Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by for corporations third quarter 2019 earnings Conference call.
Time, all participants are in listen only mode. Today's conference call is being recorded.
That's great.
Hi, Sean Gray change, we thought where are you should be approximately five new for.
Earlier today and our posted by you know also view the army culturally and the flight to which we will refer on this call.
It's actually the company's website at www Dot dot com flashy <unk>.
Okay.
Today's call, it's true all while our child that will support that Trish and Chief Executive Officer, Mr., Barry take our Chief Financial Officer.
The company management will begin with prepared remarks, and the call will conclude with UQM <unk> session.
Mike Yeah, Oh, Chief operating officer, what join Us for the Q on a session before we continue. Please note that todays discussion will contain forward looking statements made on the safe Harbor provision the U.S. private.
Okay, [laughter] Geisha Reform Act like 95.
Forward looking statements involve inherent risks and all 50.
As such the Companys actual results may be much your many different all of you had.
Information regarding this and other risks and also tend to use including the Companys annual report on form 20-F, well the fiscal year ended December 31st with Hmm and other fighting as filed with the U.S. Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statements, except as required under applicable law [noise].
Please also note that honest Army press release at this conference call include discussion.
Audited GAAP financial information as was the audit Nongaap financial measures.
He's press release contains a reconciliation of the audited no GAAP measure up to the audited most directly comparable GAAP measures.
I'll now turn the call overcharge say you'll.
The school [noise].
[noise] Hello, everyone.
Thank you for joining all earnings conference call today.
You know so [laughter] beyond truth outstanding topline and bottom line growth driven by both systems development and execution of our strategy in district, yes.
We should focus on product diversification, Brian elevations international expansion.
Our so called her revenue was 1.86 daily I'm B.
Hey, presenting.
73.3, plus then you all year increase.
Oh 11, new portfolio. This was the result of Shaul sales from both to me back in full and our newly leased amazed to be part out [noise].
It's both spread categories.
Increasingly recognized I thought I'd like global caught them worse.
In the though we continued to expand and diversify all amazed to be product line.
Oh targeting new called the most akamai and offering additional applications all usage.
Falling all released all multi both small ratable taught us in the second quarter. We recently launched the amazed me GTS and be amazed feed stock goes crazy the lateral feet. She is an update model the professional sports watch part.
Blowing [laughter] pocketing sports insurance, yes, it [laughter] based companies and suits sport monitoring functionalities distinct [noise].
We also introduced they all troll malden amazed to be X.
A new comps that pardot via saw prominence core touch screen shaped like Oh restaurant and more and Richard slated for release in 2020 [laughter] Corning Bad tool sales our international is true must continue to crack.
Yes, I'll focus on expanding Brad electronics show growth rate continues to be sure.
Let's sit or talk to resolve.
In September we successfully how our most international part of logic is done at you fall 2000, I Chamberlain, Germany.
We also received numerous global product inside the walls in general we view our goal was to use marketing campaign has done extremely show strategy for our growth and Brad promotion.
And in light of all follower success, thus far.
Driving sales more always see pod else launches.
Being developed and schedule in the field trial.
The successful sales a truth month.
And just past doubles 11 E. Comm. Most festival also demonstrated all one extra all domestic market strategy and intelligence.
This year amazed your part I'll still ditched lobbyist double 11 hold they show level in just one hour.
Me Bountiful sales lish 350000 units in only 10 hours.
In addition be linkage number one.
Sales revenue and sell the has brought him colon, both J.D. and T mall performed in the small watch markets second my recent retail crowd price I know 1000 and B.
We have completed our product portfolio in these markets that component.
We still spot gold growing market.
So I saw what you factor based strategies lying ahead, we have great confidence in future products sales, both at home and the board.
For the mall in the first call corridor, we leverage our expertize.
In smart ratable Javier and big data on I know this takes to optimize accurate as almost full or cloud based health care services.
Add their tools I dare to follow the Nike in Asia Pacific harder to some so saatchi.
Don't <unk>, our don't trend from the Peking University from hospital introduced the hospitals they should be on a copy ill health monitoring Bicuar me small expandable.
30 should indicate that the accuracy off detecting a trophy operation through E. She G.M.P.G. using smart ratable hatched leach, 94.76% and Nike's creep one tools.
