Viomi Expertise Co Ltd (VIOT) This autumn 2021 Earnings Name Transcript

Picture supply: The Motley Idiot.

Viomi Expertise Co Ltd ( VIOT -1.67% )
This autumn 2021 Earnings Name
Mar 28, 2022, 8:00 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Members

Ready Remarks:

Operator

Whats up, girls and gents. Thanks for standing by for Viomi Expertise Co., Restricted’s earnings convention name for the fourth quarter and full 12 months 2021. [Operator instructions] I’ll now flip the decision over to your host, Ms. Cecilia Li, the IR director of the corporate.

Please go forward, Cecilia.

Cecilia Li — Director of Investor Relations

Thanks, operator. Whats up, everybody, and welcome to Viomi Expertise Co., Restricted earnings convention name for the fourth quarter and full 12 months 2021. As a reminder, this convention is being recorded. The corporate’s monetary and working outcomes have been issued in a press launch earlier immediately and are posted on-line.

You possibly can obtain the earnings press launch and join the corporate’s e mail distribution record by visiting the IR part of the corporate’s web site at ir.viomi.com. Collaborating in immediately’s name, are Mr. Xiaoping Chen, the founder, chairman of the board of administrators, and chief govt officer; and Mr. Wickham Thai, the top of our finance division.

The corporate’s administration will start with ready remarks. And the decision will conclude with a Q&A session. Earlier than we proceed, please notice immediately’s dialogue will comprise forward-looking statements made below the secure harbor provisions of the U.S. Personal Securities Litigation Reform Act of 1995.

Ahead-looking statements contain inherent dangers and uncertainties. As such, the corporate’s precise outcomes could also be materially totally different from the views expressed immediately. Additional data concerning these and different dangers and uncertainties is included within the firm’s annual report on Type 20-F and different filings as filed with the U.S. SEC.

The corporate does not assume any obligation to replace any forward-looking statements, besides as required by regulation. Please additionally notice, immediately’s earnings press launch and this convention name embrace discussions of unaudited GAAP monetary data, in addition to unaudited non-GAAP monetary measures. Viomi’s press launch comprises a reconciliation of the unaudited non-GAAP measures to the unaudited most instantly comparable GAAP measures. I’ll now flip the decision over to our founder and CEO, Mr.

Xiaoping Chen. Mr. Chen will ship his remarks in Chinese language adopted instantly by an English translation. Mr.

Chen, please go forward.

Xiaoping Chen — Founder, Chairman of the Board of Administrators, and Chief Government Officer

[Foreign language]

Cecilia Li — Director of Investor Relations

Thanks, Mr. Chen. I’ll shortly translate our founder’s remarks earlier than discussing our monetary efficiency for the fourth quarter and full 12 months 2021. Whats up, everybody.

Thanks for becoming a member of our fourth quarter and full 12 months 2021 earnings convention name. Our fourth quarter web revenues reached roughly RMB 1.33 billion, beating our earlier steering. As we disclosed earlier, the year-over-year decline was primarily because of the vital lower within the gross sales of Xiaomi-branded sweeper robots. Due to our ongoing product portfolio changes, we achieved a progress margin of 25.6% for the fourth quarter, sustaining consecutive year-over-year progress because the fourth quarter of 2020, and as soon as once more demonstrating the power of our product line, rising model recognition, in addition to the development in our working high quality.

We incurred a loss within the third quarter of 2021 following substantial investments in R&D and advertising and marketing however resumed profitability in the course of the fourth quarter because of stringent cost-control measures. The sensible residence trade is creating quickly, accelerated by the trade’s general transformation, more and more matured IOT expertise, popularization of 5G, nationwide insurance policies port, in addition to life-style modifications of the character of generations, the primary sensible residence client group. In response to statistics from AskCI Consulting, China’s sensible residence market has been constantly increasing, doubling in measurement between 2016 and 2021, to achieve RMB 580 billion. It’s anticipated to exceed RMB 650 billion by the tip of 2022.

