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VIOT Viomi Technology

Participants
Cecilia Li IR Director
Xiaoping Chen Founder, Chairman & CEO
Lillian Lou Morgan Stanley
Wei He CICC
Vincent Yu Needham & Company
Call transcript
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Operator

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Co., Ltd Earnings Conference Call for the Second Quarter of 2021. [Operator Instructions]. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Director company. IR the Li, of the Cecilia Please Cecilia. go ahead,

Cecilia Li

Hello, and you, the Viomi XXXX. Technology Thank Second to of for Co., everyone, Call welcome Operator. Conference Ltd Quarter Earnings

financial is press a earlier today recorded. conference issued online. release this posted reminder, results were a The As company's and and operating in being

of Chen, website release call, download by section IR visiting press up Founder at Participating of the today's Mr. and and the company's Department. in Executive Wickham ir.viomi.com. can Xiaoping session. begin You earnings the company's for Mr. the of sign the Chief Thai, e-mail management list Q&A Finance a and with company's the our Chairman the call Directors distribution Board with Officer; will prepared remarks, the and Head The conclude will of

please today's made Private Securities contain forward-looking continue, safe provisions XXXX. we of Act will note of statements harbor discussion Litigation U.S. the under Before Reform

and Forward-looking inherent involve risks statements uncertainties.

as English Chen will Chinese, the remarks turn please a Mr. and directly over company's release filings of by information expressed I XX-F as note included most the Chen. with company's the will such, uncertainties U.S. non-GAAP followed unaudited translation. measures. Mr. except CEO, any actual go obligation reconciliation Viomi's non-GAAP is the Please SEC. report law. different well Chen, in be information materially other in and the release and Form on ahead. GAAP as Further As includes these discussions annual of our today. the Founder his risks may Mr. views contains financial other call and GAAP and press unaudited also the results from financial to this now measures. update as conference Viomi's forward-looking statements, company measures earnings doesn't immediately also comparable any press The unaudited by filed assume to deliver required audited call Xiaoping regarding to

Xiaoping Chen

Language] [Foreign

Cecilia Li

before quarter our remarks Hello, performance the upon call. I joining quickly conference for this Chen. earnings Thank you, discussing will second second our quarter XXXX translate his for Mr. year. thanks of financial everyone,

the the categories of During optimized improving enhancing gross operations we profitability. business gross and higher and new the our margin margin second portfolio increased quarter, overall and further for products sales product with certain

reached home technology second margin with quarter XX% year-over-year year-over-year, Home improving Our hard shareholders net we enhanced integrates the which years the hardware both the algorithms, time, encourages reaching structure billion, non-GAAP again increased XG quarter-over-quarter company delivering to and developed IoT sensors, and is product with models, of solution structure, single market to of one-stop net and XX.X%. in working framework, attributable exploration, gross IoT implementation revenue increases smart income of XG have underscored Home storage. users, RMBX.XX products, users software After further AI our @ a company same once enables IoT channel appeal the our home announced our which smart technology branding we forming experience smart team. across providing house users. changing home officially living by strategies devices our operations and increase ecosystem To creating interconnection for younger scenarios. the strategy, from products intelligent daily for home profitability. and the At a This ordinary our entire It services significantly by cloud @ appliances, smart intelligent our

product and innovation our AI strategy. on support offerings, continue we AI our applications First, with household to to respect focus product to

leading all water XX Alpha da technology water are cutting-edge upgrades. industry products AI-enabled our these Many purifier, premium our for April other products, conditioner recently We and successful launched the with the new water the level of EROX the -- hub X the can rent space X,XXX cost air [indiscernible] consumption direction monitor products and data [indiscernible], purifier, Following including trends. of SuperPro new series AI which mineral female

rest the best festival, the Conditioner Chinese varied the shopping X and and products XXX washing many XX e-commerce [indiscernible] [indiscernible], dryer. our new sellers top of smart Pro including Air premier became on the During the Alpha

of store better we largest merchant channels, implemented terms channel In our sales strategy.

