Viomi Technology Co., Ltd Reports Third Quarter 2019 Unaudited Financial Results

November 20, 2019 at 4:00 AM EST
Net revenues increased by 89.2% year-over-year to RMB1.07 billion, exceeding guidance

GUANGZHOU, China, Nov. 20, 2019 (GLOBE NEWSWIRE) -- Viomi Technology Co., Ltd (“Viomi” or the “Company”) (NASDAQ: VIOT), a leading IoT @ Home technology company in China, today announced its unaudited financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial and Operating Highlights

  • Net revenues reached RMB1.07 billion (US$149.6 million), an increase of 89.2% from the third quarter of 2018.
  • Gross margin was 22.3%, compared to 30.0% for the third quarter of 2018.
  • Net income was RMB73.3 million (US$10.3 million), compared to a net loss of RMB59.8 million for the third quarter of 2018. Net income margin was 6.9%.
  • Non-GAAP net income1 was RMB83.9 million (US$11.7 million), an increase of 116.4% from the third quarter of 2018. Non-GAAP net income margin1 was 7.8%, compared to 6.9% for the third quarter of 2018.
  • Number of household users reached more than 2.6 million, compared to approximately 2.3 million as of the end of the second quarter of 2019 and approximately 1.4 million as of the end of the third quarter of 2018.
  • Percentage of household users with at least two connected products reached 17.1%, compared to 16.1% as of the end of the second quarter of 2019 and 13.2% as of the end of the third quarter of 2018.
  • Number of Viomi offline experience stores was approximately 1,600, compared to approximately 1,900 as of the end of the second quarter of 2019 and approximately 1,200 as of the end of the third quarter of 2018.

_________________________

1 “Non-GAAP net income” is defined as net income excluding share-based compensation expenses. “Non-GAAP net income margin” equals non-GAAP net income divided by total revenues. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

First Nine Months of 2019 Financial Highlights

  • Net revenues reached RMB2.91 billion (US$406.5 million), an increase of 81.0% from the first nine months of 2018.
  • Gross margin was 25.3%, compared to 28.6% for the first nine months of 2018.
  • Net income was RMB203.6 million (US$28.5 million), compared to RMB10.5 million for the first nine months of 2018.
  • Non-GAAP net income was RMB236.3 million (US$33.1 million), an increase of 102.2% from the first nine months of 2018. Non-GAAP net income margin was 8.1%, compared to 7.3% for the first nine months of 2018.       

“Once again, we are proud to deliver robust and healthy revenue and profitability growth in the third quarter, continuing the strong momentum from the first half of 2019, despite ongoing uncertainties in the overall industry and macro environment,” said Mr. Xiaoping Chen, Founder, Chairman of the Board of Directors and Chief Executive Officer of Viomi.

“As part of our core strategy for this year, we continued to introduce additional product lines and SKUs to strengthen our overall product portfolio and offerings. In addition to new Viomi-branded products, we have also increased our cooperation with Xiaomi on Xiaomi-branded products over the past several months through the introduction of additional product categories, including range hoods, sweeper robots and more recently, refrigerators. Moreover, we also recently launched our new premium AI-focused “coKiing” brand, starting first with a series of air conditioning products. This brand focuses on the mid-to-high-end market and we expect “coKiing” to further complement our IoT @ Home product portfolio, address the needs of more consumer segments, open up new markets and enrich the overall user experience,” added Mr. Chen.

“Continuing the theme of preparing for the upcoming 5G era and establishing a leading position in this space, we recently introduced our own 5G Customer Premise Equipment products. Developed with industry-leading specifications, we expect this product to raise the IoT @ Home experience to a higher level through its next-generation connectivity capabilities. Separately, to complement our product innovation and development efforts, we have also been stepping up efforts in developing our proprietary e-commerce platform, Yunmi Shangcheng, and social-commerce platform, Viomi Lifestyle Center. Both platforms have experienced significant growth over the past year, providing us extra inroads to enhance household user stickiness and create further monetization opportunities going forward,” concluded Mr. Chen.

