Viomi Technology Co., Ltd Reports First Quarter 2020 Unaudited Financial Results

May 26, 2020 at 5:00 AM EDT
First quarter net revenues increased by 13.2% year-over-year, exceeding previous guidance
 

GUANGZHOU, China, May 26, 2020 (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 first quarter ended March 31, 2020.

First Quarter 2020 Financial and Operating Highlights

  • Net revenues were RMB765.5 million (US$108.1 million), representing an increase of 13.2% from the first quarter of 2019.
  • Gross margin was 18.8%.
  • Net income was RMB17.8 million (US$2.5 million), compared to RMB41.3 million for the first quarter of 2019.
  • Non-GAAP net income1 was RMB31.4 million (US$4.4 million), compared to RMB53.1 million for the first quarter of 2019.
  • Number of household users reached more than 3.7 million, compared to approximately 3.2 million as of the end of 2019 and approximately 2.0 million as of the end of the first quarter of 2019.
  • Percentage of household users with at least two connected products reached 18.4%, compared to 17.9% as of the end of 2019 and 15.2% as of the end of the first quarter of 2019.
  • Number of Viomi offline experience stores was approximately 1,500, compared to approximately 1,700 as of the end of 2019.

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

“Despite challenging industry conditions and ongoing macro uncertainties as a result of the COVID-19 outbreak, we successfully delivered better-than-expected results in the first quarter of 2020,” said Mr. Xiaoping Chen, Founder, Chairman of the Board of Directors and Chief Executive Officer of Viomi. “Net revenues for the first quarter increased 13.2% year-over-year, exceeding our previous guidance and demonstrating the resilience and diversified nature of our business.”

“Since the start of the second quarter, our business and supply chain operations have largely returned back to normal. In addition, we have seen meaningful signs of an overall industry recovery and we have accelerated the execution of our growth strategy for this year. Last week, we hosted our virtual 5G IoT Strategy and 2020 New Product Launch Event, where we presented our vision and product strategy for the imminent 5G + IoT era. The centerpiece of the event was the introduction of our state-of-the-art 21Face Interactive Smart Screen (TV). Equipped with industry-leading specifications, innovative motion-control capabilities and rich content offerings, this product will complete our vision for the fully-integrated and screen-filled IoT @ Home lifestyle experience. In addition, we announced a series of exciting next-generation products, including new lines of water purifiers, 21Face large-screen refrigerators, washing machines, various smart kitchen products and smart devices, together with new online content offerings and partnerships to enhance our user engagement. Moreover, we are expanding our premium AI-centric ‘coKiing’ brand with introductions of additional product categories across full home scenarios, further diversifying our brand and our consumer market. We expect these key initiatives, built upon our successes over the past several years, to bring the Viomi brand to the forefront and the standard-bearer of 5G + IoT for the home environment,” Mr. Chen added.

“Looking ahead in 2020 and beyond, we will adhere to dynamic and prudent business practices while maintaining stable expansion under our 5G + IoT strategic framework. We are fully committed to and confident in achieving our ‘3511’ long-term objectives, our roadmap to becoming a large-scale, high-tech leader in the IoT @ Home space,” concluded Mr. Chen.

“We achieved a solid double-digit increase in net revenues, exceeding our previous guidance, despite the adverse industry conditions in the first quarter. This can be largely attributed to our diversified business, product and channel mix as well as our ever-increasing brand awareness across sales channels and among end-consumers. We also continued to sustain a healthy level of profitability, having implemented a number of stringent cost control measures to offset the adverse industry-wide impacts of COVID-19, while maintaining our commitment to research and development. The Company’s balance sheet remained strong, with approximately RMB1.2 billion of cash and cash equivalents, short-term deposits and investments as of March 31, 2020,” Mr. Shun Jiang, Chief Financial Officer of Viomi, commented.

“While uncertainties remain, we believe our financial strength and operational flexibility will position us well to capture the opportunities ahead, as the industry and broader economy continue to recover,” Mr. Jiang concluded.

First Quarter 2020 Financial Results

Net revenues were RMB765.5 million (US$108.1 million), compared to RMB676.2 million for the first quarter of 2019, primarily due to the successful rollout and increased sales of certain Xiaomi-branded and Viomi-branded products, offsetting the broader industry-wide impacts of COVID-19.

