Q4 2022 Viomi Technology Co Ltd Earnings Call

Speaker 2: the fourth quarter and four year 2022 .

Speaker 2: At this time all participants are in listen only mode.

Speaker 2: Today's conference call is being recorded.

Speaker 2: I would now like to turn the call over to your host, Ms. Claire Zee, the IR Director of the company. Please go ahead, Claire.

Speaker 3: Hello everyone and thank you Rocco and welcome to the Wyoming Technological Limits Earnings Conference call for the fourth quarter and full year 2022. As a reminder, this conference is being recorded. The company's financial operating results were issued in a press release earlier today and posted online. Talk to you soon.

Speaker 3: You can download the earnings price relief and sign up for the company's email distribution list by visiting the IR session of the company's website at ir.viomi.com. Participating in today's call is Mr. Chen Xiaoping, the founder, chairman of the board of directors and chief executive officer.

Speaker 3: The company's management will begin with prepared remarks and the call will conclude with a 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 U.S. Private Securities Litigation Reform Act of 1995.

Speaker 3: Forward-looking statements involve inherent risks and uncertainties. As such, 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-S.

Speaker 3: and other selling of felt with the US Securities and Exchange Commission.

Speaker 3: The company does not assume any obligation to update any forward-looking statements except as required by law. Please also note that well-missed earnings price relief and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

Speaker 3: In addition, Wellness price release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our founder and CEO , Mr. Chen Xiaoping. Mr. Chen will deliver his remarks in Chinese.

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Speaker 3: Thank you Mr. Chen and I will quickly translate our funders remarks before discussing our financial performance for the fourth quarter and a full year of 2022.

Speaker 3: Hello everyone, thank you for joining us today on our fourth quarter and full year 2022 earnings conference call. Due to the adverse impact of the pandemic and the macro high winds, we experienced a year-over-year decline in revenue in the fourth quarter and our business scale was greatly affected by external factors and strategic adjustments throughout 2022.

Speaker 3: Nevertheless, our growth margin in the full-scorder increased by 3.2 percentage points quarter over quarter of 2022, benefiting from our product portfolio optimization efforts. Our full-year growth margin in 2022 also keeps stable as compared with 2021, despite fluctuations throughout the year.

Speaker 3: In the fourth quarter, facing the uncertainties of the external environment, we focused on accelerating the recovery of our business health and optimizing our operations.

Speaker 3: First, to holistically strengthen our product portfolio, we leverage our competitiveness.

Speaker 3: advantages and continue to enhance our corporate categories with upgraded functionalities.

Speaker 3: As well as longest-standing category, our AI water purification products lead industry with their advanced technology. We grew sales of this product by 6% year over year and 133.

Speaker 3: In the fourth quarter, despite the year's challenges, we're selecting our success in strengthening our product competitiveness.

Speaker 3: Going forward, we will redouble our efforts to optimize distribution channels, depend our existing technological advantages, and further drive our products market penetration. In addition, to improve our operating efficiency, we implemented more disciplined cost-control measures, other results.

Speaker 3: Both selling and marketing research and development expenses decreased year over year in the fourth quarter. In particular, selling and marketing expenses as the proportion of revenue.

Speaker 3: Now we're all compared with that in the second quarter of 2022 on a similar revenue scale. We will continue to optimize cost, streamline organizational structure and improve operations.

Speaker 3: efficiency. While refining our operations, we also remain committed to bring more useful and user-friendly whole-house smart solutions to customers and continuously improving and challenging experience of our products.

Speaker 3: In October , we hosted our virtual 2020-24 software launching event, AI Help42.0. This online event focused on software upgrades and product interaction across four dimensions, including healthcare, energy conversion, and environmental protection.

for active intelligence and natural interaction, further improving our one-stop-IOT home solution from the software set side. In November , well-missed proprietary one-stop-IOT home solution platform, HomeMapF was rewarded by Precision Science and Technology Award by the Ministry.

a Biden Ministry of Science and Technology and the National Office for Science and Technology Awards of China. Meanwhile, we launched a series of new AI smart home appliance, including one of our patent technologies, Silver-to-Max, an AI-RenTrood with intelligence vision which won a silver award in 2020.

