Viomi Technology Co., Ltd. — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021. Although the request references 2021 Q4, this filing reports annual results; standalone fourth-quarter financial figures are not clearly provided in the supplied text. Financial statements are prepared under U.S. GAAP and reported primarily in RMB.
Business context
Viomi develops and sells IoT-enabled smart-home products, including appliances, water-purification systems, consumables and related services. It reported approximately 6.6 million household users at year-end. The Cayman Islands parent conducts substantially all China operations through subsidiaries and contractual VIE arrangements; VIEs generated 91.6% of FY2021 revenue.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | RMB5,303.8m (US$832.3m) | RMB5,825.6m | Down 9.0% |
| Gross profit / margin | RMB1,198.1m / 22.6% | RMB1,083.0m / 18.6% | Profit up 10.6%; margin up 4.0 percentage points |
| Operating income / margin | RMB64.7m / 1.2% | RMB184.0m / 3.2% | Down 64.9% |
| Net income | RMB88.9m (US$13.9m) | RMB174.4m | Down 49.0% |
| Net income per ordinary share, basic / diluted | RMB0.42 / RMB0.40 | RMB0.83 / RMB0.80 | Lower year over year |
| Operating cash flow | RMB309.0m | RMB185.2m | Up 66.9% |
| Investing cash flow | RMB(265.3)m | RMB(433.1)m | Lower cash use |
| Cash, cash equivalents and restricted cash at year-end | RMB622.8m | RMB574.7m | Up RMB48.1m |
Operating expenses rose 24.6% to RMB1,160.5m, including selling and marketing of RMB751.0m, R&D of RMB311.8m and general and administrative expenses of RMB97.7m. Selling and marketing equaled 14.2% of revenue, versus 10.3% in 2020. Excluding share-based compensation, management reported net income of RMB136.3m versus RMB246.6m.
At December 31, 2021, current assets were RMB2,945.8m and current liabilities RMB1,594.5m, implying working capital of approximately RMB1,351.2m and a current ratio of about 1.85. Cash and cash equivalents were RMB587.0m, restricted cash RMB35.8m, and short-term investments RMB828.9m. Total liabilities were RMB1,625.8m; reported long-term borrowing was RMB16.1m. The filing does not show a separate year-end short-term borrowing balance.
Material changes versus FY2020
- Revenue fell as Viomi scaled back Xiaomi-branded sweeper-robot supply and adjusted product mix; management also cited weaker demand in certain categories.
- Gross margin recovered to 22.6% from 18.6%, which management attributed mainly to shifting toward higher-margin products and cost controls.
- Revenue declined across all four reported business lines: IoT @ Home portfolio RMB3,401.0m (down 7.4%); home water solutions RMB742.9m (down 15.9%); consumables RMB367.0m (down 4.1%); small appliances and others RMB792.9m (down 10.7%).
- Sales to Xiaomi were RMB2,295.6m, or 43.3% of revenue, compared with RMB2,889.4m, or 49.6%, in 2020. Xiaomi receivables were RMB320.9m at year-end, down from RMB609.1m.
- Inventory increased to RMB576.4m from RMB439.4m; inventory turnover days rose to 45 from 33. Third-party accounts and notes receivable fell to RMB302.3m from RMB427.4m.
- Capital expenditures were RMB110.2m. The company reported RMB116.5m in outstanding capital commitments, mainly for the Viomi IoT Technology Park.
Outlook, risks and unusual items
- Outlook: Management believed cash, cash equivalents, restricted cash and anticipated operating cash flow would cover general corporate needs for at least 12 months. It expected continued R&D investment and said selling and marketing expense as a share of revenue should gradually moderate over time. No numerical revenue or earnings guidance is provided.
- Demand and operating risks: Competition, product-mix and pricing pressures, supply-chain bottlenecks, raw-material costs, contract-manufacturer reliance, inventory forecasting and COVID-19-related disruptions could affect results.
- Customer concentration: Xiaomi remains a strategic partner, shareholder and largest customer. The company’s agreements may be terminable in specified circumstances, and the Xiaomi-branded sweeper-robot supply reduction contributed to lower revenue.
- China and structure risks: Investors own shares in a Cayman Islands holding company, not the VIEs. The company relies on contractual arrangements whose enforceability and regulatory treatment in China are uncertain. Cash movement and dividends are also subject to PRC restrictions.
- Market and regulatory risks: The auditor was identified by the PCAOB as not fully inspectable; the filing warns of potential U.S. trading prohibition under the HFCAA. China’s evolving cybersecurity, data-protection and overseas-listing requirements may create additional obligations.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end. Two material weaknesses remained: insufficient U.S. GAAP/SEC reporting expertise and incomplete accounting policies and reporting procedures. The previously identified warranty-provision weakness was reported as remediated.
- Unusual items: The filing reports no material legal or administrative proceedings. In March 2022, after the reporting period, Viomi terminated a celebrity marketing relationship following negative publicity; management said the incident materially affected its marketing plan but did not materially adversely affect its brand or operations.
- Capital returns: No regular dividends were planned for the foreseeable future. The company repurchased approximately 666,000 ADSs in December 2021 at an average US$2.83 per ADS under its repurchase program.
Important facts for investors to verify
- Whether gross-margin gains can persist while revenue, operating income and net income remain under pressure.
- The pace and profitability of Viomi’s shift away from Xiaomi dependence, including the impact of reduced sweeper-robot sales and the status of Xiaomi agreements.
- Inventory growth, receivable quality and collection, warranty estimates, and the increase in expected-credit-loss provisions.
- Progress in remediating the two remaining material weaknesses and improving disclosure controls.
- Developments in VIE enforceability, PRC cybersecurity and listing rules, and PCAOB inspection/HFCAA exposure.
- Funding needs and execution risks for the IoT Technology Park, including the RMB116.5m capital commitment and cash accessibility across the group.