RLX (RLX) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, May 20, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Wang Ying (Kate Wang)
• Chief Financial Officer — Chao Lu
• Head of Capital Markets — Sam Tsang

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TAKEAWAYS

• Net Revenue -- RMB 1.59 billion, up 96.2% year over year and 38.9% quarter over quarter, driven primarily by international operations, European acquisition accretion, steady China business, and a one-time impact from China's export policy change.
• International Revenue Mix -- Over 70% of total net revenues have come from international business for several consecutive quarters, reflecting a significant shift in revenue base.
• Gross Margin -- Reached 31.8%, up from 28.6% in the same period last year, primarily attributable to improved product mix and supply chain optimization.
• Non-GAAP Operating Margin -- Rose to 19.6% from 13.3% last year, reflecting operational leverage from revenue growth.
• Non-GAAP Income from Operations -- Increased 187.9% year over year to RMB 310.3 million, showing significant operating profit expansion.
• Non-GAAP Net Income -- Reached RMB 357.3 million, an increase of 41.4% from RMB 252.7 million last year, indicating earnings growth converting from top line performance.
• Total Financial Assets -- RMB 14.53 billion (approximate USD 2.1 billion) as of March 31, 2026, down sequentially from RMB 15.73 billion at December 31, 2025, primarily due to dividend payments during the quarter.
• Working Capital Efficiency -- Accounts and notes receivable turnover days were 15, inventory turnover days were 32, and payable turnover days were 49, all indicating efficient operational cycles.
• European Expansion -- The company entered two new international markets in Southeast Asia and Europe this quarter, reinforcing its segmented market strategy and replicating its Asia business model abroad.
• Manufacturing Infrastructure -- The fully operational integrated Nexus facility now consolidates R&D, manufacturing, and commercial operations, improving efficiency, protecting proprietary technology, and reducing the risk of competitive imitation.
• Regulatory Developments -- The U.K.'s Tobacco and Race Act bans cigarette sales to anyone born after 2008 but exempts regulated e-vapor, creating a shifting landscape that management frames as a "tailwind" for compliant harm reduction products.
• New Product Categories -- Modern oral products are being scaled with expanded production and distribution, while heated tobacco’s launch is deferred due to current market dynamics.
• Export Tax Policy Shift -- The cancellation of China's export tax rebate resulted in temporary first-quarter channel inventory front-loading, but management expects minimal long-term impact on cost structure and margins.

SUMMARY

Management emphasized continued international momentum, with new market entries and deepening presence in both Europe and Southeast Asia. Cash resources have been strategically guided toward supporting European integration through infrastructure investments, such as new warehouses, to accelerate local scaling and distribution efficiency. Leaders anticipate the U.K. generational smoking ban will increase compliance barriers and help established brands consolidate share, especially as e-vapor remains available to future adult consumers. RLX is expanding modern oral offerings while pausing near-term heated tobacco investment, prioritizing its position in the immediate e-vapor opportunity set. Financial stability, characterized by sustained cash reserves and disciplined M&A strategy, supports execution of the next growth phase and further Asian and European market penetration.

• The company stated, "Our international business remained our key growth driver," directly attributing over 70% of total net revenue to these geographies.
• Wang Ying highlighted new operational efficiencies developed through the Nexus facility as "a closed loop intellectual property fortress" and a lever to accelerate agile responses to global trends.
• Management characterized Europe's regulatory and commercial environment as both high-barrier and high-value, and described their approach as "highly selective" for further M&A, focusing “long-term synergy rather than an immediate scale.”
• RLX signaled its endorsement of China's regulatory direction, with Sam Tsang stating, "we support regulators in combating illegal products and welcome measures that foster a healthier and more sustainable industry."
• Sam Tsang confirmed a strategy to "blending our global innovation capabilities with their localized institution," to capture market share more efficiently.

INDUSTRY GLOSSARY

• Nexus: RLX's integrated facility consolidating R&D, manufacturing, and commercial operations to protect proprietary technologies and enhance operational agility.
• Tobacco and Race Act: U.K. law phasing out sales of combustible cigarettes for generations born after 2008 while exempting regulated harm reduction alternatives.
• Modern oral products: Smokeless, non-combustible nicotine pouches designed as alternatives to traditional tobacco products.
• Heated tobacco (HMB): Tobacco product category that heats tobacco to deliver nicotine-containing aerosol without combustion.