“Product sales across our Viomi-branded and Xiaomi-branded products remained strong in the third quarter of 2019, with net revenues increasing by 89.2% on a year-over-year basis to RMB1.07 billion, exceeding our previous guidance and showing acceleration on a sequential basis. Gross margin was 22.3% for the third quarter of 2019, reflecting the continued shifts in the Company’s business and product mix. Non-GAAP net income increased by 116.4% year-over-year to RMB83.9 million. Non-GAAP net income margin remained solid, increasing to 7.8% in the third quarter of 2019, compared to 6.9% in the third quarter of 2018, primarily attributable to greater economies of scale, together with improved operating efficiencies,” Mr. Shun Jiang, Chief Financial Officer of Viomi, commented.

“With regard to our offline store network, we continued to see strong interest and support from franchisees in the Viomi brand. However, in light of prevailing industry conditions, we have shifted our focus in the second half of 2019 towards further enhancing and optimizing our store performance and productivity, including the closure of underperforming stores. The number of Viomi offline experience stores was approximately 1,600 as of the end of the third quarter of 2019, compared to approximately 1,900 as of the end of the second quarter. Although the number of stores decreased, revenues generated from our offline channels still increased on a sequential basis. Going forward into 2020, we will continue to diversify our sales channels, including the opening of additional Viomi offline experience stores, as well as increasing our presence across other mainstream channels, to further broaden our market access and increase brand awareness. Separately, we continued to deepen our household user penetration. We had more than 2.6 million household users as of the end of the third quarter of 2019, compared to approximately 2.3 million as of the end of the second quarter. In addition, the percentage of our household users owning at least two or more of our IoT products increased to 17.1% from 16.1% as of the end of the second quarter,” Mr. Jiang concluded.

Third Quarter 2019 Financial Results

Net revenues increased by 89.2% to RMB1.07 billion (US$149.6 million) from RMB565.3 million for the third quarter of 2018, primarily due to continued successful rollout and significant increase in sales of Viomi-branded products, together with the successful launch of new Xiaomi-branded products.

IoT-enabled smart home products. Revenues from IoT-enabled smart home products increased by 71.9% to RMB829.2 million (US$116.0 million) from RMB482.5 million for the third quarter of 2018, primarily due to the continued successful rollout of the Company’s smart kitchen products and other smart products, together with the successful launch of new series of Xiaomi-branded products.

  • Smart water purification systems. Revenues from smart water purification systems increased by 1.2% to RMB214.5 million (US$30.0 million) from RMB212.0 million for the third quarter of 2018. The increase was driven by healthy growth in sales volumes, partially offset by declines in average selling prices.
     
  • Smart kitchen products. Revenues from smart kitchen products increased by 74.3% to RMB342.1 million (US$47.9 million) from RMB196.3 million for the third quarter of 2018. The rapid growth was primarily driven by significant increases in sales volumes across many of the Company’s smart kitchen product categories, in particular Viomi-branded refrigerator products, as well as the successful launch of new series of Xiaomi-branded products such as range hoods and gas stoves.
     
  • Other smart products. Revenues from other smart products increased by 267.8% to RMB272.7 million (US$38.1 million) from RMB74.1 million for the third quarter of 2018. The rapid growth was primarily driven by significant increases in sales volumes of the Company’s Viomi-branded washing machine, water heater and sweeper robot products.

Consumable products. Revenues from consumable products increased by 333.3% to RMB53.7 million (US$7.5 million) from RMB12.4 million for the third quarter of 2018, primarily due to increased demand for the Company’s water purifier filter products.

Value-added businesses. Revenues from value-added businesses increased by 164.8% to RMB186.5 million (US$26.1 million) from RMB70.4 million for the third quarter of 2018, primarily due to new product introductions, together with increased demand for the Company’s value-added products, including the successful launch of new series of Xiaomi-branded products.

