit margin may fluctuate quarterly, We are confident that our overall operating profit margin will continue to improve, driven by the strategic leveraging of our existing workforce during our regional expansion. Consequently, operating expenses are expected to increase at a much slower rate than our top-line growth.

Speaker Change: Furthermore, we have been increasingly and independently developing e-vapor products since the release of our second generation hot system product, Relax Alpha. And we have in-house illiquid R&D and manufacturing capabilities.

Kate Wang: And we have in-house ill-equipped R&D and manufacturing capabilities. These industry-leading capabilities allow us to collaborate closely with our consumer insight team and respond quickly to the changing use of behavior, and other significance advantage that set us apart.

Chao Lu: Although our growth profit margin may fluctuate quarterly, We are confident that our overall operating profit margin will continue to improve, driven by the strategic leveraging of our existing workforce during our regional expansion. Consequently, operating expenses are expected to increase at a much slower rate than our top-line growth.

Speaker Change: These industry-leading capabilities allow us to collaborate closely with our consumer insights team and respond quickly to the changing user behavior.

Kate Wang: So regarding your second question, it is about our current status of national products in China, as well as the multi-share of illegal products. So, as mentioned in previous quarters, we are submitting new products on a rolling basis. We are seeing more products being approved by the regulators. To give you an idea of the progress, as of the end of last year, we have 21 flavors of two, and as of June 2024, over 30 flavors have received approval, including our newly launched product series, CloudChamp. We understand the market concerns regarding the profilings of illegal products, which significantly threaten the recovery of complex products in mainland China.

Sam Tsang: So regarding your second question, it's about how to grow the local market share in overseas markets. So compared to mainland China, where we have an established market share, we are still relatively new in many parts of the world. This presents significant opportunities to expand our user base and point of sales penetration.

Speaker Change: and other significant advantages that set us apart.

Speaker Change: So regarding your second question is about our current status of national products in China as well as the market share of illegal products.

Sam Tsang: As discussed in previous earnings call, our primary focus will be increasingly, the availability of our products to reach more potential consumers. The main distribution channels for our category remain modern trade channels, including convenience stores.

Sam Tsang: 超級市場和特色店鋪, We have different products in the pipeline tailored for these channels, which you will see in the market soon.

Speaker Change: So as mentioned in previous quarters, we are submitting new products on a rolling basis.

Sam Tsang: Thank you very much for the two questions.

Chao Lu: As a result, our non-gas net profit for the second quarter of 2024 increased by 147% year-over-year to RMB 213-minute. For the same period, our non-gas basic net income per ABS was RMB 0.171. And non-gas diluted net profit per ABS was RMB 0.164. In terms of cash flow, we recorded an operating cash inflow of 197 minutes in the second quarter of 2024. A substantial increase from 41 minutes in the same quarter of the previous year. This notable improvement is primarily attributed to our enhanced working capital and inventory management strategy.

Operator: 多謝, The next question comes from Peihang Lyu with CICC.

Speaker Change: We are seeing more products being approved by the regulators.

Speaker Change: To give you an idea of the progress, as of the end of last year, we had 21 flavors approved, and as of June 2024, over 30 flavors have received approval.

Operator: Please go ahead.

Peihang Lyu: Okay, thank you, Management.

Peihang Lyu: This is Peihang from CICC.

Speaker Change: including our newly launched product series Sa Qian.

Speaker Change: We understand the market concerns regarding the prevalence of illegal products, which significantly threaten the recovery of compliance products in Mainland China.

Kate Wang: However, tracking illegal products' market share has become increasingly difficult as more sales shift online and transactions are conducted more quickly. Based on our on-the-ground assessments, illegal products still account for a significant majority of sales in China. And of course, I mean our market share amongst the compliance products has been stable and healthy. Thanks for your questions.

Speaker Change: However, tracking illegal products' market share has become increasingly difficult as more sales shift online and transactions are conducted more discreetly.

Speaker Change: Based on our on-the-ground assessment, illegal products still account for a significant majority of sales in China.

Chao Lu: This notable improvement is primarily attributed to our enhanced working capital and inventory management strategy. Additionally, we are currently experiencing a negative cash conversion cycle. Inventory turnover days do that just 21 days in the second quarter of 2024. Significantly reduced from over 50 days in the second quarter of 2023 and 30 days in the first quarter of 2024. As of June 30, 2024, our total financial asset, including cash and equivalence, restricted cash, and various forms of short-term and long-term deposits and investments, total 14.9 billion RMB.

Speaker Change: And, of course, I mean our market share amongst the compliance products has been stable and healthy. Thanks for your questions.

Peihang Lyu: Yes, sir, helpful. Thank you, Sam.

Chao Lu: Additionally, we are currently experiencing a negative cash conversion cycle.

Yun Guo: The next question comes from Yun Guo with Citix. Please go ahead. Thanks, Management. This is going from Citix. I have two questions here.

Speaker Change: That's very helpful. Thank you, Sam.

Chao Lu: Inventory turnover days do that just 21 days in the second quarter of 2024. Significantly reduced from over 50 days in the second quarter of 2023 and 30 days in the first quarter of 2024. As of June 30, 2024, our total financial asset, including cash and equivalence, restricted cash, and various forms of short-term and long-term deposits and investments, total 14.9 billion RMB.

Speaker Change: The next question comes from Yunguo with Citix. Please go ahead.

Peihang Lyu: I have two questions here.

Yun Guo: The first question is which product categories are showing general momentum in overseas markets? What is the current contribution of disposable products to overseas revenue?

Speaker Change: Thanks management, this is Guoying from SITX. I have two questions here. The first question is that which product categories are showing strong growth momentum in overseas markets?

