Viomi Technology Co Ltd (VIOT) 2019 Q4 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Co., Ltd Earnings Conference Call for the Fourth Quarter and Full Year 2019. (Operator Instructions) Today's conference call is being recorded. (Operator Instructions) I will now turn the call over to your host, Ms. Cecilia Li of The Piacente Group, the company's Investor Relations partner. Please go ahead, Cecilia.

Thank you, Andrew. Hello, everyone, and welcome to Viomi Technology Co., Ltd Earnings Conference Call for the Fourth Quarter and Full Year 2019. As a reminder, this conference is being recorded. The company's financial and operating results were issued in the press release earlier today and are posted online. You can download the earnings press release and sign-up for the company's e-mail distribution list by visiting the IR section of the company's website at ir.viomi.com.

Participating in today's call are Mr. Xiaoping Chen, the Founder, Chairman of the Board of Directors and the Chief Executive Officer; and Mr. Shun Jiang, the Chief Financial 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 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 these and other risks and uncertainties is included in the company's registration statement on Form F-1 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 Viomi's earnings press release and this conference call also include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Viomi's press release contains a reconciliation of unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I will now turn the call over to Viomi's Founder and CEO, Mr. Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, followed immediately by English translation. Mr. Chen, please go ahead.

(foreign language)

[Interpreted] Thank you, Xiaoping. This is Shun, Viomi's CFO. I'll quickly translate Mr. Chen's remarks while providing an operational update and discuss our financial performance for the fourth quarter of 2019 and our outlook.

Hello, everyone. Thank you for joining our fourth quarter and full year 2019 earnings conference call. 2019 was another extraordinary year for Viomi. Our business went in strength to strength, with robust growth across all product segments, successful innovation, new product development, increasing brand recognition, larger market share and deeper channel penetration business momentum continued to be strong, with fourth quarter and full year 2019 revenues increasing by 82.2% and 81.5% year-over-year, respectively, exceeding the high end of our previous guidance.

Non-GAAP net income in the fourth quarter and full year 2019 increased by 54.6% and 85.2% year-over-year, respectively. We recorded our best ever Double 11 sales performance in 2019, with our online channels more than doubling respective GMV in the fourth quarter on a year-over-year basis. Performance was strong across our core online channels, including YouPin, JD, Tmall and Suning as well as our own e-commerce platform, Yunmi Shangcheng. Our Xiaomi-branded products business also performed extremely well, with water purifier seeing strong volume growth and new products such as sweeper robots, range hoods and stoves and blenders, all contributing meaningfully to the year-over-year growth. The Viomi IoT @ Home, (foreign language) brand has come a long way since inception only a few short years ago.

From our recent successes, we have well and truly established ourselves as a credible name and a leader in the IoT industry in China and are continuing to reap the benefits of our increased brand visibility, scale and channel penetration. We are also making efforts towards streamlining and optimizing SKUs within each of our existing product categories while further deepening and broadening our sales channels across both online and off-line networks. Investments in research and development and innovation has always been fundamental to our success. As a testament to our leading R&D capabilities, Viomi was named as one of the kings of IoT in 36KR's list of cutting-edge technology and high-growth enterprises in November. In addition, we were listed as one of the national intellectual property demonstration enterprises in 2019. As of the end of 2019, we had registered over 1,300 patents domestically, with many of our products obtaining Chinese high-tech product certifications.

As part of our 5G plus IoT strategy, we continue to introduce to the market many new innovative and cutting-edge product lines as well as new product categories throughout 2019 and into 2020, including products under our premium coKiing brand that we launched in late 2019. In terms of 5G capabilities, we rolled out our state-of-the-art hybrid network in 5G CPE product in October, equipped with Qualcomm SD [XX] 5G Microchip, featuring one-touch connectivity and the ability to connect over 256 IoT products, providing groundbreaking seamless full-home wireless coverage technology to consumers.

We have also been dedicated to developing next-generation WiFi 6 enabled products and technologies, integrating WiFi, Bluetooth, ZigBee and other protocols to deliver truly holistic connectivity and user experiences across IoT products in the home environment. We're excited and look forward to sharing these products with the market in the coming months as they are introduced.