Cost of revenues increased by 110.2% to RMB831.4 million (US$116.3 million) from RMB395.5 million for the third quarter of 2018. The increase was relatively in line with the rapid growth of net revenues.

Gross profit increased by 40.2% to RMB238.1 million (US$33.3 million) from RMB169.9 million for the third quarter of 2018. Gross margin was 22.3%, compared to 30.0% for the third quarter of 2018. The decrease in gross margin was primarily due to the continued shifts in the Company’s business and product mix.

Total operating expenses decreased by 26.5% to RMB169.2 million (US$23.7 million) from RMB230.2 million for the third quarter of 2018, primarily due to a significant decrease in share-based compensation expenses. A one-off share-based compensation expense of RMB90.2 million incurred in the third quarter of 2018 was no longer incurred in the third quarter of 2019. Additionally, the Company continued to achieve further economies of scale and improve operational efficiencies.

Research and development expenses increased by 29.3% to RMB43.2 million (US$6.0 million) from RMB33.4 million for the third quarter of 2018, primarily due to an increase in personnel-related expenses.

Selling and marketing expenses increased by 16.4% to RMB113.4 million (US$15.9 million) from RMB97.4 million for the third quarter of 2018, primarily due to increases in expenses in relation to the growth of the Company’s business, offset by a decrease in advertising and promotion-related expenses as a result of the Company’s achieving further economies of scale and improved operational efficiencies.

General and administrative expenses decreased by 87.3% to RMB12.6 million (US$1.8 million) from RMB99.4 million for the third quarter of 2018, primarily due to a significant decrease in share-based compensation expenses. A one-off share-based compensation expense of RMB90.2 million incurred in the third quarter of 2018 was no longer incurred in the third quarter of 2019.

Income from operations was RMB82.5 million (US$11.5 million), compared to a loss from operations of RMB59.2 million for the third quarter of 2018. Non-GAAP operating income2, excluding the impact of share-based compensation expenses, was RMB93.1 million (US$13.0 million), an increase of 136.0% from RMB39.4 million for the third quarter of 2018.

Income before income tax expenses was RMB85.8 million (US$12.0 million), compared to a loss before income tax expenses of RMB56.4 million for the third quarter of 2018.

Income tax expenses were RMB12.5 million (US$1.7 million), compared to RMB3.5 million for the third quarter of 2018.

Net income was RMB73.3 million (US$10.3 million), compared to a net loss of RMB59.8 million for the third quarter of 2018, which was primarily due to a one-off share-based compensation expense of RMB90.2 million incurred in the third quarter of 2018. Net income margin was 6.9% for the third quarter of 2019.

Non-GAAP net income was RMB83.9 million (US$11.7 million), an increase of 116.4% from RMB38.7 million for the third quarter of 2018. Non-GAAP net income margin was 7.8%, compared to 6.9% for the third quarter of 2018.

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2 “Non-GAAP operating income” is defined as income from operation excluding share-based compensation expenses. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

Balance Sheet and Cash Flow

As of September 30, 2019, the Company had cash and cash equivalents of RMB727.1 million (US$101.7 million), restricted cash of RMB4.8 million (US$0.7 million), short-term deposits of RMB112.0 million (US$15.7 million) and short-term investments of RMB269.8 million (US$37.8 million), compared to RMB940.3 million, RMB29.6 million, nil and RMB169.0 million, respectively, as of December 31, 2018.

For the third quarter of 2019, net cash provided by operating activities was RMB116.7 million.

Shares Outstanding

As of September 30, 2019, the Company had a total of 208.8 million shares, or the equivalent of 69.6 million ADSs, outstanding.

First Nine Months of 2019 Financial Results

Net revenues increased by 81.0% to RMB2.91 billion (US$406.5 million), from RMB1.61 billion for the first nine months of 2018.

