RLX - RLX Technology highlights cost savings as it contends with regulatory shifts

RLX Technology ( NYSE: RLX ) rose modestly in premarket trading on Wednesday after the Chinese e-cigarette company after reporting Q2 earnings.

For the second quarter, the Beijing-based manufacturer recorded non-GAAP EPADS of $0.073 alongside revenue of $333.5M. Meanwhile, gross margin declined 130 basis points from 2021 to 43.8%

"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,: CFO Chao Lu said.  “Meanwhile, our ongoing efforts to optimize cost structure and maximize operational efficiency paid off in the second quarter.”

He added that regulatory shifts have presented a problem , leading to a “slow start: for sales of newly compliant products. He stressed cost savings and regulatory compliance as key focuses of the company moving forward.

Still, general and administrative expenses increased by 531.3% from in the second quarter as compared to the prior year quarter to $43.4M due to an increase in share-based compensation expenses and increases in employee compensation.

"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," CEO Ying Wang said. "Aligned with our efforts to comply with the new requirements, we remained dedicated to our core strategy, continuously investing in research and development.

Research and development expenses rose to RMB117.6M for the quarter from RMB4.9M in the same period of 2021. The company cited an increase in share-based compensation expense, salaries and welfare benefits, and elevated consulting expenses.

Shares rose 2.67%in premarket trading on Wednesday.

Read more on the details of the earnings results .

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