Q3 2020 Viomi Technology Co Ltd Earnings Call

At this time, all participants are in listen only mode.

The conference call is being recorded I would now like to turn the call over to your host Ms. Cecilia Elite. These senior IR manager up the company. Please go ahead Cecilia.

Yeah, operator, Hello, everyone and welcome to bomb and technology called Limited earnings Conference call and her caught and wanted warranty other way.

Hi, There this conference is being recorded becoming financial and operating results.

On the press release earlier today and appeals to online you can download journeys gross relation and sign up for the county email distribution list for visiting the IR section of the company's website I'd I, our dog and Dot Com [noise].

And into the call on mystery shopping channel founder Chairman and the board of Directors and Chief Executive Officer, and Mr. hinge on the chip on the job is there like how many management will begin with rebel and Mark and the call will conclude with <unk> and efficient [noise].

Before we continue please note today's discussion will contain forward looking at them and mid and or does the public companies shows how the U.S. Private Securities Litigation Reform Act of 90, 95 toward the guest and nuts, and bolts <unk> and answered and I was talking about moving it afterwards out and they didn't materially different from the views because we're after debt well the infamous.

And regarding these and other risks and answered and kids is included in California report on form 20, <unk> now and all other calling up and started with the U.S. bigger different on trends can you share.

The comedy doesn't assume any obligation to update any forward looking statements, except as required by law.

Please also note that volume earnings press release, and this conference call include a discussion on this up and audio and GAAP financing inflammation as well as and non-GAAP financial measure bombing press release on towns day every combination habit and auditing and GAAP measures to the and obviously the most directly comparable GAAP measures [noise].

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I think your shopping this is Sean barmy, CFO and quickly translate and as the trends remarks before discussing our financial performance for the third quarter Twentytwenty.

Well everyone. Thank you put you on your earnings conference call for the third quarter of Twentytwenty on to the backdrop of a meaningful industry recovery and rebound and consumer demand and opposed to pandemic landscape. We continued our strong growth momentum in the third quarter with net revenues, increasing by 39% year over year to around 1.49 billion RMB exceeding our price.

This guidance once again.

Over the past two years as part about Fiveg to strategy, we have been developing a five day Archie technology protocol and algorithm framework for the home environment, including sensor technology algorithms and smart hardware.

And Twentytwenty, we accelerated the introduction and about the strategic Fiveg Iraqi products and services under this framework. It may amongst many strategic products and services. We introduced our 21 face interactive smart screen TV and home sales concept, which mark the comprehensive implementation of Iraqi at home from across all from scenarios and screen.

And.

Following this at a recent product launch event in October we launched state of the art Archie chip modules C.P.E. on customer premise equipment router products and also on pads screen based control interface for other strengthening fiveg Archie smart connection capabilities for the from environment.

We are fully confident that the increasing penetration and adoption and add on.

Patient and applied you technology, how fiveg chief focus strategy will help us maintain a leadership position in this rapidly evolving industry [noise].

To this point and we continue to expand our value added businesses and content applications and our recent Fiveg technology product launch event, we also announced additional enhancements to our line of 21 face large screen refrigerators and further expanded relate related content partnerships. Following on previous cooperation with various entertainment and media plan.

Forms, including Google Music online video platform I'd see audio sharing platform. She my lay on FM and recipe sharing on so-called.

We also recently reached a cooperation agreement with Dolby China's popular short video and social media platforms.

We have also made efforts to integrate and leverage our E. Commerce platform you sometime throughout a large screen operating system to capitalize on the home consumption scenarios and a large screens enable ohio to operating interface, consisting of entertainment shopping advertising and social media applications to create and.

Increasing levels of usage speaking this and data generation.

Going forward well continue to explore even more I always see content offerings and partnerships in relation to our large screen products, such as community group purchasing and grocery delivery services, allowing us to cater to the dynamic ever changing consumption consumption and use a behavioral trends well, providing more value added services and enhanced experiences.

And lots of greater consumer emphasis on clean and cleanliness and the post pandemic era, we have ramped up efforts to capture opportunities and our bar and me branded water purifiers and sweeper robots in times of water Purifiers. Following up on my introduction of New series of large flux next generation water Purifiers in September we low.

Launched a high and water purifiers sub brand and trends you and its first series of double reverse osmosis water purifiers called Super demonstrating our commitment to establishing a professional brand and providing high quality drinking water as well as diversified from water solutions as.

