RLX Technology Announces Fourth Quarter and Fiscal Year 2020 Unaudited Financial Results

BEIJING,March26,2021 -- 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 fourth quarter and the fiscal year ended December 31,2020.

Fourth Quarter 2020 Financial Highlights

Net revenues were RMB1,618.5 million (US$248.0 million),representing an increase of 44.5% from RMB1,120.2 million in the third quarter of 2020.

Gross margin was 42.9%,compared to 39.1% in the third quarter of 2020.

Net loss was RMB236.7 million (US$36.3 million),compared with net income of RMB7.8 million in the third quarter of 2020.

Non-GAAP net income[1] was RMB419.3 million (US$64.3 million).

[1] Non-GAAP net (loss)/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.

Fiscal Year 2020 Financial Highlights

Net revenues were RMB3,819.7 million (US$585.4 million) in fiscal year 2020,representing an increase of 146.5% from RMB1,549.4 million in the prior year.

Gross margin was 40.0% in fiscal year 2020,compared to 37.5% in the prior year.

Net loss was RMB128.1 million (US$19.6 million) in fiscal year 2020,compared with net income of RMB47.7 million in the prior year.

Non-GAAP net income was RMB801.0 million (US$122.8 million).

"We are pleased to report financial and operational results for the fourth quarter of 2020. Throughout 2020,despite challenges stemming from COVID-19,our business remained resilient,and our management team maintained our focus on building and strengthening RELX as a trusted brand for adult smokers," said Ms. Ying (Kate) Wang,Co-founder,Chairperson of the Board of Directors and Chief Executive Officer of RLX Technology. "We continue to consistently uphold and practice our ethical principles,including facilitating the prevention of underage use of our products through our industry pioneering Guardian Program,introducing effective age-verification practices to the industry. This fourth quarter also witnessed the first anniversary of the launch of our Sunflower System,ourtechnology-driven underage-access-prevention system. In addition,we continued to advance our Golden Shield Program in cooperation with the public,media and local authorities to combat sales of counterfeit products."

"Looking forward,we plan to further solidify our leadership as we endeavor to continue investmentin scientific research,enhance our technology and product development,strengthen our distribution and retail network,bolster supply chain and production capabilities,and extend our global capabilities. These strategic initiatives are designed to support our growth over the long-term," Ms. Wang concluded.

Closing of Initial Public Offering ("IPO")

On January 26,2021,the Company completed the closing of its initial public offering of 133,975,000 American depositary shares ("ADSs"),each representing one Class A ordinary share. The number of ADSs issued at closing included 17,475,000 ADSs issued pursuant to the exercise in full of over-allotment option by the underwriters. At a price to the public of US$12.00 per ADS,the total offering size was US$1,607.7 million.

Fourth Quarter 2020 Unaudited Financial Results

Net revenuesincreased by 44.5% to RMB1,618.5 million (US$248.0 million) in the fourth quarter of 2020 from RMB1,120.2 million in the third quarter of 2020. The increase was primarily due to an increase in net revenues from sales to offline distributors,which was mainly attributable to the expansion of the Company's distribution and retail network.

Gross profitincreased by 58.6% toRMB694.1 million (US$106.4 million) in the fourth quarter of 2020 from RMB437.5 million in the third quarter of 2020.

Gross marginincreased to 42.9% in the fourth quarter of 2020,compared to 39.1% in the third quarter of 2020.

Operating expenseswere RMB852.6 million (US$130.7 million) in the fourth quarter of 2020,representing an increase of 124.4% from RMB380.0million in the third quarter of 2020.

Selling expenses increased by 127.0% toRMB196.7 million (US$30.1 million) in the fourth quarter of 2020 from RMB86.7 million in the third quarter of 2020. The increase was mainly driven by (i) an increase in share-based compensation expenses,and (ii) an increase in branding material expenses.

General and administrative expensesincreased by 75.4% to RMB447.0 million (US$68.5 million) in the fourth quarter of 2020 from RMB254.8 million in the third quarter of 2020. The increase was primarily due to (i) an increase in share-based compensation expenses,and (ii) an increase in professional service fees.

Research and development expenses increased by 441.9% toRMB208.9 million (US$32.0 million) in the fourth quarter of 2020 from RMB38.5 million in the third quarter of 2020. The increase was primarily driven by (i) an increase in share-based compensation expenses,and (ii) an increase in software and technical service expenses.