In February, we announced the company had entered into a memorandum of understanding with the local government in Shunde, Guangdong Province, for the development of Viomi IoT Technology Park, a comprehensive high-tech industrial campus expected to be completed in 2 phases over and up to 10-year period. The first phase is expected to include the company's multifunctional headquarters, including a product experience center, R&D center, smart manufacturing center and centralized hub for sales and customer service functions. The second is expected to focus on and accommodate additional facilities for the company's IoT products, serving as a focal point for Viomi's extended supply chain capability, while attracting more upstream and downstream corporate and business opportunities. This initiative demonstrates our commitment to strengthening our IoT supply chain resources and provides necessary foundation to support the manufacturing and R&D capabilities we will need in order to thrive in the upcoming 5G and IoT era. This technology park will equip us with the necessary resources to capture the increasing number of opportunities before us going forward.

As you can see, our company had significant positive momentum heading into 2020. However, the recent COVID-19 outbreak has created unique global and industry-wide challenges, impacting supply chains, logistics sales channels as well as overall consumer sentiment and purchasing behavior. Based on the overall industry data, domestic retail sales of many home appliances products have seen significant double-digit declines in the first 2 months of the year, with off-line channels being particularly hard hit. Having said that, we, together with our suppliers and customers, have gradually resumed normal operations since mid-February and have seen noticeable improvements going into March, both from a supply and demand perspective. It is also worth noting that we currently have minimal exposure to international export markets and have minimal exposure to international suppliers. Accordingly, we do not see any meaningful direct impacts from the current COVID situation outside of China.

Nevertheless, we believe our industry as well as the broader economy are still facing significant uncertainties over the near to medium term that will be difficult to quantify. Although the situation may currently be improving in China, the recent escalation globally is likely to continue to depress overall consumer confidence and spending patterns in the domestic market in the months to come. We are, therefore, utilizing this time to further enhance our operational efficiency and implement stringent cost control measures across all areas of our business, in addition to our product development and sales and marketing efforts.

At the start of the year, we announced our Viomi 2030 3511 strategic objective. With our mission to become a leading large-scale technology enterprise, we are shaping our corporate culture and mapping out our plans to achieve strong and sustainable growth over at least the next 10 years. We are fully confident that our strong business fundamentals, robust financial resources and strategic direction will enable us to power through this unprecedented period and achieve our long-term goals. Finally, in light of prevailing market conditions, we announced today that our Board of Directors had approved a share repurchase program where the company is authorized to repurchase up to USD 10 million worth of its Class A ordinary shares in the form of American depository shares over the next 12-month period. The share repurchase program reflects our confidence in our business outlook and demonstrates our commitment to maximizing long-term shareholder value. Our healthy balance sheet and strong cash flow generating ability provides us with ample flexibility to effectively implement the share repurchase program while continuing to execute our growth strategies.

So that concludes our founder's comments. I will now prepare and provide an operational update and discuss our financial performance for the fourth quarter and full year 2019, together with our outlook. In the interest of time, I will not go into too much detail on the historical operational updates and statistics, which you can see from our earnings release, and they continue -- which continue to strengthen in the fourth quarter. So let me move on to provide a review of our fourth quarter results as well as outlook.

So in the fourth quarter, our business momentum continued to be strong, and we again delivered robust top line growth, exceeding the high end of our previous guidance. In addition, we continue to achieve healthy levels of bottom line growth with very strong cash flow and balance sheet positions. As Xiaoping discussed, net revenues increased by 82.2% to RMB 1.7 billion from RMB 955.7 million for the fourth quarter of 2018, primarily due to continued successful rollout and significant increase in sales of both Viomi-branded and Xiaomi-branded products. Revenues from IoT-enabled smart home products increased by 75.1% to RMB 1.349 billion from RMB 770.6 million for the fourth quarter of 2018. Within this category, revenues from smart water purification systems increased by 35.1% to RMB 385.9 million to RMB 285.7 million for the fourth quarter of 2018. This growth was primarily driven by the introduction and rollout of new series of larger capacity water purifier products, together with an overall increase in sales volume.

Revenues from smart kitchen products increased by 64.5% to RMB 432.8 million from RMB 263.1 million for the fourth quarter of 2018. The growth is primarily driven by increases in sales volumes of the company Viomi-branded refrigerated products, together with the rollout of new Xiaomi-branded products, such as range hoods and gas stores.

Revenues from other smart products increased by 139.4% to RMB 530.9 million, from RMB 221.8 million for the fourth quarter of 2018. The record growth is primarily driven by the rollout of new Xiaomi-branded sweeper robot products as well as growth in sales volumes of Viomi-branded water heaters and smart devices.

