RLX Technology Inc. 3Q 2025 Earnings Call - Global Expansion Drives 49% Revenue Surge Amid China Challenges

Kate Wang, Chief Executive Officer, RLX Technology Inc.: Hello, ladies and gentlemen. Thank you

Conference Call Operator: for standing by for RLX Technology Inc. Third Quarter twenty twenty five 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 for about forty minutes.

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

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Thank you very much. Hello, everyone, and welcome to IRH Technologies’ third quarter twenty twenty five earnings conference call. The company’s financial and operational results were released through P and L’s wire services earlier today and have been made available online. You can also view the earnings press release by visiting our IR website at ir.reax.com. Participants on today’s call will include our Chief Executive Officer, Ms.

Kate Wang our Chief Financial Officer, Mr. Chao Lu and me, Sam Zhang, Head

Chao Lu, Chief Financial Officer, RLX Technology Inc.: of Capital Markets. Before

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: we continue, please note that today’s discussion 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, expects, anticipates, aim, estimates, intend, plan, belief, potential, continue or other similar expressions. Forward looking statements involve inherent 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, many of which are factors beyond our control. The company, its affiliates, advisers and representatives do not undertake any obligation to update its forward looking information, except as required under the applicable law. Please note that IRIX Technologies earnings press release and this conference call will include discussions of unaudited GAAP financial measures as well as unaudited non GAAP financial measures. Parex’s press release contains a reconciliation of the unaudited non GAAP financial measures to the unaudited GAAP financial measures. For today’s call, management will use English as the main language.

They will also provide simultaneous interpretation on the Chinese line. Please note that the Chinese line is in listen only mode, and Chinese interpretation is for convenience purposes only. In case of any discrepancy, management statements in the original language will prevail. I will now turn the call over to Ms. Kees Wang.

Please go ahead.

Kate Wang, Chief Executive Officer, RLX Technology Inc.: Thank you, Sam, and thank you all for joining today’s call. This quarter, we once again delivered robust results in a challenging global environment. Our net revenues surged 49% year over year to $1,129,000,000 with non GAAP operating profit reaching 188,000,000. This performance underscores the strength our industry leading portfolio and our excellent execution across international markets, bolstered by a gradual recovery in Mainland China. It also validates the scalability of our globalization strategy and the outstanding technological innovation that secures our leadership in the e vapor sector.

Turning to Mainland China. Regulatory enforcement strengthened markedly, yield positive shifts in market dynamic. For instance, enhanced customers’ inspection have curtailed illegal returns of exported products, channeling customers back to legitimate brands from non compliant alternatives during this quarter’s modest Mainland China revenue recovery. That said, the persistence of an unregulated related e vapor market remains a significant headwind, distorting competition and restraining volume recovery. Our revenue from Mainland China stands at RMB $320,000,000 this quarter or approximately 13% of q two twenty twenty one level, illustrating the scale of ongoing challenges.

True market order can only be achieved through consistent enforcement action, particularly against illegal online sales. As a leading compliant player, we continue to advocate for strict enforcement and remain committed to providing adult smokers in China with a superior diversified portfolio of quality tobacco alternatives. We are also advocating for regulatory adjustments around tobacco flavor formulation. This could align public policy with consumer preference, to foster a more transparent, orderly market. Internationally, our strategy continues to gain momentum with 70% to 80% of our revenues now derived from international markets.

Amid various headwinds, including the big puffy effect, disciplined execution, quality product, and deep legal insights continue to drive success. Our new Asia Pacific franchise retail model exemplifies this strategic and execution excellence. By uniting independent big stores under a cohesive brand to enhance retail execution, amplify visibility, and elevate user experience, we generated meaningful same store sales Furthermore, our robust R and D capabilities remain a core differentiator in international markets, enabling rapid innovation and local market adoption. Notably, our recent East Asia product launch set industry benchmarks of disposable e vapor products for design excellence. Bearing category growth and exceptional demand.

Our expansion into adjacent categories with the departure of our modern oral product was strengthened our portfolio and pipeline, unleashing growth potential as we capture demand from previously untapped user segment. Beyond APAC, Europe remains a critical growth market, distinguished by regulatory maturity and an involved user base. Our strategic equity investment in a leading European EV firm enhances our market intelligence and positions us to capitalize on future opportunities effectively. In The United Kingdom, where the government implemented ban on disposable EV product in June 2025, we demonstrated strong business adaptability. Through our proactive strategy to migrate migrate consumers to reusable and a sustainable product format reinforced by robust retail execution and strategic category management.

