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spk02: Hello, ladies and gentlemen. Thank you for standing by for the Biomi Technology Company Limited's earnings conference call for the third 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. Claire Gee, from the company's IR department. Please go ahead, Claire.
spk00: Thank you. Hello, everyone, and welcome to Wyoming Technology Co-Limited's earnings conference call for the third quarter of 2022. 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 earnings press release and sign up for the company's email distribution list by visiting the IR session of the company's website at ir.wyoming.com. Participating in today's call are Mr. Chen Xiaoping, the founder, chairman of the board of directors, and chief executive officer, and Mr. Cai Weicheng, 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 that 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. Further information regarding this and other risks and uncertainties is included in the company's annual reports on Form 20F, and other filings are filled with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law. Please also note that wellness earnings price release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial measures. In addition, wellness price release contains a reconciliation of unaudited non-gap measures to the annotated most directly comparable gap measures. I will now turn the call over to our founder and CEO, Mr. Chen Xiaoping. Mr. Chen will deliver his remarks in Chinese, followed immediately by an English translation. Mr. Chen, please go ahead. Hello, everyone.
spk01: Welcome to the third quarter of 2022. In the third quarter, we achieved a sales revenue of 6.8 billion RMB, which is slightly lower than our previous expectations, mainly due to the continuous softening of market demand and the repeated uncertainty of the epidemic in China. The sales revenue also dropped. In addition to the red-light environment, Xiaomi's small business in 2022 The year-round full stop has also had a certain impact on the scale of the same period. At the same time, the impact of the ratio of product sales and ratio change, the third quarter, the ratio of the relatively higher-quality products has increased significantly, causing the overall profit margin to fall temporarily. In the fourth quarter, we will expect the profit margin to return to normal levels. In order to create long-term product competitiveness and brand visibility, we have continuously invested in elevator and flat advertising. We have also joined up with Langchao Studio and Gongmao Home Appliances, to launch a video interview program. We and our own media people, including investors Zhang Xuanlin, the chairman of Gongmao, Li Feng, and others, on how to re-explore the future of Chinese people with all-knowledge, conducted in-depth discussion. In such an interview to ask all-knowledge questions, we faced our own media people, Yili Jing, about all-knowledge questions about all-knowledge. We provided a comprehensive solution to all-knowledge problems based on Yunmi. Through the four major capabilities and four services, and cover the whole scene of smart home appliances and smart home appliances products, so that more people can live in their future home earlier. Under the effect of the economic downturn, under the large background of the decline in size, the promotion of product strategies and brands has led to a temporary loss in our business. But we can see that with the gradual expansion of smart home appliances, the turning point of the industry is coming, and we are already leading the growth of all smart products. In the past few months, we have continued to conduct AI Help for 2.0 The focus on software upgrade from customer health, energy-saving, environmental protection, active intelligence, and natural interaction to four-dimensional product replacement is a step forward from the software end of a fully intelligent solution. At the same time, a series of smart home appliances will be launched at the hardware end. For example, the 1,200-carat Muscle Pro with an A.I. wood-fired alpha A.I. generator with an A.I. wood-fired A.I. generator with an A.I. wood-fired alpha A.I. generator This product has achieved a good result in the pre-production and operation stages. In August of this year, we held the first year of the company's Science and Technology Year, giving a generous award to the company's technology team and technology talents. This year, we are giving the Tesla Model 3 award to the technology stars as a major incentive to continue to stimulate our innovation level. Then in the first half of this year, after Guangdong Province set up the Boshu Work Station, we successfully set up the Boshan Enterprise Boshou Work Station. Then in the future, Yunmi will continue to cultivate industry top talent for society with universities and professional institutions, and restore some of our automated products and innovations to promote all-automated industry development. Then until the end of the third quarter, we have applied for a global patent. Five thousand and five hundred pieces. The global collection of limited edition. Three thousand and five hundred pieces. The collection of invention patents. Two thousand and one hundred pieces. In the most recently announced. Two thousand and two. Boshan Manufacturing Company. One hundred walls. We are ranked 38th, 60th, and 73rd among the 100 famous companies in Foshan and 100 companies in Foshan. At the same time, we are ranked 20th in Foshan's innovation ranking. This is a recognition of Yunmi's technological innovation capability and a confirmation of our comprehensive strength. In the third quarter, we will continue to promote the expansion strategy of our large shopping malls. In Hebei, Anhui, Hubei, Fujian, etc., we will open more than 200 to 400 bottles of 4S Chenjin-style experience stores. At the same time, the sales of 3G shopping malls will steadily increase. In Hunan, Guangxi, Ningxia, etc., many