with strong These larger enhancing to stores more brand We immersive, image. high-quality narrow-based door with experiences have merchants and enhancing users services, provide -- collaborated experience improved and technology trending with our store stores operation comprehensive experience image. with offer larger more

square XXX According nationwide the exceeded growth. potential new million based transactions more overall square national other XXXX, in market report policies X apartment respectively, our research XXX decreases [indiscernible] We customer than in costs promotes meters, market ads [indiscernible] services. to total XXX,XXX offer have in estimation, Furthermore, for comparison [indiscernible] smart ads this residential to XX development sales and established unit stores and meters strategy X channel and sales, the acquisition huge equals after-sales the growth source over and [indiscernible] and our meters on installation appliances drives which creating market. of square XXXX, home

efforts. become around recognition We spokesperson, more the generations. nation. in also Media XXX branding To tools major consumer one thereby target omnichannel our product brand Focus with among consumers more [indiscernible] growth to and marketing, we and increased reaching invited collaborated leader marketing of younger diverse advertise cities our We in enhancing branding cities, in across our top China's and with investment our celebrities to

top advertise [indiscernible] following the consumers. X high-end our months. increase and domestic channels to television to as on well in exposure plan As we other Furthermore, airline to

technology short-form as our channel our KOL strengthened through grow brand marketing to customer Sixth, also optimization social in as streaming. and [indiscernible] on base. live We media, including new as well strengthen innovation, our positioning cities revenue videos trending and

also our expand. expanding global are market We

sliver our predictions. progressing business of with expansion our in overseas is line Our

countries India, North second to in in Europe, in selling European than Asia previous and units XX more coverage the Australia. our quarter. began addition countries Saudi We and Thailand In Arabia, in

American market. our shared North previous the were August, products official on we call, entry Amazon our in As in earnings into launched our marking U.S.

mode pipeline includes wafer development product our new year. expand series and overseas for to of domestic both and a globally in self-operating the continuing second products Although Furthermore, of market. half the begin the

making business and our In smart great to transformation the are collection industry. home major benefit with intelligent the optical there and addition believe a drive are will We wider automated in of labor development upgrades. we that that X drivers technology technology, UVs

group and the and appliances. Smart First, are consultants, technology [indiscernible] consumer of in prefers According research transformation products a the in on our those younger Home become generation by major has to structure has main third-party and the conducted purchase smart to demand more China generation China. increased in [indiscernible] likely consumption and driver terms generation the

the created past and the Demand customers have of products connection has the to related Home X the products between will era. and acceptance. an intelligence new and Secondly, an development emotional over energy smart vehicles to industry other Smart smart industries many the increase entered demand drive in for years also consumer

average parts exceed According growth by penetration Thirdly, ministry over mentioned has report XXX% the past rate Industry and will will key the years. Smart IoT Ministry actually China's Life rate promoting will Chinese to issued a units at of of by be improved that greatly and applications. and Home XG in annual XX%, Smart of XXXX. personnel the The Technology the XG user Information infrastructure XG Government,

industry. Our Smart national of the policy Home the IoT support will benefit development also

IoT to becoming while We provider, one-stop solutions technology. the are developing leading hardcore committed home our

store products strengthen year, actually to improve strategy enhancement merchant larger through of AI second half will the to trending technology continue innovation is our we our branding. channel our better the Looking and

contribute well ongoing China, deliver as opportunities on development long-term Home consumer in life in the as and confident of expansion ability growth With transformation. Smart core and our positively intelligence our remain we to industry-wide capitalize to

