VIOT Viomi Technology Company Ltd

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, 2021.

First Quarter 2021 Financial and Operating Highlights

• Net revenues reached RMB1,255.6 million (US$191.6 million), an increase of 64.0% from the first quarter of 2020.
• Gross margin was 21.1%, compared to 18.8% for the first quarter of 2020.
• Net income attributable to ordinary shareholders of the Company increased by 173.2% to RMB49.1 million (US$7.5 million) from RMB18.0 million for the first quarter of 2020.
• Non-GAAP net income attributable to ordinary shareholders of the Company1 increased by 106.8% to RMB65.3 million (US$10.0 million) from RMB31.6 million for the first quarter of 2020.
• Number of cumulative household users reached to approximately 5.6 million, compared to approximately 5.1 million as of the end of 2020 and approximately 3.7 million as of the end of the first quarter of 2020.
• Percentage of household users with at least two connected products reached 20.4%, compared to 20.0% as of the end of 2020 and 18.4% as of the end of the first quarter of 2020.

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

“We started 2021 with an all-around robust performance in the first quarter. Leveraging the optimization of our product portfolio, new product sales growth and enhanced brand recognition, we delivered strong net revenues that exceeded our previous guidance, increasing 64.0% from the same period in 2020 when our operations were impacted by COVID-19. We also continued achieving a healthy recovery on gross margin,” said Mr. Xiaoping Chen, Founder, Chairman of the Board of Directors and Chief Executive Officer of Viomi.

“Our continued growth over the past several years has been driven by continuous optimization of our IoT products and holistic IoT solutions, through innovation and integration of cross-boundary technologies, alongside a deep understanding of our users’ needs. We remain focused on AI applications across our product portfolio and have introduced a series of strategic new AI-based products, including water purifiers, smart toilets, water heaters, range hoods, gas stoves and air conditioners, among others. Our products are designed with an eye on health care, smartification, home security and natural AI voice interactions. Some new products, equipped with sensors and supported by AI algorithms, are able to collect home and human health data with users’ consent,” Mr. Chen added.

“In addition, we focused our resources on developing key product categories and rolled out more differentiated and industry-leading products. Following our introduction of a series of premium large-flux water purifiers, we launched a mineral water purifier, EROx, which retains beneficial minerals for human health during the purification process to meet high-end users’ needs. We have accumulated a significant number of innovative technologies and patents in the area of water purification, with more than 700 registered patents as of the end of the first quarter. Some of these patents have been awarded the China Excellent Patent Award, authorized by China National Intellectual Property Administration and World Intellectual Property Organization, as well as recognized by China Association for Quality Inspection and other authorities.

“First quarter growth was also attributable to our overseas market expansion. Our sweeper robot business which launched in the fourth quarter of last year has developed rapidly in Mid Europe, Southeast Asia, Korea, Australia and other regions and expanded to North Europe and additional Asian countries this year. We plan to expand to North American markets and channels in the second half of this year. The new sweeper robot products with differentiated functionalities we introduced earlier have been welcomed by domestic and global markets, and are expected to continue driving sales in overseas channels.

“Looking ahead at the rest of 2021, we will continue to optimize our IoT product portfolio with a focus on AI application and technology innovation, strengthen our brand recognition through additional effective marketing and advertising tools, and improve our IoT home services including sales, experience, after-sale and installation services, enhancing overall 5G IoT home system and user experience while maintaining our leading position in the IoT home industry and bringing long-term shareholder value,” concluded Mr. Chen.

First Quarter 2021 Financial Results

REVENUE

Net revenues increased by 64.0% to RMB1,255.6 million (US$191.6 million) from RMB765.5 million for the first quarter of 2020, primarily due to the continued successful rollout and significant increase in sales of new products, overseas market expansion, as well as the low-base effect of the first quarter of last year due to COVID-19.

• IoT @ Home portfolio. Revenues from IoT @ Home portfolio increased by 111.5% to RMB919.2 million (US$140.3 million) from RMB434.7 million for the first quarter of 2020. The growth was primarily driven by sustained sales increases for certain new product series, in particular Viomi-branded sweeper robots and smart kitchen products.