In the smart home devices category, we unveiled our super-to-AS smart door lock with an ultra-wide-angle digital people.

Our solid progress in product innovation across both software and hardware further underscores our business philosophy.

Focus on products and technological innovation to provide customers with a useful and user-friendly whole-health-engaging experience.

In addition to our product advancements, we constantly constantly strive to optimize our one-stop IOT home solution through ongoing technological innovation and the talent development.

After receiving approval to establish a doctoral workstation in the first half of 2022, in October , we were also successfully authorized to set up a postdoctoral workstation. Moving forward, we'll be cooperating with universities and professional institutions to...

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in industry, incubate whole health intelligence projects and promote the development of whole housing, encouraging the industry.

In November 2022, we were once again included in the State Intellectual Property Office list of National Intellectual Property Demonstration and Reprizes from 2022 to 2025, reflecting our continuous efforts in innovation and intellectual property management.

As of the end of the fourth quarter, we have applied for more than 6,100 global patents and accumulated 3,800 authorized patents worldwide, along with more than 2,500 inventions.

These achievements are a testament to our technological innovation capabilities and our comprehensive strength.

Despite the challenging environment streaming from repeated COVID-19 outbreaks as well as the negative of rolling COVID policies on our store opening progress, sales of our bundled home solutions by our offline merchants still reached new heights in 2022.

In Valmet's four-star flagship stores in Yunnan, Shenzhen, and Hunan, among others, our offline merchants sign bundle home solutions orders ranging from 100,000 to over 400,000 RMB per unit.

Clearly demonstrating at the growing popularity of wellness one stop I already own solution nationwide.

Furthermore, in the fourth quarter, we successfully introduced an area of products to oversee markets, such as air conditioners, washing machines, and refrigures. Moving forward, this additional product categories will serve as a new world's driver for our overseeing This.

In summary, we still see many uncertainties in horizons. In the post-pandemic year with consumption confidence recovering, we will adhere to our study development strategy, concentrating on three factors as we continue to optimize our operations.

First, continue to strictly control expenses and improve operational efficiency. Second, focus on core product categories and optimize product structure. And finally, steadily extend domestically and introduce new product categories in overseeing market to accelerate the recovery of our business.

As we forge ahead, we will continue to maintain sufficient financial reserves. Continuously consolidate brand strength, prepare to recovery of business, profitability, and provide strong support for brand development as we strive to achieve healthy and sustainable growth, laying the foundation for delivering long-term returns to our users and the flow.

Share Holders.

Thank you. And that concludes our Founders' remarks. Now I will go over our fourth quarter and full year 2022 and audit financial results in more details.

Net revenue was 910.5 million RMB compared to 1,332.8 million RMB for the fourth quarter of 2021. The decline was mainly due to a decrease in revenue from IoT home services.

portfolio and smart appliance and others. Revenue from Audi at Home Profolio Decreased by 48.1% to 385, 59.2 million RMB from

692 million RMB for fourth quarter of 2021. The decline was primarily due to SKU adjustments for smart kitchen products.

692 million RMB for fourth quarter of 2021. The decline was primarily due to SKU adjustments for smart kitchen products. Resonates from

Home water solutions increased by 6.0% to 29.2 million RMB from 263.3 million RMB for the fourth quarter of 2021. The increase was primarily driven by an increase in revenues from larger.

120.4 million RMB for the fourth quarter of 2021. Revenues from small appliance and others decreased by 39.3% to 155.9 million RMB from 257.1 million RMB for the fourth quarter of 2020.

B4-4 quarter of 2021. Gross margin was 23%, compared to 25% for the fourth quarter of 2021. The decline was primarily due to a decreasing selling price of certain clean-up products of the Bogrine of App?? disposal.

our ProDapterfolio Adjustment. The operating expense is decreased by 24% to 274.7 million RMB. From 340.7 million RMB, for the fourth quarter of 2021.

primarily due to a decreasing selling and marketing expenses, partially off-site by an increase in general and administrative expenses.