Share-based compensation expenses recognized in selling expenses,general and administrative expenses and research and development expenses in total were RMB656.1million (US$100.6million) in the fourth quarter of 2020 and RMB238.2million in the third quarter of 2020. The increase was primarily due to the increase in fair value of ordinary shares of Relx Inc.

Loss from operationswas RMB158.5million (US$24.3million) in the fourth quarter of 2020,compared with income from operations of RMB57.5 million in the third quarter of 2020.

Income tax expensewas RMB110.6million (US$17.0million) in the fourth quarter of 2020,compared with income tax expense of RMB77.3 million in the third quarter of 2020,primarily due to an increase in taxable income.

Net losswas RMB236.7million (US$36.3million) in the fourthquarter of 2020,compared with net income of RMB7.8 million in the third quarter of 2020.

Non-GAAPnet income was RMB419.3 million (US$64.3million) in the fourthquarter of 2020.

Basic and diluted net loss per American depositary share ("ADS")were both RMB0.165 (US$0.025) in the fourth quarter of 2020,compared to basic and diluted net income per ADS of RMB0.005 in the third quarter of 2020.

Non-GAAP basic and diluted net incomeper ADS[2]were both RMB0.292 (US$0.045) in the fourth quarter of 2020,compared to RMB0.171 in the third quarter of 2020.

[2] Non-GAAP basic and diluted net (loss)/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.

Fiscal Year 2020 Unaudited Financial Results

Net revenuesincreased by 146.5% toRMB3,819.7million (US$585.4 million) in fiscal year 2020 from RMB1,549.4million in the prior year. The increase was primary due to an increase in net revenues from sales to offline distributors.

Gross profitincreased by 162.9% toRMB1,527.6 million (US$234.1 million) in fiscal year 2020 from RMB580.9 million in the prior year.

Gross marginwas 40.0% in the fiscal year 2020,compared to 37.5% in the prior year.

Operating expenseswere RMB1,514.4 million (US$232.1 million) in fiscal year 2020,representing an increase of 188.7% from RMB524.6million in the prior year.

Selling expenses increased by 23.3% to RMB443.2 million (US$67.9 million) in fiscal year 2020 from RMB359.4 million in the prior year. The increase wasprimarily due to (i)an increase in share-based compensation expenses,and (ii) an increase in salaries and welfare benefits to the Company's selling personnel,partially offset by a decrease in e-commerce platform service expenses as the Company closed its stores on e-commerce platforms and ceased collaboration with e-commerce platform distributors in response to the October 2019 Announcement.

General and administrative expensesincreased by 479.5% to RMB772.0 million (US$118.3 million) in fiscal year 2020 from RMB133.2 million in the prior year. The increase wasprimarily attributable to (i) an increase in share-based compensation expenses,and (ii) an increase in salaries and welfare benefits to the Company's general and administrative personnel.

Research and development expenses increased by 837.2% to RMB299.3 million (US$45.9 million) in fiscal year 2020 from RMB31.9 million in the prior year. The increase wasprimarily due to (i) an increase in share-based compensation expenses,and (ii) an increase in salaries and welfare benefits to the Company's research and development personnel.

Share-based compensation expenses recognized in selling expenses,general and administrative expenses and research and development expenses in total were RMB929.1 million (US$142.4 million) in fiscal year 2020 and RMB52.7 million in the prior year,primarily due to the increase in fair value of ordinary shares of Relx Inc.

Income from operationsdecreased by 76.7% to RMB13.1 million (US$2.0 million) in fiscal year 2020 from RMB56.4 million in the prior year.

Income tax expensewas RMB230.5million (US$35.3million) in fiscal year 2020,representing an increase of 789.3% from RMB25.9million in the prior year. The increase wasprimarily due to an increase in taxable income.

Net losswas RMB128.1 million (US$19.6 million) in fiscal year 2020,compared with net income of RMB47.7 million in the prior year.

Non-GAAP net income was RMB801.0 million (US$122.8 million) in fiscal year 2020.

Basic and diluted net loss per ADSwere both RMB0.089 (US$0.014) in fiscal year 2020,compared to basic and diluted net income per ADS of RMB0.033 in the prior year.

Non-GAAP basic and diluted net incomeper ADSwere both RMB0.557 (US$0.085) in fiscal year 2020,compared to RMB0.070 per ADS in the prior year.

BalanceSheet

As of December 31,2020,the Company had cash and cash equivalents,restricted cash,short-term bank deposits and short-term investments of RMB3,421.4million (US$524.4million),compared to RMB811.7 million as of December 31,2019.