So please note that from the fourth quarter of 2020 onwards, the company will present revenues from smart kitchen products and other smart categories together in one combined category. As these categories have broadly similar margin profiles and given the company placed a strategic emphasis on our IoT @ Home product portfolio as a whole, we believe the category should be viewed holistically to provide a more appropriate understanding of our overall performance.

So revenues from consumable products increased by 125.6% to RMB 94.6 million from RMB 41.9 million for the fourth quarter of 2018, primarily due to increased sales volumes of the company's water purifier filter products.

Revenues from value-added businesses increased by 107.7% to RMB 297.4 million from RMB 143.2 million for the fourth quarter of 2018, primarily due to new product introductions together with increased demand for the company's small appliances products. Cost of revenues increased by 100% to RMB 1.395 billion from RMB 697.4 million for the fourth quarter of 2018. The increase is relatively in line with the record growth of net revenues. Gross profit increased by 34.1% to RMB 346.6 million from RMB 258.4 million for the fourth quarter of 2018. Gross margin was approximately 20% compared to 27% for the fourth quarter of 2018. The decrease in gross margin is primarily due to shifts in the company's business and product mix, together with additional promotional activities conducted during online shopping festivals that occurred during the fourth quarter.

Total operating expenses increased by 37.7% from RMB 273.6 million from RMB 198.6 million for the fourth quarter of 2018, primarily due to the rapid growth of the company's business. R&D expenses increased by 57% to RMB 65.6 million from RMB 41.8 million for the fourth quarter of 2018, primarily due to an increase in personnel expenses and patent-related expenses. Selling and marketing expenses increased by 36.7% to RMB 185.3 million from RMB 135.5 million for the fourth quarter of 2018, primarily due to the -- due to an increase in logistics expenses as well as a result of the company's business growth. G&A expenses were RMB 22.6 million compared to RMB 21.3 million for the fourth quarter of 2018.

So total operating expenses as a percentage of sales decreased to 15.7% for the fourth quarter of 2019 as compared to 20.8% for the fourth quarter of 2018, as we continue to enjoy economies of scale and greater operating efficiencies. On a non-GAAP basis, which includes the impact of share-based compensation -- excludes the impact of share-based compensation expenses, total operating expenses as a percentage of sales decreased to 15.1% in the fourth quarter of 2019 compared to 19.7% in the fourth quarter of 2018. Net income was RMB 90.2 million, an increase of 64.4% from RMB 54.9 million for the fourth quarter of 2018. Non-GAAP net income, which excludes the impact of share-based compensation expenses was RMB 100.7 million, an increase of 54.6% from RMB 65.1 million for the fourth quarter of 2018.

Additionally, our balance sheet remained extremely strong. As of December 31, 2019, we had cash and cash equivalents of RMB 972.4 million, restricted cash of RMB 30.6 million, short-term deposits of RMB 60 million and short-term investments of RMB 316.2 million. Collectively, such liquid assets amounted to over RMB 1.3 billion, and we have minimal debt.

For the fourth quarter of 2019, net cash provided by operating activities was RMB 300.2 million, a reflection of our strong cash flow generating capabilities over the course of the year. And I won't go into detail on our full year 2019 results, as they can be reviewed in detail in our earnings release.

Now let's turn to our outlook. So while we had extremely strong momentum heading into 2020, COVID-19 has -- indeed has had an adverse impact on the overall industry and sector as well as our business in the first quarter of 2020. Not only has there been an impact on the supply, in terms of manufacturing capacity and logistics, but also on the demand side in terms of retail channel operations, consumer sentiment and customer purchasing behavior. As Xiaoping mentioned, we believe our industry as well as the broadening economy in China as well as globally are still facing significant challenges and uncertainties over the near to medium term, that will be difficult to quantify.

In light of these factors, for the first quarter of 2020, the company expects net revenues to be approximately flat as compared to the first quarter of 2019 with the introduction and ramp-up of new products offsetting the negative impacts of adverse macro and industry conditions in the quarter. In terms of profitability, while we expect to remain profitable in the first quarter, we do expect to see a decline in net profit and net profit margin as compared to the first quarter of 2019, mainly as a result of a higher fixed cost base due to the overall growth of our business as well as shift in margin profiles of certain of our products.

In more detail, as a result of more aggressive promotional campaigns to mitigate the impact of adverse industry conditions, together with channel destocking initiatives during the period, given the lower-than-expected consumer demand, both at least in -- in large part due to the COVID-19 situation, we expect to experience a decline in the ASP, gross profit margins and revenue contribution from water purifier products in the first quarter of 2020 as compared to the first quarter as well as the fourth quarter of 2019.

