Q1 2025 RLX Technology Inc Earnings Call
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Speaker Change: Hello, Ladies and gentlemen, thank you for standing by for our L. Excess Technology, Inc. 's first quarter 2025 earnings conference call.
Operator: Hello ladies and gentlemen, thank you for standing by for RLX's Technology Inc's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question and answer session.
Speaker Change: At this time all participants are in a listen only mode. After management's remarks, there will be a question and answer session.
Operator: Today's conference call is being recorded and is expected to last for about 40 minutes.
Speaker Change: Today's conference call is being recorded and is expected to last for about 40 minutes I will now turn the call over to your host Mr. Samsung head up head of capital markets for the company. Please go ahead Sam.
Sam Tsang: I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam. Thank you very much.
Speaker Change: Yeah.
Speaker Change: Thanks, very much Hello, everyone and welcome to <unk> first quarter earnings conference call the company.
Sam Tsang: Hello everyone and welcome to RLX Technology's 1st Quarter 2025 Earnings Conference Call. The company's financial and operational results were released through PL&E's wireless services earlier today and have been made available online. You can also view the earnings press release by visiting our IR website at ir.rlxtech.com Participants on today's call include our Chief Financial Officer, Mr. Chao Lu, and myself, Sam Tsang, Head of Health and Markets.
Speaker Change: These financial and operational results were released for PR Newswire services earlier today and.
Speaker Change: You may vote online.
Speaker Change: And also build the earnings press release by visiting our sites and I I'll talk for that type of call.
Mr. Chow: Participants on this with his colleague Who's our Chief Financial Officer, Mr. Chow.
Speaker Change: Myself Samsung.
Mr. Chow: Hit the market.
Mr. Chow: Before we continue please note that today's discussions will contain forward looking information made under the safe Harbor provisions of the U S private securities.
Sam Tsang: Before we continue, please note that today's discussion will contain forelooking information made under the Safe Harbor Prohibitions of the U.S. Department of Security's Dissertation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential, continue, or other similar expressions. Four of his statements involve inherent risks and uncertainty. 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.
Mr. Chow: Does that makes every format Nike and Adi.
Mr. Chow: These statements typically come even worse I guess my well expect August estimates.
Mr. Chow: Potential competing or art or similar expressions.
Mr. Chow: Okay.
Mr. Chow: Florida looking statements involve inherent risks and uncertainties.
Mr. Chow: The accuracy of these statements may be impacted in a number of suites and uncertainties that could cause actual results to differ materially from those projected or anticipated.
Mr. Chow: Many of which factors are beyond our control.
Mr. Chow: The company is affiliated advisors.
Sam Tsang: The company, its affiliates, advisors, and representatives do not undertake any obligation to update this form of information except as required under the applicable law.
Mr. Chow: These do not undertake any obligation to update its forward looking information, except as required under the applicable law.
Speaker Change: Please note that our synergies.
Sam Tsang: Please note that RLX Technology's earnings press release and this conference call can include discussions of and audited GAAP financial measures as well as audited non-GAAP financial measures. RLX press release contains a reconsideration of the unaudited non-gap measures to the unaudited gap measures.
Speaker Change: <unk> press release, and this conference call for discussions of unaudited GAAP financial measures.
Speaker Change: Well, it's been audited non-GAAP financial measures.
Speaker Change: Our press release contains a reconciliation of the unaudited non-GAAP measures.
Speaker Change: To the GAAP measures.
Speaker Change: I will now turn the call over to Mr. Chao Li Please go ahead.
Chao Lu: I will now turn the call over to Mr. Chao Lu, please go ahead. Thank you, Sam, and thank you, everyone, for joining our earnest conference call today. I will start with an update on the global regulatory landscape and the market trend.
Chao Li: Thank you Stan and thank you everyone for joining our conference call today.
Chao Li: I will start with an update on the global regulatory landscape and the market trends.
Chao Lu: Followed by our recent business development and financial overview. We were pleased to deliver impressive results in the first quarter of 2025 amid a challenging macro and regulatory environment. underscored by a 47% year-over-year increase in net revenues to RMB808 million. and a non-gap operating profit of RMB106 million.
Chao Li: Followed by our recent business development and financial overview.
Chao Li: Yeah.
