Q2 2022 Viomi Technology Co Ltd Earnings Call
Hello, Ladies and gentlemen, thank you for standing by for Bright Ami Technology company.
Earnings Conference call for the second quarter of 2022.
At this time all participants are in a listen only mode today.
Today's conference call is being recorded I would now.
I'd like to turn the call over to your house with clarity from the company.
Please go ahead Claire.
Thank you Anita Hello, everyone and welcome to Valley's Technology Co Ltd earnings Conference call for the second quarter O T cell down on timing too. Although a reminder, this conference is being recorded the company's financial and operating results were issued in a press release earlier today and are posted.
You can download the earnings press release on South, Florida companies email distribution list by visiting the IR section of the company's website at IR <unk> com participating into this call.
Inspections, often the founder chairman of the board of Directors, and Chief Executive Officer, and Mr tie with the head of our Finance Department. The company's management will begin with prepared remarks, and the call will conclude with the Q&A session.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provision of the United States Private Securities Litigation Reform Act of 90, 95 forward looking statements involve inherent risks and uncertainties.
The company's actual results may be materially different from the views expressed today further information regarding this and other risks and uncertainties is included in the company's annual report on form 20-F, and other filings filed with the United States Securities that make exchange Commission the company does.
<unk> assume any obligation to update any forward.
Looking statements, except as required by law.
Please also note that the wound me its earnings press release and this conference call include discussions of unaudited GAAP financial information as well and all of the unaudited non-GAAP financial measure. In addition, Rami press release contains a reconciliation of these.
non-GAAP measure was an oddity, but mostly directly comparable GAAP measure I will now turn.
The call over to vomit, you find out that they deal with their turns out he's our chairman will deliver his remarks in Chinese for immediately by English translation. Mr. Chen. Please go ahead.
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Thank you Mr. Chang I will quickly translate our founders and Mark before discussing our financial performance for the second quarter of 2000 and I'm talking to.
Hello, everyone. Thanks for joining US second quarter 2022 earnings conference call in the second quarter. Our total net revenues to reach 900 on the timing for me now RMB in line with our previous guidance the year over year decline in revenues was mainly due to two factors for this year.
We cut off the selling off Xiaomi branded sweeper robot, which had a high prior year base of comparison second since the beginning of the year, owing to the rest of broccoli, Nike where currency market consumption will continue to decrease in the second quarter, along with the soft demand industrial wide.
To support the release of premium products in our high end brand transformation, we continue to enhance our brand promotion and the increased advertising spending during the second quarter.
And two the launch of a large number of elevator.
And print ads, we've reached a more targeted at a younger groups by parents, along with Tmall and becoming a co sponsor of the well known variety scope design ideal future broke out there among those he better plan for our investment in branding and product promotion during a rapidly wake peer in the macro environment resulted in.
Temporary temporary operating loss in the second quarter by the way. It believes these measures will help us to build a long term brand awareness. Furthermore, judging from our performance during the six months, a shopping festival and the South all of our high end products in recent months.
Our marketing investment over the past few quarters, let's say the contribution of high end product sought us out and it hurts our trading technology branding position.
Second quarter, we continued to execute our high quality business.
Duration on strategy for continuing to streamline and.
And optimize our product mix.
Both of our core business and our product line to be a best selling product and third is a man called country, I mean patients being improvement measure.
On the supply chain.
This effort lead to ongoing optimization of our operation with gross margin increasing by about 1% year over year, representing consecutive year over year improvement since the fourth quarter of 2020, Despite COVID-19, recurrence it and the way consumer spending extra.
Accelerating considerable pressure.
We made significant progress impulse product innovation channel expansion and strategic Calvary collaborations.
In addition, we continue to develop our one stop Iot at home solutions further solidifying the foundation for our long term for it back in house.
Landings, England.
First.
With respect to our products were introduced a theory about the new Apple and our strategic new product launch event in March, including bass pro or I'll say, yeah air conditioning refrigeration.
Formaldehyde removal well, our large screen refrigerator with a I've been amazed functionality, our royal theory about a laser interactive smart screen, incorporating <unk> ultra high definition display similar to our 2000 gallons Beaver Lodge Frac water purifier.
<unk>, which generates a michael ultra micro bubble to renew.
More passive passive side with vigor and our Royal series of AI to income washing machines amount of them.
Air Conditioner water purifier, and interactive smart screen chemical market in the second quarter. In addition, we also introduced US yourself, Neil Smart home devices that go.
I link our smart lock.