We have also and export expedited the development of our own sleeper robot business with the recent introduction and automatic donor disposables Threepar robot Alpha as well as our series of ladies and navigated and visual navigated sweeper of on.

These two product categories have been extremely well received by the market and to deliver significant sales growth in recent months, including across the double 11 sales season, and we expect them to be key pillars about for the years ahead. We also expect these categories to allow us to better tap into on Maisons per rapidly growing export markets and.

Leveraging upon our extensive existing experience, nor how and supply chain resources Weve also been making the appropriate internal and resource and allocations and new personnel hired to ensure the success of these projects. Moreover, we continue to make innovative technology breakthroughs across our core product categories. For example on new series of premium I bought.

Washing machines is able to assess water quality and cleanliness to suggest optimal loans sessions and.

And our next generation AI, and new wins wash and dry eye product is able to help users shortened dry and time by over 50% through stated the on air circulation technology. These revolution and these revolutionary technologies and related paid and well continue to help us resolve use a pain points caused by traditional models further improving the user experience.

Yes.

We have also continued to deepen and board and now sales channel presence historically, we have focused on Standalone and franchise barmy experience stores from offline presence as we continue to increase and increase our brand penetration and recognition. We have initiated plans to greatly increase the overall points of sales, particularly through coal price.

And with various other two outlets of major ecommerce retailers, such as J.D. and T. Mobile. We're also continuing discussions in relation to additional partnerships with retail leaders. For example, we recently established the first part and we experienced store as part of our strategic cooperation with Hunan friendship and a poll on commercial card limited to promote and I are cheaper.

Redox and concepts and went on province.

Looking back at the two years since our IPO and we have more than doubled our revenues, reaching close to 6 billion RMB for this year up from just over 2.5 billion RMB and 2018, we.

We have also successfully expanded into numerous diverse product lines and significantly expanded our sales channel channel presence and further enriched our pet and <unk>.

And your firmly establishing bar and me as a highly differentiated fiveg Archie consumer technology brand, all while maintaining healthy levels of profitability.

Looking ahead, we will continue to execute on coal Fiveg technology strategy, focusing on RIZAPORT, focusing resources on core categories, while streamlining and optimizing our product lines and SK use well fully devoted and committed to delivering strong high quality gross and cementing ourselves as an industry leader and the next generation of product.

Technology is in Africa.

Applications and.

Our goal is to make the fiveg pretty hard and my reality for the benefit of all our consumers and stakeholders.

That concludes our founders comments now, let's turn to the detailed financial review of our third quarter results as well as the outlook for the fourth quarter and full year of Twentytwenty and.

Share being discussed net revenues were 1.49 billion RMB and increase of 39% compared to the third compared to the same period of last year. Once again, demonstrating the strength of our diversified business mix as the industry began to recover from the impact of COVID-19 revenues from army part of the business increased by 46.5%.

To 861.9 million RMB for the third quarter of 2020, representing around 58 percentage of total revenues for the quarter.

Revenues from Iran.

Pardon.

Volume increased by 72.5% to 1.06 billion RMB from 614.8 million on B for the third quarter of two and 90, primarily due to the continued successful rollouts of certain new product categories in particular, sweeper robots and air conditioning systems third quarter sales from high margin Barmy branded.

So people are bonds, which we expect to be a key growth driver going forward demonstrated multi fold increases both on a year over year as well as quarter over quarter basis and represented around 45% of overall revenues in the quarter.

Revenues from our from water solutions part of the business decreased by 33.2% to 145.4 million on Beep did decline was mainly was primarily due to year over year decreases in average selling prices, particularly of Shami <unk> branded water purifier products. This effect was partially mitigated by the successful introduction of and six.

Significant increasing sales and sales of.

On new series of Army branded water purifier products revenues from bar and me, Brian and water purifier products nearly doubled in the third quarter GAAP and are on track to more than double in the fourth quarter, both on a year over year basis.

Pardon me, Brian and water purifiers are expected to contribute over 20% of our total heart and water solutions business and over 3% of our total revenues and the second half of 2020, as compared to 10% and less than 2%, respectively and the same period last year.

Based on the factors above and taking into consideration on a recent performance. Despite the structural industry wide shifts and water purifier retail prices that we have previously discussed extensively. We current we currently expect revenues for the fourth quarter from now from water solutions business to be at a similar level as the same period of last.

Yes.