Chao Li: We were pleased to deliver impressive results in the first quarter of 2025.
Chao Li: Having gene macro and regulatory environment.
Chao Li: This caused by a 47% year over year increase in net revenues to RMB 808 million.
Chao Li: non-GAAP operating profit of RMB 108 6 million.
Chao Li: Since the beginning of 2025, the ebay for industry has faced growing global scrutiny.
Chao Lu: Since the beginning of 2025, the e-vapor industry has faced growing global scrutiny and an increasingly stringent regulatory environment. Industry-wide, e-vapor exports from China decreased year over year in the first quarter. mainly due to bans on disposable e-vapor products or e-vapor products in general. excise tax, and enhanced regulatory enforcement in certain countries. Specifically, the UK, the world's second largest e-vapor market, and also New Zealand. announced a ban on disposable e-vapor products effective next month. prompting local distributors to adopt a more cautious approach to import. Additionally, Spain imposed heavier taxes on e-vapor products in April, while Mexico, Vietnam, and Kazakhstan banned e-vapor products completely.
Chao Li: And the increasingly stringent regulatory environment.
Chao Li: Industry wide.
Speaker Change: You basically exports from China decreased year over year in the first quarter.
Speaker Change: Mainly due to ban all disposable E vapor products.
Speaker Change: E vapor products in general.
Speaker Change: Excise tax and the enhanced regulatory enforcement in certain countries.
Speaker Change: Specifically.
Speaker Change: The U K.
Speaker Change: It was the second largest E vapor market.
Speaker Change: And also in New Zealand.
Speaker Change: Announced a ban on disposable E vapor products effective next month.
Speaker Change: Prompted local distribute us to adopt a more cautious approach to importing.
Speaker Change: Okay.
Additionally span.
Speaker Change: Post heavier taxes on ebay products in April.
Speaker Change: While Mexico, Vietnam, and Kazakhistan Bank E vapor products completed.
Speaker Change: Regulatory shifts will continue to impact the whole industry and compelled manufacturers.
Chao Lu: regulatory shifts will continue to impact the whole industry and compel manufacturers to adapt throughout 2025 and beyond. These regulatory changes drive changes in user trends and the e-vapor industry. For example, the ban on disposable e-vapor products inspired the industry to develop alternatives for disposable users. Now the Big Puff trend that started in Europe is spreading to Asia and the rest of the world. spurring innovation and impacting industry-wide revenue models. Big Puff vapes are rechargeable, cartridge-based, or disposable e-vapor products that offer a significantly larger volume of e-vapor, e-liquid. and Haiyao.com than traditional way. For example, our previous disposable N-classic Closed system cartridge-based e-vapor products contain just 2 milliliters of e-liquid.
Speaker Change: To adapt throughout 2025 and beyond.
Speaker Change: These regulatory changes drive changes you're used to train.
Speaker Change: And ebay for industry.
Speaker Change: For example, the ban on disposable E vapor products inspired the industry about alternatives for disposable use it.
Speaker Change: Now the big Puff trend that started in Europe.
Speaker Change: Is spread into Asia, and the rest of the world.
Speaker Change: But innovation and the impact of industry wide revenue models.
Speaker Change: A big part of our rechargeable cockpit space or disposable E vapor products that offer a significantly larger body of ebay.
Speaker Change: Liquid.
Speaker Change: And higher puff carriage ban in traditional base.
Speaker Change: For example, our previous disposable and the classic.
Speaker Change: Closed system cartridge based E vapor products contain just two millimetre illiquid.
Speaker Change: In comparison our.
Chao Lu: In comparison, our most recently launched BigPuff product can contain up to between 14 and 20 mL of liquid. Since most manufacturing costs for e-vapors come from hardware rather than the e-liquid. The marginal cost of adding more e-liquid to big-puff products is relatively low. Despite the significant increase in e-liquid volume, the per-unit selling price of Bigpox products is not as proportionally higher than that of the traditional products. As a result, Bigpox products have effectively lowered the per milliliter consumption expense of e-liquid for users. Furthermore, the larger e-liquid capacity of big-puff products reduces the frequency of replacement.
Speaker Change: Most recently launched big tough products can contain up to between 14 and 20 minute VITAS liquid.
