Viomi Technology Co., Ltd Reports Second Quarter 2022 Unaudited Financial Results

Gross margin improved year-over-year to 22.1% from 21.2 %

GUANGZHOU, China, Aug. 22, 2022 /PRNewswire/ -- 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 second quarter ended June 30, 2022.

Second Quarter 2022 Financial and Operating Highlights

• Net revenues reached RMB924.2 million (US$138.0 million), compared to RMB1,658.9 million for the second quarter of 2021.
• Gross margin increased to 22.1% from 21.2% for the second quarter of 2021.
• Number of cumulative household users reached approximately 7.2 million, compared to approximately 6.9 million as of the end of the first quarter of 2022 and approximately 5.9 million as of the end of the second quarter of 2021.
• Percentage of household users with at least two connected products reached 22.0%, compared to 21.8% as of the end of the first quarter of 2022 and 20.7% as of the end of the second quarter of 2021.

Mr. Xiaoping Chen, Founder and CEO of Viomi, commented, "In the second quarter, we continued to execute our high-quality business operation strategy: (i) continue to streamline SKUs and optimize our product mix; (ii) focus on core business and product lines to build best-selling products; and (iii) implement cost control and efficiency improvement measures in production and supply chain. These efforts led to the ongoing optimization of our business operation with gross margin increasing by about 1% year-over-year, representing consecutive year-over-year improvement since the fourth quarter of 2020. Despite COVID-19 recurrences and weak consumer spending exerting considerable pressure on our sales, we made significant progress in product innovation, channel optimization and strategic cooperation alongside the development of our one-stop IoT home solutions, further solidifying the foundation for our long-term product enhancement and branding influence."

"First, with respect to our products, we introduced a series of new AI products at our strategic new products launch event in March, including Space Pro, our all-space AI air conditioner featuring formaldehyde removal; Boss, our large-screen refrigerator with AI fitness functionality; our Royal series of AI laser interactive smart screens incorporating 4K UHD display; Super 2, our 2000G super large-flux water purifier which generates ultra-micro bubbles to remove pesticide residues; and our Royal series of AI twin-tub washing machines. Among them, the air conditioner, water purifier, and interactive smart screen came to market in the second quarter. We also introduced a series of new smart home devices, such as EyeLink, our smart lock with upgraded 3D facial recognition technology, as well as HomePad Plus, our AI screen-based control interface for managing all smart home appliances across scenarios. These new AI-equipped products provide our consumers with a superior smart home experience and have received favorable market feedback and reviews."

Mr. Chen added, "Furthermore, sales growth and product influence among our mid- to high-end products are also increasing. During the recent domestic '618' shopping festival, some of our mid- to high-end products topped the e-commerce sales charts in their respective categories, such as our Space series of air conditioners, Super series of water purifiers and 21Face AI large-screen refrigerators. Meanwhile, based on our one-stop IoT home solutions, we are accelerating the implementation of our premium bundled home solution offerings across the nation. After our offline merchants signed whole-home solution orders ranging from RMB200,000 to RMB400,000 with customers in Beijing, Guangzhou, Changsha and Kunming in the first quarter, our offline merchants in Chengdu, Zunyi, Yinchuan and some other cities followed suit, recording multiple high-end whole-home solution orders exceeding RMB200,000 and RMB300,000 in the second quarter. Our consumers' recognition and adoption of our premium AI products and our bundled home solution offerings are a testament to the success of our phased transformation into a premium brand and our investment in R&D for our AI products."

"Second, we continued to execute our 'larger store, better merchant' channel strategy. In the second quarter, we cooperated with our newly signed offline merchants and opened additional Viomi 4S and 5S flagship stores in provinces including Hunan, Anhui and Guizhou, etc. These flagship stores enhanced our 'trending technology' branding positioning through unified storefront decoration and immersive scenario experience, and helped implement our one-stop IoT home solutions."

"Third, to support the release of premium new products and our high-end brand transformation, we continued to enhance our brand promotions in the second quarter. In addition to the launch of a large number of elevator and print ads, we reached more targeted young groups by partnering with Tmall and becoming the co-sponsor of the well-known variety show 'Design Ideal Future' broadcasted on the Mango TV platform, exposing a growing audience to our immersive smart home experience across whole-home scenarios and bringing an intelligent lifestyle to more young consumers," Mr. Chen commented.

"In addition, we continued to deepen our strategic cooperation with more channels in the second quarter to promote the integrated and development of the smart home industry. In the first half of this year, we reached partnerships with JD.com, Tmall and China Telecom. We are exploring strategic cooperation with additional channels and companies to create a more convenient and smart living experience and promote the development of smart home ecology for families."

"We successfully navigated the challenges caused by the pandemic and the weak macro industry environment in the first half of the year, and made progress in developing new products and enhancing brand awareness. As we progress through 2022, we will continue to focus on product innovation and product portfolio optimization, devoting more resources to improving product competence while implementing more disciplined cost and expense control measures to lay a solid foundation for long-term healthy growth," Mr. Chen concluded.

Second Quarter 2022 Financial Results

REVENUE

Net revenues were RMB924.2 million (US$138.0 million), compared to RMB1,658.9 million for the second quarter of 2021. Net revenues were in line with the Company's previous guidance. The decline was mainly due to (i) the complete cutoff of sales of Xiaomi-branded sweeper robots this year, as well as its high prior-year base for comparison, and (ii) the ongoing product portfolio adjustments in some categories.

