Viomi Technology Co., Ltd

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Company Limited's earnings conference call for the first quarter of 2022. 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.

Thank you. I'm right here. Hello, everyone, and welcome to Valme Technology Co., Ltd. earnings conference call for the first quarter of 2022. As a reminder, this conference is being recorded. The company's financial and operating results were issued in press release earlier today and are posted online. You can download 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.valme.com. Participating in today's call are Mr. Xiaoping Chen, the founder chairman of the board of directors and chief executive officer, Mr. Wei-Tung Tsai, the head of our finance department. The company'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 Security Legislation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results made it materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's annual report on Form Term F and other filings filed with the U.S. Securities and Exchange Commission. The company doesn't assume any obligation to update any forward-looking statements, except as required by law. Please also note, wellness earnings press release and this campus call include discussions of inaudited gap financial information as well as inaudited non-gap financial measures. Wellness 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. Follow immediately by English translation. Mr. Chen, please go ahead.

Hello, everyone. Thank you for attending our first quarter phone call in 2022. In the first quarter, we achieved a sales income of about 7.1 billion RMB, which is in line with our previous expectations. The sales income has also declined, mainly due to two reasons. The first is the high sales technology of Xiaomi Saoli in the same period as last year. This year, we have completely stopped Xiaomi Saoli's business, mainly focused on free brand sales. The second is that we have been under the control of the epidemic in various places since this year. In the first quarter, the market consumption dropped, and the demand for the entire industry also decreased significantly. In addition, in order to create long-term product competitiveness and brand popularity, we continued to increase the cost of research and marketing in the first quarter. At the beginning of 2022, the number of our research dollars increased by 47% in 2021, mainly due to the expansion of AI and algorithm teams. As of March 31 this year, smart products, wireless network, active intelligence, spatial perception, and natural interaction, as well as design, OTA, upgrade, and plus member system, and increase business, and other four types of services. Currently, our one-stop smart solution has achieved step-by-step results. This is due to our focus on product innovation, improvement of service system, and expansion of the strategic channel of full-size smart. First of all, at the product end, we use a larger AI-based We are going to launch more new products, including the new air-conditioner Space Pro, which has the core power function of Mars, as well as the 2,000-carburetor water-cooled Super-2, AI mechanism interactive screen, Royal Pro series refrigerator and washing machine, and other products. The continued growth of products is inseparable from the continuous accumulation of our research and talent. Our research and development has also gained the recognition of industry and authoritative institutions. Taiwan Taiwan Taiwan Taiwan Guangdong Province to set up the Guangdong Province Doctor's Office and get the selection qualification of the Guangdong Province Doctor's Office. In the future, there will be opportunities and universities and professional institutions together to cultivate top-of-the-line talents in the industry for the society, and restore the comprehensive development of the industry to promote intelligent furniture. Second, we shared with the mayor in the last performance report that we are based on a solution for all-encompassing systems for different types of families. In the past two months, our high-end set-up plans have been rapidly growing. Before that, our online stores have signed more than 200,000 to 400,000 full set orders from Beijing, Guangzhou, Changsha, Hebei, Kunming, and other places to achieve a transformation from selling products to selling solutions. In addition, we have deepened the cooperation range with Jindong Logistics to strengthen our Chinese and European services that plan logistics, warehouse and installation. In addition, our package-based solutions from product design to installation and delivery have improved the efficiency of all networks, which also allows consumers to enjoy better social service capabilities. Third, we see that the development of fully automated technology has extended from the industry to the external channels. The smart ecosystem based on family scenarios is gradually forming. Our strategic cooperation with the channels is also further upgraded. We reached a strategic cooperation alliance with Tianmao last week. Both sides will build AI smart kitchen, AI smart living room, AI smart balcony, AI smart bathroom, AI smart bedroom, and AI smart environment. In April, we also collaborated with Jindong to create the product of the Jindong peak of 420. According to our strategic cooperation with Jindong last year, We have recently selected China Telecom Digital Ecosystem's leading partner through channel integration to jointly promote the full-fledged intelligent coverage of tens of millions of households. We are also promoting strategic cooperation with other channels and enterprises to play our leading role in the solution of the full-fledged intelligent solution project and contribute to the intelligent ecosystem of families. In addition, although the progress of our offline large-scale large-scale stores is affected by the pandemic, some of the local shops have slowed down in the construction and opening process, but the overall progress is still within our expectations. We co-operate with offline stores to create a large-scale, long-term, clean-up-like cloud experience store in the middle of the crowd, providing the local consumers with a perfect smart home, smart housing, and service of a full-fledged smart solution. In our overseas business, due to the impact of the international war and the decline in consumer power, part of the consumers have lost their clothes. We have made some substantial progress. We have cooperated with Malaysian and Vietnamese agents to expand sales in these areas. The online self-sufficiency model continues to expand. As for the commercial part, after the online Italian Amazon self-sufficiency store, we randomly launched German, French, and Spanish Amazon self-sufficiency stores. Our Alpha 2 Pro sautéed chicken received good reviews from European consumers at the top price. Our sautéed chicken is the first to come out of the sea in the first quarter and will expand sales this year and next year. In the second half of the year, we will focus on four aspects. Increase the innovation and creation of AI products. Enhance advertising and marketing. Enhance the brand position and popularity of the technology brand. Continue to optimize our product structure. Deepen the channel. Implement the offline strategy of large business and large e-commerce. Improve the experience of consumption and long-term development of long-term brand value. We will also carry out stricter and more rigorous discount measures and cost control. Thank you, Mr. Chen.