IoT-enabled smart home products. Revenues from IoT-enabled smart home products increased by 8.0% to RMB542.7 million (US$76.6 million) from RMB502.5 million for the first quarter of 2019, primarily due to the continued successful rollout of the Company’s smart kitchen products and other smart products.

  • Smart water purification systems. Revenues from smart water purification systems decreased by 10.0% to RMB108.0 million (US$15.3 million) from RMB120.0 million for the first quarter of 2019. The decline was primarily due to decreases in average selling prices, despite a double-digit year-on-year growth in sales volumes.
     
  • Smart kitchen and other smart products. Revenues from smart kitchen and other smart products increased by 13.6% to RMB434.7 million (US$61.4 million) from RMB382.5 million for the first quarter of 2019. The growth was primarily driven by the continued successful rollout of certain new products, in particular the Xiaomi-branded sweeper robots, which offset the broader industry-wide impacts of COVID-19.

Consumable products. Revenues from consumable products increased by 35.0% to RMB65.0 million (US$9.2 million) from RMB48.1 million for the first quarter of 2019, primarily due to increased demand for the Company’s water purifier filter products.

Value-added businesses. Revenues from value-added businesses increased by 25.6% to RMB157.8 million (US$22.3 million) from RMB125.6 million for the first quarter of 2019, primarily due to new product introductions, together with increased demand for the Company’s small appliances.

Cost of revenues increased by 27.7% to RMB621.5 million (US$87.8 million) from RMB486.8 million for the first quarter of 2019.

Gross profit was RMB144.0 million (US$20.3 million), compared to RMB189.4 million for the first quarter of 2019. Gross margin was 18.8%, compared to 28.0% for the first quarter of 2019. The decline in gross margin was primarily due to the shifts in the Company’s business and product mix, together with decreases in average selling prices of certain product categories, including the smart water purification systems, in the quarter.

Total operating expenses decreased by 12.4% to RMB134.2 million (US$19.0 million) from RMB153.1 million for the first quarter of 2019, primarily due to stringent expense control measures implemented during the quarter to offset the adverse industry-wide impacts of COVID-19, while continuing to invest in research and development.

Research and development expenses increased by 62.0% to RMB59.3 million (US$8.4 million) from RMB36.6 million for the first quarter of 2019, primarily due to increases in employee-related expenses, expenses associated with new product development and expenses related to the application of patents.

Selling and marketing expenses decreased by 35.1% to RMB65.5 million (US$9.2 million) from RMB100.9 million for the first quarter of 2019, primarily due to a decrease in logistics expenses as well as stringent expense control measures in relation to marketing and promotional activities and other selling and marketing related expenses, implemented during the quarter to offset the adverse industry-wide impacts of COVID-19.

General and administrative expenses decreased by 39.5% to RMB9.5 million (US$1.3 million), compared to RMB15.6 million for the first quarter of 2019, primarily due to the Company’s stringent expense control measures implemented during the quarter to offset the adverse industry-wide impacts of COVID-19.

Income from operations was RMB12.5 million (US$1.8 million), compared with RMB37.1 million for the first quarter of 2019. Non-GAAP operating income2, excluding the impact of share-based compensation expenses, was RMB26.1 million (US$3.7 million), compared with RMB48.9 million for the first quarter of 2019.

Income before income tax expenses was RMB17.9 million (US$2.5 million), compared to RMB47.2 million for the first quarter of 2019.

Income tax expenses were RMB0.1 million (US$18 thousand), compared to RMB5.9 million for the first quarter of 2019.

Net income was RMB17.8 million (US$2.5 million), compared to RMB41.3 million for the first quarter of 2019.

Non-GAAP net income was RMB31.4 million (US$4.4 million), compared to RMB53.1 million for the first quarter of 2019.

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

As of March 31, 2020, the Company had cash and cash equivalents of RMB445.9 million (US$63.0 million), restricted cash of nil, short-term deposits of RMB143.0 million (US$20.2 million) and short-term investments of RMB603.3 million (US$85.2 million).

Outlook

For the second quarter of 2020, the Company currently expects:

  • Net revenues to be between RMB1.25 billion and RMB1.28 billion, representing a year-over-year growth of approximately 7.7% to 10.3%.