7%.
Back to me.
[laughter] demonstrated that people can manage day cardio house, both a factor, it's pretty cheap and remote trait.
Through the use of small spreadable devices.
In the meantime [noise].
We are continuing to improve our user experience expats really innospecs innospecs pick healthcare related scenarios.
We recently launch for the action is some of my suite products, which then [laughter] activated.
Automatically are good the user by vibrating I view also said no I wrote message to the pre configurations emergency contact.
We also introduced Bradney old health care Lee I piece. So this is.
Which allows you. So it's all follows smart valuable part out tool have tools, such as E G reading and on analysis.
Oh, no cardio notification or knows.
Culturally how's your posts and numerous other tools as power off the various premiums for all these packages.
Expats still basis and continue to complement our coal revenue stream from smock ratable pod upsells and become an increasingly important component.
And contributor to our revenue model and dissolved.
Looking ahead, our plan is to keep investing and improving our R&D capabilities asbestos seeking additional strategy partnerships.
In addition, as always we will continue in awaiting this I'll call them Crolles Parness sell me and time make school.
Our long term past this show me and a popular me Ben pot apply remain unchanged.
We look forward to developing and producing future generations. After me Ben.
Coding.
They're Asia is targeting different market segments and consummate profiles.
In the meantime, we are also collaborating closely with cod makes on popped up the environment.
We plan to launch multiple product lines. This time makes in the U.S. <unk> audio trend you tend to.
This X was in our self developed AI chip Paulson number one our smart ratable pod and cloud based services, we strive to for why did you those bad experience in both small and health care in order to improve there.
Daily Smart glass.
Thank you again for joining today I would now turning to call our to our Seattle Baby trade.
[laughter]. Thank you all.
We're very pleased we saw robust of financial result in the sort of color.
Let me also grow seven days, 3.3% year over year on total shipments reached 13.7 million units.
So 67.1% from the same pure lots here.
That's a result, so were primarily driven by the rising global demand or both me, but for and the our newly launched a must be products.
In the meantime, our first nine months revenue that's shipments have already exceeded 28 his whole year performance.
Along with revenue expansion.
Our operating efficiency also improved in the quarter.
With operating expense as a percentage or Oh for revenue.
Certain 0.5% declining 4.3, and 1.4 percentage points respectively.
The second quarter at 29 team and the sort of quarter last year. Despite our increase in investment in R&D and Brent equity during the quarter.
This combined financial and operational improvements coupled with strong revenue growth.
To bottom line year over year gross of 78.7%.
As we further diversify our product lines since there are service offerings form.
Form and solidify a strategic alliance and and to grow our global.
Footprint, we are confident yeah, our ability to continue delivering healthy financial and operating performance going forward.
My follow up there and so if this call I will highlight the key financial measures for the third quarter at 29 scene and encourage you to refer to our earnings press release for further details regarding our financial results.
No fear or some of the highlights of our strong third quarter Oh amounts are expressed in RMB unless otherwise stated.
As previously mentioned.
Nobody else in this quarter 29 to increase the bye.
I wanted to 3.3% cool 1.86 billion from 1.07 billion.
Well, that's it for the third quarter of 28 kids.
Gross profit increased significantly by.
63.8% cool 470 million from 237 million into third quarter 20 Adrian.
Our gross margin was 25.2%.
Compared with 26.7% a year ago.
Despite the decrease was primarily a result, so from increasingly proportional me back or yeah revenue mix.
Even by its continue the sales momentum.
Second quarter.
Product launch.
Moving to expenses.
Total operating expenses increased a body.
If he is 6.5% to 451 million from 160 minute <unk>.
For the third quarter 28.
Reflecting our strategy of investing in R&D branding and marketing, where you have long term returns.
Research and development expenses increased by 107.7% to 425 million.
60, a minute for that sort of quarter Bossier.
Primarily fueled by increased in.
Our personnel related expenses and a rise in cost associated with the testing of new pipeline product [noise].
General and administrative expenses in the third quarter it remained essentially flat.
70 million compared with 68 million for this quarter at 28.
Our selling and marketing expenses increased by 75.1% to 57 million from started who really for this quarter last year actually increased advertising and promotional expenses.
For all new I must be products.
We also expanded our sales and marketing team to post hours sales efforts globally.