• Home water solutions. Revenues from home water solutions decreased by 4.0% to RMB103.8 million (US$15.8 million) from RMB108.0 million for the first quarter of 2020. The decline was primarily due to the decreases in average selling prices of Xiaomi-branded water purifier products. This was partially offset by the successful introduction and increased sales of a new series of Viomi-branded water purifier products, which narrowed the year-over-year decline for home water solutions, compared to previous quarters.

• Consumables. Revenues from consumables are RMB64.8 million (US$9.9 million), compared to RMB65.0 million for the first quarter of 2020.
• Small appliances and others. Revenues from small appliances and others increased by 6.4% to RMB167.8 million (US$25.6 million) from RMB157.8 million for the first quarter of 2020.

GROSS PROFIT

Gross profit increased by 84.1% to RMB265.0 million (US$40.5 million) from RMB144.0 million for the first quarter of 2020. Gross margin was 21.1%, compared to 18.8% for the first quarter of 2020, primarily driven by the Company’s efforts to shift the business and product mix toward higher gross margin products, including the rollout of new Viomi-branded water purifiers and sweeper robots, alongside the optimization of margins across product lines and cost control measures.

OPERATING EXPENSES

Total operating expenses increased by 63.8% to RMB219.8 million (US$33.6 million) from RMB134.2 million for the first quarter of 2020, primarily due to the growth of the Company’s business.

Research and development expenses increased by 10.7% to RMB65.6 million (US$10.0 million) from RMB59.3 million for the first quarter of 2020, mainly due to the increase of research and development experts and related salaries and expenses.

Selling and marketing expenses increased by 110.8% to RMB138.0 million (US$21.1 million) from RMB65.5 million for the first quarter of 2020, primarily attributable to the low-base effect of the first quarter of last year due to COVID-19 when the Company undertook very limited marketing and advertising activities.

General and administrative expenses increased by 71.3% to RMB16.2 million (US$2.5 million), compared to RMB9.5 million for the first quarter of 2020, primarily due to the increase of personnel and related salaries and expenses.

INCOME FROM OPERATIONS

Income from operations increased by 276.1% to RMB47.1 million (US$7.2 million) from RMB12.5 million for the first quarter of 2020.

Non-GAAP operating income2, which excludes the impact of share-based compensation expenses, increased by 142.2% to RMB63.2 million (US$9.7 million) from RMB26.1 million for the first quarter of 2020.

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.

NET INCOME

Net income attributable to ordinary shareholders of the Company increased by 173.2% to RMB49.1 million (US$7.5 million) from RMB18.0 million for the first quarter of 2020.

Non-GAAP net income attributable to ordinary shareholders of the Company increased by 106.8% to RMB65.3 million (US$10.0 million) from RMB31.6 million for the first quarter of 2020. 

BALANCE SHEET

As of March 31, 2021, the Company had cash and cash equivalents of RMB906.3 million (US$138.3 million), restricted cash of RMB45.2 million (US$6.9 million), short-term deposits of RMB97.7 million (US$14.9 million) and short-term investments of RMB596.9 million (US$91.1 million), compared to RMB504.1 million, RMB70.6 million, nil and RMB696.1 million, respectively, as of December 31, 2020.

RECENT DEVELOPMENT

The Company has appointed Mr. Xiufei (Bob) Bao as its president, effective on May 24, 2021. Prior to joining Viomi, Mr. Bao served as the general manager of Beingmate Baby & Child Food Co., Ltd., from July 2018 to January 2021. Mr. Bao received his EMBA degree from Zhejiang University in 2011, and his bachelor’s degree from Anhui University of Finance and Economics in 1991.

Mr. Chen commented, “With the rapid consumption upgrade and evolving user needs, users are keen on brands that are fashionable and of good quality. In order to promote our “3511” long-term strategy and further develop us as the trending brand in IoT home area, we warmly welcome Bob to join Viomi as our president. We believe Bob will bring new energy and insights to our branding development with his extensive experience in the consumer industry.”

OUTLOOK

For the second quarter of 2021, the Company currently expects:

• Net revenues to be between RMB1.72 billion and RMB1.85 billion, representing a year-over-year growth of approximately 2.1% to 9.8%.