We not only safeguarded our market position, but also sustained top line strength amid a sharp industry contraction. In summary, this quarter’s results reflect our growing strength, resilience, and a leading innovation made a complex macro environment. We are building more than financial value. We are cultivating a global brand with quality and sustainable leadership. Looking forward, we remain confident in our ability to shape the smokeless industry and deliver lasting value to our stakeholders.

Now I will hand it over to Chao for a detailed review of our financial performance.

Chao Lu, Chief Financial Officer, RLX Technology Inc.: Thank you, Kate, and hello, everyone. Before we dive into the financial details, please note that all figures I present today are denominated in RMB, unless otherwise stated. We are pleased to report another strong quarter marked by robust revenue growth and improved profitability. In 2025, our strategic emphasis on international markets continued to drive exceptional results. Net revenues reached RMB 1,100,000,000.0, reflecting impressive increases of 49% year over year and 28% quarter over quarter.

Importantly, we reinforced our market leadership in core regions while proactively capturing organic growth and strategic investment opportunity. Selected Asian markets delivered strong organic growth fueled by successful product innovation and introduction and effective local execution. Additionally, our investment in a premier European e vapor industry, a vapor company contributed significantly this quarter. Having consolidated this entity’s financials since June, a full three month performance is now reflected in our results. Meanwhile, a mild recovery in Mainland China market provided a positive backdrop during this period.

Let’s turn to profitability. We further strengthened our profitability this quarter, a testament to our disciplined execution and operational excellence. Our gross profit margin expanded by four percentage points year over year and 3.7 percentage points quarter over quarter. This improvement was driven by the consolidation of our equity investments in the European market, favorable shifts in geographic revenue mix and margin enhancements in all key international regions. Additionally, we achieved our eighth consecutive quarter of positive non GAAP operating profit, reaching 188,000,000.

Our non GAAP operating profit margin expanded by six percentage points year over year, reflecting both enhanced operating leverage and rigorous cost management. Looking ahead, we remain committed to driving further profitability improvement as we scale globally by relentlessly prioritizing operating efficiency and maintaining a lean organizational structure. Moving on to financial flexibility. We maintained our strong cash position, supported by solid financial fundamentals and disciplined capital allocation. Our cash flow generated from operating activities surged in quarter three, rising to RMB358 million from RMB157 million in the same period last year.

This performance reflects our efficient working capital management, characterized by a healthy negative cash conversion cycle with inventory turnover days at 25, receivable turnover days at 11, and payable turnover days at 53. As of 09/30/2025, our total financial assets, including cash and cash equivalents, restricted cash, short term bank deposits, net short term investments, net long term bank deposits, net and long term investment securities, net stood at RMB 16,400,000,000.0, approximately USD 2,200,000,000.0. Dollars This strong liquidity position provides ample flexibility to pursue strategic investments that accelerate our global expansion and fuel innovation, while also enabling us to enhance shareholder value through disciplined capital deployment and a sustainable return. That brings me to shareholder return, which I believe is something you are focused on. With a consistent, disciplined capital allocation approach, we have returned nearly all of our non GAAP net profits to shareholders through strategic share repurchases and dividends over the past four years.

As of 09/30/2025, we have repurchased approximately USD $330,000,000 in ordinary shares represented by ADSs. For this quarter, we are declaring a cash dividend of $0.1 per ordinary share or ADS. Furthermore, since our IPO, including the cash dividend announced today, we have returned over US500 million dollars to shareholders through repurchases and dividends. Our capital framework is purpose built to support durable profit growth while maximizing long term returns for shareholders, balancing reinvestment in strategic growth with responsible financial stewardship. In closing, this quarter’s results are a clear testament to our outstanding execution and distinctive competitive advantages across global markets.

We’re not just navigating challenges, we are transforming them into opportunities through innovation and tailored local strategy. As we unlock new growth avenues, we remain focused on delivering sustainable value that benefits all stakeholders today and into the future. Thank you for your attention. We now welcome your questions. Operator, please proceed.

Conference Call Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. For the benefit of all participants on today if you wish to ask your question in Chinese, please immediately repeat your question in English.

The first question today comes from Lydia Singh with Citi. Please go ahead.