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 Tuesday, May 26, 2020 (8:00 p.m. Beijing Time on May 26, 2020) 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: 10144139

A telephone replay will be available one hour after the call until June 2, 2020 by dialing:

US (Toll Free): +1-877-344-7529
International: +1-412-317-0088
Replay Passcode: 10144139

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 RMB7.0808 to US$1.00, the effective noon buying rate for March 31, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on for March 31, 2020, 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
Cecilia Li
E-mail: ir@viomi.com.cn

The Piacente Group, Inc.

Emilie Wu
Tel: +86-21-6039-8363
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 March 31,
    2019   2020   2020
    RMB   RMB   US$
             
Assets            
Current assets            
Cash and cash equivalents   972,438   445,860   62,967
Restricted cash   30,567    
Short-term deposits   60,000   142,994   20,195
Short-term investments   316,201   603,278   85,199
Accounts and notes receivable from third parties (net of allowance of RMB2,006 and RMB4,688 as of December 31, 2019 and March 31 2020, respectively)   316,189   279,628   39,491
Accounts receivable from a related party (net of allowance of nil and RMB32 as of December 31, 2019 and March 31, 2020, respectively)   707,947   317,299   44,811
Other receivables from related parties (net of allowance of nil and RMB4 as of December 31, 2019 and March 31, 2020, respectively)   23,944   38,264   5,404
Inventories   418,015   371,120   52,413
Prepaid expenses and other current assets   62,314   94,172   13,300
             
Total current assets   2,907,615   2,292,615   323,780
             
Non-current assets            
Prepaid expenses and other non-current assets   11,170   11,354   1,603
Property, plant and equipment, net   67,293   61,712   8,715
Deferred tax assets   12,276   13,896   1,962
Intangible assets, net   4,357   5,578   788
Right-of-use assets, net   19,762   18,893   2,668
Long-term deposits     60,000   8,474
             
Total non-current assets   114,858   171,433   24,210
             
Total assets   3,022,473   2,464,048   347,990
             
Liabilities and shareholders’ equity            
Current liabilities            
Accounts and notes payable   1,043,159   742,729   104,893
Advances from customers   103,150   40,778   5,759
Amount due to related parties   25,106   4,737   669
Accrued expenses and other liabilities   325,042   208,005   29,376
Short-term borrowing   95,868    
Income tax payables   33,522   31,035   4,383
Lease liabilities due within one year   6,993   6,643   938
Total current liabilities   1,632,840   1,033,927   146,018
             
Non-current liabilities            
Accrued expenses and other liabilities   1,795   1,725   244
Lease liabilities   13,391   12,815   1,810
Total non-current liabilities   15,186   14,540   2,054
             
Total liabilities   1,648,026   1,048,467   148,072
             

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 March 31,
    2019   2020   2020  
    RMB   RMB   US$
             
Shareholders’ equity            
Class A Ordinary Shares (US$0.00001 par value; 4,800,000,000 shares authorized; 98,444,732 and 98,724,008 shares issued and outstanding as of December 31, 2019 and March 31, 2020, respectively)   6   6   1  
Class B Ordinary Shares (US$0.00001 par value; 150,000,000 shares authorized; 110,850,000 shares issued and outstanding as of December 31, 2019 and March 31, 2020, respectively)   6   6   1  
Additional paid-in capital   1,192,332   1,206,876   170,443  
Retained earnings   195,596   211,029   29,803  
Accumulated other comprehensive loss   (19,145)   (7,831)   (1,106)  
             
Total equity attributable to shareholders of the Company   1,368,795   1,410,086   199,142  
             
Non-controlling interests   5,652   5,495   776  
             
Total shareholders’ equity   1,374,447   1,415,581   199,918  
             
Total liabilities and shareholders’ equity   3,022,473   2,464,048   347,990  

Note: On January 1, 2020, the Company adopted ASC326, “Financial Instruments-Credit Losses” using modified-retrospective transition approach. Following the adoption of this guidance, a cumulative-effect adjustment to retained earnings, amounting to RMB2.4 million, was recognized as of January 1, 2020.

