RLX Technology Inc.

Hello, ladies and gentlemen. Thank you for standing by for RLX Technology Inc's third quarter 2023 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.

Thank you very much. Hello, everyone, and welcome to IR Technology's third quarter 2020 free earnings conference call. The company's financial and operational results were released through PR on this 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 ir.relectech.com. Participants on today's call will include our CEO, Ms. Kate Wang, our CFOs, Chao Lu, and myself. 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, expect, target, estimate, intent, 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, its affiliates, advisors, and representatives do not undertake any obligations 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. RLX 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.

Thank you, Sam, and thanks, everyone, for making time to join our earnings conference call today. Before I get into our third quarter results, I would like to briefly update you on our industry's macro and regulatory involvement. As most of you know, it has been a year since the new regulation framework came into effect. bringing a number of changes to the industry. On the supply side, the new rules have pushed industry participants across the value chain to adjust their businesses and standardize their operations under the authority's supervision. This no longer concerns some strong players including us, who have already adapted to the new regulations and proactively developed new compliant products to meet users' needs. However, persistent irregularities among other industry participants continue to disturb the market order and adversely affect the industry's recovery with an active impact. of illegal flavored products lingering. On the demand side, the new regulations seem to have less impact on users and consumption. Studies have shown that most evapour users are still unaware of the changes brought about by the new regulations. A survey conducted by Shanghai Jiao Tong University reviewed that 40% of users now mainly use national standard of compliance products, but 17% have not even tried compliance products. Furthermore, only 40% of users said they knew that legitimate retailers are only allowed to sell tobacco-flavored products. Users' lack of awareness of the new regulations has slowed the transition to compliant products, as has the easy availability of legal flavored products. Advocating users about the new regulations Complying the products' advantages and the dangers of illicit products is pivotal to the industry's recovery. But this will take time and effort. Amid this challenging environment, we continue to refine and broaden our product portfolio while improving operational efficiency during the third quarter. I'm pleased to say that these efforts paid off, reflecting our strong execution of our effective core strategy. We narrowed our operating loss and boosted cash flow during this quarter. We are also seeing signs of sequelae recovery in our top sign. Our CFO will provide the details of those results in just a moment. Now let me share a bit more about our strategic efforts and the progress of our product portfolio improvement. In terms of cartridges, we now offer five distinctive series of compliant devices at various price points versus just two series, Phantom and Phantom Pro, a year ago. Last month, we launched LeiLi, our fifth compliant series, featuring an adjustable power at a more affordable price than Phantom Pro and ZSUS. We have also quickly expanded our flavor offerings with 17 distinct tobacco flavors now available versus two back in October 2002. Our wide selection of compliant products is designed to fulfill diverse demands across every user's taste and budget. We will continue to closely monitor market demand and collect users' feedback to inform our product refinements further while leveraging our leading R&D capabilities and deep industry knowledge to develop our portfolio accordingly. Our product's value proposition to users extended far beyond our broad production of product selection. First, IOX has prioritized quality control and product safety since our inception. Supported by our strong research quality control and safety assessment capabilities, we can guarantee higher product quality and safety. All of our products and ingredients must meet international standards and obtain regulatory approval before hitting the market. Furthermore, as a fully compliant participant, we greatly value this consumption clearance and provide outstanding after-sales service If users have problems with our products, we can call our whole line to visit our stores for assistance. Our excellent customer service team can respond and address users' issues in a timely manner with professional service and patient solutions. We also offer a one-year warranty on all of our devices and cartridges. These unique advantages add immense value to our products and provide peace of mind for users. In contrast, illegal products are manufactured by unlicensed factories, leading to poor quality, a lack of quality control, and potential health and safety issues. Illegal products may have dangerously high nicotine concentration levels or contain levels of nickel or chromium exceeding the standards, as well as other banned ingredients. Illicit cartridges also frequently have oversized tanks, which can create severe safety hazards when used in conjunction with many compliant vaping devices. We remain confident that our growing lineup of quality products will continue to earn more users' recognition, and ultimately, their loyalty as adult smokers realize our product's superiority and develop new habits. Meanwhile, we are trying to enhance users' knowledge of new regulations and collaborating with regulators to combat illegal products to create a healthy and orderly market. Before I conclude, I would like to share that our RelaxQuality and SafeLab recently received customer testing facilities certificate approval from Eurofins Technologies, becoming the first EVAPOR brand in China to gain this certification. The recognition by the industry-leading authority indicates that our lab's capabilities of testing electrochemical times meets the global standard. qualifying our test results for acceptance by 54 SAECC member countries and regions worldwide. Through our ongoing efforts in scientific research and development, we continue to enhance our product safety assessment capabilities and quality control. In conclusion, we continue to afford ahead during the quarter made a challenging environment. We have made meaningful progress in our recovery over the past year, with an intense focus on our core strategies to develop our portfolio and enhance efficiencies. Looking ahead, we see external havens persisting especially the lingering negative impact of illegal products and the uncertainties in the consumption environment. As such, we will deepen our commitment to offering compliant, high-quality products to adult smokers and educating users on their various benefits. Meanwhile, to catch potential growth opportunities in the international market, on November 10th, 2023, we terminated an existing non-competition agreement with IELX, Inc., which had been entered into on December 16th, 2020. Terminating this agreement gives us the flexibility to build an international presence in the future by conducting tobacco harm reduction product business outside China. As we move into 2024, we believe our expansion to international markets, effective product strategy, and resilience in this model will propel our recovery, positioning RLX for long-term growth and sustainable value creation. With that, I will now turn the call over to our CFO, 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.