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Viomi Technology Co (VIOT) Q3 2020 Earnings Call Transcript

VIOT Earnings Call - Final Transcript

Viomi Technology Co (NYSE: VIOT) Q3 2020 earnings call dated Nov. 25, 2020.

Corporate Participants:

Cecilia Li — Senior Investor Relations Manager

Xiaoping Chen — Founder, Chairman of the Board of Directors and Chief Executive Officer

Shun Jiang — Chief Financial Officer


Hanli Fan — Morgan Stanley — Analyst

Xudong Chen — CICC — Analyst

Joy Wei — 86Research — Analyst

Vincent Yu — Needham & Company — Analyst



Hello, ladies and gentlemen, thank you for standing by for Viomi Technology Co., Ltd Earnings Conference Call for the Third Quarter of 2020. [Operator Instructions]

I would now like to turn the call over to your host, Ms. Cecilia Li, the Senior IR Manager of the Company. Please go ahead, Cecilia.

Cecilia Li — Senior Investor Relations Manager

Thank you, operator. Hello, everyone, and welcome to Viomi Technology Co., Ltd earnings conference call for the third quarter 2020.

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 then sign up for the Company’s email distribution list by visiting the IR section of the Company’s website at

Participating in today’s call are Mr. Xiaoping Chen, the Founder, Chairman of the Board of Directors and 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 US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, Company’s actual results may be materially different from the views we express 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 US Securities and Exchange Commission. The Company does not assume any obligation to update any forward-looking statement except as required by law.

Please also note that Viomi’s earnings press release and 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 the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

Now I will — 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.

Xiaoping Chen — Founder, Chairman of the Board of Directors and Chief Executive Officer

[Foreign Speech]

Shun Jiang — Chief Financial Officer

Thank you, Xiaoping.

This is Shun, Viomi’s CFO. I’ll quickly translate Mr. Chen’s remarks before discussing our financial performance for the third quarter of 2020.

Hello, everyone. Thank you for joining our earnings conference call for the third quarter of 2020. Under the backdrop of a meaningful industry recovery and rebound in consumer demand in the post-pandemic landscape, we continued our strong growth momentum in the third quarter with net revenues increasing by 39% year-over-year to around RMB1.49 billion, exceeding our previous guidance once again. Over the past three [Phonetic] years, as part of our 5G IoT strategy, we have been developing a 5G IoT technology protocol and algorithm framework for the home environment, including sensor technology, AI algorithms and smart hardware.

In 2020, we accelerated the introduction of our strategic 5G IoT products and services under this framework. It May, amongst many strategic products and services, we introduced our 21Face interactive smart screen TV and Home SaaS concept, which marked the comprehensive implementation of IoT @ Home across all home scenarios and screens. Following this, at a recent product launch event in October, we launched state-of-the-art IoT chip modules; CPE or customer premise equipment router products and our HomePad screen-based control interface, further strengthening 5G IoT smart connection capabilities for the home environment.

We are fully confident that with the increasing penetration and adoption — and adaptation of 5G technology, our 5G IoT focused strategy will help us maintain a leadership position in this rapidly evolving industry. To this point, we continue to expand our value-added businesses and content applications. At our recent 5G IoT product launch event, we also announced additional enhancements to our line of 21Face large-screen refrigerators and further expanded related content partnerships. Following our previous cooperation with various entertainment and media platforms, including Kugou Music, online video platform iQIYI, audio sharing platform, Ximalaya FM, and recipe sharing app, Douguo, we also recently reached a cooperation agreement with Douyin, China’s popular short video social media platform.

We have also made efforts to integrate and leverage our own e-commerce platform, Yunmi Shangcheng, through our large-screen operating system to capitalize on the home consumption scenarios. Our large screens enable our IoT operating interface consisting of entertainment, shopping, advertising and social media applications to create ever increasing levels of usage, stickiness and data generation. Going forward, we’ll continue to explore even more IoT content offerings and partnerships in relation to our large-screen products such as community group purchasing and grocery delivery services, allowing us to cater to the dynamic ever-changing consumption and user behavioral trends while providing more value-added services and enhanced experiences.