Yun Guo: And my second question is that, seeing the second quarter this year, there has been a surge in products in relation. How does a company plan to capture market opportunities in Europe before the disposable ban takes effect? Thank you.

Guoying: What's the current contribution of disposable products to overseas revenue? And my second question is that since the second quarter this year, there has been a surge in product innovation. How does the company plan to capture market opportunities in Europe before the disposable ban takes effect? Thank you.

Kate Wang: Thanks, Florian, for your questions. So, the first one is about the subcategory of our product category. And the second question is about the potential European disposable ban. So, for the first question, the popularity of different subcategories varies from countries to countries and is largely dependent on local regulations, including taxation and product restrictions. So, in markets where disposable products are still permitted, the restrictions are negligible in content. We are seeing strong traction among products with high illiquid volume. Additionally, some disposable now feature smart technologies such as Bluetooth and display screens, which are gaining popularity among users.

Chao Lu: In summary, we built a strong foundation for sustained growth and operational efficiency around the globe in the first half of 2024.

Chao Lu: In summary, we built a strong foundation for sustained growth and operational efficiency around the globe in the first half of 2024. Our international expansion is flourishing, supported by our healthy balance sheet and effective strategic execution. As we continue to expand our presence domestically and internationally, we remain committed to delivering sustained value to our shareholders.

Peihang Lyu: The first one is about overseas competition. We have noticed currently overseas brands like iMiracle or Alphard and Geekvape are aggressively entering the Pod system and four-in-one categories.

Speaker Change: for your questions. So the first one is about the subcategory of our product category, and the second question is about the potential European disposable ban.

Chao Lu: Our international expansion is flourishing, supported by our healthy balance sheet and effective strategic execution.

Peihang Lyu: How does the company perceive your product advantages among other competitors?

Peihang Lyu: And my second question is with regard to the domestic market.

Speaker Change: So, for the first question, the popularity of different subcategories varies from countries to countries, and it largely depends on local regulations, including taxation and product restrictions.

Peihang Lyu: What is the current status of new GB products submitted for approval in China?

Peihang Lyu: And what is the approval progress?

Peihang Lyu: And how has the market share of illegal products changed along with enhancing of regulatory enforcement in the second quarter?

Chao Lu: As we continue to expand our presence domestically and internationally, we remain committed to delivering sustained value to our shareholders.

Peihang Lyu: Thank you.

Speaker Change: So in markets where disposable products are still permitted with few restrictions on nicotine content, we are seeing strong attraction among products with high D-liquid volume.

Chao Lu: This concludes our prepared remarks today.

Operator: This concludes our prepared remarks today. We will now open the call to questions. I'll play it up please, go ahead. We will now begin the question and answer session. To ask a question you may press star than one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star than two, at this time we will pause momentarily to assemble our roster for the benefit of all participants on today's call. If you wish to ask your questions to management in Chinese, please immediately repeat your question in English.

Operator: We will now open the call to questions.

Operator: I'll play it up please, go ahead.

Speaker Change: Additionally some disposables now feature smart technologies such as Bluetooth and display screens which are gaining popularity among users.

Operator: We will now begin the question and answer session.

Kate Wang: In these marches, disposable continues to contribute a significant portion of sales. In countries where a ban on disposable is announced or anticipated, pod and open systems are gaining market share. This shift is partly driven by distributors and retailers actively reducing that disposable income trees and migrating users to pod or open systems to prepare for upcoming regulatory changes. So, capitalized on this trend, we are launching our open system products Relaxed Prime this month, which will pair perfectly without illiquid solutions.

Operator: To ask a question you may press star than one on your telephone keypad.

Speaker Change: In these marches, disposables continue to contribute a significant portion of sales.

Operator: If you are using a speaker phone, please pick up your handset before pressing the keys.

Speaker Change: In countries where a ban on disposables is announced or anticipated,

Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star than two, at this time we will pause momentarily to assemble our roster for the benefit of all participants on today's call.

Speaker Change: Pod and Open Systems are gaining market share.

Speaker Change: This shift is partly driven by distributors and retailers actively reducing their disposable inventories and migrating users to TOT or open systems to prepare for upcoming regulatory changes.

Operator: If you wish to ask your questions to management in Chinese, please immediately repeat your question in English.

Speaker Change: To capitalize on this trend, we are launching our open system product, RELUX Prime, this month, which will pair perfectly with our eliqui solutions.

Lydia Ling: The first question comes from Lydia Ling with City, please go ahead.

Lydia Ling: The first question comes from Lydia Ling with City, please go ahead. Thanks management, so Lydia from City. So here I have two questions at your meeting related to your overseas business. So the first one, if we look at your first half results, we just see that your company entry may some progress in the overseas market. So could you share with us now to what the biggest challenge is that you might face during your entry or overseas expansion.

Speaker Change: Regarding your second question about the European slaver ban...

Lydia Ling: Thanks management, so Lydia from City.

Speaker Change: So as mentioned previously, our leading product development capabilities coupled with our consumer insights team enable us to quickly identify emerging product trends and rapidly develop products that can cater to demand.

Lydia Ling: So here I have two questions at your meeting related to your overseas business.

Lydia Ling: And also looking into the second half, how would you actually facilitate your extension in the overseas market? Is there any detail target that you may share with us such as light work countries or regions that you target to enter in the second half or consolidate in the second half. And my second question is for the market that you already entered for the overseas market. And so what could be the growth target that management is thinking about or target, how to further drive the market share in those light countries. And also if any color on the product or light channel strategy that you are targeting for or planning for the looking forward, that would be very helpful. Thank you.

Lydia Ling: So the first one, if we look at your first half results, we just see that your company entry may some progress in the overseas market.