offline stores will sell tens of thousands of yuan or even tens of thousands of yuan shopping orders. We have chosen to be more diversified to meet the needs of consumers at various prices. In terms of overseas markets, in September this year, we will launch a number of new products at the Berlin EFA Electronics Exhibition. The Berlin EFA Electronics Exhibition will mark our first time in the global consumer electronics market to be recognized by the European market. We have also planned for more products to be launched in the fourth quarter of this year. It is expected that the external scale will continue to break through. In the future, in the face of continuous We will continue to improve our business in the following three aspects. First, we will continue to improve the layout and layout of our full-fledged smart product line from the product end. Today, we can adjust our resource configuration to improve some of our technical innovation. Second, we will continue to optimize our structure, make shortcuts, improve our operating efficiency, and reduce our operating costs. Third, maintain sufficient cash assets. Currently, we have a cash balance of about 1.1 billion yuan. To meet the needs of the company's liquidity and operation funds, we will provide stable security for the company's long-term development. We also hope that in the future, we will be able to provide long-term feedback to shareholders and users in the management, products, and promotion. Thank you.
spk00: Thank you, Mr. Chen. I will quickly translate our funder's remarks before discussing our financial performance for the third quarter of 2022. Hello, everyone. Thanks for joining our third quarter 2022 earnings conference call. In the third quarter, our total revenue reached 685.8 million RMB below our previous guidance as a result of lingering weak market demand and the pandemic resurgence. In addition to the macro high winds, The complete cutoff of sales of Xiaomi branded sweeper robots in 2022 adversely impact our third quarter revenue. Furthermore, due to the adjustment of the product portfolio and increasing the proportion of the revenue from product categories with relatively low growth margins caused a temporary decline in the company's overall growth margin in the third quarter. However, we estimate the growth margin will return to a normal normal level in the fourth quarter. To build our long-term product competitiveness and brand awareness, alongside our ongoing advertiser and print ad campaigns, we jointly launched a video interview program with Long Chao Studio and Gongmao Home Appliance. In this program, we go deeper into the topic of how the IoT home solution is reshaping the future homes of Chinese people with Zhang Qianming, senior media specialist and investor. and Li Feng, the chairman of Gongma Home Appliance. In the interview, asking about whole home intelligence, we responded to the senior media specialist's questions about how smart home development with in-depth information on our one-stop IoT home solution and our four capabilities, four services, approach to the smart home. With smart home appliance and the smart home products now covering all scenarios. More people want to live in homes of the future immediately. Although our investment in product innovation and branding resulted in a temporary loss in the context of a challenging macro environment, we expect that given the continuously expanding user base of smart home appliance, the industry will soon approach an inflection point. Valme has taken the lead and positioned our company to capitalize on this demand by completing the hardware and software integration and upgrade necessary to create a truly smart home. We believe our communications with consumers and our explorations of the future of smartification will encourage more consumers to become smart home users, enhance our brand influence, and promote the development of industry. Separately, we have made good progress in product innovation brand promotion, and channel expansion over the past few months. Underpinned by our effective long-term brand and product development strategy, we continue to strengthen our trending technology brand positioning. In terms of product innovation, we hosted AI Helpful 2.0, our all-time online software launch event on October 26. The event focused on our software upgrade and product interaction across four dimensions, including health care, energy conservation and environmental protection, active intelligence, and the natural interaction, further improving our one-stop IoT home solutions from the software side. At the same time, on the hardware side, we launched a series of new smart home appliances, including Alpha, our AI range with AI smart eye function, Master Pro, our 1,200-gallon Transient AI water purifier with integrated heat purification. Alpha 3 Pro, our AI sweeping robot equipped with an all-purpose base station. And Super 2 Max, our AI gas water heater with intelligent temperature control. In the category of smart home products, we introduced Super 2 AI smart door locks with an ultra-wide-angle digital peephole. These new products achieved good results and have received broad consumer recognition in their pre-sale and crowdfunding stages. By deeply integrating our software and hardware, we provide richer home use scenarios and more intelligent user experiences, empowering more users to enjoy the convenience and ease of IoT home solutions. Our continuous product innovation is supported by our elevated research and development capabilities, as well as our efforts to build deep talent resources. In August, we held our first annual scientific and technological meeting, where we generally rewarded our technological innovation teams and individuals. And the winner of the technology superstar prize was rewarded a Tesla car, constantly encouraging ongoing R&D innovation. Furthermore, following the approval we received to establish our From doctoral workstation in the first half of 2022, we obtained