Final April, 16 authorities companies, together with the Ministry of Trade and Info Expertise, collectively issued guiding opinions on accelerating the event of digital houses and enhancing the dwelling high quality, which requires a reasonably full set of digital home-related insurance policies and requirements to be established by the tip of 2022, in addition to a digital residence commonplace system to be in place by the tip of 2025. We additionally see that customers who use the sensible residence merchandise are remodeling from small teams of individuals to the mass market. Over the previous 12 months, enterprises from varied sectors, resembling residence enhancements, communication, and web entered the IoT sensible residence trade in fast succession, focusing on trade alerts resembling {hardware} merchandise, IoT improvement platforms, and working methods. As one of many first enterprises to give attention to IoT sensible residence space, we now have been providing one-stop IoT residence options since 2017.

We now have quickly embraced our one-stop IoT residence product line and are actually creating a premium custom-made AI residence expertise to deliver IoT sensible residence options to the following degree. First, I would like to debate our most — our newest product improvements, in addition to our upgraded one-stop IoT residence options. 1=N44, which we concerned at our technique strategic product launch occasion this month. 1=N44 leverages three elements to synergistically present customers with a seamless customizable sensible residence expertise.

The 1=N44 stands or our complete product portfolio, sensible residence home equipment, and residential units throughout residence eventualities. The primary of 4 represents the 4 main sensible residence capabilities of residence map, together with automated networking, energetic intelligence, spatial consciousness, and pure interactions. We now have already achieved the one-click residence system, now working with our sensible residence display units. To help residence map’s spatial consciousness capabilities, we’re creating Alpha X, our self-developed millimeter wave radar module.

Alpha X can sense customers’ presence and motion to trace trajectory with out zero contact, offering higher person privateness safety in contrast with the viral sensors. Going ahead we’ll combine Alpha X into our product capabilities, resembling automated hearth management, sleeping, and monitoring to really obtain energetic system intelligence. We’re additionally iterating our merchandise’ voice detection perform to allow pure interactions between customers and units. And part 4 represents 4 extra providers we provide to our customers, together with the sensible residence resolution system, OTA improve, a membership system, and value-added providers.

We now have additionally enriched our band of sensible residence options providing with packages designed for varied forms of households, together with our RMB 60,000 to RMB 80,000 Tremendous packages for big residences value over RMB 1 million, our RMB 200,000 Area packages for penthouses, and our RMB 300,000 Royal sequence for homes valued at over RMB 100 million, which delivers a premium custom-made AI expertise for the high-end market. And like different sensible IoT residence firms which focus on platforms or working methods, we used our sensible residence merchandise on the service to deliver our customers in upgrading complete residence IoT expertise, in addition to optimize the product functionalities by software program and AI utility. On the March occasion, we additionally launched a sequence of high-end merchandise with our at the moment most superior AI expertise, underscoring our trending expertise branding positioning. These new merchandise embrace our all-space AI air conditioner Area Professional, which makes use of energetic manganese to closely take away formaldehyde; Boss, our AI protection fridge geared up with 3D somatosensory sensors; Tremendous 2, our 2000G large-flux water air purifier, which makes use of ultra-micro bubbles to take away the agricultural residues; and a brand new sequence of sensible residence units, resembling HomePad Plus, our AI screen-based management interface; and Cyber 2T, our sensible lock with 3D facial recognition and video capabilities.

We additionally launched a number of new merchandise in our premium model, coKiing, together with the Royal Professional sequence of double-screen fridges priced at RMB 50,000, the Royal sequence of AI laser interactive sensible screens priced at RMB 40,000; and the Royal sequence of AI twin-tub washing machines priced at RMB 200,000. Second, I would wish to share with you our progress in creating our offline channels. Over the previous few months, we now have continued to execute our bigger retailer, higher service provider channel technique. We’re opening extra immersive offline shops encompassing over 200 or 300 sq. meters in Tier 1, Tier 2, and new Tier 1 cities to reinforce our trending expertise branding positioning, in addition to present our prospects with a extra complete and premium sensible residence expertise.

