Viomi Technology Co., Ltd (VIOT) Earnings Call Transcript & Summary

Welcome, everyone. Thank you for joining us today. I'm Scott Powell, President of Skyline Corporate Communications Group, LLC. Skyline Corporate Communications Group LLC, provides strategic Investor Relations and Corporate Communications advisory services to public and late-stage private companies globally. Our team has worked with scores of U.S.-listed public companies from around the globe across diverse industries and various market caps. Please visit our website at www.skylineccg.com. Skyline Corporate Communications Group, LLC, is pleased to welcome you to its proprietary branded webinar event at the Skyline Signature Series. We're very pleased to have Viomi Technology presenting today, which is a smart home, which through its subsidiaries, develop them sells, IoT-enabled smart home products in the People's Republic of China. The company offers IoT-enabled smart home products, including smart water purification systems, smart kitchen products such as refrigerators, oven steamers, dishwashers, range hoods and gas stoves and other smart products comprising air conditioning systems, washing machines, water heaters, smart water kettles, sweeper robots, smart locks and other smart devices. The Skyline Signature Series provides public companies with a convenient and effective forum to communicate their story to a diverse audience of carefully curated and selected financial professionals through live webinars. The information presented on today's webinar is not to be construed as an offer to sell nor a solicitation of an offer to purchase any securities. Before I turn the floor over to Viomi technologies, I would like to point you to our 17 B disclaimer and disclosure statement. Skyline Corporate Communications Group, LLC will receive compensation from Viomi Technologies, NASDAQ ticker VIT for providing Investor Relations services relating to Viomi Technologies securities including the preparation and distribution of the supplier and for hosting this virtual company presentation today. Skyline's fee is disclosed at www.skylineccg.com disclosures in accordance with Securities and Exchange Commission Rule '17 subsection B. After today's presentation and formal remarks, you'll have a chance to ask the company management questions. Please just type your questions into the Q&A box at the bottom center of your Zoom screen. I'd now like to turn the floor over to Viomi Technologies management team for their presentation today. Please go ahead.

Thank you, Scott. Yes. I’m Claire IR director of Viomi and welcome to our today's sharing behind us in the acquisition of our newly completed technology part, and we at Viomi are pioneer to provide an intelligent platform integrated with hardware, software and services. The world leading innovative developer of comprehensive one-stop solutions for IoT Smart Household. Our mission is to redefine future home by offering one-stop IoT at-home solutions for smart living experience. And today, we have our founder and CEO of Viomi Mr. Xiaoping Chen; and the Head of Capital Market, [ Mr. Jinling Zhang ]. Mr. Chen will share his detailed and certain insights into the sector of Viomi. Mr. Chen will elaborate in detail about the financial and operational performance. And for the last part, I will introduce our future strategy in water purifier. Mr. Chen will deliver his speech in China and followed by immediate translation. Mr. Chen, please go ahead.

[Foreign Language].

