EX-99.1 2 tm2226362d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

RLX Technology Announces Unaudited Second Quarter 2022 Financial Results

 

BEIJING, September 21, 2022 /PRNEWSWIRE/ - RLX Technology Inc. ("RLX Technology" or the "Company") (NYSE: RLX), a leading branded e-vapor company in China, today announced its unaudited financial results for the second quarter ended June 30, 2022.

 

Second Quarter 2022 Financial Highlights

 

·Net revenues were RMB2,233.9 million (US$333.5 million), compared with RMB2,541.4 million in the same period of 2021.
·Gross margin was 43.8%, compared with 45.1% in the same period of 2021.
·U.S. GAAP net income was RMB441.6 million (US$65.9 million), compared with RMB824.3 million in the same period of 2021.
·Non-GAAP net income1 was RMB634.7million (US$94.8 million), compared with RMB651.8 million in the same period of 2021.

 

"Over the past several months, we have made meaningful strides in adapting our business and product development to the new regulatory framework. Specifically, we have obtained the License for Manufacturing Enterprise and received regulatory approvals for some of our new products, demonstrating our operational excellence and industry-leading R&D capabilities," said Ms. Ying (Kate) Wang, Co-founder, Chairperson of the Board of Directors, and CEO of RLX Technology. "Aligned with our efforts to comply with the new requirements, we remained dedicated to our core strategy, continuously investing in research and development. Since 2018, we have partnered with leading research institutions on scientific research and product development, laying a solid foundation for our sustainable future growth. Furthermore, amid the evolving e-vapor market and volatile macro conditions, we continued to streamline our business structure and optimize our operational processes, comprehensively enhancing our agility and efficiency. As always, we remain committed to fulfilling our users' demands for safe, high-quality products in strict compliance with regulatory requirements."

 

"We are pleased that we recorded net revenues of RMB2.2 billion in the second quarter. We believe this elevated level of revenue in the second quarter was primarily due to frontloading of sales in the downstream value chain in anticipation of the discontinuation of our older products as the industry transition period nears its end in the third quarter. Meanwhile, our ongoing efforts to optimize cost structure and maximize operational efficiency paid off in the second quarter. Non-GAAP expense ratio was down quarter over quarter, leading to improved profitability," said Mr. Chao Lu, Chief Financial Officer of RLX Technology. "In light of the regulatory changes, we are off to a slow start of the sales of our new products that are compliant with the National Standards in the new transaction system mandated by the regulators. Despite the macro headwinds, we will continue to steadily focus on cost optimization while reinforce our product competitiveness under the new regulatory regime to create sustainable, long-term growth for our shareholders."

 

Second Quarter 2022 Financial Results

 

Net revenues were RMB2,233.9 million (US$333.5 million) in the second quarter of 2022, compared with RMB2,541.4 million in the same period of 2021. The decrease was primarily due to the suspension of store expansions and new product launches during the transition period to comply with regulatory requirements.

 

Gross profit was RMB977.9 million (US$146.0 million) in the second quarter of 2022, compared with RMB1,146.5 million in the same period of 2021.

 

 

1 Non-GAAP net income is a non-GAAP financial measure. For more information on the Company's non-GAAP financial measures, please see the section “Non-GAAP Financial Measures” and the table captioned "Unaudited Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this press release.

 

 

 

 

Gross margin was 43.8% in the second quarter of 2022, compared with 45.1% in the same period of 2021. The decrease was primarily due to (i) an unfavorable product mix shift, (ii) an increase in inventory provision, and (iii) an impairment loss recognized for property, plant and equipment to comply with recent regulatory developments.

 

Operating expenses were RMB530.9 million (US$79.3 million) in the second quarter of 2022, representing an increase of 217.6% from RMB167.2 million in the same period of 2021. The increase in operating expenses was primarily due to the change in share-based compensation expenses, which was RMB193.2 million (US$28.8 million) in the second quarter of 2022 compared with a positive RMB172.5 million in the same period of 2021, consisting of (i) share-based compensation expenses of RMB17.9 million (US$2.7 million) recognized in selling expenses, (ii) share-based compensation expenses of RMB151.1 million (US$22.5 million) recognized in general and administrative expenses, and (iii) share-based compensation expenses of RMB24.2 million (US$3.6 million) recognized in research and development expenses. The increase in share-based compensation expenses was primarily due to the changes in the fair value of the share incentive awards that the Company granted to its employees as affected by the fluctuations of the Company's share price.

