Q2 2025 RLX Technology Inc Earnings Call
Speaker #4: Hello, ladies and gentlemen. Thank you for standing by for RLX Technology Inc.'s second quarter 2025 R&D conference call. At this time, all participants are in a listen-only mode.
Sam Tsang: Hello, ladies and gentlemen. Thank you for standing by for RLX Technology Inc.'s second 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. Today's conference call is being recorded and is expected to last about 40 minutes. I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam.
Speaker #4: After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded and is expected to last about 40 minutes.
Speaker #4: I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam.
Speaker #5: Thank you very much. Hello, everyone, and welcome to RLX Technology's second quarter 2025 R&D conference call. The company's financial and operational results were released through PR Newswire earlier today and have been made available online.
Sam Tsang: Thank you very much. Hello, everyone, and welcome to RLX Technology's second quarter 2025 earnings conference call. The company's financial and operational results were released through PR Newswire 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 will include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu, and me. 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 Litigation Reform Act of 1995. These statements typically contain words such as may, will, expect, target, estimate, intend, believe, potential, continue, or other similar expressions. Forward-looking information involves inherent risks and uncertainties.
Speaker #5: You can also view the earnings press release by visiting our website. Participants on today’s call will include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu, and me.
Speaker #5: Before we continue, please note that today's discussions will contain further information made under the Safe Harbor Provisions of the US Private Securities Litigation Reform Act of 1995.
Speaker #5: These statements typically contain words such as "may," "will," "expect," "target," "estimate," "intend," "believe," "potential," "continue," or other similar expressions. Further information involving hearing risks and uncertainties: 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: 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 company's 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 unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to Ms. Kate Wang. Please go ahead.
Speaker #5: Many of the factors are beyond our control. The company is affiliated with advisors and representatives who do not undertake any obligation to update this further information.
Speaker #5: Exempt as required under the applicable law. Please note that RLX Technology's earnings press release and this conference call include discussions of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures.
Speaker #5: Our express release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to Ms. Kate Wang.
Speaker #5: Please go ahead.
Speaker #6: Sam Sam Tsang, and thanks everyone for making time to join our earnings conference call today. First off, we are pleased to deliver impressive second quarter results.
Kate Wang: Thank you, Sam. Thanks, everyone, for making time to join our earnings conference call today. First off, we were pleased to deliver impressive second quarter results amid shifting consumer trends and a rapidly evolving macro and regulatory environment. Highlighted by a 40% year-over-year increase in net revenues to RMB 818 million and a non-GAAP operating profit of RMB 116 million. This strong performance underscores our effective strategic execution in our international expansion and outstanding ability to quickly adapt to change in regulation and consumer demand. With our matchless innovation and go-to-market capabilities, we are confident in our ability to lead this industry's realignment and continue driving sustainable growth. Let's move on to an overview of the global smokeless alternative market and the latest e-vapor consumer behaviors and regulations relating to the e-vapor segment, as well as our corresponding strategic initiatives.
Speaker #6: Amid shifting consumer trends in the rapidly evolving macro and regulatory environment, highlighted by a 40% year-over-year increase in net revenues to $880 million and a non-GAAP operating profit of $116 million.
Speaker #6: This strong performance underscores our effective strategic execution in our international expansion and our outstanding ability to quickly adapt to changes in regulations and consumer demand.
Speaker #6: With our matchless innovations and go-to-market capabilities, we are confident in our ability to lead this industry realignment and continue driving sustainable growth. Let's move on to an overview of the global smokeless alternative market and the latest e-vapor consumer behaviors and regulations relating to the e-vapor segment.
Speaker #6: As well as our corresponding strategic initiatives, the transition toward smokeless nicotine products continues to gain traction worldwide. While e-vapor remains a key driver of this shift with solid momentum, other categories such as heat-not-burn, devices, and modern oral nicotine products are also contributing, collectively reshaping the tobacco alternative landscape.