 

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
    March 31, 2019 March 31, 2020 March 31, 2020
    RMB RMB US$
Net revenues:        
A related party   251,880   404,979   57,194  
Third parties   424,329   360,527   50,916  
Total net revenues   676,209   765,506   108,110  
         
Cost of revenues (including RMB9,194 and RMB14,593 with related parties for the three months ended March 31, 2019 and 2020, respectively)   (486,787 ) (621,540 ) (87,778 )
         
Gross profit   189,422   143,966   20,332  
         
Operating expenses(1)        
Research and development expenses (including nil and RMB596 with a related party for the three months ended March 31, 2019 and 2020, respectively)   (36,572 ) (59,261 ) (8,369 )
Selling and marketing expenses (including RMB8,134 and RMB8,080 with related parties for the three months ended March 31, 2019 and 2020, respectively)   (100,948 ) (65,470 ) (9,246 )
General and administrative expenses   (15,624 ) (9,458 ) (1,336 )
         
Total operating expenses   (153,144 ) (134,189 ) (18,951 )
Other income   812   2,741   387  
         
Income from operations   37,090   12,518   1,768  
         
Interest income and short-term investment income   9,707   5,336   754  
Other non-operating income, net   431   90   13  
         
Income before income tax expenses   47,228   17,944   2,535  
         
Income tax expenses   (5,900 ) (126 ) (18 )
         
Net income   41,328   17,818   2,517  
         
Less: Net income (loss) attributable to the non-controlling interest shareholder   138   (157 ) (22 )
         
Net income attributable to the Company   41,190   17,975   2,539  
         
Net income attributable to ordinary shareholders of the Company   41,190   17,975   2,539  
               

 

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
    March 31, 2019 March 31, 2020 March 31, 2020
    RMB RMB US$
         
Net income attributable to the Company   41,190   17,975 2,539
         
Other comprehensive (loss) income, net of tax        
Foreign currency translation adjustment   (14,083 ) 11,314 1,598
         
Total comprehensive income attributable to the Company   27,107   29,289 4,137
         
Net income per ADS*        
-Basic   0.60   0.26 0.04
-Diluted   0.57   0.25 0.04
         
Weighted average number of ADS used in calculating net income per ADS        
-Basic   69,266,667   69,768,219 69,768,219
-Diluted   71,720,196   71,943,488 71,943,488
         
Net income per share attributable to ordinary shareholders of the Company        
-Basic   0.20   0.09 0.01
-Diluted   0.19   0.08 0.01
         
Weighted average number of ordinary shares used in calculating net income per share        
-Basic   207,800,000   209,304,658 209,304,658
-Diluted   215,160,587   215,830,463 215,830,463
           
 *Each ADS represents 3 ordinary shares.        
         
(1) Share-based compensation was allocated in operating expenses as follows:        

 

    Three Months Ended
    March 31, 2019 March 31, 2020 March 31, 2020
    RMB RMB US$
         
General and administrative expenses   1,871 2,376 336
Research and development expenses   6,106 8,240 1,164
Selling and marketing expenses   3,817 2,970 419


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
    March 31, 2019 March 31, 2020 March 31, 2020
    RMB RMB US$
         
Income from operations   37,090 12,518 1,768
Share-based compensation expenses   11,794 13,586 1,919
         
Non-GAAP operating income   48,884 26,104 3,687
         
Net income   41,328 17,818 2,517
Share-based compensation expenses   11,794 13,586 1,919
         
Non-GAAP net income   53,122 31,404 4,436
         
Net income attributable to the Company   41,190 17,975 2,539
Share-based compensation expenses   11,794 13,586 1,919
         
Non-GAAP net income attributable to the Company   52,984 31,561 4,458
         
Net income attributable to ordinary shareholders   41,190 17,975 2,539
Share-based compensation expenses   11,794 13,586 1,919
         
Non-GAAP net income attributable to ordinary shareholders   52,984 31,561 4,458
         
Non-GAAP net income per ADS        
-Basic   0.75 0.45 0.06
-Diluted   0.75 0.44 0.06
         
Weighted average number of ADS used in calculating Non-GAAP net income per ADS        
-Basic   69,266,667 69,768,219 69,768,219
-Diluted   71,720,196 71,943,488 71,943,488
         
Non-GAAP net income per ordinary share        
-Basic   0.25 0.15 0.02
-Diluted   0.25 0.15 0.02
         
Weighted average number of ordinary shares used in calculating Non-GAAP net income per share        
-Basic   207,800,000 209,304,658 209,304,658
-Diluted   215,160,587 215,830,463 215,830,463

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