Viomi Technology Co., Ltd Q2 FY2023 earnings call

• Total revenue in first half of 2023 was RMB1.3 billion, down 20% y-o-y; gross margin declined 1.9 percentage points. - Operating expenses decreased 30.3%, net loss margin decreased 1.4 percentage points. - Enhanced product mix by focusing on core categories; water purification products revenue contribution rose to 22% from 14% a year ago. - Subsidiary Guangdong Lizi Technology designated as national-level specialized and innovative 'Little Giant enterprise' for water purification R&D. - Introduced series of high-tech products at Spring New Product Launching Event, including AI vertical air conditioners, ultra-thin fridge/washing machine set, etc. - Included in 2023 China’s Top 500 brands, ranked 443rd, brand valuation RMB3.385 billion. - Participated in offline events like AWE, Shenzhen Creative Week, etc., to support offline sales recovery. - Overseas markets enriched with new categories accounting for over 60% of overseas revenue.

Total revenue was RMB1.3 billion, down 20% year-over-year. IoT@Home portfolio revenue decreased 21.8% to RMB691.7 million from RMB884.7 million. Home water solutions revenue increased 1.7% to RMB286.6 million from RMB281.9 million, with revenue contribution rising to 22% from 14% a year ago. Consumables revenue decreased 21.0% to RMB135.9 million from RMB172.1 million. Small appliances and others revenue decreased 36.1% to RMB190.2 million from RMB297.6 million. Gross profit was RMB286.8 million, down from RMB391.5 million, with gross margin at 22.0% vs 23.9% prior year.

• Continue to streamline organizational structure and enhance operational efficiency. - Further deepen roots in water purification industry, roll out more industry-leading products. - Keep focusing on fine-tuning product mix and improving whole-house intelligent product matrix. - Deepen industrial layout, strengthen cost controls, increase operational efficiency.

• Geopolitical crisis and foreign currency fluctuations in European market affected sales of sweeper robots. - Intense competition in robotic vacuum cleaner category. - Consumer sentiment lukewarm and strategic adjustments impacted revenue in first half.

Q: How did the quarterly revenue perform in Q1 and Q2, and which categories showed good sales in first half of 2023?

A: First quarter had lower revenue due to SKU streamlining; 618 promotion showed subdued consumption recovery. Air conditioners saw increased sales from March, revenue contribution rose to 18% from 15% last year. Water purifiers' large flex models revenue contribution increased to 22% from 17% last year.

Q: What is the pipeline for new products launched this year and business focus for second half?

A: Launched products like Master 3 Pro formaldehyde-removing AI vertical air conditioner, etc. Second half focus on deepening water purification roots, fine-tuning product mix, deepening industrial layout to improve operational performance.

Q: How has the robotic vacuum business performed in first half of 2023?

A: Business scale shrunk due to overdependence on overseas market, especially Europe. Sales suffered in second quarter. Enriched overseas product categories, over 60% of overseas revenue from new categories, and exploring Southeast Asian market.