Our income tax or income before income tax was 228 million compared with.
129 million.
For the third quarter of 28 him.
The gap.
And the GAAP net income.
I feel good about where the company increased about increased a tool poor hardware and 3 million compared with 114 million.
For this quarter of 218.
Net income attributable to ordinary shareholders of the company also increased a tool to water or three minute.
Basic and diluted net income per Ats attributable to ordinary shareholders of Wami Corporation.
3.31, RMB and is 3.15 RMB respectively.
As a reminder, if they do yes represents war across a ordinary shares.
Net for none.
GAAP measures.
Adjusted net income attributable to Army Corp increased the tool poor Hunter and I'm really from 134 million for Q3 28 kids.
Finally, adjusted basic and diluted net income Hirsch they do yes.
Attributable to ordinary shareholders <unk> Army Corp was 3.41, and 3.25 RMB respectively.
They look at into cash.
So for September sort of his 29 kit.
The company.
<unk> cash on cash you equivalence of 1.72 billion compared with 1.44 billion.
At the end of 28 Kim.
And now to our outlook.
I had total fourth quarter of 29 kit.
The management currently expects net revenues to be between 1.9 Street billet and 1.95 billion.
Which would represent an increase of approximately.
57.6% to 59.2% from 1.2 billion.
For the fourth quarter uptime, T.H. and [noise].
[noise]. This concludes our prepared remarks, well, we will now open the call two questions.
Operator, Please go ahead.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using you speakerphone. Please pick up your handset before passing the keys.
Withdraw your question. Please press Star then to.
For the benefit of that participants on today's call. If you wish to ask your question to the company's management in Chinese based immediately you repeat your question in English at this time, we will pause momentarily to assemble thereafter.
The first question today comes from Dr. Chang of Credit Suisse. Please go ahead.
Hi, Good evening Mandarin. Thank you for taking my question. My I think big question is on the Shami smartwatch competition.
Previously, we believe that <unk> Shami smart watch a will be targeted at a different segment compared to our amazed fed products, but the price range since pretty similar on some of the higher end ranges for amazed that products.
Could you.
She hasn't insights on the view on.
On this and if there's any risk on for amazed that on Shami channels. Thank you.
[laughter] Oh this is Mike Mccown and Ah. So basically there are a oh the differences in terms of Ah you know the feature set Oh the shall be spot. What for example, they have a the a though the.
Calling function.
Fortyg and ER faced somebody Oh, you know that's more taking or to Oh, you know up scenarios, where Oh, you know you My Oh my phone with you all and Oh currently that scenario is well you know quite.
A new too you know two to two many users all for US Oh, we mostly as a target a or that the smart watches or we have a lot of sports feature as well as a lot of health care feature.
And also Oh in terms of Oh fashion in terms of up Oh, Oh, Oh allocations. Those are all the features we focus on sports feature health care feature a s. aureus, Oh look sentence in fashion. So.
Where's Ah Ah you know the again the Shami Smartwatches more focus on communication also be something is a a slightly different you know it's different oh future taught us sets of targeting different people and different scenarios.
[noise] choice or does that that's your question.
Yeah, and also with so I think I May said, obviously you have a products are sold through Shami channels is there any risk Oh, oh impact to that.
[noise] due to their directly answer your question.
For unless we products our own brand products majority of them.
Did not close to a chemise channel, we have successfully build our own channel and we.
We are still expanding our distribution channel right now.
Okay. Thank you very much.
The next question comes from our third right of Citi. Please go ahead.
Hi, Hong zone and are taking it might.
Congrats for the third results Oh, well, let's see.
I have a tool question so number wanting to use a housekeeping question.
Number two we sell new product.
So I would not to start song, but number one oh. So you mentioned that this quarter, we should a 13.7 immediate.
Total product can you give us some breakdown also.
The Shelby Bad Paul do you know so youre all bring product Oh, the other opiate products suite.
And also appeals will come in a ball.
The I'd like you spent a you mentioned that.
You know you out there aren't you space actually increase Oh, I'm, just going into saying Oh. This is quite a.
The Beijing.
Can you also elaborate all kinds of product you are talking up thank you.
Okay offer.
For the first off our total shipments I had some way or announced Oh.
