Viomi Technology Co., Ltd Q2 FY2022 earnings call

• Revenue decline was due to cessation of Xiaomi branded sweeper robot sales and COVID-19 impact on market consumption.
• Increased brand promotion with advertising spending, partnerships with Tmall and Mango TV show.
• Business operations: Streamlined SKUs, optimized product mix, implemented cost control and efficiency measures, leading to 1% year-over-year gross margin increase.
• Product innovation: Introduced new AI products like Space Pro air conditioner, Boss refrigerator, Royal series smart screens, etc., with positive market feedback.
• Channel expansion: Opened Xiaomi 4S and 5S starship stores, focused on Southeast Asian market for overseas business.
• Strategic cooperation: Partnered with Jingdong.com, Tmall, China Telecom, and Kuka.

In the second quarter of 2022, Viomi's net revenues were RMB924 million. The IoT and home portfolio revenues decreased by 54.2% to RMB524.5 million from RMB1,146.3 million in the second quarter of 2021. Home water solutions revenues decreased by 17.4% to RMB180.9 million from RMB218.9 million. Consumables revenues decreased slightly by 1.9% to RMB100.3 million from RMB102.2 million. Small appliances and others revenues decreased by 38.1% to RMB118.5 million from RMB191.5 million.

For the third quarter of 2022, Viomi currently expects net revenues to be between RMB740 million and RMB840 million, driven by market conditions and preliminary estimates subject to change.

• COVID-19 recurrences and overall market demand uncertainty.
• International macro environment impacts on overseas sales, including oil and raw material price increases, euro exchange rate fluctuations.
• Indirect impact from real estate sector on home appliance demand.

Q: How is the expectation for the second half of the year in terms of sales and margin, and key drivers?

A: Revenues expected to be driven by new high-end product sales and exporting additional product categories; gross margin estimated to maintain at least 20% overall.

Q: What about overseas market expansion and trends?

A: Overseas consumer demand still weak, focusing on Southeast Asian market and selling additional product categories.

Q: How is the robot vacuum segment performing and outlook?

A: Sales of own branded sweeper robots weak, focusing on Southeast Asian market and selling additional product packages.

Q: Current cooperation with Xiaomi, contribution to revenue, and future outlook?

A: Cooperation stable, Xiaomi-branded business revenue contribution stabilized around 40%, looking for new cooperations.

Q: Contribution of smart home solution to revenue and real estate impact?

A: Smart home solution not separately disclosed; indirectly impacted by real estate via overall home appliance demand, but smart home trends less dependent on real estate now.