Kate Wang: The transition toward smokeless nicotine products continues to gain traction worldwide, while e-vapor remains a key driver of this shift with solid momentum. Other categories, such as heat-not-burn devices and modern oral nicotine products, are also contributing, collectively reshaping the tobacco alternative landscape. Most consumers enter the smokeless market by moving away from traditional cigarettes rather than switching between smokeless products. Since each smokeless segment addresses distinct consumer needs, these three categories are more complementary than directly competitive, creating an ecosystem where multiple smokeless segments can thrive simultaneously. E-vapor products are favored by those who value device performance, portability, and often engage in outdoor activities. Heat-not-burn products appeal to long-time smokers, seeking an experience closer to conventional smoking. At the same time, modern oral nicotine plays seamlessly into the lifestyle of office workers and frequent travelers.
Speaker #6: Most consumers enter the smokeless market by moving away from traditional cigarettes rather than switching between smokeless products. Since each smokeless segment addresses distinct consumer needs, these three categories are more complementary than directly competitive.
Speaker #6: Creating an ecosystem where multiple smokeless segments can thrive simultaneously. E-vapor products are favored by those who value device performance, portability, and often engage in outdoor activities.
Speaker #6: Heat-not-burn products appeal to long-time smokers seeking an experience closer to conventional smoking. At the same time, modern oral nicotine plays seamlessly into the lifestyle of office workers and frequent travelers.
Speaker #6: Collectively, these categories are expected to capture a significantly larger share of the total nicotine market over the next 5 to 10 years. With oral nicotine currently standing as the fastest-growing segment, against this backdrop, we are seeing a clear industry shift from single category to multi-category portfolios.
Kate Wang: Collectively, these categories are expected to capture a significantly larger share of the total nicotine market over the next 5 to 10 years, with oral nicotine currently standing as the fastest growing segment. Against this backdrop, we are seeing a clear industry shift from single category to multi-category portfolio. Historically, leading brands concentrated on a single product type, but today, diversification is becoming the potential standard among industry leaders. RLX has already established market leadership and high brand recognition in the e-vapor segment. Last year, we extended beyond this core focus with a pilot program for modern oral nicotine products and have completed our 2B prototype. Although the prototype has not yet officially launched in the 2C market, the feedback from distributors has been very positive, potentially broadening our portfolio to reduce risk and capture greater market share.
Speaker #6: Historically, leading brands concentrated on a single product type, but today, diversification is becoming the potential standard among industry leaders. ILX has already established market leadership and high brand recognition in the e-vapor segment.
Speaker #6: Last year, we expanded beyond this core focus with a pilot program for modern oral nicotine products and have completed our 2B prototypes. Although the prototype has not yet officially launched in the 2C market, the feedback from distributors has been very positive.
Speaker #6: Potentially broadening our portfolio to reduce risks and capture greater market share. We remain committed to exploring additional categories that align with both our capabilities and evolving consumer needs.
Kate Wang: We remain committed to exploring additional categories that align with both our capabilities and evolving consumer needs. With our strong execution track record, deep consumer insights, and proven ability to innovate, we are well positioned to lead this transformative shift across the smokeless alternative industry. For our core e-vapor business, we have clear strategies and execution plans to address evolving global trends and local market dynamics. One of this year's global developments is what we call the big puff effect, where consumers are increasingly gravitating towards devices with a higher puff count per unit. This trend has driven substantial increases in product capability, capacity, while also reducing the per millimeter cost of e-vapor consumption. We have responded quickly to this change by launching a range of high-capacity products tailored to local preferences.
Speaker #6: With our strong execution track record, deep consumer insights, and proven ability to innovate, we are well positioned to lead this transformative shift across the smokeless alternative industry.
Speaker #6: For our core e-vapor business, we have clear strategies and execution plans. To address evolving global trends and local market dynamics, one of this year's global developments is what we call the "big puff effect."
Speaker #6: Consumers are increasingly gravitating towards devices with a higher puff count per unit. This trend has driven substantial increases in product capability, while also reducing the millimeter cost of e-vapor consumption.
Speaker #6: We have responded quickly to this change by launching a range of high-capacity products tailored to local preferences. At the same time, we are maintaining our focus on innovation beyond short-term trends.
Kate Wang: At the same time, we are maintaining our focus on innovation beyond short-term trends, ensuring that we have a pipeline of products that deliver superior performance, greater sustainability, and stronger consumer value for the long term. While the big puff effect has had an outsized influence in recent quarters, we expected the market to gradually stabilize towards the end of this year as physical constraints, such as handling comfort and portability, limit further enlargement of devices. This stabilization will establish a new baseline from which the industry can resume healthy, sustainable growth in 2026 and beyond. Then, on disposable products due to environmental impact, another movement we are seeing in many major markets globally. While disposable products have historically been an integral part of our portfolio, we recognize that the future lies in more sustainable solutions.
