RLX Technology Inc. 6-K Analysis & Summary – 3/14/2025

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RLX Technology Inc.

6-K

Earnings Release (Preliminary), Guidance Update, Stock Buyback

Filing date:

03/14/2025

TLDR:

RLX Technology Inc. announced its unaudited financial results for the fourth quarter and fiscal year 2024, highlighting revenue growth and global expansion, and also repurchased shares and declared cash dividends.

ELI5:

RLX, a vaping company, made more money this year because they sold more products overseas and managed their costs better. They also gave some of that money back to their investors.

Accession #:

0001104659-25-023665

Published on

March 16, 2025

Analyst Summary

RLX Technology Inc. reported a significant increase in net revenues for both Q4 2024 and FY 2024, primarily driven by international expansion.
Gross margins improved in both Q4 and FY 2024 due to a favorable change in revenue mix and cost optimization initiatives.
GAAP net income decreased in Q4 2024 but increased for the full year 2024.
The company repurchased approximately US$109.2 million of its ordinary shares during fiscal year 2024 and returned approximately US$122.9 million to its shareholders through share repurchases and dividends.
Management is focused on international markets, harm-reduction solutions, innovation, compliance, and product portfolio diversity for 2025.
Inventory turnover increased significantly from 2.68 in 2023 to 12.05 in 2024, indicating improved efficiency in managing inventory.
Revenue growth was 73.26%, significantly higher than the vaping industry average of 5-10%.

Opportunities and Risks

Opportunity: Continued international expansion offers significant growth potential.
Opportunity: Focus on harm-reduction solutions aligns with evolving consumer preferences and regulatory trends.
Risk: Evolving regulations in the e-vapor industry could impact operations and financial performance.
Risk: Competitive pressures in the e-vapor market require continuous innovation and effective marketing.
Risk: Fluctuations in share-based compensation expenses can distort financial results.

Potential Implications

Company Performance

Continued revenue growth and improved margins could lead to sustained profitability.
Effective management of operating expenses will be crucial for maintaining profitability.
Successful international expansion will be key to long-term growth.
The company’s strong cash position provides flexibility for strategic investments and shareholder returns.

Stock Price

Positive financial results and shareholder returns could drive stock price appreciation.
Regulatory uncertainties and competitive pressures could create volatility in the stock price.
Investor sentiment towards the e-vapor industry could impact the stock price.

RLX Technology Inc. (RLX) – Form 6-K Filing Report – March 14, 2025

Executive Summary

This report analyzes RLX Technology Inc.’s Form 6-K filing, submitted on March 14, 2025, which contains the unaudited financial results for the fourth quarter and fiscal year ended December 31, 2024. The company demonstrates strong revenue growth driven by international expansion, improved gross margins, and a return to profitability. While GAAP net income decreased in Q4, full-year results show improvement. The company is actively returning value to shareholders through share repurchases and dividends. Overall, the outlook appears positive, but investors should monitor the impact of regulatory changes and competitive pressures on the e-vapor market.

Company Overview

RLX Technology Inc. (NYSE: RLX) is a leading global branded e-vapor company. The company focuses on developing superior e-vapor products by leveraging its in-house technology, product development capabilities, and insights into adult smokers’ needs. The company’s primary market is international, with a focus on open-system and disposable e-vapor products.

Detailed Analysis

Financial Performance

Net Revenues

* **Q4 2024:** RMB 813.5 million (US$111.4 million), a significant increase from RMB 520.5 million in Q4 2023.
* **FY 2024:** RMB 2,748.6 million (US$376.6 million), a substantial increase from RMB 1,586.4 million in FY 2023.
* **Key Driver:** International expansion is the primary driver of revenue growth.

Gross Margin

* **Q4 2024:** 27.0%, compared to 23.7% in Q4 2023.
* **FY 2024:** 26.4%, compared to 24.4% in FY 2023.
* **Key Driver:** Favorable change in revenue mix and cost optimization initiatives.

Net Income (GAAP)

* **Q4 2024:** RMB 127.4 million (US$17.5 million), decreased from RMB 216.0 million in Q4 2023.
* **FY 2024:** RMB 564.3 million (US$77.3 million), increased from RMB 541.0 million in FY 2023.