IoT-enabled smart home products. Revenues from IoT-enabled smart home products increased by 70.7% to RMB2.24 billion (US$313.1 million) from RMB1.31 billion for the first nine months of 2018.

  • Smart water purification systems. Revenues from smart water purification systems increased by 5.4% to RMB679.3 million (US$95.0 million) from RMB644.5 million for the first nine months of 2018.
     
  • Smart kitchen products. Revenues from smart kitchen products increased by 84.7% to RMB890.0 million (US$124.5 million) from RMB481.9 million for the first nine months of 2018.
     
  • Other smart products. Revenues from other smart products increased by 262.7% to RMB668.5 million (US$93.5 million) from RMB184.3 million for the first nine months of 2018.

Consumable products. Revenues from consumable products increased by 71.2% to RMB171.3 million (US$24.0 million) from RMB100.0 million for the first nine months of 2018.

Value-added businesses. Revenues from value-added businesses increased by 155.1% to RMB496.9 million (US$69.5 million) from RMB194.8 million for the first nine months of 2018.

Cost of revenues increased by 89.3% to RMB2.17 billion (US$303.6 million) from RMB1.15 billion for the first nine months of 2018.

Gross profit increased by 60.2% to RMB735.8 million (US$102.9 million) from RMB459.4 million for the first nine months of 2018. Gross margin was 25.3%, compared to 28.6% in the first nine months of 2018.

Total operating expenses increased by 21.1% to RMB533.6 million (US$74.7 million) from RMB440.7 million for the first nine months of 2018.

Research and development expenses increased by 69.0% to RMB139.3 million (US$19.5 million) from RMB82.4 million for the first nine months of 2018.

Selling and marketing expenses increased by 40.9% to RMB343.9 million (US$48.1 million) from RMB244.0 million for the first nine months of 2018.

General and administrative expenses decreased by 55.9% to RMB50.4 million (US$7.1 million) from RMB114.2 million for the first nine months of 2018.

Income from operations increased by 988.6% to RMB218.5 million (US$30.6 million), compared to RMB20.1 million for the first nine months of 2018. Non-GAAP operating income, excluding the impact of share-based compensation expenses, was RMB251.1 million (US$35.1 million), compared to RMB126.4 million for the third quarter of 2018.

Income before income tax expenses was RMB236.3 million (US$33.1 million), compared to RMB25.5 million for the first nine months of 2018.

Income tax expenses were RMB32.7 million (US$4.6 million), compared to RMB15.1 million for the first nine months of 2018.

Net income was RMB203.6 million (US$28.5 million), compared to RMB10.5 million for the first nine months of 2018.

Non-GAAP net income was RMB236.3 million (US$33.1 million), compared to RMB116.8 million for the first nine months of 2018. Non-GAAP net income margin was 8.1%, compared to 7.3% for the first nine months of 2018.

Outlook

For the fourth quarter of 2019, the Company currently expects:

  • Net revenues to be between RMB1.40 billion and RMB1.44 billion, representing a year-over-year growth of approximately 46.5% to 50.7%.

For the full year of 2019, the Company currently expects:

  • Net revenues to be between RMB4.31 billion and RMB4.35 billion, representing a year-over-year growth of approximately 68.1% to 69.7%.

The above outlook is based on the current market conditions and reflects the Company’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Conference Call

The Company’s management will host a conference call at 8:00 a.m. Eastern Time on Wednesday, November 20, 2019 (9:00 p.m. Beijing Time on November 20, 2019) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

US (Toll Free): +1-888-346-8982
International: +1-412-902-4272
Mainland China (Toll Free): 400-120-1203
Hong Kong (Toll Free): 800-905-945
Hong Kong: +852-3018-4992
Conference ID: 10136701

A telephone replay will be available one hour after the call until November 27, 2019 by dialing:

US (Toll Free): +1-877-344-7529
International: +1-412-317-0088
Replay Passcode: 10136701

Additionally, a live and archived webcast of the conference call will be available at http://ir.viomi.com.