Full Conference Call Transcript

Sam Tsang: Thank you very much. Hello, everyone, and welcome to RLX Technologies First Quarter 2026 Earnings Conference Call. The company's financial and operational results were released through PR Newswire services earlier today and have been made available online. You can also view the earnings press release by visiting our IR website at ir.relxtech.com. Participants on today's call will include our Chief Executive Officer; Ms. Kate Wang; our Chief Financial Officer, Mr. Chao Lu; and Sam Tsang, Head of Capital Markets. Before we continue, please note that today's discussions 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, anticipate, aim, estimate, intend, plan, 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 affiliate, advisers and representatives do not undertake any obligation 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. For today's call, management will use English as the main language. We will provide simultaneous interpretation on the Chinese line. Please note that the Chinese line is in listen-only mode, and Chinese interpretation is for convenience only. In case of any discrepancy, management statements in the original language will prevail. I will now turn the call over to Ms. Kate Wang. Please go ahead.

Wang Ying: Thank you, Sam, and thank you all for joining today's call. We are off to a robust start in 2023, supported by a highly scalable global ecosystem and our ability to capture rising market opportunities. We achieved strong revenue growth, increasing by 96.2% year-over-year and 38.9% quarter-over-quarter as we continue to accelerate our international expansion and deepen our global presence. Our international business sustained its rapid organic growth, while our Mainland China business demonstrated resilience and stability. We further refined our user-first approach through highly localized strategies and engagement with trusted regional business partners across the value chain to ensure superior product market.

We also integrated our R&D manufacturing and commercial operation into our cutting-edge hub, which we call Nexus, further enhancing our core capabilities and competitive edge. These initiatives, along with our growing operational agility enable us to quickly align with evolving market dynamics and seamlessly meet global demand, further strengthening our presence across key international markets. Let me now walk you through our recent business update in more detail. The global regulatory landscape around tobacco and smokeless alternatives continues to evolve. The United Kingdom's Landmark Tobacco and Race Act, which officially became law in April 2026 is a notable example reflecting a growing global trend towards phasing out combustibles while maintaining regulated pathways for harm reduction alternatives.

Under this rule, anyone born up to 2009 will never be legally committed to purchase combustible cigarettes. Importantly, the ban applies only to cigarettes and exams regulated harm reduction alternatives such as V. In effect, the U.K. is gradually eliminating the future consumer base for cigarettes while preserving the existing regulatory framework for our category. We believe that this will now be an isolated development. Public health improvements are increasingly being pursued worldwide by restricting tobacco while regulating harm reduction products. For companies like IX Technology with strong compliance capabilities, best-in-class product quality and a proactive regulatory approach, this represents a welcome structural tailwind rather than a headwind.

A well-regulated market rewards scale, compliance and innovation, areas where we already lead. As regulatory uncertainty diminish, the competitive landscape is expected to become more defined and our differentiated position may become even more valuable. Moving on to our international expansion. Europe maintains a cornerstone of our global strategy, given its increasingly mature regulatory environment and strong demand for high-quality alternatives. Our May 2025 strategic investment in a European company has delivered value that extends well beyond the financial strengthening our capability in navigating local market dynamics. Our successful integration and operational experience have given us the confidence to evaluate further expansion across the continent.

Our expansion in Europe is driven by a dual engine strategy that place equal importance on strategic M&A and organic growth. While we are optimistic about the European potential, we maintain a highly selective approach to strategic investments, prioritizing long-term synergy rather than an immediate scale. We are focused on building a strong foundation through product and operational excellence, developing products tailored to European consumer preference and regulatory standards while deepening our distribution partnerships and expanding our presence across key retail channels. At the same time, we are crafting our reputation as a premium reliable brand that resonates with local lifestyle and offers innovation that user can trust, ensuring that our presence is both impactful and long-lasting.

Overall, we believe Europe is a high-value, high-barrier market. We are not seeking rapid entry, but rather building a durable presence with care and discipline. On the operational side, I'm pleased to announce that our integrated smart manufacturing facility in Nexus is now fully operational. This is more than manufacturing upgrade. Expanding our self-manufacturing capability and capacity and bringing R&D, manufacturing and commercial operations under one roof allows us to pursue complex, high precision quality standards and long-term strategic directions. Our self-manufacturing capability also serves as a closed loop intellectual property fortress. Our proprietary technologies will maintain fully within our control and advantage that is difficult for competitors to replicate.

In addition, this integrated hub has materially improved our operational efficiency, enabling faster decision-making and a more agile response to global market shifts. To sum up, we continue to integrate regulatory expertise and international market intelligence to build more resilient, more scalable global platform. Against this backdrop, we remain focused on driving innovation and user-centric product development while further enhancing our distribution and retail capabilities and accelerating our expansion in Europe and spontaneously defending and elevating our leading market share in Asia. Looking ahead, with a quality-led growth strategy and a strong commitment to innovation and compliance, we will continue to deliver sustainable long-term value for our global stakeholders.