Speaker #6: Ensuring that we have a pipeline of products that deliver superior performance, greater sustainability, and stronger consumer value for the long term. While the big puff effect has had an upside influence in recent quarters, we expect the market to gradually stabilize towards the end of this year, as physical constraints such as handling comfort and portability limit further enlargement of devices.
Speaker #6: This stabilization will establish a new baseline from which the industry can resume healthy, sustainable growth in 2026 and beyond. Additionally, there is a movement we are seeing in many major markets globally concerning disposable products, due to environmental impacts.
Speaker #6: While disposable products have historically been an integral part of our portfolio, we recognize that the future lies in more sustainable solutions. This shift plays directly to one of ILX's core strengths: cartridge-based technology.
Kate Wang: This shift plays directly to one of our core strengths, cartridge-based technology in both closed system and open system products. We are advancing cartridge-based technology by investing in new product development, optimizing e-liquid and cartridge integration to achieve superior performance while providing greater value for consumers. By doubling down on our strengths, we aim to lead the industry's transition toward sustainable solutions while capturing new market opportunities that emerge from this shift. On the operational front, we continue to refine and tailor our overseas regional operations for greater agility, enhancing our ability to adapt to local changes both effectively and efficiently. We have invested in local retail support, which provides us with firsthand retail and user insights into these markets. This empowered us to refine our go-to-market strategies and optimize our product portfolio for each market, while also helping our distributors make better day-to-day operational decisions.
Speaker #6: In both closed and open system products, we are advancing cartridge-based technology by investing in new product development. We are optimizing e-liquid and cartridge integration to achieve superior performance while providing greater value for consumers.
Speaker #6: By doubling down on our strengths, we aim to lead the industry's transition toward sustainable solutions while capturing new market opportunities that emerge from this shift.
Speaker #6: On the operational front, we continue to refine and tailor our OEC's regional operations for greater agility, enhancing our capability to adapt to local changes both effectively and efficiently.
Speaker #6: We have invested in local retail support, which provides us with first-hand retail and user insights into these markets. This has empowered us to refine our go-to-market strategies and optimize our product portfolio for each market.
Speaker #6: While also helping our distributors make better day-to-day operational decisions. In addition to operational improvements, we have been actively pursuing partnerships with new capable distributors and retailers in key regions to broaden our reach and secure access to critical growth markets worldwide.
Kate Wang: In addition to operational improvements, we have been actively pursuing partnerships with new, capable distributors and retailers in key regions to broaden our reach and secure access to critical growth markets worldwide. In March 2025, we entered into an investment agreement with the leading compliant European e-vapor company, with a full suite of capabilities and services in the local market. This partnership brings us a wealth of new capabilities in Europe, while also expanding our operational footprint and enhancing our local market share. In summary, the smokeless alternative market continues to evolve rapidly, driven by regulatory clarity, changing consumer preferences, and technological innovation. By implementing a multi-category strategy, strengthening our global distribution network, and emphasizing sustainable product innovation, all while maintaining our deep commitment to compliance, we are positioning RLX to capture the opportunities of today while shaping the future of the industry.
Speaker #6: In March 2025, we entered into an investment agreement with the leading compliant European e-vapor company, which has a full suite of capabilities and services in the local market.
Speaker #6: This partnership brings us a wealth of new capabilities in Europe while also expanding our operational footprint and enhancing our local market share. In summary, the smokeless alternative market continues to evolve rapidly.
Speaker #6: Driven by regulatory clarity, changing consumer preferences, and technological innovation, by implementing a multi-category strategy, strengthening our global distribution network, and emphasizing sustainable product innovation, all while maintaining our deep commitment to compliance, we are positioning ILX to capture the opportunities of today while shaping the future of the industry.
Speaker #6: We remain committed to building a healthier and more sustainable world for our current customers and generations to come. Now, let's move on to our financial results for the second quarter of 2025.
Kate Wang: We remain committed to building a healthier and more sustainable world for our current customers and generations to come. Now, let's move on to our financial results for the second quarter of 2025. Chao, please go ahead.
