viot-ex991

Viomi Technology Co., Ltd Reports Fourth Quarter and Full Year 2020 Unaudited Financial Results

GUANGZHOU, China, March 25, 2021 -- 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 fourth quarter and full year ended December 31, 2020.

•Net revenues reached RMB1,889.0 million (US$289.5 million), an increase of 8.5% from the fourth quarter of 2019.

•Gross margin was 23.5%, compared to 17.1% for the third quarter of 2020 and 19.9% for the fourth quarter of 2019.

•Net income attributable to ordinary shareholders of the Company was RMB110.6 million (US$16.9 million), an increase of 23.3% from the fourth quarter of 2019.

•Non-GAAP net income attributable to ordinary shareholders of the Company¹ was RMB115.5 million (US$17.7 million), an increase of 15.3% from the fourth quarter of 2019.

•Number of cumulative household users reached more than 5.1 million, compared to approximately 4.6 million as of the end of the third quarter of 2020 and approximately 3.2 million as of the end of the fourth quarter of 2019.

•Percentage of household users with at least two connected products reached 20.0%, compared to 19.5% as of the end of the third quarter of 2020 and 17.9% as of the end of the fourth quarter of 2019.

•Net revenues reached RMB5,825.6 million (US$892.8 million), an increase of 25.3% from 2019.

•Net income attributable to ordinary shareholders of the Company was RMB173.3 million (US$26.6 million).

•Non-GAAP net income attributable to ordinary shareholders of the Company was RMB245.5 million (US$37.6 million).

“As we continued to execute on our quality growth strategy which focuses on shifting our business and product mix toward higher margin products, we are pleased to deliver meaningful gross margin recovery in the fourth quarter along with strong full-year growth,” said Mr. Xiaoping Chen, Founder, Chairman of the Board of Directors and Chief Executive Officer of Viomi.

“As part of our growth strategy, we continue to roll out more high-end new products with a focus on seamless integration with AI and IoT, which we firmly believe to be the backbone of smart products in the IoT era. Our innovative SKUs with higher margins and higher average selling prices are the main drivers of our recent gross margin uplift. In the past months, we have introduced Super and Vision series of water purifiers under our new premium water purifier sub-brand Quanxian, new SKUs of 21Face 5G large-screen refrigerators, EyeBot AI washing machines and New Wind AI washer-dryers, together with a series of smart home devices, including 5G IoT CPE products, routers and IoT chips. In particular, as a result of our investment in Viomi-branded premium water purifiers, we have maintained our leading position in the technology innovation in this area and expect an even greater revenue contribution from this category. Earlier this month, two of our water purification technologies were recognized by professional organizations and experts including China Association for Quality Inspection with the potential to be applied in the water purification industry. In addition, leveraging our investment and endeavors in research and development, we have achieved solid performance in patent innovation. As of the end of 2020, the number of our accumulative domestic and global patent applications had reached over 3,000, among which, over 2,400 were already registered.

“The successful launch and rapid development of our new business in Viomi-branded sweeper robots for domestic and overseas expansion were also key pillars of our overall profitability improvement. In the fourth quarter, we assembled a dedicated sweeper robot team and introduced Alpha and other series of sweeper robots. We will continue to roll out more differentiated SKUs and expand into more global markets.

“We are also seeking to provide more comprehensive IoT household solutions, consisting of IoT product experiences, services and internet content. With regards to our value-added content, we consistently upgrade our large-screen refrigerator operating system and recently expanded our cooperation with additional third-party platforms to further enrich our large-screen internet resources and create differentiated kitchen scenario experience and increase user stickiness,” added Mr. Chen.

“As we progressed into 2021, we have continued to execute on our quality growth operating strategy through the introduction of new high-end products and the optimization across product lines. We will introduce a series of new AI products including water purifiers, sweeper robots, air conditioners, and smart kitchen products, among others, in our upcoming Spring new product launch event in early April. We will also invest more resources in branding and research and development for our IoT products, as well as our IoT service system to optimize our 5G IoT Home system and user experience. We remain confident in our ability to maintain our leading position in the IoT home industry as we continue to execute our strategy to deliver robust and stable growth, a healthy level of profitability and long-term shareholder value,” concluded Mr. Chen.

Net revenues increased by 8.5% to RMB1,889.0 million (US$289.5 million) from RMB1,741.7 million for the fourth quarter of 2019. The growth was slightly below the Company’s previous guidance by approximately 0.6%, primarily due to the proactive step to stop the sales of some specific products with lower average selling prices and lower gross margins, e.g. specific low-end refrigerators and washing machines, in order to make room for the launch of new large-screen refrigerators and high-end washing machines and improve profitability.