In greater detail

Research and development expenses decreased by 23.6% to 74.7 million RMB from

97.8 million RMB for the fourth quarter of 2021, many due to a decrease in research and development expertise and related salaries, as well as the county new company's continued efforts in R&D efficiency improvement.

selling and marketing expenses decreased by 29.7% to 151.1 million RMB from 240.8 million RMB for 4th quarter of 2021, many due to a decreasing logistics and marketing expenses.

General and administrative expenses increased by 74.5% to 48.9 million RMB compared to 28 million RMB for the first quarter of 2021. Primarily due to an increasing the estimated allowance for accounts and notes receivables.

from a third-party client recognizing the same period. Now, a lot of the tributes both to ordinary shareholders of the company was 106.3 million RMB, and on Get Now, a tribute both to ordinary shareholders of the company was 116 million RMB.

The difference between Nellog and operations, Nellog, the difference between Nellog from operations and Nellog in 2022 was many due to an increase in the valuation allowance of deferred tax assets provided, which caused an increase in income tax expenses.

Additionally, our balance sheet remains healthy. As of December 31, 2022, the company had cash and cash equivalent of $737.1 million RMB. The treaty cash off $76.1 million RMB. Short term deposits of $171.5 million RMB and the short term investment of $197.1 million RMB.

Revenue from IOD at Home portfolio decreased by 52.4% to 1619.9 RMB.

decreased by 52.4% to 1,619.9 RMB.

34001 million RMB for 2021. Revenue from Homeward Solutions decreased by 8.3%. 2681.1 million RMB from 742.9 million RMB for...

2021. Revenue from consumables decreased by 2.4%.

to $368.4 million RMB from $367 million RMB for 2021. Revenues from small appliance and others decreased by 27.7% to $573.3 million RMB from $8.7 million RMB from $8.7 million to $8.7 million

792.9 million RMB for 2021. Growth profit was $7 792.9 million RMB for 2021.

37.1 million RMB compared to 1,198.1 million RMB for 2021.BERG Project recommending projects in action by the

22.8% from 26% for 2021. Total operating expenses decreased by 10% for 2021.

10.7% to 1036.5 million RMB from 1160.5 million RMB for 2021. In more details, research and development expenses.

decreased by 3.8% to 300 million RMB from 311.8 million RMB for 2021. S&M expenses decreased by 18.1% to 6.5% from 311.8 million RMB for 2021.

640.9 mm from 731 mm before 2021. J&A expenses increased by...

24.5% to 121.7 million RMB, compared to 97.97 million RMB for 2021. Net loss attributable to ordinary shareholders of the company was 275.5 million RMB.

and non-gap net loss attributable to ordinary shareholders of the company's 256 million RMB.

And this concludes our previous remarks. We will now open the call for Q&A. Our founder and I will join this session and answer questions. Operator, please go ahead.

Thank you. To ask a question, please press star 1 on your touch tone phone.

If you're using a speaker phone, we ask you to please pick up your handset before pressing the keys.

To withdraw your question, please press stars and two. And for the benefit of all participants on today's call, if you wish to ask your question to manage with in Chinese, please immediately repeat your question in English. Once again, ladies and gentlemen, that's stars and one if you have a question.

And today's first question comes from Marcus Liang with Morgan Stanley . Please go ahead. Hello. Hello. Thank you management for taking my question.

I have three small questions. Firstly, can I ask how is the sales trending year to date for January and February 2023? And my second question would be, with robot vacuum appears moderating their prices, so making the prices lower, how does VOMC, the market growth going forward and the market share as well going forward?

The second question and the last question is how do you see your overseas expansion and what are you focused on and how is this split between China and overseas revenue in 2022? Thank you so much.

The second question would be, as your robot vacuum competitors are lowering prices, how do you see market growth going forward and your market share in this segment as well? Thank you.