Speaker #6: Please go ahead.
Speaker #5: Thank you, Kate. And hello, everyone. Before I start the detailed discussion of our financials, please note that unless otherwise stated, all the financials I will present today are in R&D terms.
Chao Lu: Thank you, Kate. Hello, everyone. Before I start the detailed discussion of our financials, please note that unless otherwise stated, all the financials I will present today are in RMB terms. First, top line, we delivered another strong quarter with net revenues reaching RMB 880 million, representing a 40% year-over-year increase and a 9% quarter-over-quarter increase. This impressive performance highlights our successful internationalization strategy and our ability to capture the opportunities presented by the accelerating global shift toward reduced-risk smokeless alternatives. The consolidation of our recently acquired European e-vapor company in June also contributed to our robust growth figures. Meanwhile, our China business also achieved significant year-over-year growth thanks to stricter control aimed at combating illegal products, as well as our successful launch of a disposable product series in the second half of last year. Next, turn to profitability.
Speaker #5: First, top line: we delivered another strong quarter with net revenues reaching R&D $880 million, representing a 40% year-over-year increase and a 9% quarter-over-quarter increase.
Speaker #5: This impressive performance highlights our successful internationalization strategy and our ability to capture the opportunities presented by the accelerating global shift toward reduced-risk smokeless alternatives.
Speaker #5: The consolidation of our recently acquired European e-vapor company in June also contributed to our robust growth figures. Meanwhile, our China business also achieved significant year-over-year growth.
Speaker #5: Thanks to stricter control aimed at combating illegal products, as well as our successful launch of a disposable product series in the second half of last year.
Speaker #5: Next, turning to profitability, we drove a 2.3 percentage point expansion in our gross margin year-over-year to 27.5%. This reflects a favorable revenue mix from international markets and our continued cost optimization efforts.
Chao Lu: We drove a 2.3 percentage point expansion in our gross margin year over year to 27.5%, reflecting a favorable revenue mix from international markets and our continued cost optimization efforts. Sequentially, excluding the effects of amortization and depreciation of assets arising from fair value step-up in business acquisitions in the second quarter of 2025, which increased our cost of revenue, our gross margin remained stable quarter over quarter, showcasing our ability to maintain steady profitability amid intense competition and regulatory changes in international markets. The second quarter of 2025 marked our seventh consecutive quarter of positive non-GAAP operating profit at RMB 116 million, with non-GAAP operating margin expanding by more than 5 percentage points year over year to 13.2%. This improvement was driven by contributions from our fast-growing international business and enhanced operating leverage.
Speaker #5: Sequentially, excluding the effects of amortization and depreciation of assets, a rising from fair value step-up in business acquisitions in the second quarter of 2025.
Speaker #5: Which increased our cost of revenue, our gross margin remained stable quarter-over-quarter, showcasing our ability to maintain steady profitability amid intense competition and regulatory changes.
Speaker #5: In international markets, the second quarter of 2025 marked our seventh consecutive quarter of positive non-GAAP operating profit at R&D of $116 million, with non-GAAP operating margin expanding by more than 5% year-over-year to $13.2%.
Speaker #5: This improvement was driven by contributions from our fast-growing international business, and enhanced operating leverage. Looking forward, we are positioned to further improve profitability as we scale globally by remaining focused on efficiency and maintaining a lean organizational structure.
Chao Lu: Looking forward, we are positioned to further improve profitability as we scale globally by remaining focused on efficiency and maintaining a lean organizational structure. Next, on cash, in terms of cash flow, we achieved operating cash inflow of RMB 230 million in the second quarter of 2025, a significant increase from RMB 197 million in the same period last year, underscoring both our scale growth and disciplined working capital management. Our negative cash conversion cycle remains a competitive strength, with inventory turnover at 31 days, receivable turnover at 16 days, and payable turnover at 67 days. Our cash position remains solid. As of June 30, 2025, our total financial assets, including cash and equivalents, restricted cash, various short-term and long-term deposits, and investments stood at RMB 15.5 billion, approximately $2.2 billion in U.S.
Speaker #5: Next on cash, in terms of cash flow, we achieved operating cash inflow of R&D $230 million in the second quarter of 2025, a significant increase from $117 million in the same period last year.