Revenues from consumable sales increased by 32.6% by 32.6% to 71.3 million on be primarily due to increased demand for our water purifier filter products revenues from small appliances and other increased by 12.6% to 209.9 million on B in terms of sales channel breakdown.

As discussed above around 58% of our total net revenues for the third quarter derived from I bought from Alberta, and meat business and extra and approximately 42% was derived from national Mi business within the RV business approximately 70% was on line 20 percentage was offline and around 10% was exports.

And the online channels JD was the largest contributor with just over one third of our total online revenues from the volume of business in large part due to temporary and for the double 11 from C.

Sales festival, followed by European with just over 2020 per cent contribution and then Sunni and T Mall.

Gross profit increased by 6.8% to 254.3 million RMB and gross margin was 17.1 per cent compared to 22.3% from the third quarter of 2019 and 14.3% for the second quarter all Twentytwenty the year over year decrease in gross margin was primarily due to the ships and the company's product and.

Business mix, especially the introduction of Shami branded three per robots and the pilot launch about air conditioning systems together with the structural industry wide should see what a purified retail prices on a year over year basis.

The quarter over quarter increase in gross margin was primarily due to a stabilization and average selling prices and margins across product lines, including water purifiers together with more positive shifts and overall business and product mix towards higher gross margin products.

In fact, apart from the water purifier ASP dynamic in the from first half gross margins across other individual.

Product categories have been quite stable overall and have been demonstrating from the uplift trends in the second half of Twentytwenty as compared to last year gross margin gross profit, excluding the water purifiers business actually increased by over 20% on a year over year basis in the third quarter.

In terms of on gross margin outlook for the fourth quarter up well considering the major sales price holds such as double 11, and double 12, Shanxi and function from the negative impact on our overall gross margin should be somewhat mitigated this fourth quarter, partially due to our overall product street portfolio, streamlining and optimization initiatives and on.

Although we do expect gross margin to the fall in the fourth quarter to be slightly lower than the third quarter, the dividends should not be as pronounced as compared to the second quarter.

As we continue to phase out low margin products and focus our efforts on generating greater revenue contribution from higher margin product categories and SK use as a result of our overall premium by state Premiumization theme, we do expect to experience and noticeable degree of gross margin uplift in the year ahead as compared to 2020.

Total operating expenses increased by 33.8% to 226.4 million RMB, primarily due to the gross business together with an increased and share based compensation expenses as we discussed during the last quarter in more detail R&D expenses R&D expenses increased by 22% to from 52.7 million.

And RMB, selling and marketing expenses increased by 34.2 million or 34.2% to 152.2 million RMB and DNA expenses increased by 72.3% to 21 point Formula and RMB, primarily due to the income due to an increased and share based compensation expenses total.

Total operating expenses as a percentage of revenues decreased from 15.2% from 15.8% per the third quarter of 2019, excluding the impact of share based compensation expenses total operating expense as a percentage of revenues was 13.7% as compared to 14.8% for the same period of last year the decline and.

The expense ratio was predominantly due to greater economies of scales and operating efficiencies.

Net income attributable to ordinary shareholders and the company was 34.9 million RMB and non-GAAP net income attributable to ordinary share holders of the company was 57 point formula and RMB. Additionally, our balance sheet remained healthy as of September 32020, we had cash and cash equivalents of 715.6 million RMB restrict.

Good cash of 39.7 million on be short term deposits and.

And and short term investments of around 179.6 million on <unk>.

Now, let's turn to our outlook for the fourth quarter of 2020. We currently expect net net revenues to be between 1.9 billion RMB and 2.0 billion RMB, representing a year over year growth of approximately 9.1% to 14.8% for the full year of Twentytwenty. We currently expect net net revenues to be between five point.

Eight 4 billion and 5.94 billion RMB.

Representing a year over year growth of approximately 25.6% to 27.7%.

The above outlook is based on current market conditions and reflects the company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change in conclusion based on current industry and business trends. We are cautiously optimistic that the coming year will present significant and attractive opportunities for us our co focus on.

We remain on delivering robust topline growth through new product launches sales channel as expansion and market share gains. In addition, and importantly, we believe we now have we have now turned a corner in terms of our gross margin trend and now expect to see meaningful gross margin uplift going forward as a result, as hot as increasingly more positive shifts and.

Our business and product mix.

That concludes our prepared remarks, we will now open the call for cure and at a.

Operator, Please go ahead.

Thank you we will now begin the question and answer session.

Yes. Good question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.