Business Outlook

For the first quarter of 2021,the Company currently expects net revenues to exceed RMB2,300 million,and expects non-GAAP net income to exceed RMB590 million. The Company's expected net income will also include share-based compensation expenses which depend on the Company's share price and are not available without unreasonable efforts. The Company also expects gross marginto remain steady.

The above outlook is based on the current market conditions,including those related to the COVID-19 pandemic,and reflects the Company's preliminary estimates of market and operating conditions,and users' demand,which are all subject to change. Please refer to "Safe Harbor Statement" in this press release for risks associated with forward-looking statements.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on March 26,2021 (8:00 PM Beijing/Hong Kong Time on March 26,2021).

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：

1345855

Participants should dial-in at least 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 April 2,by dialing the following telephone numbers:

United States:

+1-877-344-7529

International:

+1-412-317-0088

Replay Access Code:

10152933

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 and 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 "branded store plus" 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 (loss)/income and Non-GAAP basic and diluted net (loss)/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 (loss)/income represents net (loss)/income excluding share-based compensation expenses. Non-GAAP basic and diluted net (loss)/income per ADS is computed using Non-GAAP net (loss)/income and the same number of ADSs used in GAAP basic and diluted net (loss)/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 (loss)/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 (loss)/income,basic and diluted net (loss)/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 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.

Notes to Unaudited Financial Information

The unaudited financial information disclosed in this press release is preliminary. The audit of the financial statements and related notes to be included in the Company's annual report on Form20-Ffor the year ended December31,2020 is still in progress.

Adjustmentsto the financial statements may be identified when the audit work is completed,which could result in significant differences between the Company's audited financial statements and this preliminary unaudited financial information.

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 RMB6.5250 to US$1.00,the exchange rate on December 31,2020 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollars 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,business outlook and 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,except for share and per share data,or otherwise noted)

As of

December 31,

December 31,

2019

2020

2020

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

135,544

1,113,988

170,726

Restricted cash

348,548

340,813

52,232

Short-term bank deposits

287,652

493,282

75,599

Receivables from online payment platforms

9,545

862

132

Short-term investments

40,000

1,473,349

225,801

Accounts and notes receivable

38,795

20,089

3,079

Inventories,net

219,311

329,123

50,440

Amounts due from related parties

-

21,006

3,219

Prepayments and other current assets

103,473

74,383

11,399

Total current assets

1,182,868

3,866,895

592,627

Non-current assets:

Amounts due from related parties

72,789

-

-

Property,equipment and leasehold improvement,net

66,452

74,500

11,418

Intangible assets,net

5,399

5,393

826

Long-term investments

5,000

4,000

613

Deferred tax assets

104

6,000

920

Right-of-use assets,net

90,227

91,743

14,060

Other non-current assets

21,266

11,354

1,740

Total non-current assets

261,237

192,990

29,577

Total assets

1,444,105

4,059,885

622,204

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts and notes payable

499,021

1,459,782

223,721

Contract liabilities

18,410

320,434

49,109

Salary and welfare benefits payable

42,318

179,558

27,518

Taxes payable

2,783

363,644

55,731

Accrued expenses and other current liabilities

25,633

116,929

17,920

Amounts due to related parties

298

11,174

1,713

Lease liabilities-current portion

31,439

45,073

6,908

Total current liabilities

619,902

2,496,594

382,620

Non-current liabilities:

Amounts due to related parties

646,011

-

-

Deferred tax liabilities

10,574

5,210

798

Lease liabilities-non-current portion

61,338

49,448

7,578

Total non-current liabilities

717,923

54,658

8,376

Total liabilities

1,337,825

2,551,252

390,996

Shareholders' equity:

Ordinary shares (US$0.00001 par value; 5,000,000 shares authorized 1,436,815,570

and 1,570 shares issued and outstanding as of December 31,2019 and 2020,

respectively)

94

94

14

Additional paid-in capital

59,589,857

243,656

Statutory reserves

1,000

153

Retained earnings/(Accumulated deficit)

46,461

(81,640)

(12,512)

Accumulated other comprehensive loss

(819)

(678)

(103)

Total shareholders' equity

106,280

1,508,633

231,208

Total liabilities and shareholders' equity

1,204

RLX TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME/(LOSS)

(All amounts in thousands,or otherwise noted)

