On November 13th, Wuxin Technology (NYSE: RLX) released its unaudited financial report for the third quarter of 2023. The report showed that Wuxin Technology's net revenue for the third quarter of 2023 was RMB 430 million ($58.67 million), a year-on-year increase of 13.2% and a decrease of 59.0%. Under non US GAAP, the adjusted net profit for the third quarter was RMB 200 million ($27.07 million), an increase of 129.0% month on month and a decrease of 39.9% year-on-year.
As of September 30, 2023, Wuxin Technology has a total of RMB 15.13 billion (2.07 billion US dollars) in cash and cash equivalents, restricted cash, short-term bank deposits, short-term investments, long-term bank deposits, and long-term investment securities.
Wuxin Technology's net income in the third quarter of 2023 was RMB 42.81 million ($58.7 million), a significant decrease compared to the same period last year. The main reason for the decrease was the discontinuation of old products and competition for illegal products in the market. This competition reappeared after the special action of regulatory agencies ended in April 2023.
The gross profit for the third quarter of 2023 was RMB 105.7 million (USD 14.5 million), compared to RMB 52.2 million in the same period of 2022.
The gross profit margin in the third quarter of 2023 was 24.7%, compared to 50.0% in the same period of 2022. The main reason for the decrease is the imposition of a 36% consumption tax, which came into effect on November 1, 2022.
According to disclosure, the operating expenses for the third quarter of 2023 were 145 million yuan (19.9 million US dollars), compared to 56.8 million yuan in the same period of 2022. The main reason for the increase is the change in share-based compensation expenses. The changes in share-based compensation expenses include the confirmation of positive RMB 4 million ($600000) in sales expenses and RMB 29.8 million ($4.1 million) in general and administrative expenses. The change in stock based compensation expenses is mainly due to the fair value of stock based incentive awards granted to employees by the company changing with the fluctuation of the company's stock price.
Founder of Wuxin Technology Chairman and CEO Wang Ying stated: Since the implementation of the national standard for e-cigarettes for one year, we have continuously optimized our product portfolio in accordance with regulatory requirements, committed to providing high-quality national standard products to adult smokers. However, the existence of the gray industry chain of illegal fruit flavored products and the lack of understanding of national standard products by consumers have led to slower than expected speed for users to switch to national standard products. We believe that these challenges are short-term, as awareness and regulation of the harm of illegal products increase With the gradual strengthening of the attack, the industry is expected to develop more healthily and orderly, and more users will trust national standard products and gradually complete the switch
Mist Core Technology CFO Lu Chao stated: In the third quarter, our efforts to improve profitability and optimize costs continued to achieve results. In the third quarter, non US GAAP operating losses continued to narrow, and non US GAAP net profit margin also showed signs of recovery. At the same time, the company's operating cash flow has been positive for two consecutive quarters, reflecting the resilience of the company's business in the new regulatory environment. Looking ahead, the company will continue to Strive to improve financial performance and create long-term value for shareholders
Wuxin Technology is the operator of the leading domestic e-cigarette brand Yueke, with a dominant position in China. After going public, its market value once reached hundreds of billions of yuan. However, after tightening regulation in China, the market value plummeted only to a fraction of its peak period. After the new e-cigarette policy began on October 1 last year, the company's revenue scale also significantly shrunk by 90%. After the new regulations, there is also a dual attack of illegal e-cigarettes and heavy taxes, especially illegal e-cigarettes, which have basically eroded the legitimate e-cigarette market. Although the government is vigorously cracking down, the scale is still huge.
However, based on the analysis of financial statements in recent quarters, Wuxin Technology has a large amount of cash reserves and the company is still able to achieve positive returns. The company has been financially healthy throughout its history and has not experienced any large-scale losses. After a significant reduction in revenue, it has not fallen into the dilemma of making ends meet with significant losses.