And the benefit of all participants on today's call. If you wish to ask your question to the company's management in Chinese. Please immediately you repeat your question in English at this time, we will pause momentarily to assemble the roster.

[noise]. So first question today comes from Hanley Pan of Morgan Stanley. Please go ahead.

Hi, Thank you Ms. channel and the Mr. Zhao Anastasiya on day is highly from from Morgan Stanley and thanks for the other briefing.

I have two questions. The first question is it's on some recent business updates and particularly by channel. So Youre offline channel and online channel post come and I can you so whats youre.

Kind of offline channel and recovery pace and as you can see in recent months and also for the online channel for some of the competitors and we can see some other growth slowed down post come and 19. So how do you observe your online channel sales gross income in last few months post co made so.

And that's my first question and my second question is coming for the next year outlook because Mr. Chow mention and some some some some outlook for next year, just now, but I just want to dig into that for example, you are you on your topline by kind of like any numerical projection for us and.

Now I'd also you mentioned your gross margin expansion and what and I would also on the no more about kind of like net margin. So how how would the gross margin as well as you on expenses would affect you are on kind of like bottom line margin and that March and so those are my on two questions and thanks for management.

[noise] Thanks Jaime.

I'll take those two questions.

First question on on the other sales channel trends and recovery and outlook. So as discussed during the earnings call. Just now sales recovery in general has been quite healthy now were you would've seen reported nearly 40% year over year gross mainly on the back of new product launches as well as a pickup and overall consumer activity.

And industry, while industry wide sales channel recovery.

So in terms of channel breakdown, we have not seen major structural changes in terms of overall online channel traffic trends, which you might have seen in quite good quite robust and these results by the major E commerce reach and retailers and the last couple of weeks I'll call online channels remain a key sales channel for us.

For for this year as well as the year ahead, so still very positive trends as well as feedback on for from the online channels. So the offline channel performance has also definitely stabilized since the difficult times in the price top and this year and we have once again, we initiated our efforts towards growing our offline points of sales.

Sales. So also as discussed just now we have historically focused more on Standalone and franchise bar and meet experienced stores per offline presence.

As we continue to increase on brand presence and recognition we have initiated plans to greatly increase overall points of sales and the offline channels, particularly through cooperation with many of the average without lots of the other major E commerce retailers, such as non JD and T mobile and we're also continuing to to.

Discussions and in relation to two additional partnerships and retail leaders touches went on friendship as well as colon and and Suneet. So in terms of.

Al Standalone stores will continue to optimize our franchise structure from as well as I look to optimize opportunistically open additional stores, but I think the most of the offline sales point of sales growth will be additional partnerships with these outdoor retailers as well as other retail and leaders we could potentially.

More than double our offline points of sales so over the next year or so.

And the second question is a very good one how is the outlook for 2021 and kind of the margin trends both on a gross as well as the operating and net basis.

And just break that down into a few parts firstly on kind about oh.

On top line growth outlook. So generally we remain very positive on 2020 ones outlook.

From a topline perspective right.

From several perspectives one is obviously, the so called and low base effect. So obviously as everyone knows the first half of 2020, especially the first quarter was materially impacted by the effects of co benign team.

Assuming the situation in China remained stable.

Which is which they're obviously still uncertainties around reduced expect to experience a rebound effect on the year on year basis as a result from this low base effect.

Secondly, our new product launches so as discussed on since the middle and this year, we have made a significant push towards two new product categories that we believe will form very important growth pillars in 2021 and then.

Then being barmy branded water purifiers, and various small and small appliances products, particularly sweeper robots. So.

Leveraging upon our existing notice count, which we already have quite a large presence within these two categories through our relationship with Xiaomi and together with a new investments in R&D as well as the hours and.

Personnel hires we believe we do believe that there is significant potential to significantly increase our presence in these are very attractive and growing markets, particularly given consumer trends towards these cleanliness and a theme.

So and a little bit more detail for water purifiers we.

We initially introduced a series of large flux next generation and water purifier products and the middle of this year.

That's the subsequently we recently launched a high and a water purifiers sub brands I try and Jim and its first series of double reverse osmosis water pure product I called Super in September. So net revenues from from these self army branded products and nearly doubled in the third quarter and more than doubled.

In the fourth quarter and this year on a year on year basis. So very good reception. Two these are initial launches.

Similarly, we expedited the development of our own Army brand and sweeper robot business.