authorization to set up a post-doctoral workstation in Foshan. Moving forward, we will continue to cooperate with universities and professional institutions to cultivate top talents for our society, incubate smart home programs, and promote the overall development of the smart home industries. As of the end of this talk, third quarter. We have applied for more than 5,500 global patents and accumulated 3,500 authorized patents worldwide, along with more than 2,100 innovations. In the latest list of the Fortune City's top 20 enterprises for scientific and technological innovation, the Fortune City's top 100 manufacturing, top 100 private enterprise, and top 100 enterprise in 2022, while we ranked third place 38, 60, and 73, respectively, attachment to our technological innovation capability and our comprehensive strengths. Furthermore, we continue to execute our largest store and better merchant channel strategy in the third quarter and open additional value 4S flagship stores encompassing over 200 to 400 square meters in provinces, including Hebei, Anhui, Hubei, and Fujian, among others. Meanwhile, the sales volume of our bundle home solutions increased steadily, with various solution options and prices to meet customers' diverse demands. Our offline merchants signed whole home solution orders ranging from tens of thousands to hundreds of thousands of RMBs, with customers in Hunan, Guangdong, Ningxia, and other areas in this quarter. As to our oversea business, in September, we showcased a number of new products at IFA 2022 in Berlin, marking our first appearance at one of the world's most significant technology marketplace for the consumer and electronic industries, where we received positive feedback from the European market. Going forward, we will enrich our overseas offerings with additional product categories and expect a breakthrough in the scales of export sales as a result. As we forge ahead, we will continue to concentrate the following three aspects of the operation optimization. First, on the product side, streamline the number of our SPUs, adjust the resource allocation and focus on more technological advanced products while improving the home smart product landscape. Second, continuously refine our operational structure and implement disciplined cost control measures. Third, adhere to our solid long-term development strategy with ample funding reserves to support our operation while creating long-term value for all of our users and shareholders. Thank you. That concludes our funder's remarks. Now, Mr. Caiwei Cheng, the head of our finance department, will go over our third quarter 2022 unaudited financial results in more detail.
spk03: Thanks, Claire. Now, I will go over the details of the unaudited financial results for the third quarter 2022. Net revenues were $600. and 85.8 million RMB compared to 1,056.5 million RMB for the third quarter of 2021. Net revenues were below the company's previous guidance. The decline was mainly due to the ongoing product portfolio adjustment in some categories, as well as overall weakened consumer spending. Revenues from IoT at home portfolio decreased by 41.6 percent to 376 million RMB from 643.5 million RMB for the third quarter of 2021. The decline was primarily due to the SKU adjustments for some categories, as well as the complete cutoff of sales of Xiaomi-branded Ripper robots. Revenues from home water solutions decreased by 23.6% to 119.9 million RMB from 157 million RMB for the third quarter of 2021. The decline was primarily due to the decreased demand for water purifiers. Revenues from consumables decreased by 11.8% to 70.2 million RMB from 79.6 million RMB for the third quarter of 2021, which was in line with the decreased demand for water purifiers. Revenues from small plants and others decreased by 32.2% to 119.7 million RMB from 176.5 million RMB for the third quarter of 2021, primarily due to the product portfolio adjustment within these categories. Gross profit was 135.9 million RMB compared to 239.7 million RMB for the third quarter of 2021. Gross margin was 19.8% compared to 22.7% for the third quarter of 2021. The decline were primarily due to the temporary increase in proportion of revenue from products categories with relatively low gross margins. Total operating expenses decreased by 16.5% to 242.5 million RMB from 290.3 million RMB for the third quarter of 2021, primarily due to the year-over-year decrease in selling and marketing expenses. In more details, research and development expenses decreased by 19.1 percent to 66.5 million RMB from 82.2 million RMB for the third quarter of 2021. mainly due to the reduced expenses in product development as well as the decrease in research and development experts related salaries and expenses. Selling and marketing expenses decreased by 22% to 143.1 million RMB from 183.4 million RMB for the quarter of 2021, mainly due to the decrease in sales related expenses and personnel costs. General and administrative expenses increased by 33% to 32.9 million RMB compared to 24.7 million RMB for the third quarter of 2021, primarily due to the increase in estimated allowance for accounts and notes receivables recognized in the current period. Net loss attributable to the ordinary shareholders of the company was 69.6 million RMB compared to the net loss attributable to the ordinary shareholders of the company of 29.3 million RMB for the third quarter of 2021. Non-GAAP net loss attributable to the ordinary shareholders of the company was 78.7 million RMB compared to the non-GAAP net loss attributable to the ordinary shareholders of the company of 22.2 million RMB for the third quarter of 2021. Additionally, our balance sheet remained healthy As of September 30, 2022, the company has cash and cash equivalents of 760.1 million RMB, restricted cash of 65 million RMB, short-term deposit of 83.7 million RMB, and short-term investments of 259.5 million RMB. The details of unopted results for the third quarter 2022 was introduced as above. Thank you.