remarks. founder's our concludes this So,

of RMBXXX.X year. to to activities increase water enhance increased million the X.X% to expenses. year solutions ago, of marketing billion RMBXXX.X from boxes XX.X% quarter water was XX.X% review RMBXXX.X million the decrease increased to operating an Gross of due million gross by small last primarily million the RMBXXX.X year, achieved for in to of water primarily second compared second Let's XXXX, now to RMBX.XX was [indiscernible] million water purifier, to product and Selling the filter decreased billion selling, first portfolio decreased for to RMBXXX.X as The increase and increase portfolio purifier. for ordinary revenue from IoT higher accounting year consumables related and though by we Viomi-branded quarter in of certain gross COVID-XX advertising as a product product million mix the second decreased of increases water million the second @ last primarily to detail, to of by products. and the overall and by year. in quarter includes The increased quarter shift Selling million mills increased expense this turn from high order by primarily year by margin quarter expenses. our sales that same during allowance other the of Due increase resulting the same portfolio sales in shareholders the the million, and to product activities RMBXXX.X expenses RMBXX.X partially and Revenues RMBX.XX increases XX.X% optimization billion Viomi-branded pandemic and category. by increased in margin from category. across third marketing same water to last and million of the increased The million our a RMBXXX.X million. attributable of expansion branding by of to second sales R&D second from the from from and from margin gross decline second the of RMBXX.X to the portfolio by XXX.X% a the driven from to due increase to same appliances primarily In COVID-XX. and the shareholders our towards base product in quarter to estimated our detailed Home And quarter XX.X% financial XX.X% from a our RMBX.XX year-over-year purifiers expenses margin receivables, to lease growth million to and to by of expenses home salaries compared by primarily slightly primarily Viomi-branded RMBXX.X margin for second, quarter higher increased contribution last basis the Revenues quarter-over-quarter washing the promotional to increased revenues for the market RMBXX.X the the Net optimization fact, year-over-year G&A XX% X.X% last machine. of of water expenses well by second of during in expenses after products. the increases due lease to outlook quarter. primarily due in was policies the to others to sales for year, due RMBXX.X home recognition. of decreases Revenues in profit attributable demand for to mitigated to resulting marketing from adjustment continued Total quarter XX% low to XX% Xiaomi-branded adjustments portfolio by new super year-over-year million XX.X% period particularly for increased due purifier together and cost the the RMBXXX.X purifiers company efforts more Net XXXX. solutions non-net to series, XXXX, in slight income The billion the control year product due was in RMBX.XX period in XX.X% for year. last primarily million appliances for the XX.X% X.X% margin and as measures from with gross increased to RMBXXX.X RMBXX.X million smart and primarily for from pick. purifier attributable was increased due decrease last water the last due a year effect for the lines. period business the driven this from adjustment, this to by to more income increased by the to the the exemption gross for attributable by company to compared expenses RMBXX.X sales R&D Xiaomi-branded of margin

Additionally, our balance sheet remains healthy.

had investments and RMBXX.X cash now RMBXXX.X of to we like June restricted our million, of short-term outlook. turn would of of XXXX, XX, to RMBXX.X million, deposits equivalents RMBXXX.X cash cash of million. million short-term and I As

between be For RMBX.X the expect currently XXXX, RMBX to quarter of third revenue we billion. and billion net

on prepared categories. We [indiscernible] the company's is happenings decrease current quarter achieve expect The demand, this one the Finance the third brand from which in and growth, reflects outlook based Head ahead. join [indiscernible] answer we session. [indiscernible] the concludes Q&A the and our operating which Well, go open subject and and will sales of main for to will to the and of change. The Xiaomi Thai of the and conditions Mr. and business please now the own the market will brands our become faster preliminary session current are all call Wickham to questions. market customer our conditions Department, Operator, remarks,

Operator

[Operator Instructions].

from So first question Lillian Stanley. from Morgan Lou comes

Lillian Lou

I three questions. have

kind will term? I one. seeing That's ask near in all, of first we pause two rest the give of in the sales First of came contribution the Home the what particular, And in the of are product momentum I August and later... July, Maybe quarter? questions robot you just breakdown portfolio, also second a how can the sweeper IoT in us products @ from much

Unidentified Company Representative

Home contribute for machines, lenience sweeping water of than @ including fast Viomi moving contributed quarter to revenues charger. multiple sweeper refrigerators, IoT for driver small more we sweeper around XX% Home the to compared base XX contribution. machines fairly And About increased Thanks from robot portfolio, still around @ robot and of the @ and Viomi-branded heaters, XX% around biggest by last IoT Among due washing contributed have these, revenue XX%. robots Viomi low the IoT Okay. effect cuts year. second washing the Viomi-branded the was categories, and question. Home. dates revenues sweeper robots Viomi-branded

Lillian Lou

in Can on have water momentum, the a bit terms color we growth including well? little trend And as sense? any solutions of the near-term of