In light of greater consumer emphasis on cleanliness in the post-pandemic era, we have ramped up efforts to capture opportunities in our Viomi-branded water purifiers and sweeper robots. In terms of water purifiers, following our May introduction of new series of large flux next-generation water purifiers, in September, we launched a high-end water purifier sub-brand, [Indecipherable], and its first series of double-reverse-osmosis water purifiers called Super, demonstrating our commitments to establishing a professional brand and providing high-quality drinking water as well as diversified home water solutions.

We have also expedited the development of our own sweeper robot business with the recent introduction of automatic dust disposal sweeper robot, Alpha, as well as our series of laser-navigated and visual navigated sweeper robots. These two product categories have been extremely well received by the market and delivered significant sales growth in recent months, including across the Double Eleven sales season, and we expect them to be key pillars of our growth in the years ahead. We also expect these categories to allow us to better tap into our nascent but rapidly growing export markets. Leveraging upon our expansive existing experience, know-how and supply chain resources, we have also been making the appropriate internal resource allocations and new personnel hires to ensure the success of these projects.

Moreover, we continue to make innovative technology breakthroughs across our core product categories. For example, our new series of premium EyeBot washing machines is able to assess water quality and cleanliness to suggest optimal load settings. And our next-generation AI Nuwind [Phonetic] washer-dryer product is able to help users shorten drying time by over 50% through state-of-the-art air circulation technology. These revolutionary technologies and related patents will continue to help us resolve user pain points caused by traditional models, further improving the user experience.

We have also continued to deepen and broaden our sales channel presence. Historically, we have focused on standalone franchise Viomi experience stores for our offline presence. As we continue to increase our brand penetration and recognition, we have initiated plans to greatly increase our overall points of sales, particularly through cooperation with various O2O outlets of major e-commerce retailers such as JD and Tmall. We’re also continuing discussions in relation to additional partnerships with retail leaders. For example, we recently established the first Viomi experience store as part of our strategic cooperation with Hunan Friendship & Apollo Commercial Co. Ltd to promote our IoT products and concepts in the Hunan province.

Looking back at the two years since our IPO, we have more than doubled our revenues, reaching close to RMB6 billion for this year from just over RMB2.5 billion in 2018. We have also successfully expanded into numerous diverse product lines, significantly expanded our sales channel presence and further enriched our patent portfolio, firmly establishing Viomi as a highly differentiated 5G IoT consumer technology brand all while maintaining healthy levels of profitability.

Looking ahead, we will continue to execute our core 5G IoT strategy, focusing on — focusing resources on core categories while streamlining and optimizing our product lines and SKUs. We are fully devoted and committed to delivering strong high-quality growth and cementing ourselves as an industry leader in the next generation of products, technologies and applications. Our goal is to make the 5G IoT Home a reality for the benefit of all our consumers and stakeholders.

That concludes our founder’s comments.

Now let’s turn to the detailed financial review of our third quarter results as well as the outlook for the fourth quarter and full year of 2020.

As Xiaoping discussed, net revenues were RMB1.49 billion, an increase of 39% compared to the third — compared to the same period of last year, once again demonstrating the strength of our diversified business mix as the industry began to recover from the impact of COVID-19. Revenues from our Viomi part of the business increased by 46.5% to RMB861.9 million for the third quarter of 2020, representing around 58% of our total revenues for the quarter. Revenues from IoT @ Home portfolio increased by 72.5% to RMB1.06 billion from RMB614.8 million for the third quarter of 2019, primarily due to the continued successful rollout of certain new product categories, in particular sweeper robots and air-conditioning systems. Third quarter sales from high-margin Viomi-branded sweeper robots, which we expect to be a key growth driver going forward, demonstrated multi-fold increases both on a year-over-year as well as quarter-over-quarter basis and represented around 45% of overall revenues in the quarter.