Upgraded a straight <unk> facial recognition technology, although out of home block compact block hour as Green pest control interface for managing all smartphone apply them across a narrow this new AI create the products provide our consumers made rescue puerile smartphone experience and have received.
Favorable market feedback on the reveal Furthermore, so well on the pro that influx of my roommate to high end products all going crazy during the recent fixed block a shopping festival some of our me too high and pulled out how about e-commerce sell charts in their respective categories such as.
Our space theory yourself Air Conditioners Super series on water purifier and to 2020, one face and I largely agree I've read your readers.
Meanwhile, based on our one stop Iot home solutions, we are accelerating the implementation of our premium bundle solution offering nationwide after.
Our offline merchants in the first quarter signed whole home solution older ranging from 200000, RMB, two 400000, RMB, whereas customers in Beijing Guangzhou comes out in front of me, there's some offline merchants in Chengdu Li <unk> answered the artist Lady a follow through from the second quarter recording.
Mouthful high and whole home solutions older existing 200000 to RMB 300000 to RMB.
Consumers Western Asia and adoption of our.
Premium products in our bundled them solution offerings.
A testament to the surpass all right they've.
Transformation into a premium brand and operating investment in research and development of our AI products.
The successful launch of all of our new AI products, which received a post about how other people do.
Market feedback and a smooth adoption of bundles them solution offerings will not possible without our resonating adverse in technological innovation and pull that research and development.
Oh Doctor Osama June 32022, our accumulative global patent applications and a registered patent reached more than 5400, and the 3300, respectively. Our research and development achievements have also been recognized by industry unprofessional institution in July .
The Internet intelligent ear shifting master of IRA I bought a wrench food Oh visual detection module, what one that 23rd China had an excellent award although in April which is the silver and the eighth Guangdong Patent award with one of our water purifiers amazed that integrate data what are we.
Module Technology. This award are not owning the reclamation of our technological innovation capability, but also the affirmation of our intellectual property strength.
Second we continue to execute our large store.
But emerging channel strategy in the second quarter, we collaborated with our newly signed offline merchants and open additional Tommy Forest and the five Star Shakes Dorf, Inc. Probing this including Qunar alloy and the Guizhou even etc.
Flagship stores enhanced our training technology brand positioning through unified storefront decoration and Murphy.
Mario experience and help implement our one stop Iot home solution.
To our overseas business in the second quarter, So sabra international macro environment, including the increase in oil and raw material prices led to sluggish demand in the European market and brokered and challenges for our oversea yourself.
At the same time, we made positive progress in channel optimization, and our mid to high and transformation. We have established a stable cooperation with newly joined large international agent and expanded the market in the South East South East Asia with a trend of high flavors. So.
Overseas.
Corporate preparation of the me too and high end model has further even great Ugly broke last through 2022, we will further enrich the product offerings of Angela and Paragon clean Green callbacks and simultaneously real out some other categories of product.
In oversea market.
Third we continue to deepen our strategic cooperation with more channels in the second quarter to promote each.
Granted on a stable development of the smartphone industry.
In the first half of this year with your partnership with getting them both com Tmall on the China Telecom in May we extended our strategic cooperation with Coca Wow, the leading domestic home design enterprises.
Well I mean, well join join me integrate smartphones ecology, and the whole whole house customization business, well accelerating the public popularization Amaro oneself Iot in home solutions to facilitate the integration intelligence and a quality upgrading our crimson area.
In addition, we're exploring strategic cooperation with additional channels and the company a great a more convenient and the small living experience and promote.
Development of smartphone ecology for families.
We have successfully navigated the challenging caused by the pandemic and the weak macro and industry environment in the first half of the year and have made progress in developing new products and enhancing brand awareness moving forward, we will continue to focus for FX.
Lining SKU and continuously optimizing product portfolio second devoting more resources to it.
Improving the product can be done building best selling products and providing a more immersive scenario spirit third creating more offline Murphy consumption.
And facilitating accident Mentation of our one stop Iot solutions to lay out the foundation.
For user experience improvement.
The long term brand value development.
Implementing more discipline in cost and expense control measures will lay a solid foundation for long term healthy growth and create value for our customers and shareholders in the long run. Thank you.
That concludes our Founder's remarks now Mr. Choi Chung head of our Finance Department will go over our second quarter 2000, and a funny.
Although the financial results and our third quarter outlook in more detail.
Thank you now I'll go over the detail.
Older the financial results of the second quarter of 'twenty to 'twenty two.
Never finish or $924 2 million RMB compared to 1000 61700, several hundred or 658 9 million RMB 42nd quarter of 2021.