Speaker Change: It's most manufacturing costs.
Speaker Change: Well ebay Perth come from hardware rather than the illiquid.
Speaker Change: The marginal cost of adding more illiquid two big puff products is relatively low.
Speaker Change: Despite the significant increase in liquids volume.
Speaker Change: Per unit selling price big pop product its not as proportionately higher.
Speaker Change: And that of the traditional products.
Speaker Change: As a result.
Speaker Change: Big Puff products have effectively lowered her millimeter assumption expand.
Speaker Change: Quick for you says.
Speaker Change: Furthermore.
Speaker Change: The larger liquid capacity, a big tough product reduces the frequency of replacement.
Chao Lu: making them especially appealing to disposable users, many of whom initially switched to disposables to avoid the hassle of cartridge replacement. Due to their enhanced cost-effectiveness and convenience, Bigpox products have attracted numerous former disposable users and gained global popularity.
Speaker Change: Making them, especially appealing to disposable users.
Speaker Change: Many of whom initially switched to disposables.
Speaker Change: Boy it the hassle of cartridge replacement.
Speaker Change: Due to the enhanced cost effectiveness and convenience.
Speaker Change: Big pop products have attracted numerous format disposable usage and gained global popularity.
Chao Lu: a trend few in the industry had anticipated before. The sweeping VickPuff trend has driven an increase in e-liquid consumption by volume, but the lower per milliliter average selling price has stunted revenue growth across all brands. costing a drop in industry dollar value.
Speaker Change: Few in the industry you had anticipated before.
Speaker Change: Sweden Big Puff train has driven an increase.
Speaker Change: Liquid consumption by volume.
Speaker Change: The lower mainly due to average selling price have stunted revenue growth across all right.
Speaker Change: Causing jobs.
Speaker Change: Industry all of that.
Speaker Change: It has made to southern twenty-five transition should transitional year for the big pop ships.
Chao Lu: This has made 2025 a transitional year for the big pop ship. with most industry participants expecting to experience negative growth in industry dollar value this year. starting next year. We anticipate that the industry dollar value growth will align more closely with the increase in e-liquid consumption. and return to a normal road trajectory.
Speaker Change: With most industry participants expected you experienced negative growth.
Speaker Change: The Street dollar value this year.
Speaker Change: Starting next year.
Speaker Change: We anticipate that the.
Speaker Change: The industry dollar value growth will align more closely with the increased liquids assumption.
Speaker Change: And returning to a normal growth trajectory.
Speaker Change: Wow evolving regulations and trade can trumped industry sustainability and eight.
Chao Lu: While evolving regulations and trends can prompt industry sustainability and create opportunities for innovation. They also present significant operational challenges for brands. RLX is addressing these challenges by focusing on factors we can control. As a brand with advanced in-house product development capabilities, we are uniquely positioned to quickly create market-specific compliant products that align with user trends. For instance, we have launched several new large-capacity Big Puff products since the second half of last year. including disposable closed-system cartridge-based and open-system cartridge-based devices. Our ability to stay ahead of trends and swiftly meet evolving demands is what keeps us at the forefront of the industry.
Brian: Opportunities for innovation. They also presented significant operational challenges for Brian.
Brian: Is addressing these challenges by focusing on the factors we can control.
Speaker Change: As a brand with advanced in house product development.
Brian: Capabilities.
We are uniquely positioned to quickly create market specific compliant products.
Brian: With user training.
Speaker Change: What he says we have launched several new large capacity big puff products since the second half of last year.
Speaker Change: Including disposable closed system cartridge based and OLED system cartridge based devices.
Speaker Change: Goodbye fish.
Speaker Change: Our ability to stay stay ahead of trends and switch swiftly meet evolving demand is what keeps us at the forefront of the industry.
Speaker Change: Our robust inventory management system also helps safeguard against potential unexpected regulatory Chad changes.
Chao Lu: Our robust inventory management system also helps safeguard against potential unexpected regulatory changes. Furthermore, by operating in multiple global markets, we mitigate the risks associated with over-reliance on any single major market. Although we are not immune to industry shifts or the broader macro environment, we remain committed to growing at a pace that outperforms an industry. We are confident that we will achieve positive dollar growth while the industry is experiencing negative growth.