Nevertheless, we expect our overall company gross margin in the first quarter of 2020 to be relatively similar to that of the fourth quarter of 2019, with positive sequential shifts in product mix and other products margin profiles largely offsetting the impact of the decline in water purifier margins. We also have a number of initiatives underway with regards to our water purifier business, including various cost control measures, together with the launch of new higher capacity products as well as next-generation products with higher ASP and margins to mitigate the above-mentioned impact.

This outlook -- the outlook above factors the current market conditions and reflects the company's current and preliminary estimates of market and operating conditions and cost of demand, which are all subject to change. So that concludes our prepared remarks. We will now open the call for Q&A.

(Operator Instructions) The first question comes from Lillian Lou of Morgan Stanley.

(foreign language) I have 2 questions. First is about COVID-19's impact. Any run rate update in terms of how things improve from February, January and now March? How it progressed? And the impact by channel, by product categories? And the second question is about the gross -- the margin trend in fourth quarter. What exactly caused the decline from promotion, from product mix? Can you give a bit more details?

Yes. Thanks, Lillian. Let me address your questions. So in terms of the COVID-19 impact, as we discussed, right, you would have seen in a lot of the industry data. The home appliance industry has been quite materially affected by the current situation with off-line channels being particularly hard hit. So especially, in February, many products in the off-line channel were seeing, say, 70%, 80%, even 90% declines in off-line channels, with smaller declines, but still challenging conditions in off-line channels -- in online channels. I think that the trend has definitely been improving, heading into March. Especially in the last week or so, we've actually seen a good uptick, particularly in the online channels, both from an industry perspective as well as from our own perspective. So I think in summary, in terms of the channel performance, in early January, performance is actually quite strong, as you would have seen in our fourth quarter results. The momentum was very strong. And then the effects of both the early Chinese New Year as well as, obviously, with the COVID-19 situation towards the latter half of January resulted in quite steep declines for around a month or so.

As we mentioned on the call, in terms of the supply chain, this started gradually ramping up towards the second half of February and is essentially close to full capacity now. Similarly, with logistics, quite a lot of challenges in February, but it is essentially back -- nearly back to normal now. On the demand side, as mentioned in terms of sales channels, off-line is still continuing to be challenged as compared to last year, with shifts in consumer purchasing behaviors as well as where the obvious restrictions are on movement over the past couple of months. But similarly, as the stores begin to open and consumers are going back into shopping malls and retail stores, we have seen a good uptrend as compared to February, but still challenging off-line conditions heading into March. Over the past several weeks in March for off-line.

Now in terms of our outlook, I think it's still too early to see when we would expect a complete rebound. As Mr. Chen mentioned, consumer sentiment is likely still to continue to be challenged. What happens in the overseas market still remains to be seen and how that impacts the domestic economy as well as the consumer wallet, right? But I think the trend is positive. We're all hopeful and all a good recovery. In the second quarter, especially heading into the midyear 618 shopping season, online shopping festivals, but we're, I would say, cautiously optimistic in terms of the magnitude of the rebound.

Now in terms of the question on margin, year-on-year margin from the fourth quarter as compared to the previous year, I think the main cause of the year-on-year decline in gross margins was mainly as a result of the growth of our business together with the resultant shift in business mix, right? I think this has been a prevalent trend across quarters in 2019. Where in 2018, the higher-margin water purifier product represented an outsized proportion of our overall business. And through the growth of our overall business, including the various Viomi-branded products business over the course of 2019, the water purifier business while still growing has represented a lower proportion of overall sales, which has resulted in a lower gross margin. I think that is the main driver of the margin trend in the fourth quarter of 2019.

The next question comes from Xudong Chen of CICC.

(foreign language) I have 2 questions. The first one is, since the impact of coronavirus, did you see the slowdown for IoT penetration? Since this year the coronavirus suppressed the demand for the new technology innovations and every company, they just pay attention to their cash flows and to their business, not -- instead of the new technology innovation. That's the first one. And second one is, as you mentioned, water purifier ASP and the gross margin may have some pressure in Q1 2020. And could you give me some outlook for the water purifier for Q2 to Q4? And what's the strategy for the company for this year and for 2021?