Net Income (Non-GAAP)

* **Q4 2024:** RMB 251.5 million (US$34.5 million), decreased from RMB 432.6 million in Q4 2023.
* **FY 2024:** RMB 934.0 million (US$128.0 million), increased from RMB 903.9 million in FY 2023.
* **Note:** Non-GAAP net income excludes share-based compensation expenses.

Operating Expenses

* **Q4 2024:** RMB 231.5 million (US$31.7 million), decreased from RMB 263.9 million in Q4 2023.
* **FY 2024:** RMB 833.7 million (US$114.2 million), decreased from RMB 884.4 million in FY 2023.
* **Key Drivers:** Fluctuation of share-based compensation expenses and decrease in salaries and welfare benefits.

Liquidity

* As of December 31, 2024, the company had RMB 15,870.8 million (US$2,174.3 million) in cash, cash equivalents, restricted cash, short-term bank deposits, short-term investments, long-term bank deposits and long-term investment securities.
* Net cash generated from operating activities in Q4 2024 was RMB 497.0 million (US$68.1 million).

Management Discussion and Analysis (MD&A)

Management highlights the company’s progress in global operations, organizational framework upgrades, and business model refinements. The focus is on international markets and harm-reduction solutions. Management emphasizes innovation, compliance, and product portfolio diversity for 2025. The CFO notes the impressive year-over-year revenue increase and the return to profitability for the full year.

Share Repurchase Program and Dividend Payment

The company repurchased approximately US$109.2 million of its ordinary shares represented by ADSs during fiscal year 2024. As of December 31, 2024, the Company had cumulatively repurchased US$304.7 million of its ordinary shares represented by ADSs. By repurchasing shares throughout 2024 and declaring cash dividends in November 2024, the Company returned approximately US$122.9 million to its shareholders during fiscal year 2024.

Balance Sheet Highlights

Asset/Liability	December 31, 2023 (RMB)	December 31, 2024 (RMB)	December 31, 2024 (USD)
Cash and Cash Equivalents	2,390,298	5,593,492	766,305
Total Assets	16,315,097	16,871,049	2,311,324
Total Liabilities	716,681	881,096	120,710
Total Shareholders’ Equity	15,598,416	15,989,953	2,190,614

Red Flags and Uncommon Metrics

* **Share-based compensation:** Significant fluctuations in share-based compensation expenses impact operating expenses and net income. This is tied to the company’s share price, making it a volatile factor.
* **Non-GAAP Measures:** The company relies heavily on non-GAAP measures (Non-GAAP net income) to present its financial performance. Investors should carefully review the reconciliation between GAAP and non-GAAP results.
* **International Expansion Risks:** While international expansion drives revenue growth, it also exposes the company to regulatory and geopolitical risks.

Conclusion and Actionable Insights

RLX Technology demonstrates strong growth potential, particularly through its international expansion strategy. The improved gross margins and return to profitability are positive indicators. However, investors should be aware of the following:

* **Monitor Regulatory Landscape:** The e-vapor industry is subject to evolving regulations, which could impact the company’s operations and financial performance.
* **Assess Competitive Pressures:** The e-vapor market is competitive. RLX needs to maintain its market leadership through innovation and effective marketing.
* **Evaluate Share-Based Compensation Impact:** The volatility of share-based compensation expenses can distort the company’s financial results.
* **Shareholder Returns:** The company’s commitment to returning value to shareholders through share repurchases and dividends is a positive sign.

**Overall Assessment:** The company’s financial performance and strategic initiatives suggest a positive outlook. However, investors should carefully monitor the risks associated with the e-vapor industry and the company’s international expansion.

RLX Technology Inc. Financial Analysis – Q4 2024

1. Commentary

RLX Technology Inc. demonstrates strong revenue growth in both Q4 and fiscal year 2024, driven by increased demand. Gross margins also improved year-over-year, indicating better cost management. However, net income decreased in Q4, despite increased revenue, suggesting rising operating expenses. The company maintains a strong cash position, but financing activities led to a net cash outflow.