Several there's several new products include the automatic dust collecting and disposal sweeper barcode alpha and.

Well as the other laser navigated and visual and navigated a sweep of robots. So sales of our army, Brian and three per robots and again have increased multiple folder and on a year over year basis, as well as a quarter on quarter basis. So these products and to be extremely well received.

In line with general industry trends. So I think importantly, these products also and tell very healthy gross margins above our overall.

Blended gross margin, which should drive the overall margin uplift going forward as their contribution.

To overall revenue or income.

Creases over time right.

And the third point and I'll just finish on this one.

Overall kinds of products and portfolio optimization and Premiumization see right. So since the middle and this year. We've made it very much been devoting average towards a comprehensive upgrade about co product lines and.

This will encompass reducing our exposure or eliminating many of the early on.

More volume based on lower margin low as S.P.S.K. use within our product portfolio and focusing our efforts towards more innovative and differentiated product developments within our fiveg and Archie framework. So as discussed just now and we've been devoting a lot of efforts towards.

We continue to enhance the experience as well as content and entertainment partnerships and applications out 21 face a large screen refrigerate up as well as we recently launched a kind of two and a next generation models or washing machines and you should expect more of these kind of new innovative more premium.

Focus kitchen, as well as other white goods products.

As we progress through 2021.

So to this and we recorded total revenues for 2020 or close to 6 billion, which is around 25% year over year on year over year gross so although it's still very early stage talking about 2020 one taking into these considerations I think you can think about.

2021 year over year growth going on at least similar low.

Levels, if not greater right, but of course I'm business, we will give more granular guidance as we proceed to have more clarity on on next year's performance.

And I think on a gross margin basis, we've guided that so we do expect to experience and notice one three and gross margin expansion as we expect to experience more positive shifts in our.

Product mix as compared to historically and as we proceed to execute a product premiumization and streamlining strategy right. So I think we.

Increased our gross margins by around 280 basis points and the third quarter to the second quarter.

And this this this is a trend that we are very much committed to continuing and gross margins.

Close to around 20%, which would be our initial target for per 2021, and then net margins. It is a little bit more on credit on a uncertainty around given that we will obviously continue to invest in not only sales and marketing and sales personnel, but of course also R&D, but I think you.

Should it.

Expect a certain degree your on net margin uplift as compared to this year as well given that the kind of the impact on public 19.

On your broad industry this year.

Okay.

Okay. Thank you that's very detail. Thank you so much.

And next question comes from should on Chen of CCC. Please go ahead.

Hey, Southern Rosenthal.

And I have two questions and first one is you just mentioned you have just started the export business.

Can you give me more color about the oversee a monkey I like your your product to go to do other other countries and what.

What the condition now and then my second question is can you share more color on the key drivers on the I'd product portfolio and the business focus for 2000 and that's my two questions. Thank you.

[noise], yeah, so they're all a first touch up on the export business or export business and we.

We have just recently started to put a more strategic emphasis on the initial markets that have had to shoulder and quite good initial success, including includes towards on the southeast Asian, as well and eastern European markets.

Initial product categories that we've been selling to these markets are more towards the small appliances side of the business and in particular.

Sweeper robot business right. So a large portion of our existing export markets are co.

Consist of our about and existing of army branded sweep of robot products going forward and.

We have recently hired a new team just to focus on this export business I think we will continue to to leveraging on our success in the small appliances business, particularly per sweeper robust increase on SK use football on this.

Product categories for the export markets as well and and also look to expand on how export range.

For example into two water purifiers as well as perhaps some other white good products as well.

So your second question on on higher Ti per.

Products. So I think this is how we look at how our assay portfolio and RFP strategy right. So.

Formed this fiveg and Iraqi concept formed a very important part of our brand and product differentiation.

And over the past several years, we've been very much devoted to implementing a al and I are 25, GRT strategic framework in terms of products and protocols as low as algorithms right you would've seen and we launch quite a number of.

Fiveg and higher Ti related products over the past several months and we feel that such newly launched products are a very important part of our brand identity, and how consumers and customers and and consumers are.

Our able to differentiate our brand and products from peers and these products of course also build upon our comprehensive aarti at heart and platform.

Enhancing overall connectivity and also creating network effects and synergies with our existing Archie enabled product portfolio within our concept of a trend we'll pull in right Iraqi a at home, which is our vision for the Fiveg Iraqi and connected home scenario. So we will leveraging upon this platform.