Kate Wang: It's worth noting that our presence in Europe is smaller than in Asia. So, we focus on getting market share from competitors, as users my ways from disposable to our subcategories will leverage our grand equity in pot systems to attract them. This migration pays to our strengths and presents a significant opportunity to live. Thank you for our questions.

Speaker Change: Accordingly, we have several new products in the pipeline.

Lydia Ling: So could you share with us now to what the biggest challenge is that you might face during your entry or overseas expansion.

Speaker Change: It is worth noting that our presence in Europe is smaller than in Asia.

Lydia Ling: And also looking into the second half, how would you actually facilitate your extension in the overseas market?

Speaker Change: So, we focus on getting market share from competitors as users migrate from disposables to R6 categories, we will leverage our grant equity in pot systems to attract them.

Lydia Ling: Is there any detail target that you may share with us such as light work countries or regions that you target to enter in the second half or consolidate in the second half.

Speaker Change: This migration pays to our strengths and presents a significant opportunity to us.

Sam Tsang: Thank you very much, Peihang, for your questions.

Speaker Change: Thank you for your questions.

Lydia Ling: And my second question is for the market that you already entered for the overseas market.

Charlie Chen: The next question comes from Charlie Chen with China Renaissance. Please go ahead. Thank you, management, to take my questions. I have two questions. The first one is about the China market and the second one is about operations. So, for the first one, I just want to take a step back and see the overall Chinese market size. So, in the past year, there are a lot of changes in the evaping marketing China. So, I just want to know, based on your best estimate, is the evaping marketing in China still growing or at what kind of growth rate?

Speaker Change: so

Sam Tsang: So our first question is about the overseas competition.

Speaker Change: Very helpful. Thank you.

Lydia Ling: And so what could be the growth target that management is thinking about or target, how to further drive the market share in those light countries.

Speaker Change: The next question comes from Charlie Chen with China Renaissance. Please go ahead.

Charlie Chen: Thank you, management, for taking my questions. I have two questions. The first one is about China market and the second one is about operations. So, for the first one, I just want to take a step back and see...

Lydia Ling: And also if any color on the product or light channel strategy that you are targeting for or planning for the looking forward, that would be very helpful.

Sam Tsang: So I mean, since months after our inception, we have been the leader in the pot system category in Mainland China.

Lydia Ling: Thank you.

Chao Lu: Thank you very much, Lydia, for your question.

Kate Wang: Thank you very much, Lydia, for your question. So in certain case, in regulatory environments, remains our primary challenge. So one significant concern is the upcoming plan on disposable products in certain countries. So some nations, such as Poland, have proposed the implementation of this plan. It was originally scheduled for start of summer, but it has been delayed until early 2025. The regulatory changes in local markets require us to frequently adjust our product development and infantry management plans.

Speaker Change: In the past year, there are a lot of changes in the evaping market in China, so I just want you to know...

Chao Lu: So in certain case, in regulatory environments, remains our primary challenge.

Chao Lu: So one significant concern is the upcoming plan on disposable products in certain countries.

Speaker Change: Based on your best estimate, is the e-vaping market in China still growing or at what kind of growth rate? And also, how is the penetration rate in adult Chinese smokers?

Chao Lu: So some nations, such as Poland, have proposed the implementation of this plan.

Chao Lu: It was originally scheduled for start of summer, but it has been delayed until early 2025.

Chao Lu: The regulatory changes in local markets require us to frequently adjust our product development and infantry management plans.

Speaker Change: as well as how has the market share changed between GB products and non-GB products. Also, can you comment a little bit on the overall...

Chao Lu: And our challenge is how to learn to conduct business locally.

Kate Wang: And our challenge is how to learn to conduct business locally. So far, consumer brands like us, we need to expand beyond our home markets. Such challenge includes identifying specific products, design and flavors that resonates with consumers in different regions to cater to local demand. Despite these two major challenges, we have prepared a series of products for launch in various markets. And we are confident that we can earn the trust of adult smokers across different countries.

Speaker Change: Product price including tax. I mean how much does

Chao Lu: So far, consumer brands like us, we need to expand beyond our home markets. Such challenge includes identifying specific products, design and flavors that resonates with consumers in different regions to cater to local demand.

Speaker Change: China's consumers are paying for e-vaping. Is that increasing or going down because of competition?

Charlie Chen: So, the second question is about the operations. I noticed that there are some volatility in your growth margin in this quarter. So, going forward, how should we think about the growth margin as well as the cost of goods sold of your products? Thank you. Thank you for our questions, Charlie.

Chao Lu: Despite these two major challenges, we have prepared a series of products for launch in various markets.

Speaker Change: So, a second question is about the operations. I noticed that there are some volatility in your gross margin.

Speaker Change: in this quarter. So going forward, how do we, how should we think about the gross margin as well as the cost of goods sold of your products? Thank you.

Chao Lu: And we are confident that we can earn the trust of adult smokers across different countries.

Kate Wang: So, the first one is about the domestic market, market sizing, et cetera. So, first, I think it's important to note that the data for the annual market is challenging to track. So, as mentioned, sales in this segment tend to be more concealed, which is difficult to capture accurate pickers. The demand for compliance products remains relatively stable, though there are occasional situations that occur due to adjustments in channel inventory. So, currently, a non-compliance product still dominates the markets. So, regarding the market penetration, the overall penetration rate, including the compliance and non-compliance products in combined, has slightly declined compared to the period before direct relations.

Charlie Chen: Thank you for your questions, Charlie. So the first one is about the domestic market, market sizing.

Chao Lu: We are on track to miss the targets we set at the beginning of the year.

Chao Lu: Regarding the country stats, we plan to enter for the rest of the year.

Charlie Chen: etc. So first I think it's important to note that the data for the EU market is changing the track.

Chao Lu: We will continue to focus on expanding in Asia, where we first started our international expansion before gradually entering into other continents.