Third, we optimized our product portfolio on new content material channels and continued to enhance our model advertising and marketing in the course of the quarter as we did closing our third quarter earnings convention name. Following the institution of a devoted content material advertising and marketing and gross sales group for our new channels, resembling Pinduoduo and Douyin final 12 months, we now have frequently refined our product classes on these channels by including larger gross margin merchandise with mid- and high-end positioning merchandise. We additionally continued to strengthen our trending expertise model consciousness and elevated our publicity on this new channel by KOL dwell streaming and proposals, in addition to different advertising and marketing actions. In 2022, the place we’ll enhance extra investments on advertising and marketing channels, we’ll broaden our omnichannel advertising and marketing and promoting actions, together with on-line promotions, resembling in platform, KOL, and tech guru suggestions; and social media and offline promotions, such because the elevator promoting and print media.

As well as, to reinforce consciousness and publicity to our model in a whole bunch of cities, our advertising and marketing technique will promote a model message of channeling expertise to customers by a number of advertising and marketing channels. Lastly, we additionally made some progress in abroad market growth. Within the fourth quarter, we entered into markets in Singapore, Germany, Italy, and the opposite international locations, following our self-channel transformation progressing easily, shifting partly from small distributions to worldwide brokers, resulting in new partnerships with large-scale brokers in Northern Europe and Germany, amongst others. We additionally prolonged our self-operated mannequin to new abroad markets.

Together with the U.S. Amazon retailer we launched final August. We opened a self-operated Amazon retailer in Italy in March this 12 months, with extra self-operated European Amazon shops to come back into service within the coming months. By strategically shifting from promoting merchandise to promoting options, we now have pioneered a brand new enterprise mannequin within the sensible residence trade, whereas additionally enhancing our sensible merchandise, IoT capabilities, and providers for our one-stop IoT residence options.

We now have additionally strengthened our trending expertise branding as we entered the high-end market. Going ahead, we’ll proceed to extend our investments in R&D, notably in AI software program and algorithms. We’re optimizing the product strains and upgrading our expertise to ship wholesome and long-term progress. That concludes our founder’s remarks.

I would now flip to our detailed fourth quarter and full 12 months 2021 monetary evaluation, in addition to the primary quarter 2022 outlook. Internet revenues have been RMB 1.33 billion in comparison with RMB 1.89 billion for the fourth quarter of 2020. Internet revenues exceeded the corporate’s earlier steering. And a year-over-year lower was primarily because of the continued vital lower in gross sales of Xiaomi-branded sweeper robots, along with product portfolio changes for margin growth in different classes and the general weaker client demand in sure classes.

Revenues from IoT @ Dwelling portfolio decreased by 37.9% to RMB 692 million from RMB 1.11 billion for the fourth quarter of 2020. The decline was primarily because of the lower in gross sales of Xiaomi-branded sweeper robots and the continued product portfolio changes for margin growth in some classes, each of which contributed to the general gross margin enchancment for IoT @ Dwelling portfolio. Revenues from our residence wi-fi options decreased by 27.5% to RMB 263.3 million from RMB 363 million for the fourth quarter of 2020. The decline was primarily because of the weaker client demand for the trade occurred in the course of the quarter, in addition to the product portfolio changes we made by reducing the proportion of small-flux water purifiers in our product combine.

Because of product portfolio changes, the corporate as soon as once more achieved a year-over-year gross margin restoration for this class. Revenues from consumables decreased by 24.8% to RMB 120.4 million from RMB 160.2 million for the fourth quarter of 2020, primarily on account of decreased demand for air purifier filter merchandise. Revenues from small home equipment and others elevated by 2.3% to RMB 257.1 million from RMB 251.2 million for the fourth quarter of 2020. Gross revenue was RMB 341.5 million in comparison with RMB 443.8 million for the fourth quarter of 2020.