And then continue to strengthen and build upon such a platform.

And then being able to entrench really on our brand identity, and then getting a head start and being able to adapt to rapidly changing consumer trends and and lifestyle demand.

On Puerto Rico boxers acclaimed good cash flow and teachers orlen the broker deposits soil other types and the tank and dental was you allocate attempting to the share Tivo is there anything any individual and other terribly just hopefully that me and sleep on so that has the ability to today today.

We'll take and that seemed to the way that we bought so other timing champion and once you tell me what's reality that have.

Sure on Jay I think the tone and the kind of thoughts on that per game out and what the net.

So our penetration into Fiveg and you will consist of two keep phases over the next year or so so number one.

For all else screen based products in particular on the large screen refrigerate and interactive smart screen. All of these will transition into Fiveg yard. These next generation and Fiveg Arctic technology and the first half of next year and then throughout the year will gradually and implement this.

<unk> technology across our entire per product portfolio to achieve close to full penetration across our product portfolio and by the end of next year.

Okay. Thank you.

Thank you.

[noise] and next question comes from Joy way of 80 Sixresearch. Please go ahead.

And.

A question on.

Hi.

So yes the ouch.

Pretty comprehensive fiveg.

So.

And the management objective.

The tipping point of time.

And we'll find on.

Good luck and see a big gross.

And.

And Uh huh.

On investment is needed.

And she needs.

And just.

Sounds like on the Capex and marketing spending.

And secondly, and management elaborate more on.

And no service miniaturization and.

And as we have seen that you.

Sure.

Thank you.

[noise] Yep. Thanks all.

Oh, and usually take pictures to questions and Mr. Chen may have some supplements. So the first question on the tipping point are achieved.

Five geography, so in terms of the tipping point, we believe the industry transformation will be an ongoing process and we are currently still in the early adopter phase right. However, we do expect consumer and market and to attention to tip extremely quickly and I think a very good example, and this is what we have recently seen in the electric vehicle market.

Right and this is why have been devoting additional efforts towards marketing.

Especially as well as product development and innovation in firmly establishing ourselves as a first mover in this in Fiveg technology. We in this industry. So you can think of five GRT as a subset of the overall kind of off from appliances and industry at the moment similar to how electric vehicles on subsets.

And the overall automobile industry.

And I think it is a it is a very defined a trend that other than penetration as well as the contribution of these next generation technologies will increase over time and when the tipping point will be we think will be in the near term right, which is why we'd be making such brand positioning as well as.

R&D investment.

[noise] net not so mr. Chen will supplement a couple of points on this aspect next question.

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Yes, so just to supplement on your first question on the on the tipping points and Mr. Chen added three points. So.

So number one as you may know all of the telecom companies.

Especially the three large telecom companies in China on a very much a rapidly rolling out of the base stations on Fiveg LTE coverage I asked that is definitely expanding at a rapid rate right. So once the coverage.

Becomes very mainstream and of course consumers will adopt be these processes are more.

Second is the cost of the product and adaptation and the product base so to be able to leverage. These technologies. We believe that you need screen based products to grab and to provide our users with content and the best guest experience to capitalize on the Fiveg and Archie experience, which is why I think the 21 phase refrigerate up our interactive smart.

Screen TV visa as well as our holding pad recently launched on pad and switch products. These will become very important enable is on fiveg clarity on the whole.

From environment, and then third and of course, the the five GRT.

Most of volume on from the rollout of course through the speed that that's introduced technology is able to offer will be able to offer on a much more content and a better experience for consumers as opposed to the previous generation technology, which of course will further accelerate adaptation.

Right on adoption.

So that's what I was the first question on your second question on monetization of some of these Archie products.

So we believe there are many opportunities for from.

On monetization right. So at the moment, we want to we are very much focused on enhancing the consumer experience and increasing penetration as well as overall installed base of our products to try and get to get consumer buying especially the early adopters on the capabilities as well as the experience of our.

Products. So that's why we've.

And have seen over the past couple of quarters, we have significantly expanded upon the content that is available on <unk> available on our Fiveg technology enabled products, especially the btwenty, one face refrigerator I'd sort of potential monetization avenues come from for example, advertising or partnerships with various and.

FMCG suppliers.

And think of it as a focus media screen on an advertiser or a actionable immediately actionable advertising screen at the center of a home environment and.

And of course this follows on to E commerce transactions on GMB take rates and example, acting upon certain touch active advertising or even through the data on cumulated through the constant usage or be on these products are able to provide say recommendations as.

