RLX’s European Deal Resets Revenue Comparisons as Selling Costs Rise

RLX Technology’s next revenue comparison will measure a larger business than the one that reported second-quarter results. The e-vapor company said it would begin consolidating a Western European distributor in the third quarter of 2026, after taking a controlling stake in July.

In the second quarter, selling expenses grew faster than revenue from a year earlier. An improvement in gross margin more than offset the increase in operating expenses, but adjusted net income fell and operating cash flow was negative.

Selling expenses rose faster than revenue

RLX’s unaudited second-quarter revenue was RMB1,010.5 million, or $148.9 million, up 14.8% from RMB880.0 million a year earlier. The company attributed the increase primarily to international expansion and contributions from an acquisition made in May 2025. International business represented 68.5% of revenue for the quarter.

Selling expenses rose to RMB123.7 million from RMB84.6 million. RLX linked the increase primarily to salary and welfare, branding, depreciation and amortization costs associated with the May 2025 acquisition. A reduction in share-based compensation partly offset those increases.

Total operating expenses rose to RMB227.5 million from RMB203.1 million. The company said higher salary and welfare expenses, primarily related to the acquisition, drove the increase, partly offset by a decrease in share-based compensation expenses.

General and administrative expenses fell to RMB74.4 million from RMB88.4 million, primarily because of lower share-based compensation expenses. Higher legal and other consulting fees partly offset that decline. Research and development expenses were RMB29.4 million, compared with RMB30.1 million a year earlier.

Gross margin rose to 35.4% from 27.5%, which RLX attributed primarily to a favorable change in revenue mix and supply-chain optimization. Gross profit increased 47.8% to RMB357.8 million from RMB242.1 million.

Operating profit increased while adjusted net income fell

The increase in gross profit exceeded the rise in operating expenses. Under US generally accepted accounting principles, operating income climbed to RMB130.4 million from RMB39.0 million.

Non-GAAP operating income increased 28.8% to RMB149.6 million from RMB116.2 million. According to Insider Monkey, it was RLX’s 11th consecutive quarter of positive non-GAAP operating profit.

Net income moved differently. GAAP net income rose 1.6% to RMB222.0 million from RMB218.5 million, while non-GAAP net income fell to RMB238.8 million from RMB291.2 million.

RLX’s non-GAAP measures exclude share-based compensation and certain acquisition-related depreciation and amortization. The non-GAAP net-income measure also reflects tax effects on those adjustments. The measures are not defined under US GAAP.

The company used RMB63.2 million in operating activities during the quarter. Its combined cash and cash equivalents, restricted cash, deposits and investment holdings stood at RMB13,883.4 million at June 30, compared with RMB14,529.7 million at March 31.

European distributor joins RLX’s accounts in the third quarter

RLX acquired a 51% equity interest and board control in the Western European distributor in July. The distributor sells next-generation smoke-free and consumer products and has a logistics network and a business-to-business digital ordering platform serving retail merchants, according to RLX.

The company expects the acquisition to significantly boost reported revenue beginning in the third quarter, when the distributor’s results will be consolidated. RLX said it intends to use its supply chain capabilities and capital resources to work with the business on costs and cross-selling.

The distributor will be added after an uneven first half for revenue. According to Insider Monkey, first-quarter revenue rose 96.2% year over year to RMB1.59 billion, aided by a one-time pull-forward related to regulatory export adjustments. Revenue declined sequentially in the second quarter.

RLX is also expanding its product range. It has introduced oral nicotine pouches and is establishing a manufacturing facility in Southeast Asia. Chief Executive Ying Wang said the company was scaling the newly launched pouches and building its presence in other smokeless categories.