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spk01: Hello, ladies and gentlemen. Thank you for standing by for Wyoming Technology Company Limited's earnings conference call for the fourth quarter and full year 2022. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I would now like to turn the call over to your host, Ms. Claire Xie, the IR Director of the company. Please go ahead, Claire.
spk04: Hello, everyone, and thank you, Roku, and welcome to Wyoming Technology Co-Limits Earnings Conference Call for the fourth quarter and the full year 2022. As a reminder, this conference is being recorded. The company's financial operating results were issued in a press release earlier today and are posted online. You can download the earnings price release and sign up for the company's email distribution list by visiting the IR section of the company's website at ir.viomi.com. Participating in today's call is Mr. Chen Xiaoping, the founder, chairman of the board of directors, and chief executive officer. 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 provision 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 view expressed today. Further information regarding this and other risks and uncertainties is included in the company's annual report on Form 20S. and other filings as filed 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 Wellman's earnings trust release and this conference call include discussion of an audited GAAP financial information, as well as an audited non-GAAP financial measures. In addition, Wellmate's price release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP 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. 大家好,感谢大家来参加我们2022第四季度和全年的业绩电话会。
spk00: In the fourth quarter, due to the unfavorable impact of the epidemic and the macroeconomic crisis, our income has also declined. In the past year, due to the double impact of external environment and internal strategy adjustment, our overall scale has experienced a greater impact. However, we see that our net profit level in the fourth quarter rose by 3.2%. The product structure has improved to a certain extent. Although there was a seasonal fluctuation in the net profit last year, it is still stable compared to 2021. In the fourth quarter, We will continue to reduce capital and control fees, reduce organizational structure, and improve operating efficiency. We always strive to bring better value to consumers, and better solution for all-round intelligence, and continue to enhance the intelligent experience of products. In October, we held an online autumn software launch, focusing on software upgrade, from customer health, energy-saving, environmental-saving, initiative intelligence, personal interaction, and four-dimensional product delivery. From the software end, we will introduce to further enhance the cloud-based smart solution. In November, HomeMap App's cloud-based smart solution platform was awarded by the Science and Technology Department of the National Science and Technology Department of the Ministry of Science and Technology. The cloud-based smart solution was fully recognized. In the past few months, we have launched a series of AI products, such as the SuperEar Max remote control using AI. The specialized technology used in the product has also been used We have launched a super-thin, all-round master 3 cloud AI washing machine, and a 1,200-gallon master pro all-round AI water purifier that is as hot as a washing machine. We also have a super-wide-angle, online, visible cat's eye Super 2 AI smart meter and other new products. These short-term and hard-to-reach results further prove that Yunmi's business concept always focuses on product as the core of technology innovation and self-reliance to provide a useful and useful all-round intelligence experience for consumers. In addition, we continue to work hard on technology innovation and human resources training, and continue to optimize the all-round intelligence solution of Yizhan City to provide strong backing. After the first half of this year, we set up a doctoral workstation. In October, we successfully completed the doctoral post-workstation. In the future, Yunmi will continue to work together with high-efficiency and professional institutions to train top-level people in the industry, and deploy all-round smart projects to promote all-round smart industry development. In November, Yunmi re-entered the list of all-round smart industries in the list of 2020-2025 national asset rights demonstration companies announced by the National Asset Authority in 2020. As of the end of the fourth quarter, we have applied for more than 6,100 patents worldwide. With a patent of 3,800 pieces, we have applied for 8 patents, more than 2,500 pieces. These are the recognition of the cloud technology innovation capability and the recognition of our comprehensive strength. Although the four seasons have been affected by the adjustment of defense policy and large-scale changes, the progress of our construction is slow. But in the offline market, the transition has reached a high level of innovation. CSDN in Yunnan, Shenzhen, Hunan, etc. has reached more than 100,000 or even more than 400,000 transition orders. Yunmi's full-fledged smart solution is constantly occupying the minds of consumers. In the fourth quarter, we will successfully push products such as air conditioners, fridges, and washing machines to the overseas market. Next, the new export category will become a growth point for Yunmi's overseas channels. As the epidemic further loosens, China's social activities are gradually recovering. There is still a lot of uncertainty in the future. We will continue to adhere to a stable development strategy to improve our business in the following three aspects. Thank you.