-  IoT @ Home portfolio. Revenues from IoT @ Home portfolio decreased by 54.2% to RMB524.5 million (US$78.3 million) from RMB1,146.3 million for the second quarter of 2021. The decline was primarily due to the complete cutoff of sales of Xiaomi-branded sweeper robots, as well as SKU adjustments for some categories.

-  Home water solutions. Revenues from home water solutions decreased by 17.4% to RMB180.9 million (US$27.0 million) from RMB218.9 million for the second quarter of 2021. The decline was primarily due to the decreased demand of water purifiers.

-  Consumables. Revenues from consumables decreased slightly by 1.9% to RMB100.3 million (US$15.0 million) from RMB102.2 million for the second quarter of 2021.

-  Small appliances and others. Revenues from small appliances and others decreased by 38.1% to RMB118.5 million (US$17.7 million) from RMB191.5 million for the second quarter of 2021, which was primarily due to the product portfolio adjustment within this category, as well as the decreased demand of small appliances products.

GROSS PROFIT

Gross profit was RMB204.5 million (US$30.5 million), compared to RMB351.8 million for the second quarter of 2021. Gross margin increased to 22.1% from 21.2% for the second quarter of 2021, primarily driven by the Company's continued efforts to shift the business and product mix toward higher gross margin products, and partially offset by decreases in selling prices of some products for clean-up due to the product portfolio adjustment in the quarter.

OPERATING EXPENSES

Total operating expenses decreased by 14.6% to RMB264.6 million (US$39.5 million) from RMB309.7 million for the second quarter of 2021, primarily due to the year-over-year decrease in selling and marketing expenses.

Research and development expenses increased by 20.4% to RMB79.7 million (US$11.9 million) from RMB66.2 million for the second quarter of 2021, mainly due to the increase in research and development experts and related salaries and expenses, as well as the increased input in new product development.

Selling and marketing expenses decreased by 24.6% to RMB162.0 million (US$24.2 million) from RMB214.8 million for the second quarter of 2021, mainly due to the decrease in marketing expenses, partially offset by the increased expenses on advertising activities that enhance the Company's branding recognition.

General and administrative expenses decreased by 20.3% to RMB22.9 million (US$3.4 million), compared to RMB28.8 million for the second quarter of 2021, primarily due to the decrease in estimated allowance for accounts and notes receivables recognized in the current period.

LOSS FROM OPERATIONS

Loss from operations was RMB55.6 million (US$8.3 million), compared to income from operations of RMB47.2 million for the second quarter of 2021.

Non-GAAP operating loss^[1] was RMB49.9 million (US$7.5 million), compared to non-GAAP operating income of RMB60.6 million for the second quarter of 2021.

NET LOSS

Net loss attributable to ordinary shareholders of the Company was RMB39.6 million (US$5.9 million), compared to net income attributable to ordinary shareholders of the Company of RMB46.1 million for the second quarter of 2021.

Non-GAAP net loss attributable to ordinary shareholders of the Company^[2] was RMB33.9 million (US$5.1 million), compared to non-GAAP net income attributable to ordinary shareholders of the Company of RMB59.5 million for the second quarter of 2021.

BALANCE SHEET

As of June 30, 2022, the Company had cash and cash equivalents of RMB816.3 million (US$121.9 million), restricted cash of RMB46.8 million (US$7.0 million), short-term deposits of RMB10.0 million (US$1.5 million) and short-term investments of RMB237.0 million (US$35.4 million), compared to RMB587.0 million, RMB35.8 million, nil and RMB828.9 million, respectively, as of December 31, 2021.

OUTLOOK

For the third quarter of 2022, the Company currently expects:

- Net revenues to be between RMB740 million and RMB840 million.

The Company estimates that the year-over-year change in revenues will be mainly due to the uncertainty pertaining to the potential effects of the COVID-19 recurrences, as well as the potential impact of overall market demand in the third quarter of 2022.

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, all of which are subject to change.

Conference Call

The Company's management will host a conference call at 8:00 a.m. Eastern Time on Monday, August 22, 2022 (8:00 p.m. Beijing/Hong Kong time on August 22, 2022) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

A telephone replay will be available one hour after the call until August 29, 2022 by dialing:

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 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 ordinary shareholders of the Company, non-GAAP basic and diluted net income per ordinary share and non-GAAP basic and diluted net income per American depositary share ("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 ordinary shareholders of the Company is net income attributable to ordinary shareholders excluding share-based compensation expenses. Non-GAAP basic and diluted net income per ordinary share is non-GAAP net income attributable to ordinary shareholders divided by weighted average number of ordinary shares used in the calculation of non-GAAP basic and diluted net income per ordinary share. Non-GAAP basic and diluted net income per ADS is non-GAAP net income attributable to ordinary shareholders divided by weighted average number of ADS used in the calculation of non-GAAP basic and diluted net income per ADS. 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. Reconciliations of the Company's non-GAAP financial measures to the most directly comparable GAAP measures are included at the end of this press release.

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 RMB6.6981 to US$1.00, the effective noon buying rate for June 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on for June 30, 2022, 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 Fourth 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 and relevant regulatory environment relating to the Company's industry and/or aspects of the business operations 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

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