 

Selling expenses decreased by 2.7% to RMB122.6 million (US$18.3 million) in the second quarter of 2022 from RMB126.0 million in the same period of 2021. The decrease was mainly driven by (i) a decrease in salaries and welfare benefits and (ii) a decrease in branding material expenses, partially offset by an increase in share-based compensation expenses.

 

General and administrative expenses increased by 531.3% to RMB290.7 million (US$43.4 million) in the second quarter of 2022, from RMB46.1 million in the same period of 2021. The increase was mainly driven by (i) an increase in share-based compensation expenses and (ii) an increase in salaries and welfare benefits.

 

Research and development expenses were RMB117.6 million (US$17.6 million) in the second quarter of 2022, compared with a positive RMB4.9 million in the same period of 2021. The increase was mainly driven by (i) an increase in share-based compensation expenses, (ii) an increase in salaries and welfare benefits, and (iii) an increase in consulting expenses.

 

Income from operations was RMB446.9million (US$66.7 million) in the second quarter of 2022, compared with RMB979.3 million in the same period of 2021.

 

Income tax expense was RMB204.3 million (US$30.5 million) in the second quarter of 2022, compared with RMB204.2 million in the same period of 2021.

 

U.S. GAAP net income was RMB441.6 million (US$65.9 million) in the second quarter of 2022, compared with RMB824.3 million in the same period of 2021.

 

Non-GAAP net income was RMB634.7 million (US$94.8 million) in the second quarter of 2022, compared with RMB651.8 million in the same period of 2021.

 

U.S. GAAP basic and diluted net income per American depositary share ("ADS") were RMB0.348 (US$0.052) and RMB0.347 (US$0.052), respectively, in the second quarter of 2022, compared with U.S. GAAP basic and diluted net income per ADS of RMB0.595 and RMB0.591, respectively, in the same period of 2021.

 

 

 

 

Non-GAAP basic and diluted net income per ADS2 were RMB0.494 (US$0.074) and RMB0.492 (US$0.073), respectively, in the second quarter of 2022, compared with non-GAAP basic and diluted net income per ADS of RMB0.470 and RMB0.467, respectively, in the same period of 2021.

 

Balance Sheet and Cash Flow

 

As of June 30, 2022, the Company had cash and cash equivalents, restricted cash, short-term bank deposits, net, short-term investments, and long-term bank deposits, net of RMB16,831.1 million (US$2,512.8 million), compared with RMB14,880.8 million as of June 30, 2021. For the second quarter ended June 30, 2022, net cash generated from operating activities was RMB1,444.4 million (US$215.6 million).

 

Regulatory Developments and Updates on Regulatory Approvals

 

Since the first quarter of 2022, the relevant government authorities in China have issued a series of implementing rules and guiding opinions to strengthen oversight of e-cigarette products and regulate the e-cigarette industry. These rules and opinions set forth that, among others, all e-cigarette manufacturing enterprises must apply with the department of tobacco monopoly administration under the State Council of the People's Republic of China (the "State Tobacco Monopoly Administration") and obtain a License for Manufacturing Enterprise, while e-cigarette products must satisfy various standards and technical requirements prescribed therein, and pass the technical review conducted by professional institutions organized by the State Tobacco Monopoly Administration before being launched for sale. Discussion of the relevant regulatory developments and the corresponding risks, uncertainties and/or factors in a more comprehensive and detailed manner is and will be included in the Company's filings with the U.S. Securities and Exchange Commission, including, but not limited to, the Company's annual report on Form 20-F filed on April 29, 2022.

 

On June 10, 2022, one of the subsidiaries of the Company obtained a License for Manufacturing Enterprise from the State Tobacco Monopoly Administration to manufacture e-liquid in compliance with China's Administrative Measures for E-Cigarettes.

 

On July 22, 2022, another subsidiary of the Company obtained a License for Manufacturing Enterprise from the State Tobacco Monopoly Administration to own the RELX brand and manufacture RELX branded e-vapor rechargeable devices, cartridge products, and products sold in combination with e-vapor rechargeable devices and cartridge products in compliance with China's Administrative Measures for E-Cigarettes. The approved manufacturing capacity is 15,050,000 units of e-vapor rechargeable devices per year, 328,700,000 units of cartridge products per year, and 6,100,000 units of disposable e-vapor products per year. The valid term for the License for Manufacturing Enterprise obtained is from July 18, 2022, to July 31, 2023.

