Viomi(VIOT) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues increased by 89.3% to RMB1.07 billion for Q3 2019 compared to RMB565.3 million for Q3 2018 [8][17] - Non-GAAP net income rose by 116.4% to approximately RMB83.9 million for Q3 2019, up from RMB38.7 million for Q3 2018 [8][22] - Gross profit increased by 40.2% to RMB238.1 million, with a gross margin of 22.3%, down from 30% in Q3 2018 [20] - Net income was RMB73.3 million, compared to a net loss of RMB59.8 million in Q3 2018 [21] Business Line Data and Key Metrics Changes - Revenues from IoT-enabled smart home products increased by 71.9% to RMB829.2 million [17] - Revenues from smart kitchen products grew by 74.3% to RMB342.1 million [18] - Revenues from other smart products surged by 267.8% to RMB272.7 million [19] - Revenues from consumable products increased by 333.3% to RMB53.7 million [19] - Revenues from value-added businesses rose by 164.8% to RMB186.5 million [19] Market Data and Key Metrics Changes - The number of household users grew to over 2.6 million, up from approximately 2.3 million in the previous quarter [16] - The percentage of household users owning at least two IoT products increased to 17.1% from 16.1% in the prior quarter [16] Company Strategy and Development Direction - The company continues to introduce additional product lines and SKUs to strengthen its product portfolio, including new Viomi-branded and Xiaomi-branded products [9] - A new premium AI-focused brand, coKiing, was launched to target the mid to high-end market [9] - The company aims to establish a leading position in the 5G era with the introduction of its own 5G customer premise equipment [10] - Strategic cooperation with FAW Bestune for AIoT connectivity was established to enhance the smart home ecosystem [10] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing macro and industry-wide uncertainty but emphasized robust growth and strong consumer demand for Viomi products [8] - The company expects net revenues for Q4 2019 to be between RMB1.4 billion and RMB1.44 billion, representing year-over-year growth of approximately 46.5% to 60.7% [23] - For the full year of 2019, net revenues are expected to be between RMB4.31 billion and RMB4.35 billion, indicating growth of approximately 68.1% to 69.7% [23] Other Important Information - The company reported a significant decrease in total operating expenses by 26.5% to RMB169.2 million, primarily due to a reduction in share-based compensation expenses [20] - Cash and cash equivalents stood at RMB727.1 million as of September 30, 2019 [22] Q&A Session Summary Question: What is the target for new store openings by year-end? - The company expects to have around 1,600 to 1,700 stores by the end of the year, with a focus on optimizing store performance rather than aggressive expansion [24][26] Question: What is the guidance for gross margin and operating margin for Q4 and 2020? - The company anticipates a similar margin profile for Q4 as in Q3, with net margins around 7.5% to 8% [28][29] Question: What is the breakdown of sales guidance for Q4 by product? - Water purifiers are expected to grow around 10% year-on-year, while other IoT smart home categories may see growth between 50% to 100% [30] Question: Did the company see recovery in the home appliances industry in the second half? - The overall home appliances market remains weak, but the company has delivered robust growth due to its unique positioning [32] Question: What is Viomi's role in Xiaomi's long-term strategy? - The company has expanded its relationship with Xiaomi, broadening product cooperation beyond water purifiers to include large appliances [33] Question: What is the rationale for launching the coKiing brand now? - The coKiing brand aims to establish a premium product line to complement Viomi's existing offerings and target higher-end consumers [37] Question: What are the core competitive advantages of the company? - The company positions itself as a high-tech IoT brand for middle-class consumers, leveraging R&D and innovative product offerings [39]