Now I will hand the call over to Chao to review our financial results in detail.

Chao Lu: Thank you, Kate, and hello, everyone. In the first quarter of 2026, we delivered strong top line results with net revenues reaching RMB 1.59 billion, up 96.2% year-over-year and 38.9% quarter-over-quarter. This significant growth was primarily driven by momentum across our international operations, accretion from our acquired European entity, steady progress in our Mainland China business as well as the onetime impact of changes in China's export policy. Our international business remained our key growth driver, accounting for over 70% of total net revenues for several consecutive quarters. We structurally improved our margin profile through disciplined cost management and scale efficiency across our comprehensive product portfolio.

Gross margin expanded to 31.8% in the first quarter, up from 28.6% in the same period last year, mainly driven by more favorable product mix and ongoing supply chain optimization. The operating leverage from the revenue growth also translated into significant profitability. Our non-GAAP operating margin expanded to 19.6% this quarter compared to 13.3% in the same period last year. Non-GAAP income from operations jumped by 187.9% year-over-year to RMB 310.3 million. Non-GAAP net income for the quarter reached RMB 357.3 million, a 41.4% increase compared to RMB 252.7 million in the same period last year. This underscores our ability to translate top line momentum into sustained high-quality earnings growth. We maintain a highly resilient financial position.

As of March 31, 2026, our total financial assets, including cash, cash equivalents and various deposits and investments reached RMB 14.53 billion, approximately USD 2.1 billion. While this represents a sequential decrease from RMB 15.73 billion as of December 31, 2025, the change primarily reflects our commitment to delivering shareholder value through dividend payments made during the quarter. Our operational efficiency also remains strong, supported by efficient working capital management and a well-controlled cash conversion cycle. In the first quarter, accounts and notes receivable turnover days were 15 days. Inventory turnover days were 32 days and payable turnover days were 49 days.

We entered the remainder of the year with a strong balance sheet, which provides us the financial flexibility to execute our next phase of growth, accelerate our market penetration in Asia and Europe and generate sustainable long-term value for our shareholders.

Operator: Thank you, operator. We're now ready to take the questions. Our first question today will come from Ling Zhao with UBS.

Ling Zhou: Congratulations, management, for the great quarter. I have 2 questions. So the first question is, can management provide an update on the integration of the European invested company and your operations in the U.K. market, please? And then the second question would be on the recent FDA decisions on flavored vapes approval in the U.S. So does management see any implications for Relax global strategy, especially on the potential of operating in the U.S.? On the other hand, does management -- how does management assess the easing of e-cigarette policies in China?

Sam Tsang: Thank you very much, Tony, regarding your 2 questions. So the first question is about our European strategy and also our operations in the U.K. market. So our approach to the integration is centered on strategic alignment rather than day-to-day operational interference. It is a synergetic relationship. We highly value the deep local expertise and market insights that our team from the acquired European companies brings to the table. We believe their understanding of the local landscape is instrumental in refining our broader European strategy. And at this stage, their insights are actively informing our strategic decisions. In return, we are empowering them by providing the necessary capital resources and global platform support to scale their businesses.

For instance, we have recently invested a new local warehouse facility to resolve previous capital constraints that hindered their growth. This infrastructure allows them to significantly scale up operations and improve distribution efficiency. Looking ahead, we intend to leverage our cash position to help them secure more downstream resources. By blending our global innovation capabilities with their localized institution, we can capture market share more efficiently. Regarding your second question about the FDA recent decisions, we currently do not have operations in the United States. We are considering these developments from a broader industry perspective. The recent FDA guidance suggests a potential shift toward a more defined enforcement strategy that may favor credible PMT applications from legitimate industry players.

While this could make product launch more predictable for industry, we cannot speculate on future regulatory outcomes in that market. As for the China market, we support regulators in combating illegal products and welcome measures that foster a healthier and more sustainable industry. We remain fully prepared in terms of product innovation and brand equity to respond to any regulatory changes. At this point, our immediate strategic focus remains on deepening our presence in Asia and Europe and other established international regions, where we have clear operational levers. -- we focus on resources on markets where we can drive tangible growth today. Thank you very much for your questions.

Operator: Our next question today will come from Lydia Ling of Citi.

Lydia Ling: Congratulations on the results. So my question would be on your European business. So actually, we noticed that in U.K., we actually put a smoking ban for people born after 2008. So what would be the implication to your business? And how do you think about like the -- if that would benefit the development of the vape industry? And what will be your outlook for the European business? I think you also mentioned that there will be a strategic focus. So what would be your outlook for the kind of growth in European this year?