 

Conference Call

 

The Company's management will host an earnings conference call at 8:00 A.M. U.S. Eastern Time on September 21, 2022 (8:00 P.M. Beijing/Hong Kong Time on September 21, 2022).

 

Dial-in details for the earnings conference call are as follows:

 

United States (toll-free): +1-888-317-6003
International: +1-412-317-6061
Hong Kong, China (toll-free): +800-963-976
Hong Kong, China: +852-5808-1995
Mainland China: 400-120-6115
Participant Code: 3343721

 

 

2 Non-GAAP basic and diluted net income per ADS is a non-GAAP financial measure. For more information on the Company's non-GAAP financial measures, please see the section “Non-GAAP Financial Measures” and the table captioned "Unaudited Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this press release.

 

 

 

 

Participants should dial in 10 minutes before the scheduled start time and ask to be connected to the call for "RLX Technology Inc." with the Participant Code as set forth above.

 

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at https://ir.relxtech.com.

 

A replay of the conference call will be accessible approximately two hours after the conclusion of the call until September 28, 2022, by dialing the following telephone numbers:

 

United States: +1-877-344-7529
International: +1-412-317-0088
Replay Access Code: 4561200

 

 

 

 

About RLX Technology Inc.

 

RLX Technology Inc. (NYSE: RLX) is a leading branded e-vapor company in China. The Company leverages its strong in-house technology, product development capabilities, and in-depth insights into adult smokers' needs to develop superior e-vapor products. RLX Technology Inc. sells its products through an integrated offline distribution and retail model tailored to China's e-vapor market.

 

For more information, please visit: http://ir.relxtech.com.

 

Non-GAAP Financial Measures

 

The Company uses non-GAAP net income and non-GAAP basic and diluted net income per ADS, each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes. Non-GAAP net income represents net income excluding share-based compensation expenses. Non-GAAP basic and diluted net income per ADS is computed using Non-GAAP net income attributable to RLX Technology Inc. and the same number of ADSs used in U.S. GAAP basic and diluted net income per ADS calculation.

 

The Company presents these non-GAAP financial measures because they are used by the management to evaluate its operating performance and formulate business plans. The Company believes that they help identify underlying trends in its business that could otherwise be distorted by the effect of certain expenses that are included in net income. The Company also believes that the use of the non-GAAP measures facilitates investors' assessment of its operating performance, as they could provide useful information about its operating results, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by the management in its financial and operational decision making.

 

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. They should not be considered in isolation or construed as an alternative to net income, basic and diluted net income per ADS or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review its historical non-GAAP financial measures to the most directly comparable U.S. GAAP measures. The non-GAAP financial measures here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. The Company encourages investors and others to review its financial information in its entirety and not rely on any single financial measure.

 

For more information on the non-GAAP financial measures, please see the table captioned "Unaudited Reconciliation of GAAP and non-GAAP Results" set forth at the end of this press release.

 

Exchange Rate Information

 

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB are made at a rate of RMB6.6981 to US$1.00, the exchange rate on June 30, 2022, set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollar amounts referred could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all.

 

 

 

 

Safe Harbor Statement

 

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "is/are likely to," "potential," "continue" and similar statements. Among other things, quotations from management in this announcement, as well as the Company's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's growth strategies; its future business development, results of operations and financial condition; trends and competition in China's e-vapor market; changes in its revenues and certain cost or expense items; PRC governmental policies, laws and regulations relating to the Company's industry, and general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is current as of the date of this press release, and the Company does not undertake any obligation to update such information, except as required under applicable law.

 

For more information, please contact:

 

In China:

 

RLX Technology Inc. 

Head of Investor Relations 

Sam Tsang 

Email: ir@relxtech.com

 

The Piacente Group, Inc. 

Jenny Cai 

Tel: +86-10-6508-0677 

Email: RLX@tpg-ir.com

 

In the United States:

 

The Piacente Group, Inc. 