About Viomi Technology

Viomi’s mission is to redefine the future home via the concept of IoT @ Home.

Viomi has developed a unique IoT @ Home platform consisting of an ecosystem of innovative IoT-enabled smart home products, together with a suite of complementary consumable products and value-added businesses. This platform provides an attractive entry point into the consumer home, enabling consumers to intelligently interact with a broad portfolio of IoT products in an intuitive and human-like manner to make daily life more convenient, efficient and enjoyable, while allowing Viomi to grow its household user base and capture various additional scenario-driven consumption events in the home environment.

For more information, please visit: http://ir.viomi.com.

Use of Non-GAAP Measures

The Company uses non-GAAP operating income, non-GAAP net income, non-GAAP net income attributable to the Company, non-GAAP net income attributable to ordinary shareholders, non-GAAP basic and diluted net income per ordinary shares and non-GAAP basic and diluted net income per ADS, which are non-GAAP financial measures, in evaluating its operating results and for financial and operational decision-making purposes. Non-GAAP operating income is income from operations excluding share-based compensation expenses. Non-GAAP net income is net income excluding share-based compensation expenses. Non-GAAP net income attributable to the Company is net income attributable to the Company excluding share-based compensation expenses. Non-GAAP net income attributable to ordinary shareholders is net income attributable to ordinary shareholders excluding share-based compensation expenses. The non-GAAP adjustments do not have any tax impact as share-based compensation expenses are non-deductible for income tax purpose.

The Company believes that non-GAAP financial measures help identify underlying trends in its business by excluding the impact of share-based compensation expenses, which are non-cash charges, and these measures provide useful information about the Company’s operating results, enhance the overall understanding of the Company’s past performance and future prospects and allow for greater visibility with respect to key metrics used by the Company’s management in its financial and operational decision-making.

Non-GAAP financial measures should not be considered in isolation or construed as alternative to income from operations, net income, or any other measure of performance or as an indicator of the Company’s operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data. We encourage investors and others to review its financial information in its entirety and not rely on a single financial measure.

Exchange Rate

The Company’s business is primarily conducted in China and the significant majority of revenues generated are denominated in Renminbi (“RMB”). This announcement contains currency conversions of RMB amounts into U.S. dollars (“US$”) solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB7.1477 to US$1.00, the effective noon buying rate for September 30, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on for September 30, 2019, or at any other rate.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Viomi’s strategic and operational plans, contain forward-looking statements. Viomi may also make written or oral forward-looking statements in its periodic reports to the United States Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s growth strategies; the cooperation with Xiaomi, the recognition of the Company’s brand; trends and competition in global IoT-enabled smart home market; development and commercialization of new products, services and technologies; governmental policies relating to the Company’s industry and general economic conditions in China and around the globe, and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Viomi Technology Co., Ltd
E-mail: ir@viomi.com.cn

The Piacente Group, Inc.
Cecilia Li
Tel: +86-10-6508-0677
E-mail: viomi@tpg-ir.com

In the United States:

The Piacente Group, Inc. 
Brandi Piacente
Tel: +1-212-481-2050
E-mail: viomi@tpg-ir.com

VIOMI TECHNOLOGY CO., LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except shares, ADS, per share and per ADS data)

    As of December 31,   As of September 30,
    2018   2019   2019
    RMB   RMB   US$
             
Assets            
Current assets            
Cash and cash equivalents   940,298   727,076   101,722
Restricted cash   29,550   4,760   666
Short-term deposits   -   111,968   15,665
Short-term investments   168,993   269,841   37,752
Accounts and notes receivable from third parties (net of allowance of nil and RMB2,006 as of December 31, 2018 and September 30, 2019, respectively)   111,718   324,717   45,430
Accounts receivable from a related party (net of allowance of nil and nil as of December 31, 2018 and September 30, 2019, respectively)   260,984    446,909   62,525
Other receivables from a related party (net of allowance of nil and nil as of December 31, 2018 and September 30, 2019, respectively)   112,320   53,095   7,428
Inventories   231,975   452,848   63,356
Prepaid expenses and other assets   46,890   45,817   6,410
             