Gross profit increased by 28.0% to RMB443.8 million (US$68.0 million) from RMB346.6 million for the fourth quarter of 2019. Gross margin was 23.5%, compared to 17.1% for the third quarter of 2020 and 19.9% for the fourth quarter of 2019. The quarter-over-quarter and year-over-year increases in gross margin were primarily driven by the Company’s efforts to shift the business and product mix toward higher gross margin products, including the roll out of new Viomi-branded water purifiers and sweeper robots, alongside the optimization of margins across product lines.

Total operating expenses increased by 21.3% to RMB331.8 million (US$50.8 million) from RMB273.6 million for the fourth quarter of 2019, primarily due to the growth of the Company’s business, as well as the increases in research and development expenses and selling and marketing expenses.

Research and development expenses increased by 41.8% to RMB93.1 million (US$14.3 million) from RMB65.6 million for the fourth quarter of 2019.

Selling and marketing expenses increased by 17.3% to RMB217.4 million (US$33.3 million) from RMB185.3 million for the fourth quarter of 2019.

General and administrative expenses decreased by 5.7% to RMB21.3 million (US$3.3 million) from RMB22.6 million for the fourth quarter of 2019.

Income from operations increased by 36.4% to RMB126.3 million (US$19.4 million) from RMB92.6 million for the fourth quarter of 2019.

Non-GAAP operating income², which excludes the impact of share-based compensation expenses, increased by 27.3% to RMB131.2 million (US$20.1 million) from RMB103.1 million for the fourth quarter of 2019.

Net income attributable to ordinary shareholders of the Company was RMB110.6 million (US$16.9 million), compared to RMB89.7 million for the fourth quarter of 2019.

Non-GAAP net income attributable to ordinary shareholders of the Company increased by 15.3% to RMB115.5 million (US$17.7 million) from RMB100.2 million for the fourth quarter of 2019.

As of December 31, 2020, the Company had cash and cash equivalents of RMB504.1 million (US$77.3 million), restricted cash of RMB70.6 million (US$10.8 million), short-term deposits of nil and short-term investments of RMB696.1 million (US$106.7 million), compared to RMB972.4 million, RMB30.6 million, RMB60.0 million and RMB316.2 million, respectively, as of December 31, 2019.

Net revenues increased by 25.3% to RMB5,825.6 million (US$892.8 million) from RMB4,647.5 million for 2019.

Gross profit was RMB1,083.0 million (US$166.0 million), compared to RMB1,082.4 million for 2019. Gross margin was 18.6%, compared to 23.3% for 2019.

Total operating expenses increased by 15.4% to RMB931.8 million (US$142.8 million) from RMB807.2 million for 2019.

Research and development expenses increased by 29.6% to RMB265.7 million (US$40.7 million) from RMB204.9 million for 2019.

Selling and marketing expenses increased by 12.8% to RMB597.2 million (US$91.5 million) from RMB529.2 million for 2019.

General and administrative expenses decreased by 5.7% to RMB68.9 million (US$10.6 million) from RMB73.1 million for 2019.

As a percentage of total net revenues, total operating expenses decreased to 16.0% from 17.4% for 2019.

Income from operations was RMB184.0 million (US$28.2 million), compared to RMB311.1 million for 2019.

Non-GAAP operating income, which excludes the impact of share-based compensation expenses, was RMB256.2 million (US$39.3 million), compared to RMB354.2 million for 2019.

Net income attributable to ordinary shareholders of the Company was RMB173.3 million (US$26.6 million), compared to RMB292.2 million for 2019.

Non-GAAP net income attributable to ordinary shareholders of the Company was RMB245.5 million (US$37.6 million), compared to RMB335.3 million for 2019.

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.

The Company’s management will host a conference call at 8:00 a.m. Eastern Time on Thursday, March 25, 2021 (8:00 p.m. Beijing/Hong Kong time on March 25, 2021) 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 April 1, 2021 by dialing:

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

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.

The Company uses non-GAAP operating income and non-GAAP net income attributable to ordinary shareholders, 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 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.

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 RMB 6.5250 to US$1.00, the effective noon buying rate for December 31, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on for December 31, 2020, or at any other rate.

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.

