RLX Technology's Q3 2022 Net Income Decreases.

According to a report from RLX Technology, the net income for the third quarter of 2022 was RMB 1.04 billion (approximately USD 146.8 million), which is lower than the RMB 1.68 billion reported during the same period in 2021. The main reason for the decrease is the suspension of store expansions and the discontinuation of older products during the transition to new national standards for vapor products in China.

RLX Technology, a Chinese e-cigarette maker, has reported a decrease in gross profit in the current quarter compared to the same period last year, with a gross profit of CNY 522 million compared to CNY 656 million in 2020. However, the company's gross profit margin has increased from 39.1% to 50%, which RLX attributes to favorable changes in its distribution channels. As RLX gradually terminates contracts with distributors without wholesale licenses and begins directly selling to retailers, it has seen an increase in sales from retail stores. The company has also benefited from a reduction in direct costs associated with promotional activities.

Throughout the third quarter of 2022, we have been dedicated to preparing for the smooth transition to the new national standards, which will come into effect on October 1, 2022. Specifically, we have reduced our shipments of old products and gradually shifted towards a region-based national trading platform. We have now achieved nationwide coverage across all regions.

In addition to actively adapting to new standards, we are also committed to fulfilling our social responsibility, which we believe is one of our core competitive advantages. We recently released our annual corporate social responsibility report, which summarizes our efforts in market responsibility, research and development investment, environmental protection, employee career development, and corporate governance. I am proud to share that our latest S&P CSA ESG score leads 67% of our peers globally, demonstrating our strong commitment to sustainable development and ESG best practices.

During the third quarter, we achieved a net revenue of approximately RMB 1 billion. The decline in revenue compared to the previous quarter was mainly due to the cessation of production of our old products during the transition period to the new national standard, as well as the high comparison base in the second quarter, which was mainly attributed to the sales expectation of our old products ceasing production. However, we believe that our diversified product portfolio will continue to meet the needs of adult smokers, and our sales will gradually recover. This was stated by RLX Technology's CFO, Chao Lu.

At the same time, our ongoing efforts to improve operational efficiency have proven effective as evidenced by a 30.9% decrease in non-GAAP operating expenses compared to the previous period. However, the implementation of a 36% consumption tax on e-cigarette manufacturers, effective November 1, 2022, will have a negative impact on our profitability in the coming quarters. As we navigate evolving regulations, cost control measures will remain a key focus of our strategic initiatives while maintaining sustainable long-term growth.

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