Sam Tsang: So as we expand into other countries, we are confident that our pot system product will continue to win the trust of adult smokers worldwide.

Sam Tsang: We can also leverage our long-established brand equity as a reputable UAV brand. Compared with other brands primarily known for disposable products, this is one of our key competitive advantages.

Charlie Chen: So as mentioned, sales in this segment tend to be more concealed, which is difficult to capture accurate figures. The demand for compliance products remains relatively stable, though there are occasional situations occur due to adjustments in channel inventory.

Chao Lu: So regarding your second question, it's about how to grow the local market share in overseas market. So compared to mainland China, where we have established market share, we are still relatively new in many parts of the world. This presents significant opportunities to expand our user base and part of sales penetration.

Kate Wang: So regarding your second question, it's about how to grow the local market share in overseas market. So compared to mainland China, where we have established market share, we are still relatively new in many parts of the world. This presents significant opportunities to expand our user base and part of sales penetration. As discussed in previous earnings call, our primary focus will be increasingly the availability of our products to reach more potential consumers.

Charlie Chen: So currently, a non-compliance product still dominates the market.

Sam Tsang: Furthermore, we have been increasingly and independently developing e-vapor products since the release of our second generation hot system product, RLX Alpha. And we have in-house, illiquid, R&D, and manufacturing capability.

Sam Tsang: These industry-leading capabilities allow us to collaborate closely with our consumer insights team and respond quickly to the changing user behavior, and other significant advantages that set us apart.

Charlie Chen: So, regarding the market penetration, the overall penetration rate, including the compliance and non-compliance products, in combined, has slightly declined compared to the period before the regulations.

Sam Tsang: So regarding your second question, it's about our current status of national products in China as well as the market share of illegal products.

Chao Lu: As discussed in previous earnings call, our primary focus will be increasingly the availability of our products to reach more potential consumers.

Kate Wang: This decline is a primary deal to a some-like users' discontinuing using evapour products because of playful restrictions. In contrast, users of compliance product gradually return to their previous per capita consumption level, which have not fully recovered, which previously have not been fully recovered. So, the market share between compliance and non-compliance products has yet to stabilize fully. As previously it does, the share of non-compliance products remains high, despite regulatory efforts. The compliance segment is gradually stabilizing, but the performance of non-compliance product is also the overall market dynamics. So, as for pricing, the average starting price for a compliance product has remained stable over the past year, partially because of regulatory measures that have limited brand promotional efficiencies.

Charlie Chen: This decline is primarily due to some light users discontinuing using evapoproducts because of wafer restrictions.

Chao Lu: The main distribution channels for our category remain more than three channels, including convenience stores, supermarkets, and specialty-based shops.

Kate Wang: The main distribution channels for our category remain more than three channels, including convenience stores, supermarkets, and specialty-based shops. We have different products in the pipeline cater for these channels, which you will see in the market soon. Thank you very much for our two questions. Thank you.

Charlie Chen: In contrast, users of compliance products gradually returned to their previous per capita consumption levels, which previously have not been fully recovered.

Chao Lu: We have different products in the pipeline cater for these channels, which you will see in the market soon.

Chao Lu: Thank you very much for our two questions.

Charlie Chen: So the market share between compliance and non-compliance products has yet to stabilize fully.

Chao Lu: Thank you.

Peihang Lyu: The next question comes from Peihang Lyu with CICC.

Peihang Lyu: The next question comes from Peihang Lyu with CICC. Please go ahead. Okay, thank you, management. This is Peihang from CICC. I have two questions here. The first one is about overseas competition. We have noticed currently overseas brands like Imerico, LFR, and jik-web are aggressively entering the top system and four in one categories. How does the company proceed your product advantages among other competitors? And my second question is with regard to the domestic market.

Charlie Chen: As previously discussed, the share of non-compliance products remains high despite regulatory efforts.

Peihang Lyu: Please go ahead.

Charlie Chen: The compliance segment is gradually stabilizing, but the prevalence of non-compliance products influences the overall market dynamics.

Peihang Lyu: Okay, thank you, management.

Peihang Lyu: This is Peihang from CICC.

Sam Tsang: So as mentioned in previous quarters, we are submitting new products on a rolling basis.

Sam Tsang: We are seeing more products being approved by the regulators. To give you an idea of the progress, as of end of last year, we had 21 flavors approved. And as of June 2024, over 30 flavors have received approval, including our newly launched product series, Daqian.

Peihang Lyu: I have two questions here.

Sam Tsang: We understand the market concerns regarding the prevalence of illegal products, which significantly threaten the recovery of compliance products in Mainland China. However, tracking illegal products market share has become increasingly difficult as more sales shift online and transactions are conducted more discreetly. Based on our on-the-ground assessment, illegal products still account for a significant majority of sales in China.

Peihang Lyu: The first one is about overseas competition. We have noticed currently overseas brands like Imerico, LFR, and jik-web are aggressively entering the top system and four in one categories.

Charlie Chen: So as for pricing, the average selling price for a compliance product has remained stable over the past year, partially because of regulatory measures have limited brand promotional activities.

Sam Tsang: And of course, I mean our market share amongst the compliance products has been stable and healthy.

Kate Wang: We have also yet to make any price adjustments in the past year; however, with more e-liquid products like that, and the average starting price per limit interval, products may decrease if the sales of these products areas increase. At the same time, the average starting price per unit is likely to remain stable or increase slightly. So, regarding the outlook of the overall growth margin, our profit margin level has remained relatively stable, so we have continuously to enhance supply chain efficiency for each SKU and improve product design and packaging to boost profitability. Also, certain regions have introduced a high-speed on-earth products and conducts annual rate adjustments.

Sam Tsang: Thanks for your question.