[Interpreted]. We are game changer in the sector of household appliance and devices hardware from we develop a manufacturer and distributed of AI-based household appliance and devices and on the software, we have proprietary cloud-based intelligent platform to deliver integrated household connection interactions, services across hardware and home scenarios. The global smart market, smart home market is under rapid development and huge potential. We define our brand and the mini generation, which broadly consists of 25 to 40 years old, are our primary customer base. This new generation prefers high technology, smart products, healthy lifestyles, and their demand is ever increasing. On October 11th this year we announced a well-known actress among young generation of Chinese people to be our global brand spokesperson. We believe this corporation will better showcase our tech fashion brand positioning. We're honored to be listed of the 2023 China's top 500 brands by Word brand lab in June, 2023 with a brand value around the $1.9 billion and in we're also the only company listed on the smart Home industry. The trend of appliance market is balancing from single product--single smart product to solutions. And our vision is to lead and promote this transformation by bringing one-stop IoT smart home solution to more young generations. And this is our One Stop IoT Smart Home solution. One stands for One Stop IoT at home using one home map app. Numerous smart home appliance and devices offers 4 capabilities and for services. This is the examples of our immersive experience room. Our solution also includes smart home system, lighting system and entertainment system. As well as cleaning systems, smart air and water purification system. Our one stop Smart Home Solution covers all home scenarios. We'll introduce more details of our One Stop IoT home solution from hardware, software and services. We will put AI concepts into all our hardware products. We introduced this 2000-gallon water purifier. This 2000 gallon is by far the largest within the industry and can provide numerous freshwaters for the whole house demand. Durable life of men is filter, which is also the longest within industry. Also, we have this super 2 our purifier. A water purifier especially for families with babies, will add beneficial treatment elements such as holistic acid into the future, which is good for the health of young generation. We also invented the new mineral water purifier, which is a revolution within the industry. Let's take a look at our little experiment using pure water and mineral water to make tea. You can tell the difference you see on the left side. We use the mineral water to make tea can help release about 30% more beneficial elements in the tea leaf. And we also bring this revolution in the air conditioner stock and the base at our 4D air conditioner, which air flow from all direction offering you a gentle, uncomfortable feeling. These are our AI's large swing refrigerators which offer smart food management, intelligence, relaxation, interactive, interconnected with other appliance and acting like a new center of your kitchen. You can also work out to all the entertainment with it and also, we have our AI entertainment set. You can use voice control and your hand motion to control and have fun with it. We also have this multifunction AI cleaning robot which can customize cleaning area and scan, build up your home area, these are our smart door lock. When you come home with handful of groceries, your face is the key to unlock your door and it also has AI sensory mode. We'll send you alarms when detect suspicious presence wandering outside your door. The Smart door lock is a very popular product within Chinese young generation. And we have all kinds of sensors within our bundle. Smart home devices can cover the all home scenario. We have laid out the most conflict set of smart household hardware including over 60 categories and covers all home scenarios. And all these products can be connected to our software platform and makes your home smarter and know you better. And next we'll demonstrate our whole solution from the demonstration of software. Our proprietary home map app after years of intuition has already equipped with leading whole house intelligence software capability. With our one [indiscernible] technology can automatically discover all the devices in your house and connect them to the internet within one touch. Yes, it makes the connected internet very easy just within one touch. You can also manage devices within this--you can easily manage your devices through the device control panel, check out the real time status of all devices and control them from remote. Yes. You can also manage devices within the same space as a whole mode according to your personal habit. We also provide users with more upgraded intelligent experience. We use developed module and algorithms to equip our One Stop intelligence solution. Yes, for example, our microwave reader can perceive changes in the surrounding and automatically turn on the light to appropriate lightness. And you can also detect motion of human beings like automatically turn off appliance and devices, switch the surveillance camera into sensory mode. Since we robot work when you left home, our AI air conditioner can also detect user location and your user's motion to avoid sending wind towards user directly. And we also have environmental perception which include intelligent perception of air, water, gas, and temperature... And when you capture gas sensors will send alarm to your mobile phone and the turn to out the gas and also turn off the gas meter. Also, the water can monitor and adjust the water quality and the water usage and send you alarm to remind you to drink more water. And we also have a wildly application of AI voice assistant. Yes, for example, when you have many equipments in your home, according to this device’s status and other surroundings, it can select the most appropriate devices to answer you. And after the multi-device continues composition is possible users don't need to wake up AI systems repeatedly. So, we also want to share our outlook about AI. [indiscernible]. Okay, let's talk about the aspect of services. We have offered this one stop solution services including experience, consulting, design, home delivering installation and OTA upgrade. Our bundle cell solutions are able to fit in different living spaces from apartments to luxury houses and the price is flat for within budget. And we offer this master series for the 4-bedroom apartments for the majority of young couples in China. It counts over 100 pieces of products and covers over 10 scenarios. We only offer this one stop solution including more than 100 pieces of products and covers 10 more scenarios. And the total price is around $ 40,000. And includes all the rooms like dining room, kitchen, bedroom, and bathroom. Yes, we have this immersive experience store all over China. As you can see, the store image is just like the exhibition power behind us. The Chinese character it represents the Viomi 5G IoT at home... , we have this immersive experience, room, kitchen, and bedroom. The number of our household user increased rapidly within the 5 years and reached 8.1 million by the end of the first half of 2023. Household users will continue to grow with tremendous market potential. And we also--our products reach to the customers from both online and offline channels and our strong customer systems covers nationwide. Under our service system, you can make appointment within 2 hours and get your appliance installed within 48 hours and have free return for no reason within 7 days. And about our global market, we have upgraded our oversee business into a strategic business unit and we have hired a professional expertise to take in charge and our footprint will keep expanding globally. Majoring focus in South Asia, Southeast Asia, Europe, and North America. Yes, we're planning many strategic market and we'll update you when there's more progress. Yes, users in the state can check out our Amazon online store. [ Mr. Jinling Zhang ] will demonstrate in the financial and operational performance.

