RLX Technology Inc.

Hello, ladies and gentlemen. Thank you for standing by for RLX Technology Incorporated's second quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After management's remarks, there will be a question and answer session. 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. Sam Tesang, head of investor relations for the company. Please go ahead, Sam.

Thank you very much. Hello, everyone, and welcome to iRX Technologies' 7th Quarter 2022 Earnings Conference Call. The company's financial and operational results were released through Peonys wire services earlier today and have been made available online. You can also view the earnings press release by visiting the IR section of our website at irr.redactedtech.com. Participants on today's call will include our CEO, Ms. Kate Wang, CFO Chow Wu, and myself, Sam Tsang. Before we continue, please note that today's discussions will contain four working statements 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, release, potential, continue, or other similar expressions. Four working 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 factors are beyond our control. The company, its affiliates, advisors, and representatives do not undertake any obligations to update these for the pin information except as required under the applicable law. Please note that ILS Technologies earnings press release and this conference call include discussions of unaudited gap financial measures as well as unaudited non-gap financial measures. Our ILS press release contains a reconciliation of the unaudited non-gap measures to the unaudited gap measures. I will now turn the call over to Kate. Please go ahead.

Thank you, Sam, and thanks to everyone for making time to join our earnings conference call today. I'm pleased with the healthy financial performance we delivered in the second quarter as we proactively continued to adapt to the new regulatory framework. We remain focused on enhancing the full range of our capabilities, from scientific research, product development, to manufacturing advancements and operation optimization, all of which empowered us to navigate the highly dynamic market and the evolving regulatory landscape. Amid strong macro headwinds and weak consumer sentiment, our solid second quarter results, underscored the resilience of our defensive business model and our commitment to building and strengthening our brand's trustworthiness. Before taking a closer look at business updates, I would like to start with a brief recap of the milestone regulatory development in our industry. Beginning in the first quarter of 2022, the relevant government authorities in China have issued a series of implementation rules and guiding opinions to strengthen oversight of e-cigarette products and regulate the e-cigarette industry. including the administrative measures for e-cigarettes that's coming to effect in May, and the new national standards that will become effective on October 1st, 2022. Now let me share our progress on our relevant license applications as required by the administration measures. To date, two of our subsidiaries have obtained the license for manufacturing enterprise from the State Tobacco Monopoly Administration, SPMA, to conduct manufacturing activities under the regulatory guidance. Specifically, one is approved to manufacture e-liquid and the other is approved to own the RELAX brand and the manufacturer RELAX brand eVapor rechargeable devices, cartridge products, and other relevant products. Obtaining the license marks an important milestone in our strategic roadmap as we actively embrace the new paradigm with top regulatory compliance. We believe our solid, fundamental, industry-leading research and development capabilities and seasoned teams will assist further in our mission to achieve full regulatory compliance for our operation according to schedule. To build on this progress, we have redoubled our efforts to develop new products that meet the applicable requirements while fulfilling users' demands. Some of our new products will amount to the first batch of products in the industry to obtain approvals under the new national standards, a powerful validation of our industry-leading R&D capabilities. We look forward to bringing the approved product to market very soon and are confident that our product's quality, performance, and safety will continue to resonate well with our users. Currently, we have several additional newly developed products in the process of technical review and many more in the application pipeline. In the future, we will remain committed to fulfilling our users' demand for safe, high-quality products in strict compliance with regulations while exploring new growth opportunities in the industry. In particular, we firmly believe that R&D is the key to our success and sustainable future growth. It is R&D that has enabled us to quickly roll out compliant new products and maintain our brand's competitive edge. Here are a set of metrics tracking our R&D standing. Our non-GAAP R&D stands ratio has increased from 1.5% in 2018 to 3.6% in the first half of 2022. and is expected to further increase in the coming years. Beyond product R&D, we are also dedicated to fundamental scientific research to protect our users' health, working relentlessly to better understand and minimize the health risks associated with EVA products. To that end, in addition to running our own scientific labs, we have partnered with various leading research institutions, including 10 universities, two hospitals, and several independent academic research houses to conduct related research and development, building a firm foundation for ongoing product development and innovation. Furthermore, in the second quarter, we collaborated with Shenzhen institutions of the Wang Technology Chinese Academy of Sciences on an evapour cooling agent inhalation study, which concludes that evapour products containing WS23 have lower rewarding effects than pure nicotine products. A breakthrough, we believe, will support us to deliver a better, safer appearance for adult smokers. Turning now to our operations, alongside our efforts to comply with applicable regulations, we continue to streamline our business structure and operational workflow during the second quarter to enhance our agility and flexibility. Our approach has yield good initial results, with non-GAAP expense ratio decreasing quarter over quarter. Chow will elaborate on this further a bit later. We believe this comprehensive operational enhancement will enable us to neatly tackle critical changes and swiftly adapt to the market evolution, boosting both our immediate and long-term efficiency. In conclusion, we remain confident in the inherent potential of China's evapomarket. We believe that as a trusted evapobrand for adult smokers, our leading technologies and scientific advancements high-quality user base, resilient business model, and strong overall execution are our fundamental assets that will empower us to drive sustainable quality growth in the long run and further strengthen our leadership position in the industry. More importantly, we will continue to seek regulatory approvals to meet all applicable requirements on schedule while developing qualified products to deliver superior performance for the enhancing operational efficiency and capturing the industry's growth opportunities ahead of us. With that, I will now turn the call over to our CFO, Chao Lu. He will elaborate for some of our last quarter's initiatives and go over our official and financial results in more detail. Charles, please go ahead.