Gross margin elevated to 25.6% from 23.5% for the fourth quarter of 2020, primarily pushed by the corporate’s continued efforts to shift the enterprise and product combine towards larger gross margin merchandise. Whole working bills elevated by 2.7% to RMB 340.7 million 12 months over 12 months, primarily because of the enhance in R&D bills and G&A bills. In additional element, R&D bills elevated by 5.1% to RMB 97.8 million from RMB 93.1 million for the fourth quarter of 2020, primarily because of the enhance in R&D specialists and the associated salaries and bills. Promoting and advertising and marketing bills decreased by 1.2% to RMB 214.8 million from RMB 217.4 million a 12 months in the past.

G&A bills elevated by 31.4% to RMB 20 million in comparison with RMB 21.3 million for the fourth quarter of 2020, primarily because of the enhance in associated personnel salaries and bills. Internet revenue attributable to unusual shareholders of the corporate was RMB 22.7 million, and non-GAAP web revenue attributable to unusual shareholders of the corporate was RMB 33.5 million. Moreover, our stability sheet remained wholesome. As of December thirty first, 2021, we had money and money equivalents of RMB 187 million, restricted money of RMB 35.8 million, and short-term investments of RMB 828.9 million.

Subsequent, let’s briefly focus on extra key monetary outcomes for the complete 12 months 2021. Internet revenues for full 12 months 2021 have been RMB 5.3 billion in comparison with RMB 5.83 billion for 2020. Revenues from IoT @ Dwelling portfolio decreased by 7.4% to RMB 3.4 billion from RMB 3.67 billion for 2020. Revenues from our residence water options decreased by 15.9% to RMB 722.9 million from RMB 883.3 million for 2020.

Revenues from consumables decreased by 4.1% to RMB 767 million from RMB 382.9 million for 2020. Revenues from small home equipment and others decreased by 10.7% to RMB 792.9 million from RMB 887.7 million for 2020. Gross revenue was RMB 1.2 billion in comparison with RMB 1.08 billion for 2020. Gross margin improved to 22.6% from 18.6% a 12 months in the past.

Whole working bills elevated by 24.6% to RMB 1.16 from RMB 931.8 million for 2020. In additional element, R&D bills elevated by 17.4% to RMB 311.8 million from RMB 265.7 million for 2020. Promoting and advertising and marketing bills elevated by 25.8% to RMB 751 million from RMB 597.2 million a 12 months in the past. G&A bills elevated by 41.8% to RMB 97.7 million in comparison with RMB 68.9 million for 2020.

Internet revenue attributable to unusual shareholders of the corporate was RMB 88.6 million, and non-GAAP web revenue attributable to different shareholders of the corporate was RMB 136 million. Now, let’s flip to our outlook. For the primary quarter of 2020, we at the moment count on web revenues to be between RMB 618 million and RMB 713 million. We estimate {that a} year-over-year change within the first quarter income will probably be primarily because of the excessive enterprise worth of Xiaomi-branded sweeper robotic enterprise for the primary quarter of 2021, which the corporate has then subsequently scaled again that enterprise, in addition to the abroad market affect within the first quarter of 2022.

The above outlook relies on present market circumstances and displays the corporate’s present and preliminary estimates of market and working circumstances and buyer calls for, that are all topic to alter. This concludes our ready remarks, and we’ll now open the decision for the Q&A session. The top of our finance division, Mr. Wickham Thai, will be a part of the session and reply the questions.

Operator, please go forward.

Questions & Solutions:

Operator

[Operator instructions]The primary query comes from Hildy Ling with Morgan Stanley. Please go forward.

Hildy Ling — Morgan Stanley — Analyst

Thanks. [Foreign language] Let me repeat all these in English for us. So, congratulate firm on a really respectable fourth quarter outcomes and a really seen gross margin growth there. A few questions.

So, the primary one is, what concerning the — can we now have some shade of the gross sales tendencies 12 months to this point, specifically, the sweeper robots within the home and abroad market. And the second query is about additionally about income outlook, however that is additionally for the complete 12 months 2022. How ought to we give it some thought for the abroad enterprise and likewise the home enterprise? And likewise, can we now have slightly little bit of shade of every product class segments as effectively? And the ultimate query is concerning the margin of the gross margin and likewise the working margin for the primary quarter of 2022 and likewise for the complete 12 months 2022. And the way ought to we take into consideration the rising commodity costs, uncooked materials prices, and likewise the oil costs? How would that have an effect on our margin outlook? And when will we see a extra seen development of an inflection level? So, that is all for my query.