spk04: Thank you, Mr. Chen, and I will quickly translate our founder's remarks before discussing our financial performance for the fourth quarter and the full year of 2022. Hello, everyone. Thank you for joining us today on our fourth quarter and the full year 2022 earnings conference call. Due to the adverse impact of the pandemic and the macro high winds, we experienced a year-over-year decline in revenue in the fourth quarter, and our business scale was greatly affected by external factors and strategic adjustments throughout 2022. Nevertheless, our growth margin in the first quarter increased by 3.2 percentage points quarter-over-quarter of 2022, benefiting from our product portfolio optimization efforts. Our full-year growth margin in 2022 also keeps stable as compared with 2021, despite fluctuations throughout the year. In the fourth quarter, facing the uncertainties of the external environment, we focused on accelerating the recovery of our business scale and optimizing our operations. First, to holistically strengthen our product portfolio, we leveraged our competitiveness advantages and continued to enhance our core product categories with upgraded functionalities. As well as long-standing category, our AI water purification products lead industry with their advanced technology. We grew sales of these products by 6% year-over-year and 133% quarter-over-quarter in the fourth quarter, despite the year's challenges, reflecting our success in strengthening our product competitiveness. Going forward, we will redouble our efforts to optimize distribution channels, deepen our existing technological advantages, and further drive our product's market penetration. In addition, to improve our operating efficiency, we implemented more disciplined cost control measures as a result. Both selling and marketing research and development expenses decreased year over year in the fourth quarter. In particular, selling and marketing expenses as a proportion of revenue narrowed compared with that in the second quarter of 2022. on a similar revenue scale. We will continue to optimize costs, streamline organizational structure, and improve operation efficiency while refining our operations. We also remain committed to bring more useful and user-friendly whole house smart solution to customers and continuously improving intelligent experience of our products. In October, we hosted our virtual 2022 fall software launching event, AI Helpful 2.0. This online event focused on software upgrades and product interaction across four dimensions, including healthcare, energy conversion, and environmental protection, proactive intelligence, and natural interaction, further improving our one-stop IoT home solution from the software side. In November, well-meant proprietary one-stop IoT home solution platform, HomeMap app, was rewarded by Precision Science and Technology Award by the Ministry of Science and Technology and the National Office for Science and Technology Awards of China. Meanwhile, we launched a series of new AI smart home appliance, including one of our patent technologies, Super2Max, An AI Ranch Hood with intelligent vision which won a silver award in the 2022 Greater Bay Area High Value Pattern Cultivation Layout Competition. We also introduced Master 3, our AI integrated washer and dryer with an ultra-slim, fully embedded design. And Master Pro, our 1,200 gallon Chen Xian AI water purifier with integrated heat purification. In the smart home devices category, we unveiled our Super 2 AI smart door lock with an ultra wide angle digital people. Our solid progress in product innovation across both software and hardware further underscores our business philosophy. Focus on products and technological innovation to provide customers with a useful and user-friendly whole house intelligent experience. In addition to our product advance, We constantly strive to optimize our one-stop IoT home solution through ongoing technological innovation and talent development. After receiving approval to establish a doctoral workstation in the first half of 2022, in October, we were also successfully authorized to set up a postdoctoral workstation. Moving forward, Wellme will cooperate with universities and professional institutions to cumulative top talents in industry, incubate whole house intelligence projects, and promote development of whole house intelligence industry. In November 2022, we were once again included in the state intellectual property office list of national intellectual property demonstration enterprises from 2022 to 2025. reflecting our continuous efforts in innovation and intellectual property management. As of the end of the fourth quarter, we have applied for more than 6,100 global patents and accumulated 3,800 authorized patents worldwide, along with more than 2,500 inventions. These achievements are a testament to our technological innovation capabilities and our comprehensive strengths. Despite the challenging environment streaming from repeated COVID-19 outbreaks as well as the negative of growing COVID policies on our store opening progress, sales of our bundle home solutions by our offline merchants still reached new heights in 2022. In Wyoming's four-star flagship stores in Yunnan, Shenzhen, and Hunan, among others, our offline merchants signed bundle home solutions orders ranging from 100,000 to over 400,000 RMB per unit, clearly demonstrating the growing popularity of Wyoming's one-stop IoT home solution nationwide. Furthermore, in the fourth quarter, we successfully introduced an array of products to overseas markets, such as air conditioners, washing machines, and refrigerators. Moving forward, these additional product categories will serve as a new growth driver for our overseas business. In summary, we still see many uncertainties in horizon. In the post-pandemic year, with consumption confidence recovering, we will adhere to our steady development strategy, concentrating on three factors as we continue to optimize our operations. First, continue to strictly control expenses and improve operational efficiency. Second, focus on core