In line with the company's previous guidance.
In addition to the overall weaker although weaker consumption and love them and the decrease was mainly due to the social selling me Brian gets with the locals this year as well as a high prior year tasteful comparison.
And the ongoing product portfolio adjustments and the same in some categories.
Revenues from Iot of home portfolio decreased by 50.
54, 2% to $524 five medium on beef from $1146 3 million RMB for the second quarter of 2021 could.
The decline was primarily due to become big could talk of south of Xiaomi branded sweeper robot as well as two adjustments.
For some categories.
Brooklyn News from home water solutions decreased by seven point 17, 4% to $180 9 million RMB from $218 9 million RMB 42nd quarter of 2021. The decline was primarily due to decrease the amount of waterproof Walsh.
Revenues from consumables decreased slightly by one 9% to 104 employees medium on <unk> from 100 to contribute them RMB 42nd quarter of 2021.
Revenues from smart pens on autos.
Decreased by <unk> 30.
The eight 1% to <unk>.
185 million RMB from 100 about one 5 million on before you spoken corner of 2021 quantity due to put up a photo of just months within these totals and decreased demand for smartphones as products.
Gross profit.
It was $204 1 million RMB compared to 300, and so Q1 point 8 million RMB 42nd quarter of 2021.
Gross margin increased to 22, 1% from 21, 2% second quarter of 2021, primarily driven by these companies continue to shift business and product mix.
Gross margin products, and partially offset by the decreases in selling prices of some products for clean up due to the.
For the portfolio adjustments in this quarter.
Total operating expenses decreased by 14.
Percent to 240 202 four points. This median RMB from 309 7 million RMB for the second quarter of 2021, primarily due to the year over year decrease in selling and marketing expenses.
In more detail.
Research and development expenses increased by.
24% to 17 nine points.
Went to $9 7 billion RMB from this point 2 million RMB 47 quarter of 2021.
We feel to decrease.
Search and development experts and related salaries and expenses as well as the increased input and new product development.
Selling and marketing expenses decreased by 24, 6% to 152 million from RMB from 240, <unk> coal mine.
So maybe on RMB for the second quarter of 2021, mainly due to decrease in marketing marketing expenses, partially offset by the increased expenses on advertising to send enhanced truth to enhance the company's fronting with conviction.
General and administrative expenses decreased by 24, 8% to $22 9 million RMB compared to $28 8 million RMB for me for the second quarter of 2021 primarily due to the decrease in estimate allowance for accounts and notes receivables recognizing.
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Net loss attributable attributable to ultimately shareholders of the company was was 39 six.
This medium RMB compared to the net income attributable to ordinary shareholders of the company.
$6 1 million RMB for the second quarter of 2021.
non-GAAP net loss attributable to ordinary shareholders of the company.
Three combined media and RMB compared to the non-GAAP net income attributable to.
Ordinary shareholders of the company.
$9 1 million before the second quarter of 2021.
Additionally, our balance sheet maintaining healthy.
June 30, 'twenty to 'twenty, two the company had cash and cash equivalents.
816.
<unk> 3 million RMB restricted cash of 46 8 million RMB short term deposits of 10 million RMB in short term investments of 200.
37 million RMB.
Now, let's turn to be turning to our outlook for the third quarter of 2022. We currently expect net revenues to be between 740 million RMB.
840 million RMB, we estimate that you, albeit changes.
In revenues was mainly due to the uncertainty pertaining to the potential episodes if vessel COVID-19 recurrence.
As well as the potential impact of overall market demand in the third quarter of 2022.
The above all those based on the current market conditions and reflects the company's current and planned.
Linda we estimates of market and operating convictions and customer demand all of which are subject to change.
That concludes our prepared remarks, we will now open the call for Q&A session of our find them and Mr. Ty will join this session and answer questions. Operator. Please go ahead.
Thank you.
We'll now begin the question and answer session to ask a question you May press star.
And then one on your touch that that.
You are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
With the benefit of all participants on today's call. If you wish to ask your question to the company's management and Chinese. Please immediately repeat your question in English.
First question today comes from Hildy Ling with Morgan Stanley . Please go ahead.
Hi, Thank you management for the presentation I have three questions allow me to ask so the first one is about the expectation for for the second quarter of well not for the second quarter was the second half of this year in terms of the cells and also the margin expectation and what do you see.
Got the about the key drivers.
Behind this such a subtle sells expectation. So this is the first question. The second one is about the overseas market expansion overseas self.