Revenues from our home water solutions part of the business decreased by 32.2% to RMB145.4 million. The decline was — was primarily due to year-over-year decreases in average selling prices, particularly of Xiaomi-branded water purifier products. This effect was partially mitigated by the successful introduction of and significant increase in sales in sales of our new series of Viomi-branded water purifier products. Revenues from Viomi-branded water purifier products nearly doubled in the third quarter and are on track to more than double in the fourth quarter, both on a year-over-year basis. Viomi-branded water purifiers are expected to contribute over 20% of our total home water solutions business and over 3% of our total revenues in the second half of 2020 as compared to 10% and less than 2% respectively in the same period last year.

Based on the factors above and taking into consideration our recent performance despite the structural industrywide shifts in water purifier retail prices that we have previously discussed extensively, we currently expect revenues for the fourth quarter from our home water solutions business to be at a similar level as the same period of last year. Revenues from consumables increased by 32.6% — by 32.6% to RMB71.3 million, primarily due to increased demand for our water purifier filter products. Revenues from small appliances and others increased by 12.6% to RMB209.9 million.

In terms of sales channel breakdown, as discussed [Technical Issues] around 58% of our total net revenues for the third quarter derived from our Viomi business and approximately 42% was derived from our Xiaomi business. Within the Viomi business, approximately 70% was online, 20% was offline and around 10% was exports. Within the online channels, JD was the largest contributor with just over one-third of our total online revenues from the Viomi business, in large part due to preparation for the Double Eleven [Indecipherable] sales festival, followed by Youpin with just over 20% contribution and then Suning and Tmall.

Gross profit increased by 6.8% to RMB254.3 million, and gross margin was 17.1% compared to 22.3% for the third quarter of 2019 and 14.3% for the second quarter of 2020. The year-over-year decrease in gross margin was primarily due to the shifts in the Company’s product and business mix, especially the introduction of Xiaomi’s branded sweeper robots and the pilot launch of our air-conditioning systems together with the structural industrywide shifts in water purifier retail prices on a year-over-year basis. The quarter-over-quarter increase in gross margin was primarily due to a stabilization in average selling prices and margins across product lines, including water purifiers together with more positive shifts in overall business and product mix towards higher gross margin products. In fact, apart from the water purifier ASP dynamic in the first half, gross margins across other individual product categories have been quite stable overall and have been demonstrating further uplift trends in the second half of 2020 as compared to last year.

Gross profit, excluding the water purifier business, actually increased by over 20% on a year-over-year basis in the third quarter. In terms of our gross margin outlook for the fourth quarter, while considering the major sales festivals such as Double Eleven and Double Twelve, [Indecipherable], the negative impact on our overall gross margin should be somewhat mitigated this fourth quarter partially due to our overall product — portfolio streamlining and modernization initiatives. Hence, although we do expect gross margin to the — in the fourth quarter to be slightly lower than the third quarter, the dividend should not be as pronounced as compared to the second quarter. As we continue to phase out lower-margin products and focus our efforts on generating greater revenue contributions from higher-margin product categories and SKUs as a result of our overall premiumization theme, we do expect to experience a noticeable degree of gross margin uplift in the year ahead as compared to 2020.

Total operating expenses increased by 33.8% to RMB226.4 million, primarily due to the growth of our business, together with an increase in share-based compensation expenses, as we discussed during the last quarter. In more detail, RMB expenses — R&D expenses increased by 22% to RMB52.7 million; selling and marketing expenses increased by 34.2 million — 34.2% to RMB152.2 million; and G&A expenses increased by 70.3% to RMB21.4 million, primarily due to the — due to an increase in share-based compensation expenses. Total operating expenses as a percentage of revenues decreased to 15.2% from 15.8% for the third quarter of 2019. Excluding the impact of share-based compensation expenses, total operating expenses as a percentage of revenues was 13.7% as compared to 14.8% for the same period of last year. The decline in expense ratio was predominantly due to greater economies of scales and operating efficiencies.

Net income attributable to ordinary shareholders of the Company was RMB34.9 million, and non-GAAP net income attributable to ordinary shareholders of the Company was RMB57.4 million.