Speaker #5: Underscoring both our scale growth and disciplined working capital management, our negative cash conversion cycle remains a competitive strength. With inventory turnover at 31 days, receivable turnover at 16 days, and payable turnover at 67 days.
Speaker #5: Our cash position remains solid. As of June 30, 2025, our total financial assets, including cash and equivalents, restricted cash, and various short-term and long-term deposits and investments, stood at $15.5 billion.
Speaker #5: Approximately $2.2 billion in U.S. dollar terms, providing us with the flexibility to continue investing in strategic growth and innovation while navigating regulatory shifts. Finally, we are pleased to announce our third cash dividend since our IPO.
Chao Lu: dollar terms, providing us with the flexibility to continue investing in strategic growth and innovation while navigating regulatory shifts. Finally, we are pleased to announce our third cash dividend since our IPO, reaffirming our commitment to delivering value to our shareholders. We remain dedicated to generating sustainable, growing profits, and enhancing returns for our shareholders. In conclusion, our outstanding Q2 2025 results demonstrated executional excellence as well as the resilience of our business model. As the industry evolves, we are leveraging our market leadership, innovative product offerings, and localized strategies to unlock new growth opportunities. With a diversified market presence, disciplined financial management, and a clear strategic roadmap, we are confident in our ability to continue delivering sustainable growth and significant value to stakeholders, even in a year of industry transition. This concludes our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
Speaker #5: Reaffirming our commitment to delivering value to our shareholders, we remain dedicated to generating sustainable and growing profits and enhancing returns for our shareholders. In conclusion, our outstanding Q2 2025 results demonstrated executional excellence as well as the resilience of our business model.
Speaker #5: As the industry evolves, we are leveraging our market leadership, innovative product offerings, and localized strategies to unlock new growth opportunities. With a diversified market presence, disciplined financial management, and a clear strategic roadmap, we are confident in our ability to continue delivering sustainable growth and significant value to stakeholders.
Speaker #5: Even in a year of industry transition, this concludes our prepared remarks today. We will now open the call to questions. Operator, please go ahead.
Speaker #4: We will now begin the question and answer session. To ask a question, you may start in one, on your touch-tone phone. If you are using a speakerphone, please state your handset before pressing the key.
Sam Tsang: We will now begin the question and answer session. To ask a question, you may start with one on your touch-tone phone. If you are using a speaker phone, please set your handset before pressing the speaker. If your hand has been stretched 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. The first question today comes from Lydia Ling with Citi. Please go ahead.
Speaker #4: If the person has just stretched 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 #4: The first question today comes from Lydia Lin with City. Please go ahead.
Speaker #7: Thanks, management. Lydia, from City, and so I have two questions on. So first, on the regulation side, it looks like some overseas markets have started tightening regulations.
Lydia Ling: Thanks, management. Lydia from Citi. I have two questions. First, on the regulation side, it looks like some overseas markets have started tightening regulations. Do you feel that the management of the non-compliant products has become more standardized? Do you expect or have you seen positive impacts on your compliant products and also your business development? My second question is on the overseas business. Your group revenue has some sequential improvement in the second quarter. How is the organic growth of the overseas business in the second quarter? Do you also give us some updates on the progression of the overseas expansion and also your outlook for the second half and beyond? Thank you.
Speaker #7: So, do you feel that the management of the non-compliant products has become more standardized? And do you expect, or have you seen, a positive impact on your compliant products and also your business development?
Speaker #7: And my second question is on the overseas business. So your group revenue has some sequential improvement in the second quarter. How is the organic growth of the overseas business in the second quarter?
Speaker #7: And do you also give us some updates on the progression of the overseas expansion and also your outlook for the second half and beyond?
Speaker #7: Thank you.
Speaker #5: Thank you very much, Lydia. Regarding the first question, the global regulatory landscape for e-vapor products is becoming increasingly well-defined and straightforward. This development brings greater clarity to compliance requirements such as product standards and excise tax for leading and compliant corporations like our company.