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 Thursday, May 27, 2021 (8:00 p.m. Beijing/Hong Kong time on May 27, 2021) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

United States (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:	10156541

A telephone replay will be available one hour after the call until June 3, 2021 by dialing:

United States:	+1-877-344-7529
International:	+1-412-317-0088
Replay Passcode:	10156541

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 the Company, non-GAAP net income attributable to ordinary shareholders, 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 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. 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 RMB6.5518 to US$1.00, the effective noon buying rate for March 31, 2021 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on for March 31, 2021, 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 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., LtdCecilia LiE-mail: ir@viomi.com.cn

The Piacente Group, Inc.Emilie WuTel: +86-21-6039-8363E-mail: viomi@tpg-ir.com

In the United States:The Piacente Group, Inc.Brandi PiacenteTel: +1-212-481-2050E-mail: viomi@tpg-ir.com

VIOMI TECHNOLOGY CO., LTDUNAUDITED 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,
		2020		2021		2021
		RMB		RMB		US$
Assets
Current assets
Cash and cash equivalents		504,108		906,342		138,335
Restricted cash		70,601		45,192		6,898
Short-term deposits		-		97,670		14,907
Short-term investments		696,051		596,929		91,109
Accounts and notes receivable from third parties (net of allowance of RMB9,246 and RMB8,711, as of December 31, 2020 and March 31, 2021, respectively)		427,352		262,869		40,122
Accounts receivable from a related party (net of allowance of RMB61 and RMB27 as of December 31, 2020 and March 31, 2021, respectively)		609,094		272,918		41,655
Other receivables from related parties (net of allowance of RMB9 and RMB4 as of December 31, 2020 and March 31, 2021, respectively)		88,038		35,268		5,383
Inventories		439,375		592,076		90,368
Prepaid expenses and other current assets		87,280		128,255		19,575
Long-term deposits-current portion		10,000		10,000		1,526
Total current assets		2,931,899		2,947,519		449,878
Non-current assets
Prepaid expenses and other non-current assets		19,803		27,743		4,237
Property, plant and equipment, net		72,436		67,529		10,307
Deferred tax assets		14,189		16,056		2,451
Intangible assets, net		7,681		7,550		1,152
Right-of-use assets, net		20,529		25,315		3,864
Land use rights, net		62,982		62,676		9,566
Long-term deposits-non-current portion		50,000		50,000		7,631
Total non-current assets		247,620		256,869		39,208
Total assets		3,179,519		3,204,388		489,086
Liabilities and shareholders’ equity
Current liabilities
Accounts and notes payable		1,001,371		1,128,146		172,189
Advances from customers		112,613		91,306		13,937
Amount due to related parties		124,192		47,852		7,304
Accrued expenses and other liabilities		335,488		256,187		39,102
Income tax payables		50,962		48,628		7,422
Lease liabilities due within one year		9,481		11,355		1,733
Total current liabilities		1,634,107		1,583,474		241,687
Non-current liabilities
Accrued expenses and other liabilities		3,400		2,889		441
Lease liabilities		11,693		14,201		2,167
Total non-current liabilities		15,093		17,090		2,608
Total liabilities		1,649,200		1,600,564		244,295

VIOMI TECHNOLOGY CO., LTDUNAUDITED 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,
		2020			2021			2021
		RMB			RMB			US$
Shareholders’ equity
Class A Ordinary Shares (US$0.00001 par value; 4,800,000,000 shares authorized; 104,163,686 and 105,756,638 shares issued and outstanding as of December 31, 2020 and March 31, 2021, respectively)		6			6			1
Class B Ordinary Shares (US$0.00001 par value; 150,000,000 shares authorized; 103,554,546 and 103,524,546 shares issued and outstanding as of December 31, 2020 and March 31, 2021, respectively)		6			6			1
Treasury stock		(54,600	)		(54,600	)		(8,334	)
Additional paid-in capital		1,278,004			1,299,789			198,387
Retained earnings		363,051			410,410			62,641
Accumulated other comprehensive loss		(59,384	)		(55,288	)		(8,439	)
Total equity attributable to shareholders of the Company		1,527,083			1,600,323			244,257
Non-controlling interests		3,236			3,501			534
Total shareholders’ equity		1,530,319			1,603,824			244,791
Total liabilities and shareholders’ equity		3,179,519			3,204,388			489,086