product categories and optimize product structure. And finally, steadily expand domestically and introduce new product categories in overseas markets to accelerate the recovery of our business scale. As we forge ahead, we will continue to maintain sufficient financial resource, continuously consolidate brand strength, propel the recovery of business profitability, and provide strong support for brand development as we strive to achieve healthy and sustainable growth, laying the foundation for delivering long-term returns to our users and shareholders. Thank you. And that concludes our founders' remarks. Now I will go over our fourth quarter and full year 2022 and audit financial results in more detail. Net revenue were 910.5 million RMB compared to 1,332.8 million RMB for the fourth quarter of 2021. The decline was mainly due to a decrease in revenue from IoT home portfolio and smart appliance and others. Revenue from IoT at home portfolio decreased by 48.1% to 385, 59.2 million RMB from 692 million RMB for fourth quarter of 2021. The decline was primarily due to SKU adjustments for smart kitchen products. Revenues from home water solutions increased by six point percentage to 279.2 million RMB from 263.3 million RMB for the fourth quarter of 2021. The increase was primarily driven by an increase in revenues from larger flux water purifiers as a result of the product portfolio adjustments within this category. Revenue from consumables decreased by 3.5% to 116.2 million RMB to from 120.4 million RMB for the fourth quarter of 2021. Revenues from small appliance and others decreased by 39.8%. 3% to 155.9 million RMB from 257.1 million RMB for the first quarter of 2021, primarily due to the continued product portfolio adjustment within this category. And gross profit was 227.1 and 9.7 million RMB compared to 341.5 million RMB for fourth quarter of 2021. Growth margin was 23% compared to 25.6% for the fourth quarter of 2021. The decline was primarily due to a decrease in the selling price of certain cleanup products as a result of our product portfolio adjustment. The operating expenses decreased by 19.4% to 274.7 million RMB from 340.7 million RMB for the fourth quarter of 2021, primarily due to a decrease in selling and marketing expenses, partially offset by an increase in general and administrative expenses. In greater detail, research and development expenses decreased by 23.6% to 74.7 million RMB from 97.8 million RMB for the fourth quarter of 2021, mainly due to a decrease in research and development expertise and related salaries, as well as the company's continued efforts in R&D efficiency improvement. selling and marketing expenses decreased by 29.7% to 151.1 million RMB from 240.8 million RMB for the fourth quarter of 2021, mainly due to a decrease in logistics and marketing expenses. General and administrative expenses increased by 74.5% to 48.9 million RMB, compared to 28 million RMB for the fourth quarter of 2021, primarily due to an increase in the estimate allowance for accounts and notes receivables from a third party client recognizing the same period. Net loss attributable to ordinary shareholders of the company was 106.3 million RMB, and non-GAAP net loss attributable to ordinary shareholders of the company was 1.6 million RMB. The difference between net loss from operations and net loss in 2022 was mainly due to an increase in the valuation allowance of deferred tax assets provided, which caused an increase in income tax expenses. Additionally, our balance sheet remained healthy as of December 31st, 2022. The company had cash and cash equivalents of 737.1 million RMB, restricted cash of 76.1 million RMB, short-term deposits of 171.5 million RMB, and short-term investment of 197.1 million RMB. Next, let's briefly discuss some key financial results for full year 2022. Net revenue were 3,232.7 million RMB compared to 5,303.8 million RMB for 2021. Revenues from IOT at home portfolio decreased by 52.4% to 1,619.9 RMB from 3,401 million RMB for 2021. Revenues from home water solutions decreased by 8.3% to 681.1 million RMB from 742.9 million RMB for 2021. Revenues from consumables decreased by 2.4% to 358.4 million RMB from 367 million RMB for 2021. Revenues from small appliance and others decreased by 27.7% to 573.3 million RMB from 792.9 million RMB for 2021. Gross profit was 737.1 million RMB compared to 1,198.1 million RMB for 2021. Growth margin improved to 22.8% from 26% for 2021. Total operating expenses decreased by 10.7% to 1,036.5 million RMB from 1,160.5 million RMB for 2021. In more details, research and development expenses decreased by 3.8% to 300 million RMB from 311.8 million RMB for 2021. S&M expenses decreased by 18.1% to 614.9 million RMB from 751 million RMB for 2021. G&A expenses increased by 24.5% to 121.7 million RMB, compared to 97.7 million RMB for 2021. Net loss attributable to ordinary shareholders of the company was 275.5 million RMB. and non-GAAP net loss attributable to ordinary shareholders of the company funds, 256 million RMB. And this concludes our prepared remarks. We will now open the call for Q&A. Our funder and I will join this session and answer questions. Operator, please go ahead.
spk01: Thank you. To ask your question, please press star then 1 on your touchtone phone. If you are using a speakerphone, 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, ladies and gentlemen, that's star then one if you have a question. And today's first question comes from Marcus Liang with Morgan Stanley.
spk02: Please go ahead. Hello. Thank you, management, for taking my question. I have three small questions. Firstly, can I ask how is the sales trending year to date for January and February 2023? And my second question would be, with robot vacuum appears moderating their prices, so making the prices lower, how does VME see the market growth going forward and the market share as well going forward? That's my second question. And the last question is, How do you see your overseas expansion and what are you focused on? And how is the split between China and overseas revenue in 2022? Thank you so much.