We are seeing that the macro is it being quite volatile, but Europe Europe market. The European market is quite weak, but the U S market has been relatively more resilient and there seems to be a little bit of improvement in the inflation as well.
More or less pressure from it.
What do you see about the overseas ton yeah.
Oh overseas sales trends nowadays and what's your expectation in the second half of the year.
The third question is about the real bought take a robot vacuum shukman how's that performing in the first half this year and how do you see for this segment to perform in terms of the demand in the second half.
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Okay sensible hear this question for the first question regarding the sales and margins by patient.
In terms of revenue guidance for the second half of this year as usual, we don't give specific guidance, especially under the macro environment with more uncertainties due to COVID-19, and the macro market, but we expect the revenues to be driven for several perspective.
First the social.
The terms of our new high end products have been increasing increasing over the past several months and some skus hit the button. So then this doing major promotion season.
We estimate our AI centric premium quotas will help to drive mid to long term revenue pool.
Secondly, we have been preparing for is booked as putting additional product categories, including some big home.
They've compressed to open to the market in the near future, which will partially.
Mitigating the impacts from the way, we consume most demands and help drive the growth in the short term.
With this with respect to gross margin, we still estimate that to maintain a stable level.
Let's see this over 20% for the whole year.
How should we will continue to promote premier premium products with higher margins than pay product portfolio adjustments.
We expect the overall gross margin to be a reasonable note receivable level in the midterm.
For the second second question.
The opposite South.
From our observation, we estimate the overall overseas consumer demands.
It'll be a relatively weak not only in the U S, especially in euro.
Should we see due to the international dual purpose.
The increase in prices of accrual and raw materials alongside the four maybe four to euro exchange rate.
Overall consumer sentiment in Europe is relative low.
And we expect this.
Churn into the second half of this year.
While we are taking some actions to mitigate impacts of weak consumer sentiment in overseas market.
We see this pop the southeast Asia market history.
Tivoli dynamic and we see a growing market with great potential. So at this at this moment, we would increase the celsis about products in South Eastern Asia.
Second in the following months, we will start to sell additional product categories.
An additional two sweeper robots, which we're saying how do I grew up with while overseas market, we will share more details regarding this new course.
For the third question about are we come.
Oh, a week in mobile.
The social oney, Brian This would corrobos were relatively weak compared to the same period last year, mainly due to the overseas market, including international job put us.
The increase in prices of crude oil and raw materials alongside with the Euro exchange rate of.
So as we mentioned just now.
You will.
Yours really relates back to this churn to the second half of this year. However.
We discussed previously we are making some efforts to mitigate this impact.
Oh, like we will increase the south and South Asian Southeast Asia market.
In the following months, we will sell additional product categories and additional tools with the locals.
Like some like thanks.
Sciences, which we will share more details regarding this.
Of course.
Thank you.
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I'm sorry allow me to follow up a little bit of the question. So in terms of the revenue and net profit contribution how much of it is coming from overseas market and he would think about in the future is company planning to expand well put more focus into domestic market or put more focus and in the overseas market. Thank you.
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Oh.
We are quite optimistic.
Optimize our OSP revenues for the second half of the ear.
As we mentioned before.
After the cleaning and you called out.
We plan to.
Introduced new category called out by the Big appliance.
If the market and now we are looking for the oversea revenue percentage to achieve more than 20%, although the revenue presentation of the oversea market, although first half of the year.
It's around 10%. Thank you.
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The next question comes from Alex Wang with CIBC. Please go ahead.
Thank you for your presentation under me. My first question is I'll use a company called carbon Corporation with Xiaomi also due to the contribution from the stockpile to Xiaomi user companies. The revenue walk me the outlook for related to future revenue groups, where it was the future operation continue or continue to.
Spent or put all.
And my second question is in terms of the smartphone solution what is the contribution of the new smartphone solution.
Company's revenue could you give information about how the update of demand.
Suppose I repeat my.
My third question is you said alternate opportunities with Youtube is there are any performance, Chris Sharp rock songs that grasp on the real estate, how does the company view the impact on the rate.
If the industry in the future in China.
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Okay. Thank you for Florida crushes.
First question about selling the business.
Firstly, we always maintain stable cooperation to sell me and the rest in the contribution of the Xiaomi branded business that's been a stabilized so wrong, 40% over the past several quarters and we expect it to maintain at this level in short to midterm.
In terms of categories, where you cooperate.
The southeast Xiaomi branded sweeper robot that we scale back due to our relatively mature script, we don't have material changes on other categories. We are cooperating.
We've told many coberly home on home water solutions, smart kitchen products and some other small towns as well.