Brandi Piacente 

Tel: +1-212-481-2050 

Email: RLX@tpg-ir.com

 

 

 

 

RLX TECHNOLOGY INC. 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands)

 

   As of 
   December 31,   June 30,   June 30, 
   2021   2022   2022 
   RMB   RMB   US$ 
ASSETS               
Current assets:               
Cash and cash equivalents   5,208,967    1,709,115    255,164 
Restricted cash   500    500    75 
Short-term bank deposits, net   4,022,119    5,314,994    793,508 
Receivables from online payment platforms   10,006    2,653    396 
Short-term investments   3,621,637    4,320,591    645,047 
Accounts and notes receivable, net   14,024    17,144    2,560 
Inventories, net   589,088    133,545    19,938 
Amounts due from related parties   1,936    9,012    1,345 
Prepayments and other current assets, net   482,659    216,798    32,367 
Total current assets   13,950,936    11,724,352    1,750,400 
Non-current assets:               
Property, equipment and leasehold improvement, net   143,155    116,335    17,368 
Intangible assets, net   8,366    8,178    1,221 
Long-term investments, net   12,000    8,000    1,194 
Deferred tax assets, net   20,856    20,856    3,114 
Right-of-use assets, net   176,258    130,449    19,476 
Long-term bank deposits, net   2,004,593    5,485,867    819,018 
Other non-current assets   48,961    22,226    3,318 
Total non-current assets   2,414,189    5,791,911    864,709 
Total assets   16,365,125    17,516,263    2,615,109 
                
LIABILITIES AND SHAREHOLDERS' EQUITY               
Current liabilities:               
Accounts and notes payable   1,288,845    1,385,027    206,779 
Short-term loan   -    100,000    14,930 
Contract liabilities   286,651    459,051    68,534 
Salary and welfare benefits payable   170,393    141,937    21,191 
Taxes payable   597,761    420,582    62,792 
Accrued expenses and other current liabilities   313,396    252,513    37,699 
Lease liabilities - current portion   80,582    56,944    8,502 
Total current liabilities   2,737,628    2,816,054    420,427 
                
Non-current liabilities:               
Deferred tax liabilities   4,513    4,513    674 
Lease liabilities - non-current portion   104,232    87,847    13,115 
Total non-current liabilities   108,745    92,360    13,789 
Total liabilities   2,846,373    2,908,414    434,216 
                
Shareholders' Equity:               
Total RLX Technology Inc. shareholders' equity   13,514,952    14,641,773    2,185,958 
Noncontrolling interests   3,800    (33,924)   (5,065)
Total shareholders' equity   13,518,752    14,607,849    2,180,893 
                
Total liabilities and shareholders' equity   16,365,125    17,516,263    2,615,109 

 

 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME

(All amounts in thousands, except for share and per share data, or otherwise noted)

 

   For the three months ended   For the six months ended 
   June 30,   March 31,   June 30,   June 30,   June 30,   June 30,   June 30, 
   2021   2022   2022   2022   2021   2022   2022 
   RMB   RMB   RMB   US$   RMB   RMB   US$ 
Net revenues   2,541,402    1,714,450    2,233,893    333,511    4,939,898    3,948,343    589,472 
Cost of revenues   (1,394,916)   (1,057,447)   (1,256,010)   (187,517)   (2,689,339)   (2,313,457)   (345,391)
Gross profit   1,146,486    657,003    977,883    145,994    2,250,559    1,634,886    244,081 
                                    
Operating expenses:                                   
Selling expenses   (126,005)   (75,947)   (122,634)   (18,309)   (417,540)   (198,581)   (29,647)
General and administrative expenses   (46,056)   66,395    (290,745)   (43,407)   (758,870)   (224,350)   (33,495)
Research and development expenses   4,911    (24,007)   (117,567)   (17,552)   (206,723)   (141,574)   (21,136)
Total operating expenses   (167,150)   (33,559)   (530,946)   (79,268)   (1,383,133)   (564,505)   (84,278)
Income from operations   979,336    623,444    446,937    66,726    867,426    1,070,381    159,803 
                                    
Other income：                                   
Interest income, net   16,069    27,151    42,724    6,379    25,483    69,875    10,432 
Investment income   23,868    32,239    40,631    6,066    38,795    72,870    10,879 
Others, net   9,185    116,857    115,586    17,257    6,018    232,443    34,703 
Income before income tax   1,028,458    799,691    645,878    96,428    937,722    1,445,569    215,817 
Income tax expense   (204,154)   (112,636)   (204,316)   (30,504)   (380,447)   (316,952)   (47,320)
Net income   824,304    687,055    441,562    65,924    557,275    1,128,617    168,497 
Less: net income attributable to noncontrolling interests   -    (18,226)   (19,499)   (2,911)   -    (37,725)   (5,632)
Net income attributable to RLX Technology Inc.   824,304    705,281    461,061    68,835    557,275    1,166,342    174,129 
Other comprehensive (loss)/income:                                   
Foreign currency translation adjustments   (184,772)   (45,824)   580,438    86,657    (9,249)   534,614    79,816 
Total other comprehensive (loss)/income   (184,772)   (45,824)   580,438    86,657    (9,249)   534,614    79,816 
Total comprehensive income   639,532    641,231    1,022,000    152,581    548,026    1,663,231    248,313 
Less: total comprehensive income attributable to noncontrolling interests   -    (18,226)   (19,499)   (2,911)   -    (37,725)   (5,632)
Total comprehensive income attributable to RLX Technology Inc.   639,532    659,457    1,041,499    155,492    548,026    1,700,956    253,945 
                                    
