Viomi Technology Co., Ltd

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Company Limited's earnings conference call for the fourth quarter and full year 2021. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Cecilia Lee, the IR Director of the company. Please go ahead, Cecilia.

Thanks, Operator. Hello, everyone, and welcome to Valmei Technology Call Limited Earnings Conference Call for the fourth quarter for year 2021. As a reminder, this conference is being recorded. The company's financial and operating results were issued in a press release earlier today and are posted online. You can download the earnings press release and sign up for the company's email distribution list by visiting the IR section of the company's website at ir.valmei.com. Participating in today's call are Mr. Xiaoping Chen, the Founder Chairman of the Board of Directors and Chief Executive Officer, and Mr. Weiqiang Cai, the Head of our Finance Department. The Cabinet's management will begin with prepared remarks and the call will conclude with a Q&A session. Before we continue, please note, today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Full information regarding these and other risks and uncertainties is included in the company's annual report on Form 20-F and other filings filed with the U.S. SEC. The company doesn't assume any obligation to update any forward-looking statements except as required by law. Please also note Well-missed earnings press release and this campus call include discussions of inaudited gap financial information as well as inaudited non-gap financial measures. Well-missed press release contains a reconciliation of the inaudited non-gap measures to the inaudited most directly comparable gap measures. I will now turn the call over to our founder and CEO, Mr. Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, followed immediately by English translation. Mr. Chiang, please go ahead.

Hello, everyone. Welcome to the 4th quarter of 2021. We achieved a sales revenue of 13.3 billion RMB in the 4th quarter, exceeding our previous expectations. The reason for the decline is the same as in the previous quarter. The main reason is that the business of Xiaomi's sweepers has been greatly reduced. At the same time, we are continuing to adjust the product structure. In the fourth quarter of 2020, we received a continuous increase in the proportion. In the fourth quarter of 2021, we reached a profit margin of 25.6%. This proves that we have made many improvements in product strength, brand strength, and business quality. In addition, in the third quarter, there were short-term losses due to large amounts of investment in research and marketing expenses. After we implemented stricter cost and cost control, we regained our profit in the fourth quarter. We saw the overall transformation of the industry and the maturity of IoT technology in the day. The support of 5G subsidies and national policies, as well as the changes in the way of life of the consumer population after 1990, are accelerating the development of the automated furniture industry. The data of the Central Industrial Research Institute shows that the scale of the Chinese automated furniture market is continuously expanding. In 2021, it has doubled more than in 2016, reaching a scale of 5.8 billion. It is estimated that by the end of 2022, it will exceed a scale of 6.5 billion. In April last year, 16 departments such as the Ministry of Industry, Industry and Industry to develop digital families to improve the quality of housing. China's digital family-related policy system and standards need to achieve basic security by the end of 2022. The digital family standard system, which was more complete in 2025, is gradually expanding from a small group of people to a large group of people. In the past year, home appliances, telecommunications, and Internet have all been added to IoT smart homes. Good day, good day, good day, good day. We are now entering the stage of deep customization of the AI fully intelligent experience. At this month's strategic new product launch, we have released a fully upgraded full-fledged intelligent solution, which is a structure called N44. The home of IoT is a complete home. It consists of three parts. N represents the product lineup of home appliances and home appliances. 4 represents the home map of home intelligent solution. It has four functions, including wireless network, active intelligence, spatial perception, and natural interaction. So far, our product with screen has achieved a complete home equipment automatic network. Our self-proclaimed millimeter wave radar module, Alpha X, can detect users' movement patterns and statuses without contact, etc. And compared to the 4G sensor, it can better protect users' privacy. In the future, we will use it on our more products to achieve automatic control between devices, sleep monitoring, security monitoring, and so on. Realize the initiative and intelligence of the device. We are also in the voice interaction function of the product. Make people and equipment closer to natural interaction. The other 4 represents that we provide four services to users, including all-in-one design, OTA upgrade, plus membership system, and promotion business. In addition, we have completed a suite of solutions for different families. For example, we have provided more than 1 million large-scale family users with 6-8 million super suite solutions. At the same time, we have provided more than 10 million large-scale mansions with 200,000 space suite solutions, as well as more than 300,000 This kind of ROYAL AI is only for high-end users to create a deep AI experience. As you can see, unlike the IoT smart home enterprises that focus on the platform and operating system, the biggest feature of Yunmi is that it uses products as a substitute through software and AI to realize the new product function of IoT home experience. At the press conference on March 17, we released a series of high-end products with the highest AI level so far. We also released many high-end products under the brand Cochrane, including the Royal Pro AI dual-screen refrigerator for a price of 50,000 yuan, the Royal Series AI laser interactive screen for a price of 40,000 yuan, and the Royal Pro Series AI dual-hole washing machine for a price of 20,000 yuan. The second point we want to share with you is the development of our offline channels. In the past few months, we have continued to promote the channel strategy of large stores and large stores. 200 pcs, 300 pcs, 400-500 pcs, this kind of competitive experience chain is gradually expanding in the new and new line cities, carrying the brand positioning of the technology brand, providing a better high-end, all-round intelligent experience. Third, we continue to improve the product structure of new content channels and strengthen brand marketing. We shared our new channel development in the last performance call. Last year, we formed a special team to increase content marketing and sales in Pinduoduo, Douyin, and other new channels. We have recently begun to optimize the sales category of new channels, increase the product of medium-high-end high-performance products, and increase the technology trend in new channels through KOL live broadcasts and crowdfunding. This year, we will increase a lot of marketing and channel investment. So this will be our next important marketing resource promotion. So in the promotion of the platform, as well as the evaluation of KL and KJK, to our elevator, In the fourth quarter, we expanded the market in Singapore, Germany, Italy, and other countries. We are also expanding, transforming, and proceeding smoothly. From the previous small and medium-sized businesses, we are gradually turning to international agents. We are launching new businesses with major international agents in North Europe, Germany, and other places. Our online self-serve business is also rapidly developing. In addition to the previous American Amazon self-serve, our Italian Amazon self-serve will also be launched in March this year. More European Amazon self-serve will be launched in the first half of the year. Although overseas is affected by the epidemic and war, Our overall market demand is fluctuating in the short term, but our market layout is still in good shape. In the medium term, overseas market expansion will be an important step for us to achieve long-term growth. From the past of selling products to selling solutions, we have developed a new model of the smart home industry, which is constantly improving, rich and dense. Once it is a product with a comprehensive solution, Thank you, Mr. Chen. I will quickly translate our founder's remarks before discussing our financial performance for the fourth quarter and for your 2021. Hello, everyone. Thank you for joining our fourth quarter and for your 2021 earnings conference call.