VIOMI TECHNOLOGY CO., LTDUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (All amounts in thousands, except shares, ADS, per share and per ADS data)
		Three Months Ended
		March 31, 2020		March 31, 2021		March 31, 2021
		RMB		RMB		US$
Net revenues:
A related party		404,979		585,869		89,421
Third parties		360,527		669,723		102,220
Total net revenues		765,506		1,255,592		191,641
Cost of revenues (including RMB14,593 and RMB1,922 with related parties for the three months ended March 31, 2020 and 2021, respectively)		(621,540	)	(990,571	)	(151,191	)
Gross profit		143,966		265,021		40,450
Operating expenses(1)
Research and development expenses (including RMB596 and RMB750 with a related party for the three months ended March 31, 2020 and 2021, respectively)		(59,261	)	(65,601	)	(10,013	)
Selling and marketing expenses (including RMB8,080 and RMB13,004 with related parties for the three months ended March 31, 2020 and 2021, respectively)		(65,470	)	(138,024	)	(21,067	)
General and administrative expenses		(9,458	)	(16,204	)	(2,473	)
Total operating expenses		(134,189	)	(219,829	)	(33,553	)
Other income, net		2,741		1,894		289
Income from operations		12,518		47,086		7,186
Interest income and short-term investment income, net		5,336		6,518		995
Other non-operating income		90		633		97
Income before income tax expenses		17,944		54,237		8,278
Income tax expenses		(126	)	(4,859	)	(742	)
Net income		17,818		49,378		7,536
Less: Net income (loss) attributable to the non-controlling interest shareholder		(157	)	264		40
Net income attributable to ordinary shareholders of the Company		17,975		49,114		7,496

VIOMI TECHNOLOGY CO., LTDUNAUDITED 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, 2020	March 31, 2021	March 31, 2021
		RMB	RMB	US$
Net income attributable to the Company		17,975	49,114	7,496
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment		11,314	4,096	625
Total comprehensive income attributable to the Company		29,289	53,210	8,121
Net income per share attributable to ordinary shareholders of the Company
-Basic		0.09	0.24	0.04
-Diluted		0.08	0.22	0.03
Weighted average number of ordinary shares used in calculating net income per share
-Basic		209,304,658	207,876,562	207,876,562
-Diluted		215,830,463	223,072,146	223,072,146
Net income per ADS*
-Basic		0.26	0.71	0.11
-Diluted		0.25	0.66	0.10
Weighted average number of ADS used in calculating net income per ADS
-Basic		69,768,219	69,292,187	69,292,187
-Diluted		71,943,488	74,357,382	74,357,382
*Each ADS represents 3 ordinary shares.

(1) Share-based compensation was allocated in operating expenses as follows:

		Three Months Ended
		March 31, 2020	March 31, 2021	March 31, 2021
		RMB	RMB	US$
General and administrative expenses		2,376	2,472	377
Research and development expenses		8,240	10,270	1,567
Selling and marketing expenses		2,970	3,404	520

VIOMI TECHNOLOGY CO., LTDReconciliations of GAAP and Non-GAAP Results(All amounts in thousands, except shares, ADS, per share and per ADS data)
		Three Months Ended
		March 31, 2020	March 31, 2021	March 31, 2021
		RMB	RMB	US$
Income from operations		12,518	47,086	7,186
Share-based compensation expenses		13,586	16,146	2,464
Non-GAAP operating income		26,104	63,232	9,650
Net income		17,818	49,378	7,536
Share-based compensation expenses		13,586	16,146	2,464
Non-GAAP net income		31,404	65,524	10,000
Net income attributable to the Company		17,975	49,114	7,496
Share-based compensation expenses		13,586	16,146	2,464
Non-GAAP net income attributable to the Company		31,561	65,260	9,960
Net income attributable to ordinary shareholders		17,975	49,114	7,496
Share-based compensation expenses		13,586	16,146	2,464
Non-GAAP net income attributable to ordinary shareholders		31,561	65,260	9,960
Non-GAAP net income per ordinary share
-Basic		0.15	0.31	0.05
-Diluted		0.15	0.29	0.04
Weighted average number of ordinary shares used in calculating Non-GAAP net income per share
-Basic		209,304,658	207,876,562	207,876,562
-Diluted		215,830,463	223,072,146	223,072,146
Non-GAAP net income per ADS
-Basic		0.45	0.94	0.14
-Diluted		0.44	0.88	0.13
Weighted average number of ADS used in calculating Non-GAAP net income per ADS
-Basic		69,768,219	69,292,187	69,292,187
-Diluted		71,943,488	74,357,382	74,357,382

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