Speaker Change: Furthermore by.
Speaker Change: By operating in multiple global market, we can mitigate the risks associated with overly reliant on any single major market.
Speaker Change: Although we're not immune to industry shifts.
Speaker Change: In the broader macro environment, we remain committed to growing at a pace that outperforms and industry.
Speaker Change: We are confident that we will achieve positive dollar growth, while the industry is experiencing negative growth.
Speaker Change: Now, let's move on to our financial results for the first quarter of 2025.
Chao Lu: Now let's move on to our financial results for the first quarter 2025. In the first quarter of 2025, our strategic emphasis on international markets drove a 46.5% year-over-year increase in net revenue to RMB808 million. However, due to seasonal factors and the fact that the fourth quarter is traditionally the peak season for overseas markets.
Speaker Change: In the first quarter of 2025, our strategic emphasis on international market drove a 46, 5% year over year increase in net revenue.
Speaker Change: To RMB 808 minutes.
Speaker Change: However, due to seasonal factors and the fact that the fourth quarter.
Speaker Change: Traditionally the peak season for overseas market.
Chao Lu: Quarter-over-quarter growth remained subdued, with net revenues staying largely consistent with the previous quarter.
Speaker Change: Quarter over quarter growth remained subdued with net revenue it stayed largely consistent consistent with the previous quarter.
Speaker Change: Turning to profitability our.
Chao Lu: Turning to profitability, our gross profit margin improved to 28.6% in the first quarter of 2020. a 2.7 percentage point increase year-over-year and 1.6 percentage point quarter-over-quarter. This improvement was primarily due to a more favorable revenue mix from international markets and cost optimization initiatives.
Speaker Change: Gross profit margin improved to 2028, 6% in the first quarter of 2025.
Speaker Change: A $2 seven percentage point increase year over year over year, and one six percentage points quarter over quarter.
Speaker Change: This improvement was primarily due to more favorable revenue mix from international market.
Speaker Change: Cost optimization initiatives.
Speaker Change: We also achieved our sixth.
Chao Lu: We also achieved our six... consecutive quarter of positive non-gap operating profit. reaching RMB 106 million. Our non-gap operating profit margin increased by 9 percentage points year-over-year, mainly driven by incremental contributions from our international business and operating leverage.
Speaker Change: Consecutive quarter of positive non-GAAP operating profit.
Speaker Change: Reaching RMB 108 6 million.
Speaker Change: Our non-GAAP operating profit margin increased by nine percentage points year over year, mainly driven by incremental contribution from our international business and operating leverage.
Speaker Change: In terms of cash flow we achieved.
Chao Lu: In terms of cash flow, we achieved an operating cash inflow of RMB207 million in the first quarter of 2025. up from RMB4 million in the same quarter of the previous year. This reflects our business scale growth and working capital efficiency improvement.
Operating cash inflow of RMB 207 million in the first quarter of 2025.
Speaker Change: Up from RMB 4 million in the stack.
Speaker Change: A quarter of the previous year.
Speaker Change: This reflects our business scale growth and working capital efficiency improvement.
Speaker Change: As we mentioned on the last call. We are currently experiencing a negative cash conversion cycle with.
Chao Lu: As we mentioned on the last call, we are currently experiencing a negative cash conversion cycle with inventory turnover days of 25 days. Receivable turnover days of 13 days and payable turnover days of 81 days in the first quarter of 2020.
Speaker Change: Inventory turnover days 25 days.
Speaker Change: Receivable turnover days of 13 days.
Speaker Change: And payable turnover days 81 days in the first quarter of 2025.
Speaker Change: Yeah.
Chao Lu: Our cash position remains solid as of March 31st, 2025. Our total financial assets, including cash and cash equivalents, restricted cash, and various short-term and long-term deposits and investments. stood at RMB$16.2 billion compared to RMB$15.9 billion as of December 31, 2024.
Speaker Change: Our cash position remains solid as of March 31st 2025, our total financial assets, including cash and cash equivalents.
Speaker Change: Strict cash and various short term and long term deposits and investments stood at RMB 16 2 billion.
Speaker Change: Compared to RMB, two 9 billion as of December 31st 2000 2024.
Speaker Change: My conclusion.