Unidentified Company Representative

optimizations we as mentioned, quality in continue the strategies second we to product Yes, and quarter. execute

say, out purifiers. in products margin roll we including, high water new particular additional and So with higher key ASPs, some categories,

more and gross overall with In contribution the margin addition the purifiers water improve ASP price more thus and Viomi gross and water quarters. more coming shifted large in purifiers, on high-end bit we together, the focus introducing supplying to also Xiamo better revenue margin to the a

Lillian Lou

we given mix the product Okay. of trend. you My any with a shift half? we the because to implication on i.e., plan is any rising -- the this material margin very margin raw one. adjustment in the second the I second the for Do see second quarter, similar Are and good margin pattern all the ASP question margin That's And changes, have costs? and going improvement portfolio? in a have to on think expansion price

Unidentified Company Representative

Yes, we midway decrease of aromatics to some activities the our since marketing compared and branding advertising for have the still as inventively in positioning from to industry and well we observe second the About This previous second quarter, month. enhance our increase the the the the contributes also of recognition. quarter margin, ASPs products. as started across

a selling in reasonable and year, marketing expenses to and way. prudent We more compared in but will last invest

cost this gross impact expect of taken We the We think expenses has see impact such the the increased improving. will looking to have control don't impact serious mitigate margin operating will and we the forward margin on profit lower from to strategy see of cost material will right? improving, while We overall net cost taken increase as and any quarter, increase margin, impact, material the margin. been the and first we're such we We measures. have optimization don't continue kind product certain expenses

Lillian Lou

is on Okay. question last new strategy. the product My

new few and first products the market in Chen quite second putting quarter in and the being Mr. opening mentioned a think remarks, I innovated half.

these of meaningful a in how to of contribution actually what more strategy make the So revenue. kind we terms all SKUs

Cecilia Li

Mr. going Chen's Yes, I translate to am comment.

the [indiscernible] have this year. So product we

this see product make more you portfolio of this and expansion, to SKUs sweeper the water can air diverse. that increase can second all such in some -- margin the the quarter product help purifier as our quarter help can the also from can well product make such And as EROx and robots, which of categories, direction conditioners [indiscernible] respectively. contribution So first revenue us

help margin drive margin well can overall as to us our our expansion as and we this So new business the also improve the growth. SKU overall to of think help gross

Operator

next He Wei CICC. question from The comes from

Wei He

And here. I two questions have

company report. done from lot promotion also noticed we The first has can a that cooperating the and see of Focus recently like is trend we Media, financial with the the

selling we And can And would it you be marketing like expect or year? more and this show this the with strategy the in higher expense year? do a expense of So second us ratio share with higher plans promotion half details.

Cecilia Li

I will translate. quickly

we them. last more is like to half generations, since the and younger can So see are a first Smart they of among and year the Home year, the enrolled get and hotter likely Home topic the Smart use products among

very [indiscernible], [indiscernible] China's a this of product recently, and lot can invited advertising also see we of you one So brand do celebrities our the increase to popular we recognition. in and on in

of and mitigated indeed Then well in increase see measures. as expenses, this but market investment advertising mentioned and increase tools. internal marketing optimization we the of some in and And sales structure in some as partially some on see year, do advertising the this such our to recognition expenses, channels. DTU by the in and control we brand will will half selling the advertising related the of as can on Okay. the customer you will be invest advertising has also from our expenses all some data, on second increased other will we we the marketing And that television continue such

So also our us this we help will increase to image. hope branding

Wei He

question second Okay. overseas is the And about my market.

more offline to any update of are distribution due a shipping shortage give the about overseas containers? and and So online also there can the impacts both detailed negative you us channel development,

Cecilia Li

the Okay. question. I'll answer

mentioned, Australia. additional into also first [indiscernible], Asia, the more countries the the in quarter than States. of Europe, past we countries East already and first expanded including and And So quarter European X as XXXX this countries, we into India [indiscernible] XX Middle United and in entered the we of year,

most offline franchises. exported products So on channels the and online our are sold through and our both

sold [indiscernible] our to channels. products as those we So on they're the franchisees well as still and online