Peihang Lyu: How does the company proceed your product advantages among other competitors?

Peihang Lyu: That's very helpful.

Charlie Chen: We have also yet to make any price adjustments in the past year. However, with more illiquid products like Da Qian,

Peihang Lyu: And my second question is with regard to the domestic market.

Sam Tsang: Thank you, Sam.

Peihang Lyu: What is the current status of new GB products submitted for approval in China?

Peihang Lyu: What is the current status of new GB products submitted for approval in China? And what is the approval progress? And how does the market share of illegal products change, along with enhancing regulatory enforcement in the second quarter? Thank you.

Charlie Chen: The average selling price per liter of our products may decrease if the sales of these product areas increase.

Operator: The next question comes from Yun Guo with SITX.

Operator: Please go ahead.

Peihang Lyu: And what is the approval progress?

Peihang Lyu: And how does the market share of illegal products change, along with enhancing regulatory enforcement in the second quarter?

Charlie Chen: At the same time, the average selling price per unit is likely to remain stable or increase slightly.

Yun Guo: Thanks, Nansman.

Yun Guo: This is Gulin from SITX.

Peihang Lyu: Thank you.

Chao Lu: Thank you very much, Peihang, for our questions.

Kate Wang: Thank you very much, Peihang, for our questions. So the first question is about the overseas competition. So I mean, since months after our inception, we have been the leader in the part-system category in mainland China. So as we expand into other countries, we are confident that our part-system products will continue to win the trust of adult smokers worldwide. We can also leverage our long-established brand equity as a reputable eWave brand. Compared with other brands, primarily the own part is possible products.

Yun Guo: I have two questions here.

Charlie Chen: Regarding the outlook of the overall gross margin, our gross profit margin level has remained relatively stable.

Yun Guo: The first question is that which product categories are showing strong growth momentum in overseas markets?

Yun Guo: What's the current contribution of disposable products to overseas revenue?

Chao Lu: So the first question is about the overseas competition.

Yun Guo: And my second question is that since the second quarter this year, there has been a surge in product innovation.

Yun Guo: How does a company plan to capture market opportunities in Europe before the disposable ban takes effect?

Yun Guo: Thank you.

Chao Lu: So I mean, since months after our inception, we have been the leader in the part-system category in mainland China.

Charlie Chen: So we have continuously to enhance supply chain efficiency for each SKU and improve product design and packaging to boost profitability.

Sam Tsang: Thanks for your questions.

Sam Tsang: So the first one is about the subcategory of our product category.

Chao Lu: So as we expand into other countries, we are confident that our part-system products will continue to win the trust of adult smokers worldwide.

Sam Tsang: And the second question is about the potential European disposable ban.

Sam Tsang: So for the first question, the popularity of different subcategories varies from countries to countries. And it largely depends on local regulations, including taxation and product restrictions.

Sam Tsang: So in markets where disposable products are still permitted, with few restrictions on nicotine content, we are seeing strong attraction among products with high deliquid volumes.

Sam Tsang: Additionally, some disposables now feature smart technologies such as Bluetooth and display screens, which are gaining popularity among users.

Sam Tsang: In these marches, disposables continue to contribute a significant portion of sales. In countries where a ban on disposables is announced or anticipated, Pod and Open Systems are gaming microchairs, This shift is partly driven by distributors and retailers actively reducing their disposable inventories and migrating users to pod or open systems to prepare for upcoming regulatory changes. To capitalize on this trend, we are launching our open system product, RLX Prime, this month, which will pair perfectly with our Deliquid solution.

Sam Tsang: Regarding your second question about the European slaver ban...

Sam Tsang: So as mentioned previously, our leading product development capabilities, coupled with our consumer insights team, enable us to quickly identify emerging product trends and rapidly develop products that can cater to demand.

Charlie Chen: Also, certain regions have introduced excess tax on U.S. products and conduct annual rate adjustments.

Sam Tsang: Accordingly, we have several new products in the pipeline.

Sam Tsang: It is worth noting that our presence in Europe is smaller than in Asia.

Chao Lu: We can also leverage our long-established brand equity as a reputable eWave brand.

Sam Tsang: So we focus on getting market share from competitors.

Sam Tsang: As users migrate from disposables to R subcategories, we will leverage our grant equity in pod systems to attract. This migration plays to our strengths and presents a significant opportunity to us.

Kate Wang: To address these external challenges, we typically adjust our pricing accordingly to maintain a sustainable and stable growth profit margin from our reporting perspective.

Chao Lu: Compared with other brands, primarily the own part is possible products.

Charlie Chen: To address these external challenges, we typically adjust our pricing accordingly to maintain a sustainable and stable gross profit margin from a reporting perspective.

Chao Lu: This is one of our key competitive advantages.

Kate Wang: This is one of our key competitive advantages. Furthermore, we have been increasingly and independently developing eWave products since the release of our second-generation post-system products, less alpha. And we have in-house ill-equipped R&D and manufacturing capabilities. These industry-leading capabilities allow us to collaborate closely with our consumer insight team and respond quickly to the changing use of behavior, and other significance advantage that set us apart.

Chao Lu: Furthermore, we have been increasingly and independently developing eWave products since the release of our second-generation post-system products, less alpha.

Kate Wang: Thank you very much for your questions.

Sam Tsang: 謝謝提出質問, Very helpful.

Kate Wang: Thank you.

Yun Guo: Thank you.

Operator: The next question comes from Charlie Chen with China Renaissance.

Speaker Change: Thank you very much for your questions.

Operator: Please go ahead.

Charlie Chen: Thank you, management, for taking my questions.

Operator: Due to time constraints now, I would like to turn the call back over to the company for closing remarks. Thank you once again for joining us today.

