Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Company Limited Earnings Conference Call for the Fourth Quarter and Full Year 2021. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Cecilia Li, the IR Director of the Company. Please go ahead, Cecilia.

Thank you, operator. Hello, everyone, and welcome to Viomi Technology Co. Limited earnings conference call for the fourth quarter and full year 2021. As a reminder, this conference is being recorded. The company's financial and operating results were issued in a press release earlier today and are posted online. You can download the earnings press release and sign up for the company’s e-mail distribution list by visiting the IR section at 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 Chief Executive Officer, and Mr. Wickham Thai, 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 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 Annual Report on Form 20-F and other filings as filed with the U.S. SEC. The Company doesn't assume any obligation to update any forward-looking statements, except as required by law. Please also note, Viomi's earnings press release in this conference call 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 our 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] Thank you, Mr. Chen. I will quickly translate our formal remarks before discussing our financial performance for the fourth quarter and full year 2021.

Thank you, Mr. Chen. I will quickly translate our formal remarks before discussing our financial performance for the fourth quarter and full year 2021. Hello, everyone. Thank you for joining our fourth quarter and full year 2021 earnings conference call. Our fourth quarter net revenues reached approximately RMB1.33 billion, beating our previous guidance. As we disclosed earlier, the year-over-year decline was mainly due to the significant decrease in the sales of Xiaomi-branded sweeper robots. Thanks to our ongoing product portfolio adjustments, we achieved a gross margin of 25.6% for the fourth quarter, maintaining consecutive year-over-year growth since the fourth quarter of 2020 and once again demonstrating the strength of our product lineup, growing brand recognition, as well as improvement at our operating quality. We incurred a loss in the third quarter of 2021 following substantial investments in R&D and marketing, but resumed profitability during the fourth quarter as a result of stringent cost control measures. The smart home industry is developing rapidly, accelerated by the industry's overall transformation, increasingly matured IoT technology, popularization of 5G, national policy support as well as lifestyle changes of the personality [ph] generation, the main smart home consumer group. According to statistics from AskCI Consulting, China's smart home market has been continuously expanding, doubling in size between 2016 and 2021 to reach RMB580 billion. It is expected to exceed RMB650 billion by the end of 2022. Last April, 16 government agencies, including the Ministry of Industry and Information Technology, jointly issued guiding opinions on accelerating the development of digital homes and improving living quality, which requires a fairly complete set of digital home-related policies and standards to be established by the end of 2022, as well as the digital home standard system to be in place by the end of 2025. We also see that…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Hildy Ling with Morgan Stanley.

Thank you. [Foreign Language] Let me repeat all these in English first. So congratulate company on a very decent fourth quarter results and a very visible gross margin expansion there. A couple of questions. So the first one is what about the - can we have some color of the sales trend year-to-date, in particular, the sweeper robots in the domestic and overseas market? And the second question is about - also about the revenue outlook, but that's for the full year 2022. How should we think about it for the overseas business and also the domestic business? And also, can we have a little bit of color of each product category segments as well? And the final question is about the margin of the gross margin or the operating margin for the first quarter of 2022 and also for the full year 2022. And how should we think about the rise in commodity prices, raw material costs and also the oil prices, how would that affect our margin outlook? And when will we see a more visible trend of inflection point? So that's all for my question. [Foreign Language]

Okay. Thanks for Hildy's questions. For the sales chain [ph] up to date, we saw the overall consumer demand is relatively weak compared to the same period of 2021, while we saw our product and channel portfolio is trending more diversified and healthier. Firstly, we saw the sales contribution of high-end products is increasing due to our introductions of a series of premium products and our efforts for the product portfolio adjustments. Secondly, we saw the sales on our new channels such as Pinduoduo and Douyin increasing very fast, and we are increasing additional mid to high-end products and products with higher margins on these channels. We expect the sales on these new channels to increase further as well and help us to enhance our brand awareness. And for the sweeper robots, for both domestic and overseas markets, we saw weaker consumer demands for the whole industry compared to the first quarter of 2021, when we achieved a very robust growth in sweeper robots, particularly for the overseas market due to the international war and COVID-19, the market demand for smart and premium cleaning products are impacted. Despite of the overall macro environment, our introduction of new SKUs, product line optimization and overseas channel expansion are in line with our expectations. First, in terms of product SKU, we recently introduced our new self-cleaning sweeper robot, Alpha 3, in January. And we see a fast growing in sales and received good feedbacks from the market. At the recent new product launch event, we also introduced our new wet and dry vacuum cleaners, Cyber Pro and Cyber 2, which is equipped with double brushes, photo elastic sensor and OTA upgrade functions. Second, the sales contribution of high-end SKUs are increasing. As we drive the product line towards premium, the sales contribution of…

Yeah, thank you.

The next question comes from Rudi Wei with CICC. Please go ahead.

Okay. So thank you very much for the management’s presentation. And I have two questions here. The first is about our promotion and the brand building strategy. We noticed that the company has launched many new products just two weeks ago, and most of the products are targeted at high-end customers. So how do you plan to improve the brand image and make the customers willing to pay for those new products? Also, we knew our spokesperson [indiscernible] had some problems recently. So how serious is the influence to us? [Operator Instructions]

[Operator Instructions]

I will closely translate our founder's feedback. So the branding stabilized for your questions. So firstly, we are saying a turning point for the consumer groups who buy the [indiscernible] smart home products, and we see the market has been transformed from small group people to investment, and this is very important for our industry. And second, we are doing a lot, and we will consider to do more in additional marketing advertising, especially in some cities, where like young people are concentrated like this new one, Tier 1 and Tier 2 cities. And for your question about the [indiscernible] issue. As we responded very quickly and very efficiently, so this issue didn't cause any material impact on our brand image. And as we respond very quickly and which give us very additional and more exposure on the market, as you can see from way. And we are four and fourthly, we are turning our brand position into more premium. So we introduced at our recent product launch event, we are introducing more premium bonds to purchase solutions offerings to our high-end market, including the RMB300,000 solutions, the 20 - the RMB200,000 in space packages of our premium consumers. And we see the uses of such groups are increasing among our users. So that's the answer from our CEO.

[Foreign Language] So I will repeat the question in English. So what's your outlook for the competition in 2022? How do you evaluate the market competition situation? Will it become more fierce? Thank you.

[Foreign Language]

I will clearly translate. So for the question we can elaborate from two slides differences from the supplant side as we see that there are two exists many uncertainties in global , but supply chain capability is still very needed and mainly concentrated in China. So we are not very concerned about this point. And from the other side about consumer demand, we see that from the fourth quarter of last year, the consumer demand became relatively weak in domestic, as you see that they are allowing us some big giant companies. But overall, during the period that consumer demand decrease, it nearly caused more competitive situations among the players and the cap may do a lot additional stock and stocking the promotional activities. For us, as we like shift our products and business towards premium and we are maintaining the level of our gross margin and increase in R&D and do a lot of branding activities, we are confident to go through these challenges and deliver long-term growth. Thank you.

Thank you very much. That’s all from my side.

As there are no further questions now, I'd 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 contact us through the content information on our website or the Piacente Group, our Investor Relations consultant. Thank you all. Have a good night.

Thank you.

This concludes this conference call. You may now disconnect your line. Thank you.

Thank you. Bye.