-- conditions just also we are American this the can have year order Amazon. off-line U.S. selling on launched by seeking depending they we that in and we So market, the opportunities the North store [indiscernible] also for cooperation on channels

well to it the impact. and the mitigate the delayed for leader as containers. question some like optimized to Yes, we local the the we timing plan orders, impact some shipping manufacturing of for some about As as shortage did warehouses but get out delivering

doesn't any our impact cause it generally, on So market. material overseas

Operator

question from & Next comes Vincent Yu Company. from Needham

Vincent Yu

two have mentioned. questions I like to I discuss So more. bit analysts and But has already the actually a would little

this The range that we looks like is first our guidance quarter. one missed

So like, portfolio well? didn't to as miss optimization about margins. the And top touch can more which the our did expected. management as also And the as segments question previously line to second well talk about perform we contribute wanted is

-- our trends management raw in the have material And of can seen the understanding, terms do to us prices? in think in material August peak So we how we that terms in did of raw compared the quarter? share second

Cecilia Li

Okay.

your So for more when question August. I count We entering stable accounts. already about material [indiscernible] raw material second of comments first demonstrating translate will like raw the observed in

think a material the we're industry the we increase position, relatively expects, and a cost likely lot. has as not So to high been also raw

for third guideline, first quarter about So revenue the question your quarter guidance. and second the the

X for portfolio our shifting the -- have adjustments we have product quarter quarter, main and on are third focus the we points. like we and the second So

And the more can will of and contributions some growth, will us of we some and SKUs. the some in the sales and water categories devices. increase branded growth home long own that new term, with drive our will long And to products take in increase in [indiscernible] we purifier term. products in second, first, help R&D invest So products we time new see the to overall and can in resources the it potential these particular products

guidance, on product portfolio our we and So overall, the helps. will remain and focused we also in conservative be hope [indiscernible]. the third quarter, I the that about selling

Vincent Yu

management. you, Thank

more one question. follow me Let

we already So in have XXXX? you on a incurred revenue new grow hiring investing sales these and quarter like expenses than that expenses total we mentioned see stores, second basis -- in marketing year-over-year we Have growth? are faster will And spokesperson.

Cecilia Li

Okay.

So expenses and impact for marketing the operating margin. the net selling on expenses and

cooperate operate store for to reflect investment off-line expenses. operating the in the merchants that So and channel, operation you open in themselves our stores take the know, the as like to the with won't merchants care and we of

spokeperson And So for second advertising it's and have this the conducted one the this part. marketing, we been selling on the like and -- inviting quarter.

of have second the put some already will year, we ongoing expenses of this in half this the some selling we expenses part. second on in quarter. marketing So And the

sales But So like also the offline. increase. compared and to see year, effect data the also advertising will the first our internal half online we of this activity of these from help expenses all our

So effect, half. to we the continue such think we in and activities advertising will this in second do is

Operator

Next question Boon Lodges. from comes Sue from Blue

Unidentified Analyst

but a an play with the slowed sales has increasing the the measures international Where or international pandemic group management, easing continuing bit? role, international group

Cecilia Li

Okay.

also the But very market, and measures indeed market. in So the we are in balances of the time, see to the due That's post-pandemic the into for data global performance still and of far changes take uncertainties second [indiscernible] activity half make good expectations, remain and also and marketing can is see conservative we market. over we services. to strict any the But prudent in our the the to in but way see so about a over are conservative, internally, we robust the countries. some the in sales pandemic year, are we promotion some but first the year, entering half there of will in issues overseas we see some we the from overseas sales selling there

Unidentified Analyst

marketing particular market? any U.S. the strategy there in Is for

Cecilia Li

Thank you.

I week store. on of last our officially know products market, that terms U.S. in just the your were do So launched

to one part, Amazon some together. local cooperate we with operator our on So third-party will operate

customers' about as marketing the market, culture. on the will do more better the KOL And such and So they hand, PR start we guidelines some activities also add recommendations. on US other know on American to to operation Amazon, the there

through So help that pipeline on have sales the in the levers we promote market. to us U.S. already

Operator

now no the turn Cecilia are Li closing there questions, I for over remarks. as will to So further call back

Cecilia Li

you for today. joining Thank once again us

If Investor you The the website. one. Thank Relations a good Or our Group, feel to consultant. questions, information us have contact you Piacente Have free contact further please with on our all.

Operator

call. conference the concludes This

you. your You may lines. Thank disconnect