Charlie Chen: And also, how is the penetration rate in adult Chinese smokers?

Charlie Chen: I have two questions.

Charlie Chen: As well as, how is the market share change between GB products and non-GB products?

Speaker Change: Thank you.

Charlie Chen: The first one is about China market and the second one is about operations.

Charlie Chen: Also, can you comment a little bit on the overall product price, including tax?

Charlie Chen: So, for the first one, I just want to take a step back and see the overall Chinese market size.

Chao Lu: And we have in-house ill-equipped R&D and manufacturing capabilities.

Charlie Chen: I mean, how much does Chinese consumers are paying for e-vaping?

Charlie Chen: So, in the past year, there were a lot of changes in the e-vaping market in China.

Speaker Change: Due to time constraints now, I would like to turn the call back over to the company for closing remarks.

Charlie Chen: So, I just want to know, based on your best estimate, is the e-vaping market in China still growing or at what kind of growth rate?

Chao Lu: These industry-leading capabilities allow us to collaborate closely with our consumer insight team and respond quickly to the changing use of behavior, and other significance advantage that set us apart.

Charlie Chen: Is that increasing or going down because of competition?

Charlie Chen: So, a second question is about the operations.

Operator: If you have further questions, please feel free to contact ours. The knowledge is in the rest of the relations team, for the contact information provided on our website, our PSG, and pay financial communications. Thank you very much.

Charlie Chen: I noticed that there was some volatility in your gross margin in this quarter.

Charlie Chen: So, going forward, how should we think about the gross margin as well as the cost of goods sold of your products?

Speaker Change: Thank you once again for joining us today. If you have further questions, please feel free to contact our RxTechnologies Investor Relations team through the contact information provided on our website or Pierre Chianti Financial Communications. Thank you very much.

Charlie Chen: Thank you.

Sam Tsang: Thank you for your questions.

Sam Tsang: Charlie, so the first one is about the domestic market, market sizing, etc.

Sam Tsang: So first I think it's important to know that the data for the EU market is changing the track.

Sam Tsang: So as mentioned, cells in this segment tend to be more concealed, which is difficult to capture accurate pictures.

Sam Tsang: The demand for compliance products remain relatively stable.

Sam Tsang: Though there are occasional situations occur due to adjustments in channel infantry.

Sam Tsang: So currently, a non-compliance product still dominates the market.

Sam Tsang: So regarding the market penetration, the overall penetration rate, including the compliance and non-compliance products, in combined, has slightly declined compared to the period before the regulation. This decline is primarily due to some light users discontinuing using evapoproducts because of flavor restrictions.

Sam Tsang: In contrast, users of compliance products gradually return to their previous per capita consumption levels, which have not fully recovered, which previously have not been fully recovered. So the market share between compliance and non-compliance products has yet to stabilize fully. As previously discussed, the share of non-compliance products remains high, despite regulatory efforts. The compliance segment is gradually stabilizing, but the prevalence of non-compliance product issues the overall market dynamics.

Sam Tsang: Thank you very much for your questions.

Chao Lu: So regarding your second question is about our current status of national products in China, as well as the multi-share of illegal products.

Kate Wang: So regarding your second question is about our current status of national products in China, as well as the multi-share of illegal products. So as mentioned in previous quarters, we are submitting new products on a rolling basis. We are seeing more products being approved by the regulators. To give you an idea of the progress, as of end of last year, we have 21 flavors of two, and as of June 2024, over 30 flavors have received approval, including our newly launched product series, CloudChamp.

Sam Tsang: So as for pricing, the average selling price for a compliance product has remained stable over the past year. Partially because of regulatory measures have limited brand promotional activities.

Operator: 謝謝, Due to time constraints now, I would like to turn the call back over to the company for closing remarks.

Sam Tsang: We have also yet to make any price adjustments in the past year.

Operator: Thank you once again for joining us today.

Operator: This concludes the conference call. You may now disconnect your line. Thank you.

Operator: This concludes the conference call. You may now disconnect your line.

Sam Tsang: However, with more e-liquid products like Daqian...

Operator: If you have further questions, please feel free to contact RLX Technology's Investor Relations team through the contact information provided on our website or Pierre Chianti Financial Communications.

Operator: Thank you.

Sam Tsang: The average selling price per millimeter of our products may decrease if the sales of these product series increase.

Operator: Thank you very much.

Sam Tsang: At the same time, the average selling price per unit is likely to remain stable or increase slightly. So, regarding the outlook of the overall gross margin, so our gross profit margin level has remained relatively stable. So we have continuously to enhance supply chain efficiency for each SKU and improve product design and packaging to boost profitability.

Sam Tsang: Also, certain regions have introduced exercise tags on electric products and conduct annual rate adjustments.

Sam Tsang: To address these external challenges, we typically adjust our pricing accordingly to maintain a sustainable and stable gross profit margin from a reporting perspective.

Speaker Change: This concludes the conference call. You may now disconnect your line. Thank you.

Chao Lu: So as mentioned in previous quarters, we are submitting new products on a rolling basis.

Speaker Change: i

Chao Lu: We are seeing more products being approved by the regulators. To give you an idea of the progress, as of end of last year, we have 21 flavors of two, and as of June 2024, over 30 flavors have received approval, including our newly launched product series, CloudChamp.

Chao Lu: We understand the market concerns regarding the profilings of illegal products, which significantly threaten the recovery of complex products in mainland China.

Kate Wang: We understand the market concerns regarding the profilings of illegal products, which significantly threaten the recovery of complex products in mainland China. However, tracking illegal products market share has become increasingly difficult as more sales shifts online and transactions are conducted more quickly. Based on our on-the-ground assessments, illegal products still account for significant majority of sales in China. And of course, I mean our market share amongst the compliance products has been stable and healthy. Thanks for your questions. Yes, sir, helpful. Thank you, Sam.

