RLX Technology Inc.

Hello, ladies and gentlemen. Thank you for standing by for the RLX Technology Incorporated's first quarter 2023 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 Tsang, head of capital markets for the company. Please go ahead, Sam.

Thank you very much. Hello, everyone, and welcome to RX Technologies' first quarter 2023 earnings conference call. The company's financial and operational results were released through PIL newswire services earlier today and have been made available online. You can also view the earnings press release by visiting the IL section of our website at il.relaxtech.com. Participants on today's call will include our CEO, Ms. Kate Huang, our CFO, Mr. Chao Lu, and myself. Before we continue, please note that today's discussion will contain four looking 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, believe, 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 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 RxTechnologies' earnings press release and this conference call include discussions of unaudited gap financial measures as well as unaudited non-gap financial measures. RxPress release contains a reconciliation of the unaudited non-gap measures to the unaudited gap measures. I will now turn the call over to Ms. Kate Wong. Please go ahead.

Thank you, Sam, and thanks, everyone, for making time to join our conference call today. During the first quarter, we continued optimizing our compliance with GB product offerings under the new regulatory framework and made steady progress thanks to our effective product strategy and constant efforts to enhance our R&D capabilities. However, as we strive to develop new approved products to meet our users' diverse demands, the prevalence of illegal products continues to pose near-term challenges to our business in the broader industry. First, let me provide some color on recent market conditions affected by illegal products. Then, I will also discuss our first quarter endeavors in greater detail. The biggest obstacles we faced in the first quarter of 2023 was competition from illegal products. These include flavored products manufactured by companies that haven't yet obtained licenses, some flavored products manufactured for export that are illegal sold in the domestic market. and counterfeit products. The existence of these illegal products not only weight on our sales, but also disrupt the recovery pace of this whole industry by slowing consumers conversion to products that meet the national standards. But on the bright side, the government has increased its effort to crack down on illegal products, recently conducting special operations to focus on two major offenders, manufacturing companies that continue to produce flavor products illegally, and retail participants that use the internet as a distribution channel. The results of these government endeavors are encouraging thus far. We have noticed more and more unlicensed manufacturing companies deleting evapour products from their business goals in their business licenses. Also, a number of retailers found distributing illegal flavored products have been fined. Our sales have gradually recovered following the execution of these special actions. Our CFO will elaborate on this a bit later. We believe the government's crackdown on illegal products will be ongoing, and we are hopeful that it will effectively support the creation of fair and orderly market conditions, prompting a return to sustainable growth for law-abiding companies such as ILX. However, we remain vigilant on any potential rebound of these illegal activities. Amid the first quarter's external challenges, we remain focused on strengthening our core competitiveness and pursuing high-quality development. Let's take a closer look at the details. Enhancing our product development and scientific research capabilities has always been a key element of our strategy. We partnered with Shenzhen Bay Laboratory in the first quarter to establish the new atomization technology research and development platform. Together we will explore and develop new peptide drugs based on the electronic atomization technology. leveraging our deep experience in industry-leading atomization technology to improve absorption efficiency and enhance user experience. Furthermore, we continue to execute our proven product strategy, enriching and optimizing our product portfolio to meet the needs of different user groups. As of now, we have received approvals for 20 cartridge SKUs and 22 device SKUs. Encouragingly, we have received some positive feedback and constructive suggestions from users who have switched to our new products. We will continue collecting user feedback and developing products accordingly. seeking superior performance and quality while helping adult smokers transition to GB products. We remain dedicated to shouldering our social responsibility alongside our efforts to offer high-quality, compliant products for adult smokers. An outstanding example is our POP Reborn program. one of our key sustainability initiatives to help reduce plastic waste. The program has grown by leaps and bounds since its inception in 2021. As of the first quarter of 2023, we have cumulatively collected over 3 million carriages from over 80,000 users across 297 cities nationwide. What's more, users can now use our official WeChat account to find recycling locations near them or book a pickup appointment online. The used parts are recycled into cement, then used to construct roads, bridges, and other road revitalization infrastructure projects. As of today, we have invested 20 million RMB in the first phase of our rural revitalization project, providing better instructions for rural villagers while conserving precious resources. To sum up, the first quarter was a mixed bag. While we made solid progress in improving our GB product offerings, we also experienced significant headwinds from illegal products. However, we firmly believe that as adult users gradually adapt to GV products in the government's efforts to protect market order and fairness take effect, illegal products will eventually be pushed out of the mainstream market. And the worst seem to have been behind us. As a trusted UAPA brand for adult smokers, we remain confident in our core competitiveness. We will deepen our commitment to providing compliant premium products that meet our users' needs as we explore growth opportunities in the seaborbing industry. With that, I will now turn the call over to our CFO, Cao Lu. He will elaborate further on some of our latest quarter's initiatives and go over our operational and financial results in more detail.