For the three months ended

For the year ended

December 31,

September 30,

December 31,

2019

2020

2020

2020

2019

2020

2020

RMB

RMB

RMB

US$

RMB

RMB

US$

Net revenues

410,458

1,120,159

1,618,451

248,038

1,549,354

3,819,712

585,396

Cost of revenue

(289,049)

(682,617)

(924,315)

(141,657)

(968,410)

(2,292,153)

(351,288)

Gross profit

121,409

437,542

694,136

106,381

580,944

1,527,559

234,108

Operating expenses:

Selling expenses

(116,656)

(86,650)

(196,683)

(30,143)

(359,404)

(443,154)

(67,916)

General and administrative expenses

(51,619)

(254,815)

(447,045)

(68,513)

(133,221)

(771,971)

(118,310)

Research and development expenses

(14,221)

(38,546)

(208,889)

(32,014)

(31,933)

(299,285)

(45,867)

Total operating expenses

(182,496)

(380,011)

(852,617)

(130,670)

(524,558)

(1,514,410)

(232,093)

(Loss)/Income from operations

(61,087)

57,531

(158,481)

(24,289)

56,386

13,149

2,015

Other (expenses)/income:

Interest income,net

730

11,242

7,678

1,177

745

32,407

4,967

Investment income

-

5,842

11,621

1,781

-

20,352

3,119

Others,net

(522)

10,507

13,062

2,002

16,541

36,523

5,599

(Loss)/Income before income

tax

(60,879)

85,122

(126,120)

(19,329)

73,672

102,431

15,700

Income tax benefit/(expense)

10,580

(77,288)

(110,625)

(16,954)

(25,924)

(230,532)

(35,331)

Net (loss)/income

(50,299)

7,834

(236,745)

(36,283)

47,748

(128,101)

(19,631)

Other comprehensive

income/(loss):

Foreign currency translation

adjustments

5

(357)

(14)

(2)

(805)

142

22

Total other comprehensive

income/(loss)

5

(357)

(14)

(2)

(805)

142

22

Total comprehensive

income/(loss):

(50,294)

7,477

(236,759)

(36,285)

46,943

(127,959)

(19,609)

Net (loss)/income per ordinary

share/ADS

- Basic

(0.035)

0.005

(0.165)

(0.025)

0.033

(0.089)

(0.014)

- Diluted

(0.035)

0.005

(0.165)

(0.025)

0.033

(0.089)

(0.014)

Weighted average number of

ordinary shares/ADSs

- Basic

1,570

1,570

1,570

- Diluted

1,570

RLX TECHNOLOGY INC.

UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(All amounts in thousands,

2019

2020

2020

2020

2019

2020

2020

RMB

RMB

RMB

US$

RMB

RMB

US$

Net (loss)/income

(50,631)

Add: share-based compensation expenses

Selling expenses

1,737

9,760

123,270

18,892

6,250

142,325

21,810

General and administrative expenses

7,195

214,572

367,426

56,310

45,205

593,473

90,951

Research and development expenses

368

13,834

165,395

25,348

1,259

193,300

29,622

Non-GAAP net (loss)/income

(40,999)

246,000

419,346

64,267

100,462

800,997

122,752

Non-GAAP net (loss)/income per ordinary

share/ADS

- Basic

(0.029)

0.171

0.292

0.045

0.070

0.557

0.085

- Diluted

(0.029)

0.171

0.292

0.045

0.070

0.557

0.085

Weighted average number of ordinary

shares/ADSs

- Basic

1,570

RLX TECHNOLOGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands,

2019

2020

2020

2020

2019

2020

2020

RMB

RMB

RMB

US$

RMB

RMB

US$

Net cash generated from operating activities

23,549

798,828

1,290,121

197,718

338,125

2,383

396,840

Net cash (used in)/generated from investing

activities

(447,678)

(746,205)

829,504

127,125

(497,836)

(1,812,894)

(277,839)

Net cash (used in)/generated from financing

activities

584,205

324,272

(1,200,659)

(184,009)

576,402

174,881

26,801

Effect of foreign exchange rate changes on

cash,cash equivalents and restricted cash

3

15,915

(10,666)

(1,631)

(805)

19,339

2,966

Net increase in cash and cash equivalents

and restricted cash

160,079

392,810

908,300

139,203

415,886

970,709

148,768

Cash,cash equivalents and restricted cash

at the beginning of the period/year

324,013

153,691

546,501

83,755

68,206

484,092

74,190

Cash,cash equivalents and restricted cash

at the end of the period/year

484,092

546,501

1,454,801

222,958

484,092

1,958

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