Analyst, Various (Citi, CITIC, CICC, UBS): Hi, management. Thanks for the presentation, and congratulations on the results. So I have two questions. And the first one is, like, as we now enter close to the year end, so based on current progression in your international expansion, so could you actually share your revenue outlook for 2026 for the company and also the industry? And also, could you also give us some breakdown for the international business, like how is the organic growth in the third quarter?

And for your invested European e vapor business, so how did it perform in the third quarter? So this is my first question. And the second question is given that the e vapor industry has matured. So what areas are prioritized in the R and D to sustain your growth and the differentiation? Thank

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Thank you, you. Lydia, for your questions. For the first question, let me address in three parts. Regarding 2026 revenue outlook, we are committed to expanding our branded footprint selectively across international market, contingent on regulatory parity and market readiness. Although the time remains fluid, we will maintain our disciplined strategic approach.

We will share detailed plans as we finalize them in coming quarters. Regarding our third quarter twenty twenty five international growth, our international revenue grew steadily and outpaced industry averages, driven by robust organic growth in the Asia Pacific region. This reflects the strength of our tailored product innovation and route to market strategy, enabling us to deepen market penetration and consumer loyalty. And finally, regarding our European investment performance, our invested e vapor company in Europe has maintained operational stability despite recent regulatory challenges, including The UK disposable product ban. We are optimistic about our synergies and anticipate scaling this company as we advance market integration.

Regarding your second question about product innovation and differentiation, amid a maturing industry landscape, we have sharpened our focus on meaningful product evolution that delivers value. Our R and D initiatives emphasize enhancing core user experiences, particularly in flavor authenticity, device ergonomics and aesthetic design. We have optimized product performance through technological refinements and strengthened regional market responses via localized flavor portfolio. This strategy culminated in a breakthrough product launch in East Asia this quarter, distinguished by innovative design and user appeal. We believe this R and D approach is foundational for sustained differentiation and long term success.

Thank you for your questions.

Conference Call Operator: The next question comes from Guo Yin with CITIC. Please go ahead.

Analyst, Various (Citi, CITIC, CICC, UBS): Thanks, management. This is Yun Guo from CITICS, and congratulations for the results. My question is about the channel innovation in the flagship Asian markets. Can the management elaborate more?

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Sure. Definitely. Our channel innovation centers on transforming WaveStar experiences. Independence WaveStar dominates category sales, but face branding inefficiencies. Through a franchise model, we provide renovation subsidies that upgrade star enhancements under unified branding.

These initiatives has engaged over four fifty partners in an East Asian country this year, driving significant revenue growth while enhancing our brand presence and operational control. Thank you for your question.

Conference Call Operator: Next question comes from Zoe Zhu with CICC. Please go ahead.

Analyst, Various (Citi, CITIC, CICC, UBS): Hi, management. This is Zoe from CICC. My question is about our Europe business. First, could you give us some update on The UK vape company integration? And what is the strategy for your preferred expansion?

Thanks.

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Thanks very much, Yu Tong. Following the June consolidation, we are in the early stages of integration, currency prioritizing, preservation of brand equity and operational strength. Our strategy is to transform The UK operations into a multi brand retail distribution platform, leveraging supply chain and capital advantages to enhance efficiency. We are actively leveraging local expertise to expand channel development and product localization across Europe, while remaining open to strategic investments that may accelerate geographic and portfolio diversification. Thank you for your question.

Conference Call Operator: The next question comes from Ling Zhou with UBS. Please go ahead.

Kate Wang, Chief Executive Officer, RLX Technology Inc.: Congratulations, management, for the strong results in q three. So my question is, what is the current expansion status of the modern oral business, and what are the subsequent promotional strategies, of Relax? Thank you.

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Sure. Thank you very much, Joleen, for your question. Modern oral is the smokeless industry’s fastest growing segment, reflecting a clear market opportunity. Our ultra thin fast absorbing products launched in Intertek, Germany garnered strong industry validation. We plan to roll out this category in phases starting this quarter.

At this stage, our near term revenue expectations remain prudent as we build market data and consumer adoption. Thank you very much for your question.

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

Sam Sung/Sam Zhang, Head of Capital Markets, RLX Technology Inc.: Thank you once again for joining us today. If you have further questions, please feel free to contact Rx Technologies Investor Relations team through the contact information provided on our website of phnpayfinancialcommunications.

Conference Call Operator: The call has now concluded. Thank you for attending today’s presentation. You may now disconnect.