Chao Lu: However, tracking illegal products market share has become increasingly difficult as more sales shifts online and transactions are conducted more quickly.

Chao Lu: Based on our on-the-ground assessments, illegal products still account for significant majority of sales in China.

Chao Lu: And of course, I mean our market share amongst the compliance products has been stable and healthy.

Chao Lu: Thanks for your questions.

Chao Lu: Yes, sir, helpful.

Chao Lu: Thank you, Sam.

Yun Guo: The next question comes from Yun Guo with Citix.

Yun Guo: The next question comes from Yun Guo with Citix. Please go ahead. Thanks, management. This is going from Citix. I have two questions here.

Yun Guo: Please go ahead.

Yun Guo: Thanks, management.

Yun Guo: This is going from Citix.

Yun Guo: I have two questions here.

Yun Guo: The first question is which product categories are showing general momentum in overseas markets?

Yun Guo: The first question is which product categories are showing general momentum in overseas markets? What the current contribution of disposable products to overseas revenue? And my second question is that, seeing the second quarter this year, there has been a surge in products in relation. How does a company plan to capture market opportunities in Europe before the disposable ban takes effect? Thank you.

Yun Guo: What the current contribution of disposable products to overseas revenue?

Yun Guo: And my second question is that, seeing the second quarter this year, there has been a surge in products in relation.

Yun Guo: How does a company plan to capture market opportunities in Europe before the disposable ban takes effect?

Yun Guo: Thank you.

Chao Lu: Thanks, Florian, for your questions.

Kate Wang: Thanks, Florian, for your questions. So, the first one is about the subcategory of our product category. And the second question is about the potential European disposable ban. So, for the first question, the popularity of different subcategories varies from countries to countries and is largely depend on local regulations, including taxation and product restrictions. So, in markets where disposable products are still permitted, the restrictions are negligible in content. We are seeing strong traction among products with high illiquid volume.

Chao Lu: So, the first one is about the subcategory of our product category.

Chao Lu: And the second question is about the potential European disposable ban.

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Chao Lu: So, for the first question, the popularity of different subcategories varies from countries to countries and is largely depend on local regulations, including taxation and product restrictions.

Chao Lu: So, in markets where disposable products are still permitted, the restrictions are negligible in content.

Chao Lu: We are seeing strong traction among products with high illiquid volume.

Chao Lu: Additionally, some disposable now feature smart technologies such as Bluetooth and display screens which are gaining popularity among users.

Kate Wang: Additionally, some disposable now feature smart technologies such as Bluetooth and display screens which are gaining popularity among users. In these marches, disposable continues to contribute a significant portion of sales. In countries where a ban on disposable is announced or anticipated, pod and open systems are gaining market share. This shift is partly driven by distributors and retailers actively reducing that disposable income trees and migrating users to pod or open systems to prepare for upcoming regulatory changes. So, capitalized on this trend, we are launching our open system products relaxed prime this month, which will pair perfectly without illiquid solutions.

Chao Lu: In these marches, disposable continues to contribute a significant portion of sales. In countries where a ban on disposable is announced or anticipated, pod and open systems are gaining market share. This shift is partly driven by distributors and retailers actively reducing that disposable income trees and migrating users to pod or open systems to prepare for upcoming regulatory changes.

Chao Lu: So, capitalized on this trend, we are launching our open system products relaxed prime this month, which will pair perfectly without illiquid solutions.

Chao Lu: So, regarding your second question about the European slave ban.

Kate Wang: So, regarding your second question about the European slave ban. So, as mentioned previously, our leading product development scale birth is coupled with our consumer insights team and able us to quickly identify emerging growth trends and rapidly develop products that can cater to demand. Accordingly, we have several new products in the pipeline. It's worth noting that our presence in Europe is smaller than in Asia. So, we focus on getting market share from competitors, as users my ways from disposable to our subcategories will leverage our grand equity in pot systems to attract them. This migration pays to our strengths and presents a significant opportunity to live. Thank you for our questions.

Chao Lu: So, as mentioned previously, our leading product development scale birth is coupled with our consumer insights team and able us to quickly identify emerging growth trends and rapidly develop products that can cater to demand.

Chao Lu: Accordingly, we have several new products in the pipeline.

Chao Lu: It's worth noting that our presence in Europe is smaller than in Asia.

Chao Lu: So, we focus on getting market share from competitors, as users my ways from disposable to our subcategories will leverage our grand equity in pot systems to attract them.

Chao Lu: This migration pays to our strengths and presents a significant opportunity to live.

Chao Lu: Thank you for our questions.

Charlie Chen: The next question comes from Charlie Chen with China Renaissance.

Charlie Chen: The next question comes from Charlie Chen with China Renaissance. Please go ahead. Thank you, management, to take my questions. I have two questions. The first one is about China market and second one is about operations. So, for the first one, I just want to take a step back and see the overall Chinese market size. So, in the past year, there are a lot of changes in the evaping marketing China. So, I just want to know, based on your best estimate, is the evaping marketing China still growing or at what kind of growth rate?

Charlie Chen: Please go ahead.

Charlie Chen: Thank you, management, to take my questions.

Charlie Chen: I have two questions.

Charlie Chen: And also, how is the penetration rate in adult Chinese smokers, as well as how is the market share chance between GB products and non-GB products? Also, can you comment a little bit on the overall product price, including tax and how much does Chinese consumers are paying for evaping? Is that increasing or going down because of competition? So, the second question is about the operations. I noticed that there are some volatility in your growth margin in this quarter. So, going forward, how should we think about the growth margin as well as the cost of goods sold of your products? Thank you. Thank you for our questions, Charlie.