	As of December 31,		As of December 31,
	2019		2020		2020
	RMB		RMB		US$
Assets
Current assets
Cash and cash equivalents		972,438		504,108		77,258
Restricted cash		30,567		70,601		10,820
Short-term deposits		60,000	-		-
Short-term investments		316,201		696,051		106,674
Accounts and notes receivable from third parties (net of allowance of RMB2,006 and RMB9,246 as of December 31, 2019 and 2020, respectively)		316,189		427,352		65,495
Accounts receivable from a related party (net of allowance of nil and RMB61 as of December 31, 2019 and 2020, respectively)		707,947		609,094		93,348
Other receivables from related parties (net of allowance of nil and RMB9 as of December 31, 2019 and 2020, respectively)		23,944		88,038		13,492
Inventories		418,015		439,375		67,337
Prepaid expenses and other current assets		62,314		87,280		13,377
Long-term deposits due within one year	-			10,000		1,533

Total current assets		2,907,615		2,931,899		449,334

Non-current assets
Prepaid expenses and other non-current assets		11,170		19,803		3,035
Property, plant and equipment, net		67,293		72,436		11,101
Deferred tax assets		12,276		14,189		2,175
Intangible assets, net		4,357		7,681		1,177
Right-of-use assets, net		19,762		20,529		3,146
Land use rights, net	-			62,982		9,652
Long-term deposits	-			50,000		7,663

Total non-current assets		114,858		247,620		37,949

Total assets		3,022,473		3,179,519		487,283

Liabilities and shareholders’ equity
Current liabilities
Accounts and notes payable		1,043,159		1,001,371		153,467
Advances from customers		103,150		112,613		17,259
Amount due to related parties		25,106		124,192		19,033
Accrued expenses and other liabilities		325,042		335,488		51,416
Short-term borrowing		95,868	-		-
Income tax payables		33,522		50,962		7,810
Lease liabilities due within one year		6,993		9,481		1,453
Total current liabilities		1,632,840		1,634,107		250,438

	As of December 31,			As of December 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 104,163,686 shares issued and outstanding as of December 31, 2019 and 2020, respectively)		6			6			1
Class B Ordinary Shares (US$0.00001 par value; 150,000,000 shares authorized; 110,850,000 and 103,554,546 shares issued and outstanding as of December 31, 2019 and 2020, respectively)		6			6			1
Treasury stock	-				(54,600	)		(8,368	)
Additional paid-in capital		1,192,332			1,278,004			195,863
Retained earnings		195,596			363,051			55,640
Accumulated other comprehensive loss		(19,145	)		(59,384	)		(9,101	)

Total equity attributable to shareholders of the Company		1,368,795			1,527,083			234,036

Non-controlling interests		5,652			3,236			496

Total shareholders’ equity		1,374,447			1,530,319			234,532

Total liabilities and shareholders’ equity		3,022,473			3,179,519			487,283

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.

	Three Months Ended									Twelve Months Ended
	December 31, 2019			December 31, 2020			December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2020
	RMB			RMB			US$			RMB			RMB			US$
Net revenues
A related party		891,271			1,046,628			160,403			2,112,170			2,889,441			442,826
Third parties		850,379			842,382			129,101			2,535,343			2,936,183			449,990
Total net revenues		1,741,650			1,889,010			289,504			4,647,513			5,825,624			892,816

Cost of revenues (including RMB24,002, RMB79,285, RMB48,424 and RMB454,432 with related parties for the three months ended December 31, 2019 and 2020 and for the twelve months ended December 31,2019 and 2020, respectively)		(1,395,080	)		(1,445,245	)		(221,493	)		(3,565,109	)		(4,742,668	)		(726,846	)

Gross profit		346,570			443,765			68,011			1,082,404			1,082,956			165,970

Operating expenses(1)
Research and development expenses (including RMB657, RMB621, RMB657 and RMB1,915 with related parties for the three months ended December 31, 2019 and 2020 and for the twelve months ended December 31, 2019 and 2020, respectively)		(65,633	)		(93,075	)		(14,264	)		(204,942	)		(265,680	)		(40,717	)
Selling and marketing expenses (including RMB36,935, RMB44,595, RMB81,851 and RMB97,223, with related parties for the three months ended December 31, 2019 and 2020 and for the twelve months ended December 31, 2019 and 2020, respectively)		(185,320	)		(217,352	)		(33,311	)		(529,212	)		(597,176	)		(91,521	)
General and administrative expenses		(22,628	)		(21,344	)		(3,271	)		(73,061	)		(68,914	)		(10,562	)