Thank you, Mr. Chen and Claire. Thanks to everyone for attending our conference today. I will go on to introduce our recent operating performance and quickly go through some key financial figures. Okay. Over the past 3 years, China has experienced a sluggish economic development, enhance the look warm consumption market during the long period of strict academic control against the COVID 19 being largely affected by the economic environment, our top line experienced a decline since 2021. To turn around the operational performance, we started to adjust our product metrics by streamlining SKUs within our product categories and focusing more on our core products, smart water buyers. This strategic adjustment has led to a noticeable increasing of revenue contribution from purification products and our gross margin has recovered to a stable and benign level. In addition, by streamlining our organizational structure and optimizing our operational efficiency, we achieved a year-over-year 30% decline in operating expense benefited from our prudent operation strategy, we maintain sufficient capital reserves, which provides us healthy liquidity and balance sheet. As you may see the total number of our short-term deposits, short-term investment and cash and cash equivalents is over USD 140 million and each of the current ratio and debt to asset ratio led to on a very healthy level. Now will miss business basically consists of 2 essential parts, IoT portfolios and smart water bill buyers, which contributes around 55% and 35% of our revenue, respectively. As Mr. Chen introduced in the first section, we have built a whole house product metrics with over 60 hardware categories. We will keep it reaching the smartphone portfolio and using our leading IoT technologies to provide our users more helpful and user-friendly IoT home solutions to improve their smart hone experience. But meanwhile, as our development strategy during a period of time in the future, we will focus more on our board purification products. This decision is made based on 3 reasons: first, from financial aspects, the margin of water fires and futures are relatively high for our product categories. Also, as the futures are consumables in their nature, the sales of future, the sales of the water purifiers will keep regenerating revenue streams from the subsequent future sales across its entire life span. In other words, the water purification business enjoys our fourth noble effect. Second, we see a great potential in water purification business -- the market penetration rate in China is only 18%, while in the mature markets like Europe or United States. The penetration rate is over 80%. That means there is a plenty of room for growth -- future growth in domestic market. And if we look at the bigger picture, the global market size for webification industry is over USD 30 billion and supported by Chinese unique industrial chain advantage and the app growing and recently further stimulated market demands on healthy drink water. We see an unprecedented chance to expand our water purification business in the overseas markets. And third, -- there is an over 9-year experience immersed in the water purification industry, we have accumulated very solid and market-leading industrial chain capabilities from R&D to manufacturing. For example, during the 9-year of operation, the durability of our filters extended from one year to ten years and filtration sets of our worries increased from 400 gallons to 2,000 gallons, and we have maintained a solid and long-term strategic cooperation with Viomi since 2014. I -- and we have cumulatively delivered over 6 million large flux waterproof to markets with which we have built the largest big data model for whole water in China and collected over 70 billion pieces of data to precisely understand the water quality status and drinking habits of Chinese families. We have submitted over 6,300 patents applications and have been granted over 4,000 patents, among which over 2,600 patents for inventors, and we own 1,300 countries patents, particularly regarding water purification products. And our technology and industrial capability are highly recognized. We are awarded as the intellectual property demonstration at price in consecutive years from 2019 to 2025. And we won the China excellent patent award for 3 consecutive years. In July this year, we are designated as a national level of specialized and Innovative Little Giant enterprises by the Ministry of Industry and Information Technology of China. We are also listed as PhD workstation and a post-factory workstation, which will reserve sufficient talent for our future development. In short conclusion, the good profitability of water purification products, the great potential in both domestic and overseas markets and our technological and industrial strength despite our future focus on water purification business. The next part, my colleague Claire will go on to share more details on our future strategy regarding water purification.