Chao Lu: By conclusion, We started 2025 on a strong note, with robust top-line growth supported by our international strategy, sustained profitability improvements, and a solid cash position. As we continue to expand globally, we remain confident in our ability to drive sustainable growth and create long-term value for our shareholders.
Speaker Change: We started 2025 on a strong note with robust topline growth supported by our international strategy.
Speaker Change: Stained profitability improvements and a solid cash position.
Speaker Change: As we continue to expand globally, we remain confident in our ability to drive sustainable growth and create long term value for our shareholders.
Speaker Change: This concludes our prepared remarks today.
Sam Tsang: This concludes our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
Speaker Change: We will now open the call to questions.
Speaker Change: Al Queda Pease go ahead.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, 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. 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.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two 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 and at this time, well pause momentarily for roster.
Operator: And at this time, we'll pause momentarily for roster.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And the first question will come from Lydia Ling with Citi. Please go ahead.
Lydia Ling: And the first question will come from Lydia Ling with Citi. Please go ahead. Thanks, management team. This is Lydia from Citi. I have two follow-up questions.
Speaker Change: Yeah.
Speaker Change: Oh, Thanks management team. This is <unk> from Citi I have two follow up questions and so that's why you're still interested to understand more on the depo question off the overseas expansion. So could you share any latest update a particular like in a plan to until Cassara date, a new market in the following quarters.
Lydia Ling: And the first one is still interested to understand more on the progression of the overseas expansion. So could you share any latest update, particularly any plan to enter or consolidate new markets in the following quarters? This is my first question.
Speaker Change: My first question Oh, seven why is Ah Ah Ah Ah Ah management, just unmatched and does that at your accounting is to I'll have Dr involving graduate reservoir Choi of changes in the industry. So how would you assess the potential impact on your business and how do you plan to address these challenges. Thank you.
Lydia Ling: And second one is, as this management just mentioned, there actually continues to have the involving regulatory changes in the industry. So how would you assess the potential impacts on your business and how do you plan to address these challenges? Thank you.
Speaker Change: Well, thanks, very much lead here for questions regarding.
Chao Lu: Thank you very much, Lydia, for your questions. Regarding the first question about our international expansion, as we have discussed in the previous quarters, we have been maintaining a prudent approach towards expanding into new markets, especially as the global macro and regulatory environments have evolved substantially over the past two to three quarters. In several countries we have considered, regulatory shifts have led us to pause or adjust our entry plan.
Speaker Change: Regarding the first question about our international expansion as we have discussed in the previous quarters definitely maintaining a prudent approach towards expanding into new markets.
Speaker Change: Especially as the global macro and regulatory environment has evolved substantially over the past two to three quarters.
Speaker Change: In several countries, we have considered regulatory shifts have led us to pause or adjust our entry point.
Chao Lu: Given these ongoing changes, we expect to make another 1 to 2 quarters to carefully evaluate and decide on any further market expansion. And regarding your second question about the regulatory landscape, it continues to evolve rapidly this year, with new policies being introduced across multiple regions. In Southeast Asia, we are seeing straighter rules and clearer guidelines, which help clarify what's allowed and what isn't. Leaving less room for ambiguity in the industry. In North Asia, countries are reviewing EV regulations or considering the introduction of national standards. Meanwhile, in Europe and Oceania, the focus has shifted to environmental concerns, with markets such as the UK and New Zealand introducing bans on disposable boba products.
Speaker Change: Given these ongoing changes we expect to.
Speaker Change: To make another one to two quarters to carefully evaluate and decide on any further market expansion.
Speaker Change: And regarding your second question about the regulator Korea landscape continues to evolve rapidly this year with new policies being introduced across multiple regions.
Speaker Change: In Southeast Asia.
Speaker Change: Illustrates her rules and clearer guidelines.
Speaker Change: How kind of if I was allowed and what isn't.
Speaker Change: Even less room for him to the team in the industry.
Speaker Change: In North Asia countries are revealing either direct relations are considering things production months national standards.
Speaker Change: Meanwhile, in Europe and Ocean the.
Speaker Change: The focus now shifts to environmental concern with markets such as the U K and New Zealand, introducing bans on disposable portable products.