Total current assets   1,902,728   2,437,031   340,954
             
Non-current assets            
Prepaid expenses and other assets   3,636   23,687   3,314
Property, plant and equipment, net   11,301   38,764   5,423
Deferred tax assets   5,234   9,392   1,314
Intangible assets, net   169   2,533   354
Right-of-use assets, net3     18,951   2,651
             
Total non-current assets   20,340   93,327   13,056
             
Total assets   1,923,068   2,530,358   354,010
             
Liabilities and shareholders’ equity            
Current liabilities            
Accounts and notes payable   548,481   760,744   106,432
Advances from customers   86,312   73,872   10,335
Amount due to related parties   5,763   7,667   1,073
Accrued expenses and other liabilities   200,930   268,389   37,549
Short-term borrowing   -   95,868   13,412
Income tax payables   10,199   20,672   2,892
Lease liabilities due within one year3     7,105   994
Total current liabilities   851,685   1,234,317   172,687
             
Non-current liabilities            
Accrued expenses and other liabilities   518   442   62
Lease liabilities3     12,629   1,767
Total non-current liabilities   518   13,071   1,829
             
Total liabilities   852,203   1,247,388   174,516
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3 The Company has adopted ASU No. 2016-02 ‘‘Leases” beginning January 1, 2019 using the optional transition method. The only major impact of the standard is that assets and liabilities amounting to RMB9.3 million and RMB9.2 million, respectively, are recognized beginning January 1, 2019 for leased office space and an offline store with terms of more than 12 months.
 
 

VIOMI TECHNOLOGY CO., LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(All amounts in thousands, except shares, ADS, per share and per ADS data)

    As of December 31,   As of September 30,
    2018    2019    2019 
    RMB   RMB   US$
             
Shareholders’ equity            
Class A Ordinary Shares (US$0.00001 par value; 4,800,000,000 shares authorized; 90,200,000 and  96,048,677 shares issued and outstanding as of December 31, 2018 and September 30, 2019, respectively)   5     6     1  
Class B Ordinary Shares (US$0.00001 par value; 150,000,000 shares authorized; 117,600,000 and  112,740,000 shares issued and outstanding as of December 31, 2018 and September 30, 2019, respectively)   7     7     1  
Additional paid-in capital   1,193,174     1,180,099     165,102  
(Accumulated deficit) retained earnings   (95,527 )   106,945     14,962  
Accumulated other comprehensive loss   (29,786 )   (9,199 )   (1,287 )
             
Total Viomi Technology Co., Ltd (the “Company”)’s shareholders’ equity   1,067,873     1,277,858     178,779  
             
Non-controlling interests   2,992     5,112     715  
             
Total shareholders’ equity   1,070,865     1,282,970     179,494  
             
Total liabilities and shareholders’ equity   1,923,068     2,530,358     354,010  
 
 

VIOMI TECHNOLOGY CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(All amounts in thousands, except shares, ADS, per share and per ADS data)

    Three Months Ended   Nine Months Ended
    September 30, 2018   September 30, 2019   September 30, 2019     September 30, 2018   September 30, 2019   September 30, 2019  
    RMB   RMB   US$     RMB   RMB   US$  
                 
Net revenues:                
A related party   243,725   481,283   67,334     895,263   1,220,899   170,810  
Third parties   321,589   588,218   82,295     710,230   1,684,964   235,735  
Total net revenues   565,314   1,069,501   149,629     1,605,493   2,905,863   406,545  
                 
