Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Viomi Technology Co Ltd (VIOT, Financial) achieved a net profit turnaround with a net income of RMB5.6 million and a non-GAAP net income of RMB16.1 million.
- The company's core home water solution products revenue grew by nearly 13% year-over-year.
- Overall gross margin improved to 24.8% for the first half of 2024 from 22% in the prior year period.
- Strict cost control measures led to a 19.2% year-over-year decline in operating expenses.
- Viomi Technology Co Ltd (VIOT) maintained a strong cash position with free cash assets totaling RMB914.3 million.
Negative Points
- Net revenues decreased to RMB1,040.2 million compared to RMB1,304.4 million for the same period in 2023.
- Revenues from the IoT@Home portfolio decreased by 30.3% year-over-year.
- Revenues from small appliances and others decreased by 48% year-over-year.
- G&A expenses increased by 6.2% year-over-year, primarily due to higher professional fees and administrative expenses.
- The strategic reorganization may lead to a slight reduction in business scale in the short term.
Q & A Highlights
Q: As for the performance and 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 brand could outperform?
A: As for the home water solutions business, we had a 13% increase in revenue for the first half of 2024 compared to the same period of last year, mainly due to further focus on home water solutions business as well as deepening our strategic cooperation with Xiaomi on this category. Through continuous product adjustment and the effective implementation of our Focus strategy, we have achieved significant success in sales while steadily enhancing our brand strength. Strategically aligning our sales channel with differentiated products, we have successfully expanded our market share and further promoted our mineral water purifiers.
Q: What is your purpose of divesting IoT business and what are the remaining categories now? And can you explain why do you choose these categories to remain? And can you also introduce some financial results of the remaining categories?
A: The businesses we're divesting are certain underperforming IoT business, so that we can quickly restore our operations and get the company back to a benign status. Certain IoT business has shown a trend of contraction in scale during the past few years, which, to a certain extent, has dragged down our overall operating efficiency. Therefore, we have started to streamline and focus on more productive areas in 2023 and invested our resources in more advantageous product categories. Based on our preliminary estimate, the revenue of continuing business was no less than RMB500 million, with estimated income from operations more than RMB50 million for the first half of 2024. The new home water solutions business will include under-sink water purifiers, pipeline water dispensers, free installation products like hot water dispensers, smart kettles as well as centralized water purification and sorting systems and water heaters covering home scenarios, including kitchen, living room, bathroom, and whole house water system.
Q: What does the management expect to see improved after these divestments and what will be the focusing points in the future?
A: The business divestment of certain underperforming IoT business will significantly improve our operations and get the company back to a benign status. Based on our preliminary estimates, the estimated revenue of the continuing business was more than RMB800 million with the estimated income from operations more than RMB50 million for the first half of 2024. The full-year guidance of the continuing business is between RMB1.7 billion to RMB1.9 billion in top line and RMB110 million to RMB130 million of income from operations. We will concentrate our resources to focus fully on the company's most powerful water purification field and further improve the brand influence of Viomi AI Water in three aspects: strengthening collaboration with strategic partners, increasing domestic market penetration, and actively expanding in key overseas markets.
Q: What are the expected impacts of the extended filter lifespan technology on customer retention and recurring revenue, considering the reduced need for frequent filter replacements?
A: Through the application of AI technology, we hope to enhance the customer experience, increase the acceptance of water purifiers, and reduce the cost of water purification. The increasing installed base will bring in recurring revenue from consumables. The market size and penetration rate of China's household water purifier market have maintained a low level for a long time. Many customers switch to other ways to get purified water and do not change the filter mainly because of the frequently changing filters, causing a lot of problems and extra costs. Our AI technology allows customers to have a clear expectation of the lifespan of the filters and replace them by themselves. This will bring more people to purchase and continue to use water purifiers, increasing the installation rate and guaranteeing acceptable customer consumption.
Q: Can you provide more details on Viomi's omnichannel marketing and service supporting the expansion into international markets, particularly the US where competition is very strong?
A: Regarding the China expansion with our existing omnichannel marketing and solid capability combined with our accumulated strength in water purification manufacturing, R&D, and product strength will help us to explore the North American market. We have both domestic marketing and aftersales service systems covering both online and offline channels, including the sales channels of mainstream e-commerce platforms as well as live streaming sales on new media platforms. We are also actively expanding the overseas market. Besides the original European and Southeast Asian market, we are taking steps to expand the North American market. Our industrial-leading gigafactory provides strong quality assurance, and our overseas users can also download the APP for device management, real-time monitoring of water quality and usage, DIY replacement of the filters, reducing the maintenance cost.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