Okay, thank you. In the past two months of 2022, we have observed a certain degree of recovery of our offline channel, which is attributable to by the overall offline consumption rebounds. However, in the past month, due to the repeated impact of COVID-19,

and the number of our offline dealers those have decreased along with the repeated impact of... Along with the inventory backup of offline distributors lead to a decrease in the volume of shipment of our offline sales. But on the other hand, we have...

more than 100 stores newly opened during 2022, and most of which are located in the pre-declaration marketplace with over 200 square meters store area. We are steadily proceeding our channel's expanding strategy by larger store better merchants.

based on overall situation after now. The offline scale has steadily increased month over month, and the offline sales are expected to achieve a growth rate of over 30% compared to 2022. And to your second question about the backroom.

in the European market in 2022. While in the domestic market, RSV Swiffer robot mainly sold online, while the leading brands in this sector account for a large number of products sold online.

market share and this sector is already under furious competition. For our one-stop whole health intelligence solution, we will keep this product line and provide several models to meet customer service needs. In the meantime, we will further optimize

distribution channels deepen our existing technology advantages in stacks like water purifiers and so on. I believe your last question is about the oversea expectations.

And yes, as I mentioned earlier, due to the impact we mentioned, so our overall revenue proportion from overseas market decreased over 50% in 2022. But while in the second half of last year, we participated in the

IFA 2022 in Berlin in September for the first time, which is the world's most significant technology marketplace for the consumer and the electronic industries. We showcased a number of new products to the European customers and fundraisers and received many positive feedbacks.

And next to that, we accomplished the certification and sampling of air conditioners, washing machines, refrigerators in European countries, and the water purifiers, smart door locks in Southeast Asia countries. And we believe with the enriched product categories and expanded regions, hopefully our overseas low against low. We hope you'll help we'll work together to improve your water system.

would achieve a recovery and mitigate the decrease in sales of smart cleaning products. And in the past few months of 2022, the overseas sales of air conditioners and other home-applying products reached more than 60 million RMB.

And we are aiming for the overseas style to be tabled in 2022, compare with 2021. And thank you.

Thank you. And our next question today comes from Jingxing Li with CICC. Please go ahead.

Hello, thanks Madeline, thanks Claire. And I have three questions. The first one is how was the overseas market performing in 2022? And was it better or worse than the Chinese market? And what is the outlook for the overseas demand this year? Okay, thank you.

Okay, and your first question, we just discussed a little bit about the oversea market performed in 2022. Would you wait until between 2022 and Troops'

has been striking by the historically high price of natural gas and geopolitics and the expectations in the consumption market.

The European country remains subdued and as we used to focus on European markets with comparably simple product lines. So the overseas sales in 2022 has been heavily strengthened and decreased over 50%.

And also, we mentioned earlier the

We have enriched our product categories and expanded regions like Southeast Asia countries and hopefully our overseas sales would achieve a recovery.

And also about your question, I believe you asked about the domestic...

I believe you ask about the domestic, the domestic.

market growth rise and the domestic business in this quarter decreased about 30% on a year-over-year base and both online and offline channels have been striking hard by the negative effect of rolling COVID policies. However, we see some optimizations in revenue proportion by product.

With a larger percentage of revenue contributed by water purifiers, our overall growth margin improved more than 3% quarter over quarter. Looking forward, we will focus on our core product categories with technological advantages, especially water purifiers, and we will double our efforts to optimize distribution channels both on the market.

of shipment of our offline sales in the past year. But on the other hand, we have opened more than 100 stores newly in 2022, and most of which are located in the pre-declaration marketplace.

with over 200 square meters store area. We are steadily proceeding our channel expanding strategy. And based on the overall situation, our offline scale has steadily increased month over month. And offline sales are expected to achieve a growth of over 200 square meters.

rate of overall 30% compared to 2022.

compared to 2022. Thank you.

Thank you and ladies and gentlemen this concludes today's question and answer session. I'd like to turn the conference back over to management for any additional or closing comments. 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 or the PS&A group, the company's investors relations consultant.