Charlie Chen: The first one is about China market and second one is about operations.

Charlie Chen: So, for the first one, I just want to take a step back and see the overall Chinese market size.

Charlie Chen: So, in the past year, there are a lot of changes in the evaping marketing China.

Charlie Chen: So, I just want to know, based on your best estimate, is the evaping marketing China still growing or at what kind of growth rate?

Charlie Chen: And also, how is the penetration rate in adult Chinese smokers, as well as how is the market share chance between GB products and non-GB products?

Charlie Chen: Also, can you comment a little bit on the overall product price, including tax and how much does Chinese consumers are paying for evaping?

Charlie Chen: Is that increasing or going down because of competition?

Charlie Chen: So, the second question is about the operations.

Charlie Chen: I noticed that there are some volatility in your growth margin in this quarter.

Charlie Chen: So, going forward, how should we think about the growth margin as well as the cost of goods sold of your products?

Charlie Chen: Thank you.

Chao Lu: Thank you for our questions, Charlie.

Chao Lu: So, the first one is about the domestic market, market sizing, et cetera.

Kate Wang: So, the first one is about the domestic market, market sizing, et cetera. So, first, I think it's important to note that the data for the annual market is challenging to track. So, as mentioned, sales in this segment tend to be more concealed, which is difficult to capture accurate pickers. The demand for compliance products remain relatively stable, though there are occasional situations occurred due to adjustments in channel inventory. So, currently, a non-compliance product still dominates the markets.

Chao Lu: So, first, I think it's important to note that the data for the annual market is challenging to track.

Chao Lu: So, as mentioned, sales in this segment tend to be more concealed, which is difficult to capture accurate pickers.

Chao Lu: The demand for compliance products remain relatively stable, though there are occasional situations occurred due to adjustments in channel inventory.

Chao Lu: So, currently, a non-compliance product still dominates the markets. So, regarding the market penetration, the overall penetration rate, including the compliance and non-compliance products in combined, has slightly declined compared to the period before direct relations.

Kate Wang: So, regarding the market penetration, the overall penetration rate, including the compliance and non-compliance products in combined, has slightly declined compared to the period before direct relations. This decline is a primary deal to a some-like users' discontinuing using evapour products because of playful restrictions. In contrast, users of compliance product gradually return to their previous per capita consumption level, which have not fully recovered, which previously have not been fully recovered. So, the market share between compliance and non-compliance products has yet to stabilize fully.

Chao Lu: This decline is a primary deal to a some-like users' discontinuing using evapour products because of playful restrictions.

Chao Lu: In contrast, users of compliance product gradually return to their previous per capita consumption level, which have not fully recovered, which previously have not been fully recovered. So, the market share between compliance and non-compliance products has yet to stabilize fully.

Chao Lu: As previously it does, the share of non-compliance products remain high, despite regulatory efforts.

Kate Wang: As previously it does, the share of non-compliance products remain high, despite regulatory efforts. The compliance segment is gradually stabilizing, but the performance of non-compliance product is also the overall market dynamics. So, as for pricing, the average starting price for a compliance product has remained stable over the past year, partially because of regulatory measures that have limited brand promotional efficiencies. We have also yet to make any price adjustments in the past year, however, with more e-liquid products like that, and the average starting price per limit interval products may decrease if the sales of these products areas increase. At the same time, the average starting price per unit is likely to remain stable or increase slightly.

Chao Lu: The compliance segment is gradually stabilizing, but the performance of non-compliance product is also the overall market dynamics.

Chao Lu: So, as for pricing, the average starting price for a compliance product has remained stable over the past year, partially because of regulatory measures that have limited brand promotional efficiencies.

Chao Lu: We have also yet to make any price adjustments in the past year, however, with more e-liquid products like that, and the average starting price per limit interval products may decrease if the sales of these products areas increase.

Chao Lu: At the same time, the average starting price per unit is likely to remain stable or increase slightly.

Chao Lu: So, regarding the outlook of the overall growth margin, our profit margin level has remained relatively stable, so we have continuously to enhance supply chain efficiency for each SKU and improve product design and packaging to boost profitability.

Kate Wang: So, regarding the outlook of the overall growth margin, our profit margin level has remained relatively stable, so we have continuously to enhance supply chain efficiency for each SKU and improve product design and packaging to boost profitability. Also, certain regions have introduced a high-speed on-earth products and conducts annual rate adjustments. To address these external challenges, we typically adjust our pricing accordingly to maintain a sustainable and stable growth profit margin from our reporting perspective. Thank you very much for your questions. Thank you.

Chao Lu: Also, certain regions have introduced a high-speed on-earth products and conducts annual rate adjustments.

Chao Lu: To address these external challenges, we typically adjust our pricing accordingly to maintain a sustainable and stable growth profit margin from our reporting perspective.

Chao Lu: Thank you very much for your questions.

Chao Lu: Thank you.

Operator: Due to time constraints now, I would like to turn the call back over to the company for closing remarks.

Operator: Due to time constraints now, I would like to turn the call back over to the company for closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to contact ours, the knowledge is in the rest of the relations team, for the contact information provided on our website, our PSG and pay financial communications. Thank you very much. This concludes the conference call. You may now disconnect your line. Thank you.

Operator: Thank you once again for joining us today.

Operator: If you have further questions, please feel free to contact ours, the knowledge is in the rest of the relations team, for the contact information provided on our website, our PSG and pay financial communications.

Operator: Thank you very much.

Operator: This concludes the conference call. You may now disconnect your line.

Operator: Thank you.

Operator: This is the first time I've ever had such a great time in my life.

Unnamed Speaker: This is the first time I've ever had such a great time in my life. I've never had such a great time in my life.

Operator: I've never had such a great time in my life.

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