Chao Lu: These changes, like the UK and New Zealand upcoming disposable ban set for June, are driving innovation and encouraging the development of alternative products. Thanks to our strong in-house product development capabilities, we are well positioned to adapt our offerings to meet the unique needs of each market as regulations evolve. We believe that increasing regulatory requirements will make it harder for smaller players with both robust product development and supply chain capabilities to keep up.
Speaker Change: These changes like the UK and incident upcoming disposable band set for June <unk>.
Speaker Change: We're driving innovation and encourage them to departments of course.
Speaker Change: Products.
Speaker Change: Thanks to a strong in house product developments have royalties.
Speaker Change: We are well positioned to adapt our offerings to meet the union lease of each market as regulations evolve.
Speaker Change: We believe the increasing like laser requirements will make it harder for smaller players.
Speaker Change: <unk> robust product development and supply chain capabilities to keep up.
Speaker Change: Well, our long standing commitment to compliance we have created more initial from screens for us compared with our peers. This less syndrome centers.
Chao Lu: While our long-standing commitments to compliance may have created more initial constraints for us compared with our peers with less stringent standards, We are confident that our approach set us up for sustainable, long-term success as the industry matures.
Speaker Change: Confidence that our approach set us up for sustainable long term success as the industry matures.
Chao Lu: Thank you for your questions.
Speaker Change: Thank you for your question.
Speaker Change: Okay.
Speaker Change: The next question will come from Bose, you Fang with Citrix Securities. Please go ahead.
Bojia Feng: The next question will come from Bojia Feng with Citrix Securities. Please go ahead. Thank you, Management.
Morgan: Thank you management. This is from Morgan from Citic Securities.
Bojia Feng: This is Oum Mouza from CITIC Securities, and I have two questions here. So, my first question is, what's the progress of Europe's transition from disposable e-cigarettes to Big Puff products, and how do you see future product trends? And the second one is, what strategies will you adopt to further capture market share, and what are your competitive advantages in marketing and channel development? Thank you.
Speaker Change: Securities.
Morgan: Two questions here. So my first question is what's a progressive we all have to transition from just talking about basically.
Speaker Change: Two big paths.
Speaker Change: And how do you see future product.
Speaker Change: And the second one is what strategies, we adopt it seems like the capture market share and what are your competitive advantages in marketing and channel development. Thank you.
Jennifer: Oh, Thanks, Paul Jennifer a question.
Chao Lu: Thanks Bojia for your question. So the first question is about the product transition and the second question is about our strategies to capture incremental market share. So taking the UK, the largest market in the region, as an example, we've seen distributors respond proactively since the announcement of the disposal ban, even before its official enforcement. Demand for big-puff products has been steadily increasing, and we are seeing a gradual shift as users of small-puff disposables migrate to these alternatives. Some users have also switched to open-system or small-puff closed-system cartridge products. That said, until the ban takes effect, small-house disposables still dominate and hold a significant market share.
Speaker Change: So the first question is about the.
Speaker Change: The product transition and the second question was about our strategies to capture incremental market share.
Speaker Change: So taking the U K the largest market.
Speaker Change: Region as an example.
Speaker Change: Steel distributors responded proactively seems the announcements of the disposal plan.
Speaker Change: Before it used to orchestrate enforcement.
Speaker Change: Demand for our big pulsed products has been steadily increasing and we are seeing a gradual shifts as users of smallpox disposals migrates to piece or currencies.
Speaker Change: Some users have also switched to open system or small town closest come Carter's products.
Speaker Change: That said until the ban piece in fact, small disposables still dominates and hold a significant market share.
Speaker Change: First the ban is its 40th enforcement Jordan.
Chao Lu: Once the ban is fully enforced in June, we anticipate most small-path disposable users will transition to alternative methods. mostly BigPup devices. We expect this conversion to be largely completed by the end of this year. Looking ahead, we don't expect this trend toward even large-capacity products to continue indefinitely. as current products are already at the upper limit of what's convenient for users to carry and use.
Speaker Change: We anticipate most small pumps disposable users through transition to alternatives, mostly pet Pos devices.
Speaker Change: We expect this conversion to be largely completed by the end.
Speaker Change: Off this year.
Speaker Change: Looking ahead, we don't expect this trend toward even larger capacity products to continue indefinitely.