Additionally, our balance sheet remains healthy. As of September 30, 2020, we had cash and cash equivalents of RMB715.6 million; restricted cash of RMB39.7 million; short-term deposits and short-term investments of around RMB179.6 million.

Now let’s turn to our outlook. For the fourth quarter of 2020, we currently expect net revenues to be between RMB1.9 billion and RMB2.0 billion, representing a year-over-year growth of approximately 9.1% to 14.8%. For the full year of 2020, we currently expect net revenues to be between RMB5.84 billion and RMB5.94 billion, representing a year-over-year growth of approximately 25.6% to 27.7%. The above outlook is based on 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.

In conclusion, based on current industry and business trends, we are cautiously optimistic that the coming year will present significant and attractive opportunities for us. Our core focus will remain on delivering robust top line growth through new product launches, sales channels expansion and market share gains. In addition, and importantly, we believe we now have — we have now turned the corner in terms of our gross margin trend and now expect to see meaningful gross margin uplift going forward as part of increasingly more positive shifts in our business and product mix.

That concludes our prepared remarks. We will now open the call for Q&A. Operator, please go ahead.

Questions and Answers:


[Operator Instructions] The first question today comes from Hanli Fan Morgan Stanley. Please go ahead.

Hanli Fan — Morgan Stanley — Analyst

Hi. Thank you, Mr. Chen and Mr. Jiang and Cecilia. This Hanli from Morgan Stanley. Thanks for the briefing. I have two questions. The first question is on some recent business updates, particularly by channel, so your offline channel and online channel post COVID-19. So what’s your kind of offline channel recovery pace as you can see in recent months and also for the online channel for some of the competitors. We can see some growth slowed down post COVID-19. So how do you observe your online channel sales growth in the last few months post COVID? So that’s my first question.

And my second question is coming for the next year outlook because Mr. Jiang mentioned some outlook for next year just now. But I just want to dig into that. For example, your top line, by kind of like any numerical projection for us for now. And also you mentioned your gross margin expansion. And I would also want to know more about kind of like net margin. So how — how would gross margin as well as your expenses would affect your kind of like bottom line margin — net margin.

So those are my two questions, and thanks for management.

Shun Jiang — Chief Financial Officer

Thanks, Hanli. I’ll take those two questions. First question on the sales channel trends and recovery and outlook. So, as discussed during the earnings call just now, sales recovery in general has been quite healthy. You would have seen we reported nearly 40% year-over-year growth, mainly on the back of new product launches as well as a pickup in overall consumer activity and industrywide sales channel recovery. So in terms of channel breakdown, we have not seen major structural changes in terms of overall online channel traffic trends, which you may have seen in quite — quite robust earnings results by the major e-commerce retailers in the last couple of weeks. Our core online channels remain a key sales channel for us for this year as well as the year ahead. So still very positive trends as well as feedback from the online channels.

So, the offline channel performance has also definitely stabilized since the difficult times in the first half of this year, and we have once again reinitiated our efforts towards growing our offline points of sales. So, also as discussed just now, we have historically focused more on standalone franchise Viomi experience stores for our offline presence. As we continue to increase our brand presence and recognition, we have initiated plans to greatly increase our overall point of sales in the offline channels, particularly through cooperation with many of the O2O outlets of the major e-commerce retailers such as JD and Tmall. And we’re also continuing to do discussions in relation to additional partnerships with retail leaders such as Hunan Friendship as well as Gome and Suning.

So in terms of our standalone stores, we will continue to optimize our franchise structure as well as look to opportunistically open additional stores. But I think most of the offline point of sales growth will be additional partnership with these O2O retailers as well as other retail leaders. We could potentially more than double our offline point of sales over the next year or so.