spk04: Hi, Marcus. Can I recall your first question, second one? First and second one.
spk02: The first question is how is the company's sales trending year to date in January and February 2023? The second question would be as your robot vacuum competitors are lowering prices, how do you see market growth going forward and your market share in this segment as well? Thank you.
spk04: In the past two months of 2022, we have observed a certain degree of recovery of our offline channel, which is attributable to by the overall offline consumption rebound. However, in the past month, due to the repeated impact of epidemic and the number of our offline dealers, stock has decreased. Along with the repeated impact of pandemic, Along with the inventory backup of offline distributors lead to a decrease in the volume of shipment of our offline sales. But on the other hand, we have more than 100 stores newly opened during 2022, and most of which are located in the pre-decoration marketplace with over 200 square meters store area. We are steadily proceeding our channels expanding strategy by larger store, better merchant. Based on overall situation up to now, the offline scale has steadily increased month over month and the offline sales are expected to achieve a growth rate of over 30% compared to 2022. And to your second question about robotic vacuum cleaners, The scale of the overseas sales decreased a lot under the negative impact we all know, like the historically high price of natural gas, geopolitics, and overall subdued consumption atmosphere in European market in 2022. And while in the domestic market, our sweeper robot mainly sold online, while the leading brands in this sector account for a large market share, and this sector is already under fierce competition. For our one-stop, whole-house, intelligent solution, we will keep this product line and provide several models to meet customer satisfaction needs. In the meantime, we will further optimize distribution channels, deepen our existing technology advantages in products like water purifiers, and so on. And I believe your last question is about overseas expectations. And yes, as I mentioned earlier, due to the impact we mentioned, so our overall revenue proportion from overseas market decreased over 50% in 2022. But well, in the second half of last year, we participated in the IFA 2022 in Berlin in September for the first time, which is the world's most significant technology marketplace for the consumer and the electronic industries. We showcased a number of new products to the European customers and the franchisors and received many positive feedback. And next to that, we accomplished the certification and sampling of air conditioners washing machines, refrigerators in European countries, and water purifiers, smart door locks in Southeast Asia countries. And we believe with the enriched product categories and expanded regions, hopefully our overseas sales would achieve a recovery and mitigate the decrease in sales of smart cleaning products. And in the past few months of 2022, the overseas sales of air conditioners and other home appliances products reached more than 60 million RMB. And we are aiming for the overseas sales to be doubled in 2022 compared with 2021. And thank you.
spk01: Thank you. And our next question today comes from Jingxin Li with CICC. Please go ahead.
spk03: Hello. Thanks, Madeline. Thanks, Claire. And I have three questions. The first one is, how was the overseas market performed in 2022? And was it better or worse than the Chinese market? And what is the outlook for the overseas demand this year? Okay, thank you.
spk04: Okay, and your first question, we just discussed a little bit about the overseas market performed in 2022, being stricken by the historically high price of natural gas and geopolitics, and the expectations in the consumption market. The European country remains subdued, and as we used to focus on European markets, with comparably simple product lines. So the overseas sales in 2022 has been heavily strengthened and decreased over 50%. And also, as we mentioned earlier, we have enriched our product categories and expanded regions like Southeast Asia countries, and hopefully our overseas sales would achieve a recovery. And also about your question, I believe you asked about the domestic market growth rate. And the domestic business in this quarter decreased about 30% on a year-over-year basis, and both online and offline channels have been striking hard by the negative effect of rolling COVID policies. However, we see some optimizations in revenue proportion by products. With a larger percentage of revenue contributed by water purifiers, our overall gross margin improved more than 3% quarter over quarter. Looking forward, we will focus on our core product categories with technological advantages, especially water purifiers, and we'll double our efforts to optimize distribution channels both online and offline. In regards of the channels, due to the repeated impact of the epidemic, the number of our offline dealer store has decreased, along with inventory backup of offline distributors, lead to a decrease in the volume of shipment of our offline sales in the past year. But on the other hand, we have opened more than 100 stores stores newly in 2022, and most of which are located in the pre-decoration marketplace, with over 200 square meters store area. We are steadily proceeding our channel-extending strategy, and based on the overall situation, our offline scale has steadily increased month over month, and offline sales are expected to achieve a growth rate of over 30% compared to 2022. Thank you.
spk01: Thank you. And ladies and gentlemen, this concludes today's question and answer session. I'd like to turn the conference back over to management for any additional or closing comments.
spk04: Okay. 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&A group, the company's investors relations consultant. Thank you.
spk00: Thank you.
spk01: Thank you, everybody. 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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