Okay. Thanks, Xudong. Let me take your questions as well. So in terms of IoT penetration, so as you saw in our fourth quarter results, we had very strong momentum heading into 2020, right, both in terms of financial as well as operating statistics. The current situation has obviously resulted in a slowdown or a decline in retail sales of various consumer goods, including home appliances. But we do see an uptrend towards penetration for IoT products to continue to increase going forward, perhaps even more rapidly as consumers place greater emphasis on their home environment, right, with significant demand for content-rich online offerings. We do feel that these trends will present significant opportunities for us to define Viomi as a leading brand in the IoT @ Home space as we continue to roll out our IoT installed base, and we reach our own product and content offerings to consumers, and particularly going to this next generation of 5G and WiFi 6 connectivity. We see a lot of opportunities here, not just for us, but the overall kind of IoT industry as a whole, right? So short-term slowdown, but the overall trend we see as still being very attractive for IoT.

On your second question with regards to the water purifier and outlook for this year. So I think I'll say this. As you can appreciate, there's a lot of uncertainty in the industry and our economic outlook, domestically in China, in light of recent events. So there is currently very low visibility in terms of full year financial projections. Assuming continued stabilization and recovery in the current coming months, we do expect to achieve or reachieve healthy levels of top line growth for the full year above industry levels. As we continue to monitor and gather additional clarity on the situation we will, of course, provide further quantitative updates to the market on overall guidance.

In terms of the water purifier, so as mentioned, as a result of the quite aggressive promotional campaigns as well as channel destocking initiatives during the first quarter, as well -- similarly, in large part due to the COVID-19 situation, we do expect a decline in ASP and margins from water purifiers for the first quarter as compared to last year. So it's probably not appropriate to comment on the current margins of water purifiers in the first quarter due to competitive reasons. But I think you can gather some guidance from special -- from this special promotional activities that you may have seen over the past several months, right, just from public information, where popular SKUs across the industry were discounted by as much as, say, 20% to 30% or even more in terms of retail price as compared -- even as compared to the Double 11 promotional period. So our water purifier ASP and a large portion of this is, of course, 2B business, is around, say, 10% to 15% lower as compared to the first -- fourth quarter of 2019, in the first quarter of 2020.

So as mentioned as well, we do expect our overall company gross margin for the first quarter of 2020 to be relatively similar to that of the fourth quarter of 2019 with sequential shifts in product mix and other products margin profiles as well as an overall premiumization trend, largely offsetting the impact of the decline in water purifier margins. So we do have a number of other initiatives underway with regards to our water purifier business to mitigate the ASP decline and margin impact including: one, renegotiating supply prices with many of our OEM partners, which is already underway and has yielded meaningful results already; introducing larger capacity, higher ASP margin Xiaomi-branded products to the market, which there has been a general industry trend towards in any event, so we will have several new SKUs to be launched over the course of this year as well of larger capacity water purifiers; and the introduction of next-generation high-tech water purifiers for the Viomi brand to the market over the course of the year. I mean the specifications, we look forward to announcing over the coming months as well. And we also expect price competition to ease in the coming months as the industry -- or if the industry and economic impacts of COVID-19 continue to moderate.

The next question comes from Robert Cowell of 86Research.

I actually have a couple here. The first one is about your product launch schedule this year. I remember last year, the appliance world expo event in 1Q was a pretty major launch event for you guys. So I'm wondering with that event canceled this year, what is that -- what impact does that have on the product launch schedule? And then I'll have a follow-up as well.

Okay. Thanks, Robert. So that one -- so I would say our launch schedule has not been materially affected by the current situation. Obviously, we have had to adapt in terms of tailoring our launch events. So as you mentioned, the AWE expo in Shanghai as well as the Guangzhou trade expo has both been canceled or postponed this year. But we still plan to conduct our own product launch events at a suitable time and have respective ceremonies over the course of the year, perhaps through online and/or off-line measures to launch our products.

Okay. The next one is about the, I guess, framework agreement with Shunde in Guangdong province. I'm wondering, previously, we had a mostly outsourced production model. I'm wondering if this is signaling a shift toward more in-house production. And then also, what type of CapEx requirement should we be looking at for this facility in 2020 and then out-years as well?