About 20 days ago in this quarter, we were very successfully shift or close to one about 1 million unless it products and and a that Ah Ah that's a total shipments in in only one quarter does.
Historical and a the rest of the shipments are or Archie on these products.
These products.
And are pretty R&D brief.
What I can point out is the the old pass, but the opex in total.
As a percentage of our total revenue actually decreased as compared to the same quarter in 2018, and though we were very successfully managed to our agenda, achieving a expense add to compensate that that the increase in our R&D investment and.
Also in our or channel distribution trying to build deal costs. So as a result, so the this or not margin.
If you look at our net margin or your two year, it's actually slightly increased.
Okay [laughter] yeah. So.
Oh. Thank you thanks babies all the answer.
If you don't get that's wrong or actually we are not to try to be true a company because you already know R&D actually we are a happy to see are you.
That's all those future I just want to get some toddler doll. Those Ah report are all night, because Oh, you May say 20 ball for looking at the if you do get you a but such as the U.S. a leading brands.
They they actually that's either way a ballpark <unk> as long as such it. So teed up you guys pricing. So I know so I'm wondering do you have a train two eastspring you a plan on line two Oliver.
Oh smart they know so small watch.
I try and answer first and then if one's own or maybe you can add though we do have a pipeline of new products.
Yeah for next year 2020.
And that includes does include teed up as it does not reader.
And.
But majority of the products our steel variables and that does include that to the best.
Is it the other question.
Yeah, Yeah. Thank you.
Thank you.
The next question today comes from Minkow, our industrial Securities. Please go ahead.
Yeah, Hi Amendment leases Muslim from investors currency. Thank you for taking my question. So my question then what's your old translate to promote wanted to see a brand and the could you give that some kinda that's certainly on the marketing spends and 2020 . Thank you.
[noise].
Oh, yeah, so a fall a our oh.
At least it branch out you will Oh definitely continue to.
Investors are and ER and grow up brand, especially Oh, you know internationally, where we're seeing a very good adoption of our product right now and Oh, we will oh outdoor product launches Oh internationally as a as we mentioned earlier in the call.
And ER for example, a in a upcoming CES in January we will have Oh force US, yes, HM presage, a and <unk> and promote or I'll, Oh products are out and not you fall off.
Last year Oh this year.
It's also a another example, so we'll continue to do more I'll take a major international our product launches from off ramp.
Yeah.
Okay.
The next question comes from Michelle.
China Renaissance. Please go ahead.
Oh, Hello management. So I went on to know that case ever cooperation they contract with Xiaomi and October next year. So it on to know that what do you ever coverage relationship to show me.
In Q.
Oh, yeah, Yeah, So Oh, Oh, Oh currently right now again, we know we are continuing a partnership just before we.
We are a you know already working on Nabil, then five and Oh, we will we'd expect to review the up a partnership agreement, we shall me or we don't see I'm right now we don't see any change in that so Oh and again, we expect to Oh, we knew the agreement or sometime.
Oh early next year.
Okay. Thank you.
The next question comes from she ton Chen of C. I see see please go ahead.
Thank you for taking my question congratulation for the robust new resolved.
We all know application here or medical use of smartwatch and other wearable devices is there a halt recently my questions will form you can see that you go into those do you are there any plans on recent achievement to it to share we think.
Oh.
Actually or.
Our.
Mission actually is too so.
To explore opportunities in India healthcare fields, so a they since it maybe also.
Yeah. Maybe is also our students is its trends area. So or is the worst who mentioned that it is quami, who actually launched the first it used to do commercial.
They're both or even ahead of ER or other Oh famers competitors are so we are R&D lab are working on author or the last a medical fields, such as a lot oxygen.
Then blood pressure and Ah, we are a working on those and trying to get the technology.
Moved up by a China FDA and eventually a.
Approved by the U.S. I see a so we should expect a or future products in those area.
Okay. Thank you Debbie.
Thank you.
The next question comes from Robert Callow of 86 Research. Please go ahead.
Hi management. My question is about our priorities for the use of cash it seems there's a pretty significant cash balance that's why.
Yes.
Robert we are.
Okay Cumulating allowed them cashless, so far but are we are looking at strategic opportunities.
Yeah, Wesman opportunities the merger acquisition opportunities.
ER opportunities.
ER globally, and we will.