Speaker Change: That's current products are already at the upper limits of what's convenient for users to carry on Hughes.
Speaker Change: And regarding your second question about how we can gain market share.
Chao Lu: And regarding your second question about how we can gain a market share, our strategies are highly customized to each market. taking into account local user habits, regulatory environments, and channel structures. Broadly, our approach focuses on two main areas. First is product development. We will continue to optimize our product portfolio by closely tracking market trends and sales data. The insights we've gleaned enable us to launch new products or improve existing ones rapidly. We look at all aspects when considering product grades, including functionality, convenience, cost-effectiveness, and eliquid solution. The second is channel strategy. We've adopted a localized approach to distribution and retail.
Speaker Change: Our strategies are highly customized to each market's.
Speaker Change: Taking into account local user habits.
Speaker Change: Regulatory environment and channel structures.
Speaker Change: Broadly our approach focuses on two main areas.
Speaker Change: First is product development, we will continue to optimize our product portfolio by closely tracked the market trends and so stay tuned.
Speaker Change: In highschool clean enable us to launch new products or improve existing ones rapidly.
Speaker Change: We looked at all aspects, when considering port upgrades, including functionality convenience and cost effectiveness.
Speaker Change: And really quick solutions.
The second is channel strategy.
Speaker Change: Bob.
Speaker Change: Local nice approach to distribution and retail.
Chao Lu: Leveraging our successful experiences in other leasing markets, we focus on refining channel structures and carefully selecting local partners. for instance, in select Asian markets. We've introduced a franchise model for exclusive stores, converting certain web stores into our branded folders to gather first-hand market insights and further enhance our real-to-market strategy. We are also building local teams to collect detailed retail data which help us better serve both retailers and consumers. While these initiatives may lead to higher short-term subset expenses. We believe they will make our RTM strategy more effective in the long run by improving product channel fits and benefiting our distribution partners, which ultimately leads to greater value and profit.
Speaker Change: Leveraging our successful experiences in all of these markets.
Speaker Change: We focus on refining channel structures and carefully selected and local partners.
Speaker Change: For instance.
Speaker Change: So that's agent marches.
Speaker Change: We introduced a franchise model for exclusive stores converting certain wave stores into a branded oldest together firsthand marketing.
Speaker Change: And further enhance our route to market strategy.
Speaker Change: We are also building local teams to collapsed ehealth retail data, which help us better serve both retailers and consumers.
Speaker Change: While these initiatives may be to higher short term expenses.
Speaker Change: We believe they will make all our team strategy in fact, it's in the long run by improving product channel pits and benefiting all distribution partners, we should ultimately at least to a quite hold value and purpose.
Yuying Zhao: Thank you for your questions.
Speaker Change: Thank you for a question.
Yang Zhao: Your next question will come from you Yang Zhao with C. ICC. Please go ahead.
Yuying Zhao: The next question will come from Yuying Zhao with CICC. Please go ahead.
Kelly: Hi, This is Kelly from <unk> I have two questions for the management.
Yuying Zhao: This is Zoe from CNETC. I have two questions for the management. The first one is about the overseas market. Regarding the category conversion in Europe, how's the competitive landscape and what are our advantages compared to the global leaders like BAT or disposable brands like Airsoft? And as for the domestic business, are there any potential regular change and how do you foresee the future growth?
Yang Zhao: First one is about the overseas market.
Kelly: Got it thank topcoder commercial housekeeper.
Speaker Change: How's the comp off the landscape and the work hour long page Comcast will be below what do you guys have.
Speaker Change: I'll just follow up for Brian.
Speaker Change: For the domestic business.
Speaker Change: I'm, a pleasure rocket archrock well, how do you foresee that sharp out thank you.
Chao Lu: Thank you. Thanks, Sui, for your questions. Regarding the first question about the competition in Europe, we are well prepared to capture incremental market share during this global categorical shift. Our comprehensive product portfolio combined with a clear pipeline of large-volume, hybrid-based and open-system products set to launch in the coming quarters. position us strongly. Our agile supply chain and robust distribution and retail channels also gives us a competitive edge during this period of transition. Compared to traditional tobacco companies, a more flexible organization allows us to bring our products to market much faster and respond promptly to changing trends or regulatory updates.