We will maintain the Killen cooperation is see if we have photo reciprocal opportunities to explore cooperation and additional categories.
And for the second question about the home solution first of all the Iot Iot a home solution offering is one of our southern masters with bundle Seltzer and certain services and so far it's not separately calculated I'd say revenue disclosures that too.
The premium on the offerings, we recently started promoting our menu through offline merchant.
How should we previously should all offline merchant partners.
I'll offer my mantra five whole home solution oldest branches from.
200000, RMB two 400000 on B with customer, mostly in Beijing, Guangzhou, Changsha, and putting me.
In the first quarter.
And Congress multiple high and whole home solution oldest assisting 200000, RMB 300000, RMB in the second quarter in Chengdu each one of you.
And some other cities.
And regarding your question about the impact from real estate, we're not a ready imparted by is how should we don't have direct cooperation with real estate industry or in terms of the.
Declaration for housing food.
Well ourselves.
Ready imperative to second degree that's an influence.
Influence on the overall demand for home clearances for new apartments.
We absorbed the impact on the overall industry was trending meals.
Some cities have implemented policies.
Policies to stimulate real assay industry, though it takes time to recover.
In addition, with things that we think the home of transit bus industry in particular too thin.
In particular.
Clearly demand is less.
Dependent on the real estate than before.
The increase in young people starting to replace the old ones with the smart home products.
We think this fall is it the incremental housing market and smart home industry is also rely on the housing market, which is more flexible than traditional hometowns industry. Thank you.
420 shot to Sunday, She says that hasn't been told me all the cause or do you go to the old wish all neutrogena dual clutch or ultra so you're going to see the they don't want do you know what I'm, saying is we didn't say go home court eyecare.
How many people at a hotel.
Because almost all of them indefinitely, because you shouldn't pop singer each on a lot of them in the neighborhood of men to equal to the he would've the age of the only thing that we should push if we use them quickly and done that just shows the Eagle Charlotte.
December when did you just say you go into that English and a board upon three times a day Saatchi <unk> Saatchi I'm, a shocking to negotiate with regional and she had a gene how teams of people who don't you know you don't stop that.
We need somebody on Bonnie to some funny that you'll recall when the old coach again at all how the jobs are to go to you but to watch is what I see a woman pay to challenge. It unless you did you really got to go.
I'll cover the Dundee he calls ago, you wanted them to go put under all things equal would it put on amortization of individuals' dinghy shocking political it you need to see it goes you don't hold me to me all they go somewhat idle. So you can watch it on countries she's still he's a claw hungry as you know we would've told me that she calls me English holds on to your own children. She went on to the.
I think John what didn't you yana sunk into this because he or she would rather eager to Archie hungry that don't meet the highest you don't know how much how would you don't see this as job in Hood idea and nimble when they don't.
So to go through them and you see that we let it all going in student Kokoda BD equally compelling in Shanghai.
So I'm not sure how.
Almost one way that I kind of Ultrashape uncle Union digital did all the.
There's always shocking to the what you said about just how wuxi the feed aren't they don't show this without giving kind of what can we you got Toyota. She says we want that usually when I when I, Oklahoma. They don't pulpwood of BD to challenge them to or how would it be too, which I know can go hungry, okay, but with your son shoes. So although you'll you'll tell me they'll be veeva can we go before you do that you didn't know him say it enough which enhances it.
I don't mean pathogen or did they don't they don't seem to leave them.
Okay.
Translate briefly translate our fonder a response.
For the first question our cooperation with Xiaomi.
Stable.
By now and in the near future and now we are originally we had.
Working on new collaborations.
To introduce a new category to the market and we are looking for the the xiaomi.
Revenue.
Would it be increase some crazy so our total revenue and about the second question.
The three small questions actually one topic of the macro environment or the real estate industry is a D. Crazy it brings new challenges to our company and to take all the new.
Supply.
So to begin I'll then you.
Consumer.
We aim to improve the.
Unit price per customer and we are looking for for the.
Uh huh.
We're looking forward to.
Hence the bundle south offering.
And.
We are looking for the best bundle cells.
Revenue too.
To be 30% industry wide.
[noise] okay.
That concludes our response to her husband thank you.
Yeah.
As there are no further questions now I'd like to turn the call back over to the company for any closing remarks.
Okay.
Okay. Thank you once again for joining US today. If you have further questions. Please feel free to contact us through the contact information on our website under that or not.
He hasn't paid group the combination investor relationship relations consultant.
This concludes the conference call you May now disconnect your lines. Thank you for attending.