I'm used to cash in a in a good way.
Thank you.
Thanks Robert.
The next question comes from every 10 had told me International. Please go ahead.
Oh, Hi, money's going congrats for the good results I just want to follow up on the health care services that were focusing on so I wonder management could give us a bit more.
More color on part of what would the.
Small to look like in terms of those services that will launch all related to health care. Thank you.
Yeah for Oh Health care services are actually or are there are a quite oh, it's a different about several different kind of revenue streams potential revenue streams.
One is Oh actually mentioned before is Oh, working with a insurance companies and neither a you know or do a licensing of our algorithm or Oh, and Oh, it or Oh, you know a data sharing with the younger users a approval.
And our leads generation a savings or we can potentially all get a sheer off the savings.
Yeah in claim cost, but those are oh, well, there's various ways that we could oh work with insurance companies.
To monetize awful Oh, the Ah or our health care about certain features and data.
Okay. Thank you.
The next question comes from Jason such as China Renaissance. Please go ahead.
Hi, Matt Matt. Thank you for taking my questions.
So my question actually the market just speculating that Shelby will actually along several of them. So that seems December a including that bands very low and bands and some high and I'd be though to your watches.
How do you think this will impact the.
Relationship or Youre pulled out product shipment in the first top up next year. Thank you.
Well, thank you Jason.
So I guess.
Yeah.
Mr. Hong mentioned, yeah, it's already a speech that our long term plan was show me.
And the.
Popular me bad product line is the will remain unchanged. So we are.
Looking.
Forward to develop him producing future generations. So for me bad.
Yeah for show me so to be specific it that Ah we will launch from me about why in next year for showing it. So if it's a strong indicator Oh, we will.
Continue to well who worked with Xiaomi and continued the strong relationship was show me a in terms of ER or what you mentioned that show me in May our ER launch in multiple future products.
So we will Oh, we would consider that or is this a one more play or on the market.
And.
And us as of this moment that our total shipments that's still remains a top five or six globally and Oh, well, we are product or do you need in terms of features in terms of the design. So we're confident that.
We can develop our business independently and people.
Our technology and the products associate with the technology for global.
Consumers.
And Jason just to add more color a is that that for example, a in just just passed a you know single state or we're still a you know totaling how did he does our sales figures, but basically we have seen of you know very strong Oh, you know single state sale for our I missed your friend products.
Oh, you know, even though you know the Shami smartwatch was so all was also a for sale. So a you know we see no you know again very strong sales all four for this past September 11th Oh, probably I spent a fast stonkus ever awful for out for a company for Brent also recently right now I know again.
You know, we we don't really see that much impact Oh, yes, Shami us off my watch.
Yeah actually it's Bob Johnny [laughter], Yeah, we are in a single day, we know the number one.
Under the one on jure I loved 1000 and B.
Price steckman.
V bids hobby and yeah I being in a few told you will be.
He will be better in above a 1000, [laughter] and be a price range.
[noise], Okay. So how do you think how do they do you think the no no price ban Mike maybe a price that 16 night will cannibalize some of the user base from family.
Like over 100 RMB segmentation.
[noise] well the strongest of girls in future based selling independent market research is coming from.
From the smart watches so to us the focus Oh Oh.
Oh future focus area was a was a otherwise.
Health care features in terms of the ban that will be the 15 market. So far you can't see and our performance product performance you can see the loss of two generations.
Industry and the best for into how we grow that so where we are as Tom with his dad I mean, I will be accounting will be on a another sepsis and Oh, we believed that the lower priced 69 RMB.
Price, Ben or would be no comparison waste or or or our band products.
As a matter of fact, it that it the bad so cheap but is it does in well a lot of the technology involves a lot of the integration of our R&D integration of our or pod production and supply chain management.
And if it requires expertise so we're confident that the ban shipments.
Future generations that will not that much impact.
Thank you well I'm going to baby Mike. Thank you.
Thank you.
Oh, sorry, no further questions now I'd like to turn the call back over to the company for any closing remarks.
Thank you I say again for joining US today. If you have further question. Please feel free to come has homies Investor Relations Department sooner contact information provided on our website I can't say cool the company Sea lice Trans fats comes out.
[laughter]. This conference call you may now disconnect your lines. Thank you.
[laughter].