RLX Technology Inc.

Ladies and gentlemen, thank you for standing by for RLX Technologies' second 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 Stang. head of capital markets for the company. Please go ahead, Sam.

Thank you very much. Hello, everyone, and welcome to iHeart Technologies' second quarter 2020 free earnings conference call. The company's financial and operational results were released through PR's newswire services today and have been made available online. You can also view the earnings press release by visiting the IR section of our website, ir.relaxtech.com. Participants on today's call will include our CEO, Ms. Kate Huang, our CFO, Mr. Chao Lu, and myself, Sam Tsang, head of capital markets. Before we continue, please note that today's discussion will contain forward-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, expense, target, estimate, intent, belief, potential, continue, or other similar expressions. Forward-looking statements involve inherent risk 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. The company's affiliate advisors and representatives do not undertake any obligation to update its forward-looking information, except as required under the applicable law. Please note that RxTechnology's earnings press release and this conference call include discussions of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures. Our RxPress release contains a reconciliation of the unaudited non-GAAP measures to the unaudited gap measures. I will now turn the call over to Ms. Kate Wang. Please go ahead.

Thank you, Sam, and thanks everyone for making time to join our earnings conference call today. In the second quarter, we continued to forge ahead our recovery path amid a challenging environment brought about by the lingering impact of the illegal products on the EVAPOR industry. However, we worked hard to improve our product portfolio and operational efficiency. And we are happy to say that our efforts yield positive results in both our financial and operational performance for the quarter. Before I go deeper into our second quarter efforts and performance, let me briefly update you on the recent market conditions. As we shared on our last call, the prevalence of illegal products in China has significantly impacted on the compliant product sales and slowed the industry's recovery in the post-regulatory era. In March, regulators took steps to maintain a fair and orderly market, and initiated special action lasting over a month to combat illegal products. Although these measures were somehow somewhat effective, they ended in April, and we have since seen a resurgence of illegal products in the market. As a compliant participant in the eVapor industry, we have continued to restrictly comply with regulations, concentrating on improving our products to cater to users' various needs and increase our competitiveness. Thanks to our growing portfolio of high-quality products and regulators' crackdown efforts, the overall market conditions have improved compared to earlier this year. And our sales improved quarter over quarter. However, the negative impact of illegal products continues to pose a challenge. And we participate more problems on our path to full recovery. This is especially true when considering the difficulties our global counterparts have faced under similar circumstances. Let's use the United States as an example. In 2020, California state lawmakers passed a law prohibiting menthol cigarettes and other flavored tobacco products. This law went into effect in late 2022 As a result, smokers have been looking for alternatives such as flavor evapers, which are becoming increasingly popular across the country. These products are available from both legal and illegal sources. Legitimate manufacturers are working on developing and marketing California-compliant products. but competing with the easy availability of flavored products in the market is difficult. In the same way, China's compliant eVapor brands are losing market share to illegal flavored products. Although our compliant products offer better quality and safety, the playing field is not level. Illegal products becoming a broader range of flavors and at a lower cost since their manufacturers do not pay taxes. These non-compliant products are unregulated and lack quality and safety assurance, which harms the overall reputation of the evapour industry. Moreover, the illegal trade results in tax losses for the government and finds its way into young teenagers' pockets, given the shrinking size of compliant channels and fast-growing scale of the illegal channels fueled by illegal products. Though we believe that regulators will limit the impact of these products in the long run, the presence in the market will impede our recovery in the short term. Nevertheless, we are confident that our premium products will continue to bring users trust and support. Adult smokers will realize the advantages of our products and develop new habits, which will ultimately boost our momentum. Now let's move on to our strategic efforts in the second quarter. First and foremost, we continue to enhance our product portfolio, incorporating users' feedback and maintaining high quality standards. We are excited to announce that we've expanded our cartridge offerings from 15 in May to 20 in July. We have top-notch research and development capabilities efficient supply chain management, and strong quality control systems that allow us to produce high quality products consistently. Our relaxed physiochemistry lab enables us to closely monitor the chemical composition of our e-liquids and aerosols, ensuring that any potentially harmed emissions are kept to the minimum. Additionally, we are broadening our scientific research to further enhance productivity and explore the possibility of greater harm reduction. Our expanded research will cover topics ranging from chemistry and biology to social science. At IOX, we prioritize user appearance and highly value consumers' feedback, especially as we develop new products to meet their diverse needs while adhering to regulations. During the quarter, we continue to improve our user service management and systems to enhance our customer service team's abilities and ensure that users receive the best possible experience. Additionally, we expanded our initiatives to address user feedback, encouraging them to interact with us more extensively and offer more specific opinions and suggestions. Next, I would like to discuss our ESG initiatives. We recently released our third ESG report, highlighting our progress towards sustainability in 2022. At IOS, we believe that fulfilling our social responsibility is a key competitive advantage for our brand, which adult smokers trust. To guide our ESG efforts and disclosures, We perform a thorough material analysis each year, which examines various issues in relation to their importance in Iowa's sustainable development and their relevance to our stakeholders. In light of the introduction of regulatory policies and national standards for e-cigarettes, In 2022, we prioritize product innovation, harm reduction, and product quality in this year's initiatives. In addition, our materiality analysis consider external stakeholders, continue to emphasize on corporate climate actions, prompting us to proactively formulate low carbon development strategies, and strengthen our climate-related information disclosures. We also prioritize public health in our ESG efforts, investing in technological innovation to minimize the impact of evaporative products on the public. Through our 1 plus 4 research chain, we conduct systematic scientific evaluations and research on harm reduction. Validating these efforts, our subsidiary, Shenzhen Wu Xin Technology, was appointed as a 2022 Guangdong Provincial Engineering Technology Research Center for new type intelligent amortizer and inhalation by the Department of Science and Technology of Guangdong Province in December 2022. We are committed to realizing technology to advance public health initiatives and continuously refining our forward-thinking ESG strategy to benefit our company, the stakeholders, and community for the long term. As we move into the second half of the year, we expect an uneven and pumping recovery. However, we believe our effective strategy, premium products, resilient business model, and core capabilities will guide us through the ever-changing market. We will deepen our commitment to offering compliant, high-quality products to adult smokers. positioning IOF for long-term growth as we strive to create sustainable value for all stakeholders. With that, I will now turn the call over to our self, Chao Lu. He will elaborate further on some of our last quarter's initiatives and go over our operational and financial results in more detail.