Sam Tsang: Thank you very much, Lydia. Regarding the first question, the global regulatory landscape for e-vapor products is becoming increasingly well-defined and straightforward, bringing greater clarity to compliance requirements such as product standards and excise tax. For leading and compliant corporations like our company, this shift is delivering tangible benefits. We anticipate that the brand share and distribution share of the current gray and black markets will decline as regulators continue to enforce regulations, particularly by implementing stricter custom control and tax collection practices and shutting down illegal operations and stores. This transition toward compliance also presents an opportunity for us to gain market share. Many markets are implementing stricter product standards this year. With clearer rules and strong enforcement, we are seeing a transition from illegal products offered by competitors to our compliant offerings, including our cartridge-based closed system and open system products.
Speaker #5: This shift is delivering tangible benefits. We anticipate that the brand share and distribution share of the current gray and black markets will decline as regulators continue to enforce regulations.
Speaker #5: Particularly by implementing stricter custom control and tax collection practices, and shutting down illegal operations and stores. This transition toward compliance also presents an opportunity for us to gain market share, as many markets are implementing stricter product standards this year.
Speaker #5: With clearer rules and strong enforcement, we are seeing a transition from illegal products offered by competitors to our compliance offerings, including our cartridge-based closed system and open system products.
Speaker #5: Lastly, reputable retail channels, particularly key accounts such as convenience stores and petrol stations, are steering away from gray market products. Instead, they are prioritizing partnerships with compliant businesses that have a leading market share.
Sam Tsang: Lastly, reputable retail channels, particularly key accounts such as convenience stores and petrol stations, are steering away from gray market products. Instead, they are prioritizing partnerships with compliant businesses with a leading market share. This trend not only creates a more stable operating environment but also opens up significant growth opportunities for the company. Regarding your question about our organic growth of overseas business, despite the China export data reporting a year-over-year decline in the low teens for the first half of the year, our company achieved moderate year-over-year growth organically in overseas business, showcasing our resilience and ability to capture increasing market share from various types of competitors. We have gained market share progressively in many Asian markets in the first half of 2025.
Speaker #5: These trends not only create a more stable operating environment but also open up significant growth opportunities for the company. Regarding your question about our organic growth of overseas business, despite the China export data reporting a year-over-year decline in the low teens for the first half of the year, our company achieved moderate year-over-year growth organically in overseas business.
Speaker #5: Showcasing our resilience and ability to capture increasing market share from various types of competitors, we have gained market share progressively in many Asian markets in the first half of 2025.
Speaker #5: Our successful expansion into the European market this quarter marked a major step forward in the overseas business and made a meaningful contribution to our revenue growth during the quarter.
Sam Tsang: Our successful expansion into the European market this quarter marked a major step forward in our overseas business and made a meaningful contribution to our revenue growth during the quarter. For the second half of 2025, our priority will be to strengthen distribution and retail capabilities in Asia and Europe while optimizing our product portfolio to boost our competitiveness. Looking ahead, we plan to expand into additional European countries and selected Asian countries, and perhaps an additional continent by early 2026. However, this plan remains in its early stages and will depend on further developments. Thank you for your questions.
Speaker #5: For the second half of 2025, our priority will be to strengthen distribution and retail capabilities in Asia and Europe while optimizing our product portfolio to boost our competitiveness.
Speaker #5: Looking ahead, we plan to expand into additional European countries and selected Asian countries, and perhaps an additional continent by early 2026. However, this plan remains in its early stages and will depend on further developments.
Speaker #5: Thank you for your questions.
Speaker #4: The next question comes from Charlie Sen with China. Please go ahead.
Sam Tsang: The next question comes from Charlie Chen with China International Capital Corporation.
Sam Tsang: China.
Sam Tsang: Please go ahead.
Speaker #8: Thank you, management. To take my questions, I have a question regarding the domestic market. So, can you give us more color on the current situation of the China market right now?
Sam Tsang: Thank you, management, to take my questions. I have a question regarding the domestic market. Can you give us more color on the current situation of the China markets right now, in addition to the regulatory side? Also, how is RLX Technology Inc. business performance in the Chinese market so far? Thank you. Thank you very much, Charlie. We have observed a moderate recovery in the domestic compliance market this year, primarily driven by stricter custom control at China's border, which has limited the reselling of overseas business back into the domestic markets. This is certainly encouraging news, though there remains significant room for improvements. At present, over 80% to 90% of the domestic market continues to be dominated by illegal products, the majority of which are produced by small local workshops.