As well as.

Opportunities for power consumption for our consumers right and also in terms of the these partnerships with the content providers are going forward, we could even have such that for example, a small take rate on some of their successors subscriptions all take credit from our purchases from third party plant.

Forms as well so I think in the short term, we will continue to devote most of our resources on enhancing the content applications as well as strengthening and enhancing the user experience while building out to our on our installed base and once the installed base is at a.

Critical mass and we believe that the monetization part is actually the pod.

[noise]. Thanks.

[noise] and next question comes from Vincent Yu of Needham and company. Please go ahead.

Thank you then management.

Moving the with quarter.

Three questions.

First one is to color on the export ban is crucial.

Any comments on the product pricing.

The net would there be any price is union vs settlements and markets and that we have any net revenue contribution expectation.

On the new one.

On the question is about the sales.

Gross day sales can you share any comments on the per and then greenery results flow singles day sales can you share anything.

Gross rates and did our newly released it per.

So that's positive and in the sales and how and where they received.

And also.

Well this promotion will do we think on.

Its impact on our gross margin or that was on.

My question is on the product line, if you mentioned that on that and I wanted to ask you.

And get more details.

And do looking between easily won in per the category.

In particular, we are most excited about I think.

Yep. Thank you Oh I'll take those questions. So the first one on the export market as discussed the represented around 10% of our army branded business.

In the third quarter, which is around 4% to 5% of our overall revenues and has been growing extremely quickly but of course. Our overall business has also been growing extremely quickly at the moment, it's focused mainly on smaller appliances in particular sweeper robots, but as discussed we're also looking to expand on not only are we.

Regional coverage, but also the product categories that are that we will export going into next year right. So we will probably believe.

At the current stage that the export business will grow faster than the domestic business for next year.

And we will likely be a close to 10% of our overall revenues fall for next year.

Right in terms of pricing.

I think <unk> co.

Currently its predominantly suite from robot price.

Products.

We have a range of sweeper robot products as well for the mass market as was mid to high end is low.

There is no significant or material difference in terms of the asps for on the exports and versus the debt net domestic business.

Right so.

On your second question on the double.

Double 11 sales as well as kind of the performance of some key product categories. So as discussed during the call towards the towards the latter part of the current quarter and in particular, the fourth quarter, we made a gradual shift towards greater emphasis on quality and growth and are currently undergoing a product creamy.

Amortization and SK optimization phase, which is reflected in our fourth quarter guidance. So the double 11 sales festival I would say what was still successful and very much focused on some of our call on newly identified growth categories right. So some of the best performing products, where some of the various.

Newly launched products and key focus products, such as the water purifiers, and and Threepar robots, which as discussed experienced double or in some cases multi fold.

On the breakout gross right and the second half and this year as well as during the <unk> the double 11 sales price.

So.

In terms of how this affects overall margins. So as we've discussed already a gross margins generally seasonally lower and the second and fourth quarters.

Due to the sales festival, but given this year I think the fourth quarter.

And fourth quarter margins, while we currently do expect to be slightly lower than third quarter should definitely be higher than the well very much higher than the second quarter right and very much as a result of our overall S.K., you premiumization and product categories streamlining initiatives.

So on heading into 2021 is also discussed.

Given these initiatives we do expect.

And together with these kind of a more positive shifts in product trend for example, the hour and branded water purifiers and Super robots have two and northwards of 25% plus our gross margins are they will continue to drive not only top line growth, but also a driver a certain degree of margin expansion and.

Next year as well compared to this year.

Right and then lastly on.

In terms of new product categories that we are excited about it I think we've discussed this quite a bit and probably werent ER and.

Repeat spots obviously, the main categories of army branded water Purifiers sweeper robots are 21 price refrigerators as well as.

On the constant Rollouts of some of these more innovative differentiated and mid to high end products for example.

And our core categories, such as the agreed the washing machine and the new wash and dry on that we launched and off sale and our product launch event in October.

[noise]. Thank you very much.

[noise] and there are no further questions now I'd like to turn the call back over to assist Sealy and leave for any closing remarks.

And your once again for joining us today and just the other question is greater contact our Investor Relations Department and the call on the information on our website, our other cats and they go to our Investor relations. Thank.

Thank you I'll have a go on.

Thank you everyone and thank you.

This concludes the conference call you May now disconnect. Your line. Thank you and have a nice day.