Total operating expenses		(273,581	)		(331,771	)		(50,846	)		(807,215	)		(931,770	)		(142,800	)
Other income, net		19,607			14,297			2,191			35,880			32,795			5,026


Income from operations	92,596		126,291		19,356		311,069		183,981		28,196

Interest income and investment income	9,582		9,550		1,464		26,109		31,968		4,899
Other non-operating income	530		554		85		1,842		1,818		279

Income before income tax expenses	102,708		136,395		20,905		339,020		217,767		33,374

Income tax expenses	(12,470	)	(25,191	)	(3,861	)	(45,190	)	(43,321	)	(6,639	)

Net income	90,238		111,204		17,044		293,830		174,446		26,735

Less: Net income attributable to the non-controlling interest shareholders	540		633		97		1,660		1,122		172

Net income attributable to ordinary shareholders of the Company	89,698		110,571		16,947		292,170		173,324		26,563

	Three Months Ended									Twelve Months Ended
	December 31, 2019			December 31, 2020			December 31, 2020			December 31, 2019		December 31, 2020			December 31, 2020
	RMB			RMB			US$			RMB		RMB			US$
Net income attributable to the Company		89,698			110,571			16,947			292,170		173,324			26,563

Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment		(9,946	)		(25,757	)		(3,947	)		10,641		(40,239	)		(6,167	)

Total comprehensive income attributable to the Company		79,752			84,814			13,000			302,811		133,085			20,396

Net income per ADS *
-Basic		1.29			1.60			0.25			4.21		2.50			0.38
-Diluted		1.24			1.53			0.23			4.06		2.42			0.37

Weighted average number of ADS used in calculating net income per ADS
-Basic		69,644,780			69,281,941			69,281,941			69,385,502		69,604,016			69,604,016
-Diluted		72,117,474			72,417,910			72,417,910			71,951,859		71,874,591			71,874,591

Net income per share attributable to ordinary shareholders of the Company:
-Basic		0.43			0.53			0.08			1.40		0.83			0.13
-Diluted		0.41			0.51			0.08			1.35		0.81			0.12

Weighted average number of ordinary shares used in calculating net income per share
-Basic		208,934,340			207,845,824			207,845,824			208,156,507		208,812,049			208,812,049
-Diluted		216,352,423			217,253,730			217,253,730			215,855,577		215,623,773			215,623,773

*Each ADS represents 3 ordinary shares.

	Three Months Ended						Twelve Months Ended
	December 31, 2019		December 31, 2020		December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2020
	RMB		RMB		US$		RMB		RMB		US$
Income from operations		92,596		126,291		19,356		311,069		183,981		28,196
Share-based compensation expenses		10,510		4,955		759		43,168		72,203		11,065

Non-GAAP operating income		103,106		131,246		20,115		354,237		256,184		39,261

Net income		90,238		111,204		17,044		293,830		174,446		26,735
Share-based compensation expenses		10,510		4,955		759		43,168		72,203		11,065

Non-GAAP net income		100,748		116,159		17,803		336,998		246,649		37,800

Net income attributable to the Company		89,698		110,571		16,947		292,170		173,324		26,563
Share-based compensation expenses		10,510		4,955		759		43,168		72,203		11,065

Non-GAAP net income attributable to the Company		100,208		115,526		17,706		335,338		245,527		37,628

Net income attributable to ordinary shareholders		89,698		110,571		16,947		292,170		173,324		26,563
Share-based compensation expenses		10,510		4,955		759		43,168		72,203		11,065

Non-GAAP net income attributable to ordinary shareholders		100,208		115,526		17,706		335,338		245,527		37,628

Non-GAAP net income per ADS
-Basic		1.44		1.67		0.26		4.83		3.53		0.54
-Diluted		1.39		1.60		0.25		4.66		3.42		0.52

Weighted average number of ADS used in calculating Non-GAAP net income per ADS
-Basic		69,644,780		69,281,941		69,281,941		69,385,502		69,604,016		69,604,016
-Diluted		72,117,474		72,417,910		72,417,910		71,951,859		71,874,591		71,874,591

Non-GAAP net income per ordinary share
-Basic		0.48		0.56		0.09		1.61		1.18		0.18
-Diluted		0.46		0.53		0.08		1.55		1.14		0.17

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

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Non-current liabilities
Accrued expenses and other liabilities	1,795	3,400	521
Lease liabilities	13,391	11,693	1,792
Total non-current liabilities	15,186	15,093	2,313

Total liabilities	1,648,026	1,649,200	252,751