Sam Tsang: Thank you very much, Lydia, for your question. We view the U.K.'s generational smoking ban as a significant milestone in the government's long-term commitment to a smoke-free future. It's crucial to note that while the ban targets combustible cigarettes, the purchase age for e-vapor remains at 18. This effectively positioned e-vapor as the only legal nicotine consumption channel for future generations who were born after 2008 as they reach adulthood, reinforcing its role as the primary harm reduction tool. The combination of this ban with the upcoming vaping product duty in October 2026 and the HMRC licensing scheme will significantly raise the barriers to entry.

We believe this effectively clear the market of noncompliant market brands, allowing established compliance leaders like Rx to reclaim and expand our market share in the U.K. market. Thank you very much for your question.

Operator: Our next question today will come from Zoe Zhao of CICC.

Zhuonan Xu: Can you give us some updates on your investment plan in Europe and market strategy for new categories like oral pouch and HMB?

Sam Tsang: Thank you, , for your question. So our European strategy continues to follow a dual engine approach. Our management team has significantly shifted the focus towards European operations, successfully entering into new regions and channel this quarter. We are leveraging and growing understanding of the European consumer to enhance our competitive batch. Regarding M&A, we are actively evaluating opportunities that offer clear long-term strategies. However, we remain highly disciplined and cautious in our valuations. While we see many potential opportunities, these projects involve inherent uncertainties. Therefore, we do not include unannounced projects in our recent guidance, and we will share updates only when they are materialized.

Regarding the new categories that you mentioned, for the modern oral products, we are steadily scaling up our production capacity and actively identifying new distribution channels. We have high confidence in the competitiveness of our oral products and is highly differentiated. Once our overseas manufacturing infrastructure is fully established, we expect to see a significant uplift in sales volume. For HMV heated tobacco, while we possess the necessary technical results for this category, our current market dynamic assessment suggests that the timing is not optimal for large-scale investment. Therefore, we do not have any immediate launch plan for this category.

Our primary focus remains on capturing more market share within the e-vapor sector where we see the most immediate and substantial opportunities for growth. Thank you for your question.

Operator: And our next question today will come from Yan Gao of CDI.

Yun Guo: My question is that will the cancellation of the Chinese export tax rebate affect the company's production cost?

Sam Tsang: Thank you, for your question. In the short term, the anticipated policy shift partially contributed to our significant revenue increase in the first quarter as the cancellation took effect in April 2026, we saw downstream partners engage in strategic inventory positioning during the first quarter to mitigate potential price adjustments. This front-loading effect is now largely behind us, and we observed that the total volume of such push forward is relatively moderate. It is important to clarify that this policy change has little impact on organic end user demand.

It only caused a temporary shift in the timing of channel orders -- because the e-vapor value chain involves multiple layers, the actual impact of this tax change on final retail prices is expected to be manageable. We will implement appropriate cost pass-through mechanisms when necessary, and we believe the long-term impact on our overall cost structure and margins will be minimal. Thank you for your question.

Operator: And our next question today will come from Charlie Chen of CCDI.

Unknown Analyst: I just would like to management to give us more color on the current status of your overseas expansion. And also, do you have entered any new markets in the first quarter?

Sam Tsang: Thank you very much, Charlie, for your question. So in the first quarter of this year, we successfully entered into 2 markets located in Southeast Asia and Europe. Our global expansion strategy is progressing well in line with our segmented approach based on our varying degrees of market maturity. In Asia, where we have established ourselves as the #1 brand, our focus is on leveraging our significant brand equity and scale as a competitive moat. Our top-of-mind brand awareness among adult users in these regions allow us to enter new neighboring markets with a high degree of efficiency and consumer trust. We are essentially replicating our proven SaaS models while further deepening our distribution network.

In Europe, we are in an active phase of strategic exploration and adoption. While the landscape is diverse, we are increasingly confident as we refine our understanding of local consumer preferences and the evolving regulatory framework. Our approach here is more nuanced, focusing on delivering tailored, high-quality products and building deep rooted partnership with local stakeholders to ensure long-term and compliance growth. Thank you for your question.

Operator: This will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Sam Tang for any closing remarks.

Sam Tsang: Thank you once again for joining us today. If you have further questions, please feel free to contact RH Technologies Investor Relations team through the contact information provided on our website or via Piacente Financial Communications.

Operator: The conference has now concluded, and we do thank you for attending today's presentation. You may now disconnect your lines.

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