Speaker #8: In addition to the regulatory side, how is RELX's business performance in Chinese markets so far? Thank you.
Speaker #5: Thank you very much, Charlie. So we have observed a moderate recovery in the domestic compliance market this year, primarily driven by stricter customs control and China's broader.
Speaker #5: Which have limited the reselling of overseas business back into the domestic markets. This is certainly encouraging news, though there remains significant room for improvement.
Speaker #5: At present, over 80% to 90% of the domestic market continues to be dominated by illegal products, the majority of which are produced by small local workshops.
Speaker #5: These products are often of supplier quality, contribute no tax revenue to society, and are potentially associated with criminal activities. As the largest compliance brand in the domestic legal markets, we have been actively collaborating with regulators, providing over 4,000 leads and pieces of evidence concerning illegal retailers and manufacturers this year.
Sam Tsang: These products are often of subpar quality, contribute no tax revenue to the society, and are potentially associated with criminal activities. As the largest compliance brand in the domestic legal markets, we have been actively collaborating with regulators, providing over 4,000 leads and pieces of evidence concerning illegal retailers and manufacturers in this year. We believe that as stricter regulations on these local manufacturers and retailers are enforced, compliance product share of the overall domestic market will steadily increase. In terms of performance, our domestic revenue grew in line with the overall industry during the first half of 2025, with our market share in the compliance segments remaining consistently strong. This is reflected by growth in the excise tax on products line of our income statement.
Speaker #5: We believe that as stricter regulations on these local manufacturers and retailers are enforced, the compliance products' share of the overall domestic market will steadily increase.
Speaker #5: In terms of performance, our domestic revenue grew in line with the overall industry during the first half of 2025, with our market share in the compliance segment remaining consistently strong.
Speaker #5: This is reflected by growth in the excise tax on products line of our income statement. From a product perspective, cartridge parts have demonstrated faster growth than devices.
Sam Tsang: From a product perspective, cartridge ports have demonstrated faster growth than devices, reflecting a trend of existing users increasingly adopting compliance products with growing retention. Additionally, alongside the crackdown on non-compliance products, the launch of our disposable products video in the second half of 2024 has played a key role in driving the incremental recovery of our domestic business. Thank you for your question.
Speaker #5: Reflecting a trend of existing users increasingly adopting compliance products, with growing retention. Additionally, alongside the crackdown on non-compliance products, the launch of our disposable products' failure in the second half of 2024 has played a key role in driving the incremental recovery of our domestic business.
Speaker #5: Thank you for your question.
Speaker #4: The next question comes from Yuying Zhu with CICC. Please go ahead.
Sam Tsang: The next question comes from Yuying Zhu with CICC. Please go ahead.
Speaker #7: Thanks, management. This is Dolly from CICC. My first question is about dividends. We noted that the company has historically announced dividends in November, but this year dividends were announced in August.
Lydia Ling: Thanks, management. This is Charlie Chen from China International Capital Corporation. My first question is about dividends. We noticed that the company had historically announced dividends in November, but this year, dividends were announced in August. Will there be any additional dividends this year? We also notice that the company's share repurchase program will expire by the end of this year. Is there any plan to extend or launch a new share repurchase program? Thank you.
Speaker #7: Will there be any additional dividends this year? We also noticed that the company's share repurchase program will expire by the end of this year. Is there any plan to extend or launch a new share repurchase program?
Speaker #7: Thank you.
Speaker #5: Thank you. So, if our question turns to the board's decision and approval, we do not foresee any additional dividend announcements this year.
Sam Tsang: Thank you for your question. Subject to the board's decision and approval, we do not foresee there will be additional dividend announcements this year. Same as the last two years, our plan in 2025 is to distribute a cash dividend of $0.01 per ordinary share, or ADS. Regarding the share repurchase program, we have been purchasing our shares since December 2021. By the end of 2024, we have repurchased over $300 million U.S. dollars of our shares or ADS. We have also made additional share repurchases throughout 2025 through open market purchases and privately negotiated transactions. Looking ahead, we plan to remain a progressive shareholder return program. Our scale and profitability have been growing in the past three years, and recent quarter's achievements have been encouraging. As always, we'll diligently evaluate our financials and strive to generate robust shareholder returns while profitability grows.
