RLX Technology Inc.

Hello, ladies and gentlemen. Thank you for standing by for IRLX Technology, Inc.' 's first quarter 2024 earnings conference call. At this time, all participants are in the suddenly 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 RH Technologies' first quarter 2024 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 IIL section of our website at il.relaxtech.com. Participants on today's call will include our Chief Executive Officer, Ms. Kate Wang, our Chief Financial Officer, 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, 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 obligation to update this forward-looking information, except as required under the applicable law. Please note that RLX Technologies' 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 Hwang. Please go ahead.

Thank you, Sam, and thanks, everyone, for making time to join our earnings conference call today. I will begin with an overview of our international initiatives, followed by a discussion of illicit products impact on our business before I hand it over to our CFO for a review of our financials. 2024 is off to a solid start. Our operations in Southeast and North Asia are running smoothly, and our international expansion is progressing well. Since terminating our non-compete agreement with IELTS International in November 2023, our team has been diligently researching the regulatory environment and competitive landscape of the markets worldwide to inform our strategic blueprint. After thoroughly evaluating various markets, we are ready to determine our next steps and develop tailored growth strategies for each region. With our leading product development capabilities and broad portfolio of premium products for adult smokers, We are confident that we can meet each market's unique needs. We plan to expand into additional regions and we'll keep you updated on our progress in future calls. On product diversification, we are broadening our portfolio in response to rising living costs and that are impacting users both domestically and overseas. By offering more SKUs across a wider price spectrum, we can cater to diverse consumer needs and capture additional demand. In overseas markets, we are expanding our offerings beyond closed systems, starting with e-liquid products. and we plan to introduce new open system device at a later stage. Our recent launch of new e-liquid products in Southeast Asia has been well received, showing promising initial results. Regarding regulatory environments in overseas markets, we are seeing the early impact of bans on disposable. Retailers and adult users are shifting from disposable to other subcategories, such as power systems. As the leading global players in the power system market, these regulatory changes present prime opportunities for us to increase our future market share. We are poised to capitalize on this transition with an effective marketing strategy and pipelines of compliant products that meet adult smokers' needs at every price point. Turning to the impact of illicit products domestically, illicit products continue to challenge compliant products. However, we are encouraged by Chinese authorities' announcement of another round of special actions to crack down on illicit products in March. This year's initiative, spanning four months, one month longer than last year's, will focus on improving case investigation and handling and building an effective enforcement system for the industry. We are pleased to see China's regulatory authorities tackling these serious issues, though there is still a long way to go. We are already seeing some positive outcomes. For instance, authorities in Zhejiang Province successfully cracked a case involving the entire supply chain of counterfeit e-cigarettes. from product to sales. They dismantled one illegal manufacturer and two production lines, seizing 40 sets of production equipment, over 35,000 disposable e-cigarettes, over 30,000 cartridges, over 2,900 devices, and 1 million e-cigarette accessories. The seized goods were valued at more than 10 million RMB, and the total amount involved in the investigation exceeds 100 million RMB. Additionally, authorities in Gansu Province recently uncovered an illegal e-cigarette manufacturing and sales enterprise operating online. They dismantled three illegal manufacturing sites, three storage sites, and six scale shops, seizing over 2,800 disposable e-cigarettes and over 290,000 cartridges. The total value of seized goods exceeds 8.8 million RMB, with the total amount involved in the investigation surpassing As an industry leader and socially responsible company, IOX remains committed to advocating for a well-regulated e-vapor industry and collaborating with regulators to create an orderly and healthy market. Authorities are also increasingly cracking down on illicit products. In the United States, for example, the state of Florida has implemented a registry for disposable wipes. Starting March 1st, 2025, manufacturers that sell prohibited products in the state will face a $1,000 US dollar daily fine. per product until it is removed from the market. This regulation also applied to retailers, wholesalers, and distributors that ship products into Florida. Additionally, anyone who sells a nicotine product, including Whip, to someone under 21 for a third or subsequent time will face a third degree felony charge punishable by up to $5,000 in fines and five years in prison. In the UK, authorities are cracking down on unlicensed imports and serves in use vaping. Both border control and local authorities are working to seize unauthorized counterfeit products. The government is expected to announce new rules for the industry, which could include a ban on disposable vapes, a licensing scheme for retailers, and new taxes, among other regulatory measures. As a legitimate player, we view these actions as positive developments that will contribute to a healthy and orderly market, benefiting our future business development. In conclusion, our strategic expansion initiatives are already yielding positive results, setting the stage for future success. We remain confident that EVAPOR products will continue to gain traction as a harm reduction tool for adult smokers, even as regulations evolve worldwide. With an outstanding product portfolio, agile operations, and deep industry expertise, we are ready to create and seize opportunities on a global stage. 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.