Thank you, Zhang. And now allow me to introduce our future strategy in the water purifier. And first, we have been investing in properties. This is our newly completed AI at purification technology part. Let -- the overall construction has been completed and our production line will be moving by the end of this month, and we will not only collect the comprehensive strength of our water purification industry chain that also acts as our headquarter R&D center and others. Right now, we are at the first-floor activation hall, and we welcome every one of you to come and visit. And second, to build up a complete AI water purification industrial chain, including now limited to a coal filter material factory, which is industrial inclusive and the integrated smart pump production line as well as the smart faster vessel and after an integrated water circuit production line. And also, we will further strengthen our R&D capabilities due to that of global high standard testing centers, including 2 specialized labs for more comprehensive water hedging tests as well as a high standard quality control center for all components, including intelligent phosphate boosted posts or water circuit boards and et cetera. And by further cultivate in the water purification area were forming industry barriers by building the most complete and advanced water purification industrial chain, further strengthen our capabilities in the technology innovation of filtration system, upgrade performance in major components and provide more intelligent user experience. And this is our strategic new start for us for the coming years to build this global leading value water purification technology park. And moving forward, we will continue to explore and capitalize our strengths and optimize our operations, continue to deepen this dual pilot business model by improving and integrating our whole house intelligent product mine, further deepen our rules in the water purification industry. At the same time, we will maintain sufficient capital reserves to support this goal and consolidate our brands to drive a robust and sustainable growth, sparing no efforts to create long-term value for all of our users and shareholders. Thank you so much for today's sharing.

Great. Thanks, everyone. Thank you to the Viomi team for a great presentation. And thank you to everyone for joining today's Signature series. If you have questions, as I mentioned before the call began, please type your questions into the Q&A box at the bottom center of your screen. You will remain anonymous, but feel free to ask questions as appropriate. So let's start with--here's a question from one of our close friends. It says, are you using Z-Wave technology or something else?

Can you explain a little bit about the Z-wave technology?

[Foreign Language].

[Interpreted] I will translate our founders' answer. Yes. Actually, in the software from SoGEA we use Wi-Fi, ZigBee and 5G for connection area and also for the perception we use the, we are using and trying to apply to all our hardwires by using the microwave grid to do the detection work and so on. And also, we're trying to apply the 6G technology into our product.

Great. Thank you. And then another question from the same individual, where can we purchase your products on Amazon? And Owen, I think you had put in, so I think the answer is yes, Owen, I think you had put a link in, could you potentially share that link with the audience so people can see where the products are available on Amazon?

Sure. If the audience has access to the Q&A box, I included it into the answered portion. Unfortunately, we don't have a chat box, so I can't send it to the whole group, but if you just go onto Amazon and search Viomi, their store should pop right up.

Yes. Right now, on the Amazon online store, the United States, Amazon online, we only have the smart cleaning for that category. Yes.

Okay. Next question. If you could talk a little bit about who your major competitors are.

[Foreign Language].

[Interpreted]. Yes, our major competitors, I think maybe from the traditional home appliance companies, you can compare us with AO Smith who is measuring doing the water heating products and as well the water purifier products. And also, on the software front, maybe you can compare us with Huawei, which also have this IoT system. I think we're--the major difference from Viomi and Huawei, I think is Huawei IoT home. They focus on delivering the system, which is the Harmony system, and Viomi we not only have this appropriate system, we also combined with our hardware intelligence products all connected to our service platform to build up this one IoT home solution. Yes. Thank you.

Great. Thank you. And as a reminder, if anyone has additional questions, feel free to put those questions into the Q&A box at the bottom center of your screen. Next question. If the company could talk a little bit about its growth strategy, both domestic and any international growth strategies for the company.

For example, as we plan to expand into southeast markets, we're going to cooperate with the local appliances companies and we'll develop the products specialized and match the market demands in that local market. And we'll use the advantage combined, our advantage of the Chinese industrial line--industrial China, and our innovative acknowledge to the channels like the cell channels and the deep understanding of the local demands of the local brands. By doing this, we think we can adapt you to the diversified market demands of different markets. Thank you.

Thank you. And as a final reminder, if anyone has any final questions, please put them into the q and a box at the bottom center of your screen. Okay. I think those are all the questions that we have. It's late for the Viomi management team in China, so we'll let them get on their way. But I did want to thank everyone for joining another Skyline signature series today with Viomi Technologies. Again, the ticker is V-I-O-T on the NASDAQ stock market. Viomi is a developer and seller of IoT enabled smart home products in the People's Republic of China. And again, their products are available on Amazon and their IR website is https/viomi.com. So, their IR website where you can find a lot more investor information and product information, ir.viomi.com. Again, thank you all for joining today's Skyline signature series with Viomi technology. Thank you to the Viomi team for presenting today to the Skyline investor audience. And thank you all to our investors who zoomed in for today's corporate presentation. Have a great day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]