Speaker #5: Same as the last two years, our plan in 2025 is to distribute a cash dividend of $0.01 per ordinary share or ADS. Regarding the share repurchase program, we have been purchasing our shares since December 2021.
Speaker #5: By the end of 2024, we had repurchased over $300 million of our shares or ADS. We also made additional share repurchases throughout 2025 through open market purchases and privately negotiated transactions.
Speaker #5: Looking ahead, we plan to remain a progressive shareholder return program. Our scale and profitability have been growing in the past three years, and the recent quarter's achievements have been encouraging.
Speaker #5: As always, we will diligently evaluate our financials and strive to generate robust shareholder returns as our profitability grows. We are also looking at more efficient means for providing future shareholder returns.
Sam Tsang: We are also looking at more efficient means for providing future shareholder returns. Thank you for your question.
Speaker #5: Thank you for your question.
Speaker #4: The next question comes from Yan Gao with CITIC. Please go ahead.
Sam Tsang: The next question comes from Yang Gao with CITIC. Please go ahead.
Speaker #7: Thanks, management. This is Lin Guo from Citics. My question is about investment agreements. We noticed that the company entered into an investment agreement with an e-vape company based in Europe during the first half of 2025, and its annual purchasing. Could management provide more details on this agreement?
Lydia Ling: Thanks, management. This is Yang Gao from CITIC. My question is about the investment agreement. We noticed that the company entered into an investment agreement with an e-vapor company based in Europe during the first half of 2025 in its annual portfolio. Could the management provide more details to this agreement?
Speaker #5: Thank you very much, Guo Yun, for your question. In March 2025, we entered into an investment agreement with a leading compliant e-vapor company in Europe.
Sam Tsang: Thank you very much, Bo Yun, for your question. In March 2025, we entered into an investment agreement with a leading compliance e-vapor company in Europe, which has been consolidated into our financial statements starting in June. The acquired company has a 17-year track record and operates a full industry chain business model and encompasses research and development, manufacturing, warehousing, distribution, retailing, and e-commerce. RLX Technology Inc. places significant value on the company's brand, business, and operations. Following the acquisition, we have adopted a new approach in regions where the company operates. We now position ourselves as a retailer, distribution partner, and brand operator, rather than focusing solely on selling RLX branded products in these regions. Within the acquired company channel, RLX products will compete on a square footing with other brands.
Speaker #5: Which has been consolidated into our financial statements, starting in June. The acquired company has a 17-year track record and operates a full industry chain business model, encompassing research and development, manufacturing, warehousing, distribution, retailing, and e-commerce.
Speaker #5: RELX places significant value on the company's brand, business, and operations. Following the acquisition, we have adopted a new approach in regions where the company operates.
Speaker #5: We now position ourselves as a retailer distribution partner and brand operator rather than focusing solely on selling RELX branded products in these regions. Within the acquired company channel, RELX products will compete on a square footing with other brands.
Speaker #5: Looking ahead, we aim to leverage the company's distribution and retail capabilities to gain firsthand insights into European market trends. These smart partnerships have also enabled us to build capabilities previously lacking in Europe.
Sam Tsang: Looking ahead, we aim to leverage the company's distribution and retail capabilities to gain firsthand insights into European market trends. This smart partnership has also enabled us to build capabilities previously lacking in Europe, expand our operational footprint, and increase local market share. These advancements will allow us to strengthen retail capabilities, achieve localized operations, and foster greater diversity and flexibility in our business strategy. Thank you for your question.
Speaker #5: Expand our operational footprint and increase local market share. These advancements will allow us to strengthen retail capabilities, achieve localized operations, and foster greater diversity and flexibility in our business strategy.
Speaker #5: Thank you for your question.
Speaker #4: Thank you. Now I would like to go back over to the company for closing remarks.
Sam Tsang: Thank you. Now, I would like to turn it all back over to the company for closing remarks.
Speaker #5: Thank you once again for joining us today. If you have further questions, please feel free to contact the RLX Technologies investor relations team through the contact information provided on our website or via Shante Financial Communications.
Sam Tsang: Thank you once again for joining us today. If you have further questions, please feel free to contact RLX Technology Inc.'s investor relations team through the contact information provided on our website or Piacenti Financial Communications.
Sam Tsang: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.