[Foreign language]

Wickham Thai — Head of Finance

OK. Thanks for Hildy’s questions. For the gross sales development replace, we noticed the general client demand is comparatively weak in comparison with the identical interval of 2021, whereas we noticed our merchandise and channel portfolio is trending extra diversified and more healthy. Firstly, we noticed the gross sales contribution of high-end merchandise is rising on account of our introductions of a sequence of premium merchandise and our efforts for the product portfolio changes.

Secondly, we noticed the gross sales on our new channels, resembling Pinduoduo and Douyin, rising very quick. And we’re rising extra mid- to high-end merchandise and merchandise with larger margins on these channels. We expanded gross sales on this new channel to extend as effectively and assist us to reinforce our model consciousness. And for the sweeper robots, for each home and abroad markets.

we noticed weaker client calls for for the entire trade in comparison with the primary quarter of 2021 once we achieved a really sturdy progress in sweeper robots, notably for the abroad markets because of the worldwide battle and COVID-19. The market calls for for sensible and premium cleansing merchandise are impacted. Regardless of the general macro setting, our introduction of recent SKUs, product line optimization, and abroad channel growth are in step with our expectations. First, by way of product SKU, we just lately launched our new self-cleaning sweeper robotic, Alpha 3 in January.

And we see a quick rising in gross sales and acquired good suggestions from the market. On the latest new product launch occasions, we additionally launched our new moist and dry vacuum cleaners, Cyber Professional and Cyber 2, which is provided with double brushes, photoelectric sensor, and OTA improve capabilities. Second, the gross sales contribution of high-end SKUs are rising. As we drive the product line towards premium, the gross sales contribution of our high-end merchandise, resembling Alpha 2 Professional and Alpha 2 Plus, and Alpha 3 elevated.

Third, as simply mentioned, for abroad market, we efficiently stepped into new markets in Singapore, Germany, Italy, and different international locations. Additional, our new cooperation with larger-scale worldwide brokers are clean and we expanded our self-operated mannequin. Together with the U.S. Amazon retailer we launched final August, we opened Amazon retailer in Italy, and we’ll open extra self-operated Amazon shops in Europe within the coming months.

Total, although we skilled short-term market fluctuations, we nonetheless count on our cleansing enterprise in 2022 to realize progress and the product strains to show extra diversified. Yeah, for the second query concerning the gross sales outlook of 2022, typically, for the gross sales construction, we may check with the construction of This autumn 2021, like IoT @ Dwelling portfolio might accounted for half of the full portfolio, and residential water options accounted for round 20%, and small equipment and others accounted for round 20%, and consumables accounted for 10% round. For the abroad enterprise, we count on round excessive single digit of the full income. However it’s topic to the market modifications and the corporate’s adjustment later.

For the third query concerning the margin and worth, we noticed the worth of uncooked supplies have been comparatively steady when getting into into the fourth quarter of final 12 months. Whereas because of the battle and a sequence of financial reductions, the worth went up within the first quarter. The elevated worth has been partially mirrored in our ASPs, so it’s partially offset by the elevated ASPs. As well as, we now have achieved some worth lock agreements with suppliers prematurely.

So, general, we do not count on the sure worth of uncooked supplies to trigger materials impacts on our gross margin or web revenue margin aspect. Our accomplice is extra influenced by the extent of our funding in our R&D and advertising and marketing bills to ship mid- to long-term progress in addition to to strengthen our branding of one-stop residence options. We are going to take into account to extend extra investments in advertising and marketing finish channels. As we already noticed advantages of our advertising and marketing actions, like we did on the third quarter of final 12 months, we’re assured these investments will assist promote our new strategic merchandise and improve our model think about — picture.

Yeah, thanks.

Operator

The subsequent query comes from Rudi Wei with CICC. Please go forward.