Net income per ordinary share/ADS                                   
 Basic   0.595    0.528    0.348    0.052    0.382    0.877    0.131 
 Diluted   0.591    0.521    0.347    0.052    0.381    0.867    0.129 
                                    
Weighted average number of ordinary shares/ADSs                                   
Basic   1,385,410,036    1,336,118,854    1,323,877,777    1,323,877,777    1,457,602,981    1,329,964,500    1,329,964,500 
Diluted   1,394,565,595    1,354,294,220    1,330,060,097    1,330,060,097    1,462,159,428    1,345,014,312    1,345,014,312 

 

 

 

 

RLX TECHNOLOGY INC.

UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands, except for share and per share data, or otherwise noted)

 

   For the three months ended   For the six months ended 
   June 30,   March 31,   June 30,   June 30,   June 30,   June 30,   June 30, 
   2021   2022   2022   2022   2021   2022   2022 
   RMB   RMB   RMB   US$   RMB   RMB   US$ 
Net income   824,304    687,055    441,562    65,924    557,275    1,128,65217    168,497 
Add: share-based compensation expenses                                   
Selling expenses   (51,473)   (41,939)   17,896    2,672    69,230    (24,043)   (3,590)
General and administrative expenses   (41,404)   (230,087)   151,069    22,554    577,089    (79,018)   (11,797)
Research and development expenses   (79,666)   (53,211)   24,213    3,615    58,647    (28,998)   (4,329)
Non-GAAP net income   651,761    361,818    634,740    94,765    1,262,241    996,558    148,781 
                                    
Net income attributable to RLX Technology Inc.   824,304    705,281    461,061    68,835    557,275    1,166,342    174,129 
Add: share-based compensation expenses   (172,543)   (325,237)   193,178    28,841    704,966    (132,059)   (19,716)
Non-GAAP net income attributable to RLX Technology Inc.   651,761    380,044    654,239    97,676    1,262,241    1,034,283    154413 
                                    
Non-GAAP net income per ordinary share/ADS                                   
- Basic   0.470    0.284    0.494    0.074    0.866    0.778    0.116 
- Diluted   0.467    0.281    0.492    0.073    0.863    0.769    0.115 
Weighted average number of ordinary shares/ADSs                                   
- Basic   1,385,410,036    1,336,118,854    1,323,877,777    1,323,877,777    1,457,602,981    1,329,964,500    1,329,964,500 
- Diluted   1,394,565,595    1,354,294,220    1,330,060,097    1,330,060,097    1,462,159,428    1,345,014,312    1,345,014,312 

 

 

 

 

RLX TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands)

 

   For the three months ended   For the six months ended 
   June 30,   March 31,   June 30,   June 30,   June 30,   June 30,   June 30, 
   2021   2022   2022   2022   2021   2022   2022 
   RMB   RMB   RMB   US$   RMB   RMB   US$ 
Net cash generated from operating activities   649,441    308,169    1,444,388    215,640    1,477,006    1,752,557    261,649 
Net cash used in investing activities   (3,620,360)   (950,764)   (4,145,885)   (618,964)   (6,434,607)   (5,096,649)   (760,910)
Net cash (used in)/generated from financing activities   (6,174)   (161,612)   (145,189)   (21,676)   10,031,248    (306,801)   (45,804)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash   (146,515)   (20,556)   171,597    25,620    (2,289)   151,041    22,551 
                                    
Net (decrease)/increase in cash and cash equivalents and restricted cash   (3,123,608)   (824,763)   (2,675,089)   (399,380)   5,071,358    (3,499,852)   (522,514)
                                    
Cash, cash equivalents and restricted cash at the beginning of the period   9,649,767    5,209,467    4,384,704    654,619    1,454,801    5,209,467    777,753 
                                    
Cash, cash equivalents and restricted cash at the end of the period   6,526,159    4,384,704    1,709,615    255,239    6,526,159    1,709,615    255,239