Speaker Change: Oh. Thanks, So if our questions are regarding the first question about the competition in Europe.
Speaker Change: Well prepared to capture incremental market share during this global at the current cold ships.
Speaker Change: Our comprehensive product portfolio combined with a clear pipeline of large floating hundred base.
Speaker Change: Obviously, some products that were launched in the coming quarters.
Speaker Change: Position us strongly.
Speaker Change: How agile supply chain and robust distribution and retail channels also gives us the competitive edge during this period of transition.
Speaker Change: Compared to traditional tobacco companies have more flexible organization allows us to bring our products to market much faster and respond promptly to changing trends.
Speaker Change: Later he updates.
Speaker Change: Unlike some peers who operates across multiple categories.
Chao Lu: Unlike some peers who operate across multiple categories, we are fully committed to the e-vapor segment, giving us deeper insights and the ability to invest wisely in optimizing our distribution and retail strategies for each market. Furthermore, in contrast to brands that focus mainly on distribution. Our long-term compliance-driven approach and in-house R&D capabilities ensure that our product development always aligns with all regulatory requirements and user needs. Our systematic management of payment times and inventory also help minimize operational risk, helping us to maintain stability even as the market and regulatory environment evolve.
Speaker Change: We are fully committed to the E vapor segment, giving us deeper insights and the ability to invest wisely optimizing distribution and retail strategies for each market.
Speaker Change: Furthermore, when Congress two brands that focus mainly on distribution.
Speaker Change: Our long term compliance people approach and in house R&D capabilities and ensure that our product development always aligns with all regulatory requirements and he was on these.
Speaker Change: Our systematic managements of payment terms and in country also help minimize operational east hub.
Speaker Change: Helping us to maintain.
Speaker Change: Stability, even as the markets and directly to enormous Paul.
Speaker Change: Regarding your second question about our mainland China business.
Chao Lu: Regarding your second question about our mainland China business, in mainland China, the regulatory framework has remained stable in the last two years. following the rollout of management measures and new national standards back in 2022. We've made some commercial progress under the new rules. For instance, we launched a line of disposable products that has received positive market feedback. Meanwhile, enforcement against illegal markets has improved. helping us to achieve a modest year-over-year revenue growth in mainland China.
Speaker Change: In mainland China. The regulatory framework has remained stable in the last two years.
Speaker Change: Following the rollout of management measures and new National standards back in 2022.
Speaker Change: We've made some commercial progress I know the new rules for instance, we launched a line of disposable products that has received positive market feedback.
Speaker Change: Meanwhile, enforcements against illegal markets has improved.
Speaker Change: Helping us to achieve a modest year over year revenue growth mainly in China.
Speaker Change: But they were limited due to the dominance of illegal products and new markets.
Chao Lu: Thank you for watching. Looking ahead, we believe the best way to boost growth in China's legal literature market is to encourage regulatory approval of compliant yet competitive products. For example, those with slightly higher levels of cooling agents, the three national standards. If there are no significant regulatory changes, we expect the legal market to remain stable or see only modest growth. Thank you for your question.
Speaker Change: Looking ahead, we believe the best way to boost growth in China's legal with either current markets is to encourage regulator approval of compliance, yes competitive products.
Speaker Change: For example, does have slightly higher levels of cooling agents.
Speaker Change: The national standards.
Speaker Change: If there are no significant regulatory changes, we expect to illegal miners to remain stable.
Speaker Change: See only modest growth.
Speaker Change: Thank you for your questions.
Speaker Change: Due to do.
Operator: Due to time constraints, now I would like to turn the call back over to the company for closing remarks. Please go ahead. Thank you once again for joining us today.
Speaker Change: Due to time constraints.
Speaker Change: Now I would like to turn the call back over to the company for closing remarks. Please go ahead.
Speaker Change: Thank you once again for joining US today. If you have further questions. Please feel free to contact our synergies Mr Relations team for their contact information provided on our website.
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, RPR Xi'an Tei Financial Communications.
Speaker Change: <unk> financial communications.
Speaker Change: This concludes the conference call you May now disconnect your lines. Thank you.
Operator: This concludes the conference call. You may now disconnect your lines. Thank you.
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