spk00: This concludes our prepared remarks. We will now open the call for Q&A session. Our founder and Mr. Tai will join the session and answer questions. Operator, please go ahead.
spk02: Thank you. If you would like to ask a question, please press star then 1 on your touch-tone phone. If you are using a speaker phone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. And for the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Once again, that's star then one if you have a question. Today's first question comes from Marcus Liang with Morgan Stanley. Please go ahead.
spk05: Hi, thanks very much for taking my question. I have two questions. The first one, can you please give us more insight or color on the SKU adjustment in the third quarter for robotic sweepers? And my second question is, what's the recent trend of robotic sweepers in China and overseas market? And are you expecting demand to remain weak in fourth quarter and 2022? Thank you.
spk03: Yeah, thanks for Matthew's question. For the first question about the SKU adjustment as we introduced in the previous call, actually we are in a transition of product strategy and brand positioning in an ongoing process. The cleaning of certain products and integration of new products during this weak demand period to a certain extent put pressure on our operating results. It might take a longer time for the new products to be accepted by the market. Actually, we are promoting and introducing more premium and with high technology products to the market. And we emphasize more like bundle sales, bundle sales are one-stop one-stop home solution products. And for the second question about the overseas market, in the third quarter, with the international geopolitics and foreign euro exchange rate lasting, the overall consumer sentiment in euro is still low and adversely impacted our overseas sales. Though we started to sell more product categories in addition to Slipper Robots, like air conditioners, refrigerators, washing machines, and heaters, etc. Our overseas sales are expecting a recovery in the coming season. Also, as we mentioned just now, we participated the IFA 2022 in Berlin in September for the first time, which is the world's most significant technology marketplace for the consumer and electronic industries. We showcase a number of new products to the euro consumers and franchises and receive many positive feedbacks. In the meantime, we see the South and Asian markets with great potential, and we are actively exploring more new franchises in these areas. Thank you.
spk05: Sorry, can I just have a quick follow-up? So in terms of demand, do you expect it in 2023 to sort of rebound as well, same as what you talk about in fourth quarter? Thank you.
spk03: Sorry, you mean the expectation for fourth quarter?
spk05: Yeah, I mean both fourth quarter and 2023, please. Thank you.
spk03: Okay. Okay. Due to the complex situation of COVID-19 and the weak consumption in recent quarters, we tend to be more prudent about the estimation and guidance. As far as we can see, the overall popularity of the Double 11 Shopping Festival this year is not as good as last year, and the sales scale of Q4 is suspected to decline on a year-over-year basis. With the respect of gross margins, we estimate We estimate it maintains a stable level for the whole year, let's say above 20%. Also, we are continuously working on the operation optimization, both of the structure and number of SKUs has been optimized in an orderly manner. And we continue to refine our operational structure and implement the sprint cost control measures as mentioned just now. Thank you.
spk05: Thank you very much, management.
spk02: Thank you. And our next question today comes from Alex Wong with CICC. Please go ahead.
spk04: Thank you. I have three questions for you. My first question is also about overseas market. What is the overseas revenue and its growth rate? How about the overseas revenues proportion in sales? What is the outlook for overseas demand? Okay, please. You mean you got one question or two questions?