2. Financial Ratio and Metric Analysis

Profitability

Metric	2023	2024	US$	Trend	Industry
Gross Profit Margin (Q4)	23.7%	27.0%		13.92%	Vaping Industry: 20-40%
Gross Profit Margin (Year)	24.4%	26.4%		8.20%	Vaping Industry: 20-40%
Operating Profit Margin (Q4)	(27.0%)	(1.4%)		94.81%	Vaping Industry: Varies widely, many unprofitable
Operating Profit Margin (Year)	(31.3%)	(3.9%)		87.54%	Vaping Industry: Varies widely, many unprofitable
Net Profit Margin (Q4)	41.5%	15.7%		-62.17%	Vaping Industry: Varies widely, many unprofitable
Net Profit Margin (Year)	34.1%	20.5%		-39.88%	Vaping Industry: Varies widely, many unprofitable
Return on Assets (ROA)	3.32%	3.34%		0.60%	Vaping Industry: Varies widely, many unprofitable
Return on Equity (ROE)	3.47%	3.47%		0.00%	Vaping Industry: Varies widely, many unprofitable
EPS (Basic)	0.407	0.448	0.061	10.07%	Vaping Industry: Varies widely, many unprofitable
EPS (Diluted)	0.399	0.428	0.059	7.27%	Vaping Industry: Varies widely, many unprofitable

Liquidity

Metric	2023	2024	Trend	Industry
Current Ratio	13.44	10.84	-19.34%	Vaping Industry: 1.5 – 3
Quick Ratio	13.22	10.67	-19.29%	Vaping Industry: 1 – 2
Cash Ratio	3.6	6.52	81.11%	Vaping Industry: 0.2 – 1

Solvency/Leverage

Metric	2023	2024	Trend	Industry
Debt-to-Equity Ratio	0.05	0.06	20.00%	Vaping Industry: 0.5 – 1.5
Debt-to-Assets Ratio	0.04	0.05	25.00%	Vaping Industry: 0.3 – 0.6
Interest Coverage Ratio (Times Interest Earned)	N/A	N/A	N/A	Vaping Industry: >5

Note: Interest expense data not available, so Interest Coverage Ratio cannot be calculated.

Activity/Efficiency

Metric	2023	2024	Trend	Industry
Inventory Turnover	2.68	12.05	349.63%	Vaping Industry: 4-6
Days Sales Outstanding (DSO)	13.95	10.40	-25.45%	Vaping Industry: 30-45
Days Payable Outstanding (DPO)	60.52	97.23	60.65%	Vaping Industry: 30-45
Asset Turnover	0.10	0.16	60.00%	Vaping Industry: 0.5-1

Valuation

Metric	2023	2024	Trend	Industry
Price-to-Earnings Ratio (P/E)	5.56	5.04	-9.35%	Vaping Industry: 10-20
Price-to-Book Ratio (P/B)	0.25	0.25	0.00%	Vaping Industry: 1-3
Price-to-Sales Ratio (P/S)	0.87	0.50	-42.53%	Vaping Industry: 1-2
Enterprise Value to EBITDA (EV/EBITDA)	-1.97	-12.25	521.83%	Vaping Industry: 10-15

Note: Market Cap calculated using share price of $2.26 and shares outstanding of 1,288,911,783. EBITDA calculated by adding back depreciation and amortization to operating income.

Growth Rates

Metric	2023	2024	Trend	Industry
Revenue Growth	N/A	73.26%	N/A	Vaping Industry: 5-10%
Net Income Growth	N/A	4.32%	N/A	Vaping Industry: 5-10%
EPS Growth	N/A	10.07%	N/A	Vaping Industry: 5-10%

Note: Previous year data not available, so Trend cannot be calculated.

Other Relevant Metrics

Non-GAAP Net Income: This metric excludes share-based compensation expenses to provide a view of the company’s core operational profitability. While it shows a higher income figure, investors should be cautious as it omits a real expense. Non-GAAP net income increased from RMB903.9 million in 2023 to RMB934.0 million in 2024, a 3.33% increase.