Cost of revenues:                
Purchase from a related party   (2,637 ) (10,203 ) (1,427 )   (8,027 ) (24,422 ) (3,417 )
Purchase from third parties   (392,813 ) (821,163 ) (114,885 )   (1,138,053 ) (2,145,607 ) (300,181 )
Total cost of revenues   (395,450 ) (831,366 ) (116,312 )   (1,146,080 ) (2,170,029 ) (303,598 )
                 
Gross profit   169,864   238,135   33,317     459,413   735,834   102,947  
                 
Operating expenses(1)                
Research and development expenses   (33,371 ) (43,164 ) (6,039 )   (82,418 ) (139,309 ) (19,490 )
Selling and marketing expenses (including RMB8,788, RMB14,348, RMB11,558 and RMB44,916 with related parties for the three months ended September 30, 2018 and 2019, and for the nine months ended September 30, 2018 and 2019, respectively)   (97,440 ) (113,446 ) (15,872 )   (244,029 ) (343,892 ) (48,112 )
General and administrative expenses   (99,412 ) (12,590 ) (1,761 )   (114,249 ) (50,433 ) (7,056 )
                 
Total operating expenses   (230,223 ) (169,200 ) (23,672 )   (440,696 ) (533,634 ) (74,658 )
Other income   1,205   13,584   1,900     1,353   16,273   2,277  
                 
(Loss) income from operations   (59,154 ) 82,519   11,545     20,070   218,473   30,566  
                 
Interest income and investment income (including net interest expense of nil, nil, RMB333 and nil with related parties for the three months ended September 30, 2018 and 2019 and for the nine months ended September 30, 2018 and 2019, respectively)   2,784   2,818   394     5,443   16,527   2,312  
Other non-operating income     446   62       1,312   184  
                 
(Loss) income before income tax expenses   (56,370 ) 85,783   12,001     25,513   236,312   33,062  
                 
Income tax expenses   (3,465 ) (12,456 ) (1,743 )   (15,057 ) (32,720 ) (4,578 )
                 
Net (loss) income   (59,835 ) 73,327   10,258     10,456   203,592   28,484  
                 
Less: Net (loss) income attributable to the non-controlling interest shareholders   (1 ) 426   60     (1 ) 1,120   157  
                 
Net (loss) income attributable to the Company   (59,834 ) 72,901   10,198     10,457   202,472   28,327  
Accretion of Series A Preferred Shares   (2,235 )       (6,563 )    
Cumulative dividend on Series A Preferred Shares   (2,562 )       (7,631 )    
Cumulative dividend on Class B Ordinary Shares   (208 )       (620 )    
                 
Net (loss) income attributable to ordinary shareholders of the Company   (64,839 ) 72,901   10,198     (4,357 ) 202,472   28,327  
                 
                 

VIOMI TECHNOLOGY CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (CONTINUED)
(All amounts in thousands, except shares, ADS, per share and per ADS data)

       
  Three Months Ended   Nine Months Ended
  September 30, 2018    September 30, 2019   September 30, 2019   September 30, 2018    September 30, 2019   September 30, 2019
  RMB    RMB   US$   RMB    RMB   US$
                       
Net (loss) income attributable to the Company (59,834 )   72,901   10,198   10,457     202,472   28,327
                       
Other comprehensive (loss) income, net of tax                      
Foreign currency translation adjustment (8,399 )   20,255   2,834   (11,419 )   20,587   2,880
                       
Total comprehensive (loss) income attributable to the Company (68,233 )   93,156   13,032   (962 )   223,059   31,207
                       
Net (loss) income per ADS*                      
-Basic (6.93 )   1.05   0.15   (0.48 )   2.92   0.41
-Diluted (6.93 )   1.01   0.14   (0.48 )   2.82   0.39
                       
Weighted average number of ADS used in calculating net income per ADS                      
-Basic 9,355,237     69,351,625   69,351,625   9,059,474     69,298,127   69,298,127
-Diluted 9,355,237     71,932,384   71,932,384   9,059,474     71,913,887   71,913,887
                       
Net (loss) income per share attributable to ordinary shareholders of the Company                      
-Basic (2.31 )   0.35   0.05   (0.16 )   0.97   0.14
-Diluted (2.31 )   0.34   0.05   (0.16 )   0.94   0.13
                       
Weighted average number of ordinary shares used in calculating net income per share                      
-Basic 28,065,711     208,054,876   208,054,876   27,178,421     207,894,380   207,894,380
-Diluted 28,065,711     215,797,153   215,797,153   27,178,421     215,741,660   215,741,660
                           
*Each ADS represents 3 ordinary shares.