Rudi Wei — CICC — Analyst

OK. So, thanks very a lot for the administration’s presentation. And I’ve two questions right here. The primary is about our promotion and brand-building technique.

We observed that the corporate has launched many new merchandise simply two weeks in the past, and many of the merchandise are focused at high-end prospects. So, how do you propose to enhance the model picture and make the shoppers keen to pay for these new merchandise? Additionally, we knew our spokesperson, Deng Lun, had some issues just lately. So, how severe is the affect to us? [Foreign language]

Xiaoping Chen — Founder, Chairman of the Board of Administrators, and Chief Government Officer

[Foreign language]

Cecilia Li — Director of Investor Relations

So, I’ll shortly translate our founder’s suggestions. So, the branding stabilized to your questions. So, firstly, we’re seeing a turning level for the buyer teams who purchase their residence — sensible residence merchandise. And we see the market has been remodeled from small group of individuals to funding, and this is essential for our trade.

And second, we’re doing lots, and we’ll take into account to do extra in extra advertising and marketing promoting, particularly in some cities, the place, like, younger persons are concentrated like this new one, Tier 1 and the Tier 2 cities. And to your query concerning the Deng Lun subject, as we responded in a short time and really effectively, so this subject did not trigger any materials impacts on our model picture. And as we reply in a short time and which give us very extra and extra publicity available on the market, as you’ll be able to see from [Inaudible]. And we’re 4 — and fourthly, we’re turning our model place into extra premium.

So, we launched — at our latest product launch occasion, we’re introducing extra premium bands of buy options choices to our high-end market, together with the RMB 300,000 options, the 20 — the RMB 200,000 Area packages of our premium customers. And we see the makes use of of such teams are rising amongst our customers. So, that is the reply from our CEO.

Rudi Wei — CICC — Analyst

[Foreign language] So, I’ll repeat the query in English. So, what’s your outlook for the competitors in 2022? How do you consider the market competitors scenario? Will it grow to be extra fierce? Thanks.

Xiaoping Chen — Founder, Chairman of the Board of Administrators, and Chief Government Officer

[Foreign language]

Cecilia Li — Director of Investor Relations

I’ll shortly translate. So, for the query we are able to elaborate from two sides variations from the availability chain aspect. As we see that there are a number of — exists many uncertainties in international information, however provide chain functionality remains to be very wanted and primarily concentrated in China. So, we aren’t very involved about this level.

And from the opposite aspect about client demand, we see that from the fourth quarter of final 12 months, the buyer demand grew to become comparatively weak in home, as you see that they’re permitting us and a few huge large firms. However general, in the course of the interval that client demand lower, it almost brought about extra aggressive conditions among the many gamers. And the [Inaudible] might do lots extra inventory and stocking and the promotional actions. For us, as we like shift our merchandise and enterprise towards premium and we’re sustaining the extent of our gross margin and enhance in R&D and do loads of branding actions, we’re assured to undergo these challenges and ship long-term progress.

Thanks.

Rudi Wei — CICC — Analyst

Thanks very a lot. That is all from my aspect.

Operator

As there are not any additional questions now, I would like to show the decision again over to the corporate for closing remarks.

Cecilia Li — Director of Investor Relations

Thanks as soon as once more for becoming a member of us immediately. You probably have additional questions, please contact us by the contact data on our web site or The Piacente Group, our investor relations advisor. Thanks all. Have night time.

Wickham Thai — Head of Finance

Thanks.

Xiaoping Chen — Founder, Chairman of the Board of Administrators, and Chief Government Officer

[Foreign language]

Operator

[Operator signoff]

Cecilia Li — Director of Investor Relations

Thanks. Bye.

Period: 48 minutes

Name members:

Cecilia Li — Director of Investor Relations

Xiaoping Chen — Founder, Chairman of the Board of Administrators, and Chief Government Officer

Hildy Ling — Morgan Stanley — Analyst

Wickham Thai — Head of Finance

Rudi Wei — CICC — Analyst

Extra VIOT evaluation

All earnings name transcripts