Yes, thanks. So this Shunde IoT Technology Park is very much part of our long-term view as to being able to supply our -- secure our supply chain resources, right? So while we have been very successful to date running an asset-light business model, which has allowed us to scale up very quickly, I think as we get to a certain scale, being able to have a meaningful control over the supply chain in terms of sourcing as well as quality control as well as cost control, is going to be very important to us, right? And apart from manufacturing or production, the headquarter is expected to be multifunctional. So as we mentioned, it's going to be a 2-phase build up, with the first phase mainly expected to comprise our headquarters, a product experience center and R&D center, smart manufacturing center as well as the centralized sales and services functions, right? So very much acting as a centralized point to continue to grow our operations. But I think the long-term view is that at least in some critical components or some core -- in terms of core products, we would like to have a good degree of control over the supply chain for such products.

Now in terms of CapEx, I think over the next, say, 3 years, you should expect, say, RMB 300 million to RMB 500 million of CapEx, mainly in relation to the first phase, and most of this will be PP&E, so with quite long depreciation status.

The next question comes from Vincent Yu of Needham & Company.

Congrats on great quarter. So I have 2 questions. One question is about the vacuum cleaner. I do see we have launched a few vacuum cleaners, called as -- it's branded Xiaomi or as -- called as Viomi. So when are we going to see or expect to see this category in 2020? And my second question is on the promotion side. Are we going to see major promotions in the second quarter or later this year to catch the, like, rebounding demand? (foreign language)

(foreign language)

[Interpreted] Okay. Thanks, Vincent. So in terms of your first question on vacuum cleaners, both in terms of the sweeper robot as well the portable vacuum, so we have 2 categories here. One is the Xiaomi-branded robotic sweeper robot. So as you may have seen, this product has been very appealing to consumers in China, which we see some very large growth potential in this business. And actually, the performance of this particular product have exceeded our expectations and contributed meaningfully to a revenue contribution in the fourth quarter of 2019 as well as going into 2020. So this has been a very successful product launch by us with Xiaomi, and we look forward to further cooperation on this side.

On the Viomi side of the business, obviously, the portable vacuum that we recently launched as well as our own branded robotic vacuum cleaners, we do see a lot of upside in terms of market upside potential in terms of household penetration for this product, right? We see a lot of -- we see really -- that the market really just getting started. And we really see this as a very important part of our kind of IoT product portfolio, both in terms of being able to connect to other devices as well as being able to engage with consumers across the entire household as important part of our IoT @ Home infrastructure. So I think to answer the vacuum, how it fits into our overall strategy, where we do see it as an essential part of our IoT @ Home platform, even as much so as some of our larger appliances going forward.

On your second question about strategies or -- and promotional activities for the rest of 2020. So I think we will continue to benefit in the development of our products and improve our competitive advantage. I think that's very important. And I think another important is in terms of consumer preference and our target market, right? So we have seen consumers, especially in their 20s and 30s, more likely to try new products, in particular high-tech products with modern designs. So I think it's very important to develop our products, and we have designed and developed our products with smart IoT functions to cater to these young people's needs, which have effectively helped us to attract more younger customers. I think the other part is the diversification and creativity of our marketing channels. So in terms of marketing, we continue to showcase our products through cooperation online, including with a number of KOLs on online platforms, like Xiaohongshu, Little Red Book, Douyin, et cetera, inviting these KOLs to test and demonstrate our products as well as interact with on stand-in users on the platforms as well as other social media campaigns as well as our online advertising campaigns on WeChat as well as these online shopping platforms, right? So I think in addition, we also utilized a lot of off-line marketing tools as well, including off-line advertising as well as our off-line experience store network. I think for a new brand, especially for the IoT products, it's very important to get in front of consumers, be visible to consumers, to be able to create some level of awareness as well as confidence in your brand, right, something that they can touch and feel as well as test out. It's very important, especially in the nascent or beginning phases of IoT penetration in the country. So I think a mix of both online as well as off-line marketing channels has been quite essential to the growth of our business.

And I think in addition to the relative speed of our success and growth, including our quite consistent and numerous new product launches and together with the differentiated nature of our brand and value proposition, we think has also provided us with additional traditional as well as social media coverage, which has garnered additional interest from both sales platforms as well as channels, which is quite important in getting your products to consumers right? As well as, of course, to be and to see our customer base.

(Operator Instructions) As there are no further questions now, I would like to turn the call back over to the company for closing remarks.

Thank you, once again for joining us today. If you have further questions, please feel free to contact Viomi's Investor Relations department through the contact information provided on our website or The Piacente Group, the company's Investor Relations consultant. Thank you all. Have a good one.

This concludes the conference call. You may now disconnect your lines. Thank you.

Thank you, everyone.

Thank you.

(foreign language)

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]