 

(1)   Share-based compensation was allocated in operating expenses as follows:
         
    Three Months Ended   Nine Months Ended
    September 30, 2018 September 30, 2019 September 30, 2019   September 30, 2018 September 30, 2019 September 30, 2019
    RMB RMB US$   RMB RMB US$
                 
General and administrative expenses   90,992 1,818 254   91,978 5,453 763
Research and development expenses   4,867 5,609 785   9,095 17,146 2,399
Selling and marketing expenses   2,725 3,106 435   5,285 10,059 1,407
                 
                 

VIOMI TECHNOLOGY CO., LTD
Reconciliations of GAAP and Non-GAAP Results
(All amounts in thousands, except shares, ADS, per share and per ADS data)

  Three Months Ended   Nine Months Ended
  September 30,
2018
 
  September 30,
2019
  September 30,
2019
  September 30,
2018
    September 30,
2019
  September 30,
2019
  RMB    RMB   US$   RMB     RMB   US$
                       
(Loss) income from operations (59,154 )   82,519   11,545   20,070     218,473   30,566
Share-based compensation expenses 98,584     10,533   1,474   106,358     32,658   4,569
                       
Non-GAAP operating income 39,430     93,052   13,019   126,428     251,131   35,135
                       
Net (loss) income (59,835 )   73,327   10,258   10,456     203,592   28,484
Share-based compensation expenses 98,584     10,533   1,474   106,358     32,658   4,569
                       
Non-GAAP net income 38,749     83,860   11,732   116,814     236,250   33,053
                       
Net (loss) income attributable to the Company (59,834 )   72,901   10,198   10,457     202,472   28,327
Share-based compensation expenses 98,584     10,533   1,474   106,358     32,658   4,569
                       
Non-GAAP net income attributable to the Company 38,750     83,434   11,672   116,815     235,130   32,896
                       
Net (loss) income attributable to ordinary shareholders (64,839 )   72,901   10,198   (4,357 )   202,472   28,327
Share-based compensation expenses 98,584     10,533   1,474   106,358     32,658   4,569
                       
Non-GAAP net income attributable to ordinary shareholders 33,745     83,434   11,672   102,001     235,130   32,896
                       
Non-GAAP net income per ADS                      
-Basic 3.60     1.20   0.17   11.25     3.39   0.47
-Diluted 2.76     1.16   0.16   8.52     3.27   0.46
                       
Weighted average number of ADS used in calculating Non-GAAP net income per ADS                      
-Basic 9,355,237     69,351,625   69,351,625   9,059,474     69,298,127   69,298,127
-Diluted 12,181,497     71,932,384   71,932,384   11,962,361     71,913,887   71,913,887
                       
Non-GAAP net income per ordinary share                      
-Basic 1.20     0.40   0.06   3.75     1.13   0.16
-Diluted 0.92     0.39   0.05   2.84     1.09   0.15
                       
Weighted average number of ordinary shares used in calculating Non-GAAP net income per share                      
-Basic 28,065,711     208,054,876   208,054,876   27,178,421     207,894,380   207,894,380
-Diluted 36,544,491     215,797,153   215,797,153   35,887,083     215,741,660   215,741,660

Note: The non-GAAP adjustments do not have any tax impact as share-based compensation expenses are non-deductible for income tax purpose.

 

Source: Viomi Technology Co., Ltd