Viomi Technology Co., Ltd Q2 FY2024 earnings call

• Implemented a focused strategy, with core home water solution products growing nearly 13% year-over-year. Overall gross margin improved to 24.8% from 22% in the prior year.
• Announced a major business reorganization, divesting underperforming IoT-related businesses and focusing on water purification. Core home water solutions revenue in the first-half of 2024 was over RMB800 million with income from operations over RMB70 million.
• New mission 'AI for better water' leveraging AI technology in water purifiers, with a unique equipment plus consumable business model. Developed products like tankless large-flux water purifiers and Viomi Kunlun Mineral AI Water Purifier.
• Viomi ranked 439th in 2024 China's top 500 brand list with a brand value of RMB13.336 billion.
• Future plans: Strengthen collaboration with strategic partners, increase domestic marketing penetration of water purification products, and expand in key overseas markets.

Net revenues for the first-half of 2024 were RMB1,040.2 million. The IoT @ Home portfolio revenue decreased by 30.3% to RMB482 million from RMB691.7 million in the same period of 2023. Home Water Solutions revenue increased by 12.9% to RMB323.5 million from RMB286.6 million. Consumables revenue remained stable at RMB135.8 million (same as prior year). Small appliances and others revenue decreased by 48% to RMB98.9 million from RMB190.2 million. Gross profit was RMB258.1 million, with a gross margin of 24.8% (up from 22% in the prior year period).

• For the full-year 2024, revenues of the continuing business are expected to be between RMB1.7 billion and RMB1.9 billion.
• Income from operations of the continuing business is expected to be between RMB110 million and RMB130 million. This outlook is based on current market conditions and subject to change.

Q: For the Home Water Solutions business, can you introduce what is the result of both the volume and the ASP? And how do the Xiaomi brand and Viomi’s brand products perform professionally?

A: Xiaoping Chen mentioned Home Water Solutions revenue increased 13% YOY, strategic cooperation with Xiaomi, Viomi AI water purifier ranked third in the sector, and new spring product series topped a category on a leading platform.

Q: What is the purpose of divesting IoT business? What are the remaining categories now? And what will be the focusing forms in the future?

A: Divesting underperforming IoT businesses to focus on water purification. Remaining categories include unsinked water purifiers, pipeline water dispensers, etc. Future focus: Strengthen partner collaboration, increase domestic marketing, expand overseas markets.

Q: What are the expected impacts of the extended filter lifespan technology on customer retention and recurring revenue?

A: AI technology enhances customer experience, reduced filter replacement frequency and cost, DIY replacement via app, expected to increase customer adoption and recurring revenue from consumables.

Q: Can you provide more details on Viomi’s omnichannel marketing and service supporting the expansion into international markets, particularly the U.S.?

A: Existing omni-channel marketing and service in China, leveraging AI technology, expanding North American market with device management via app and real-time water quality monitoring, customized product development to support overseas expansion.