spk03: Three questions.
spk04: Three questions. This is the first question. Thank you.
spk03: Okay. As we mentioned just now in the third quarter, the international geopolitics and the euro exchange rate lasting, so we are also impacted by the overseas sales. We start to sell more categories. as we mentioned just now. And on going forward, we will keep enriching overseas offerings with additional home appliances product categories and expect new breakthrough in the scale of export sales. The proportion of the overseas revenues we will share in the future.
spk04: Thank you. My second question is about the strategy of premium new products and solutions. Considering the relatively weak demand in the Chinese market and overseas market, does Wyoming feel some pressure for its strategy regarding premium products? How does Wyoming think about the demand of China in the future? And will Wyoming consider making some adjustments in its strategy? Hello, my second question is about the company's high-endization strategy. We are concerned about the demand overseas and China's current demand is relatively weak. Does the high-endization strategy feel the corresponding resistance? How does the company view China's domestic future consumer system? Will the company's strategy be adjusted? Thank you.
spk01: Let me answer this question. Let me answer this question. The pandemic in China and the global economic adjustment, we have a few judgments. The first judgment is that at this stage, the total amount will be in a state of shrinkage. This is the first one. The second one is that the Western market and the domestic market will definitely have a certain kind of parallel. It will be similar to a double cycle. The third is that some of the areas in China that are not so developed and the consumption of young people in developed areas will be affected during this period. Their consumption of the middle and high-end will be affected. So we will have some measures on this. The first measure is that it will increase our consumption in the middle More cost-effective products will increase our SKU and product layout This is something to do The second thing is that we are overseas market We will add some of our more competitive Some export products Including us We will be in Russia or Europe this year This Eastern European country We will add some of this New products Some exports This is what we are doing
spk00: Okay, I'll quickly translate our funders' answers. Firstly, both the domestic and overseas market environment, as we can see, are all shrinking. The market demands are on a sluggish level. And secondly, As we can see, the Western world and the Eastern world, the market is coming to a balancing point. And also in the domestic world, we can see in most of the developing areas, like the rural areas of developing faculty, we see more demand in the younger generation. And so our strategy is about to facing the situation and meeting the challenge is first we will mapping more medium level products which has price advantages and also we will enrich our overseas product portfolios and we will go deeper in the East European market. Thank you.
spk04: Thank you for founder's answer and translator. My last question is about the cooperation with Xiaomi. What is the proportion of the revenue from Xiaomi in the third financial quarter? Whether the carbon cooperation is based on water purifiers? Whether there are other categories that will cooperate with Xiaomi? And what is the arrangement of the cooperation in the future? Okay. About the cooperation with Xiaomi, the proportion of revenue from Xiaomi is
spk03: In the third quarter, it's around 40%. As we mentioned just now, we gradually decreased the Xiaomi Branded Ripper robot business since early 2021 and completely cut off this business in the year 2022. Currently, the major product categories we cooperate with Xiaomi are water purifiers, smart kitchen products, and small plants like kettles, et cetera. Recently, certain models of Xiaomi branded water purifiers supplied by us have achieved remarkable sales in the market. Looking forward, we will maintain a stable cooperation with Xiaomi and explore further reciprocal opportunities in additional categories. Thank you. 我再补充一点,就是我们和小米的这个合作在
spk01: This year, although our previous sweeper business has done some of this kind of shrinkage, we now have three aspects in the process. The first is that our cooperation with Xiaomi's water purification system is still very continuous and stable, including the direction of next year and the next new generation. The first is that we are already in the process of success. The second is that we have recently expanded some of the new storage SKUs and products. The second is to expand the cooperation of SKUs. I'll briefly translate Mr. Chen's answer. Our cooperation with Xiaomi and the developing of cooperation with Xiaomi
spk00: about three aspects. Firstly, about the cooperation with water purifiers. This amount of revenue is stable, and we are working on new SKUs in the future. And also, we are expanding the water categories of smart kitchen appliance. And thirdly, we are discussing about the smart home products in the future. Thank you.
spk02: Thank you. And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Claire Jean for any additional or closing comments.
spk00: Okay. Thank you. Thank you once again for joining us today. If you have further questions, please feel free to contact us through the contact information on our website or the PS&T group, the company's investor relationship consultant. Thank you.
spk02: Okay, ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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