The second question is a very good one, how is the outlook for 2021 and kind of the margin trends both on a gross as well as the operating and net basis. Maybe I’ll just break that down into a few parts, firstly on kind of our top line growth outlook. So, generally we remain very positive on 2021’s outlook from a top line perspective, right, from several perspectives. One is obviously the so-called low base effect. So, obviously as everyone knows, the first half of 2020, especially the first quarter, was materially impacted by the effects of COVID-19. Assuming the situation in China remains stable, which there are obviously still uncertainties around, we do expect to experience a rebound effect on the year-on-year basis as a result of this low base effect.

Secondly, new product launches. So, as discussed, since the middle of this year, we have made a significant push towards two new product categories that we believe will form very important growth pillars in 2021, them being Viomi-branded water purifiers and various small — small appliances products, particularly sweeper robots. So, leveraging upon our existing know-how, which we already have quite a large presence within these two categories through our relationship with Xiaomi together with new investments in R&D as well as our own new personnel hires, we do believe that there is significant potential to significantly increase our presence in these very attractive and growing markets, particularly given consumer trends towards this cleanliness theme.

So, in a little bit more detail, for water purifiers, we initially introduced a series of large flux next-generation water purifier products in the middle of this year. Subsequently, we recently launched our high-end water purifier sub-brand, [Indecipherable], and its first series of double-reverse osmosis water purifier product called Super in September. So revenues from these Viomi-branded products nearly doubled in the third quarter and more than doubled in the fourth quarter of this year on a year-over-year basis. So very good reception to these initial launches.

Similarly, we’ve expedited the development of our own Viomi-branded sweeper robot business. Several — the several new products include the automatic dust collecting and disposal sweeper robot called Alpha as well as our other laser-navigated and visual- navigated sweeper robots. So sales of our Viomi-branded sweeper robots, again, have increased multiple fold on a year-over-year basis as well as a quarter-on-quarter basis. So these products have been extremely well received, in line with general industry trends. So I think importantly, these products also entail very healthy gross margins, above our overall blended gross margin, which should drive our overall margin uplift going forward as their contribution to overall revenue increases over time, right?

And the third point, and I’ll just finish on this one, is our overall kind of product and portfolio optimization and premiumization theme, right. So since the middle of this year, we’ve — very much been devoting efforts towards comprehensive upgrade of our core product lines. This will encompass reducing our exposure or eliminating many of the earlier, more volume-based lower margin, lower ASP SKUs within our product portfolio and focusing our efforts towards more innovative and differentiated product development within our 5G IoT framework. So, as discussed just now, we’ve been devoting a lot of efforts towards continue to enhance the experience as well as content and entertainment partnerships and applications in our 21Face large-screen refrigerator as well as we recently launched kind of two next-generation models of washing machines, and you should expect more of these kind of new innovative, more premium-focused kitchen as well as other white goods products as we progress through 2021.

So to this end, we’ve guided total revenues for 2020, of course, to RMB6 billion, which is around 25% year-over-year — year-over-year growth. So, although it’s still very early stage talking about 2021, taking into these considerations, I think you can think about 2021 year-over-year growth on at least similar levels, if not greater, right? But of course, this — we will give more granular guidance as we proceed to have more clarity on next year’s performance.

And I think on a gross margin basis, we have guided that we do expect to experience a noticeable degree of gross margin expansion as we expect to experience more positive shifts in our product mix as compared to historically, and as we proceed to execute our product premiumization and streamlining strategy, right. So I think we increased our gross margins by around 280 basis points in the third quarter to the second quarter. I think this is a trend that we very much are committed to continuing, and gross margins of close to around 20% would be our initial target for 2021. I think net margins has a little bit more uncertainty around given that we will obviously continue to invest in not only sales and marketing and sales personnel, but of course also R&D. But I think you should expect a certain degree of net margin uplift as compared to this year as well given the kind of the impact of COVID-19 on the overall industry this year.


Hanli Fan — Morgan Stanley — Analyst

Thank you. That’s fair detail. Thank you so much.


The next question comes from Xudong Chen of CICC. Please go ahead.

Xudong Chen — CICC — Analyst

[Foreign Speech]

I have two questions. And first one is, you just mentioned you have just started the export business. Can you give me more colors about the oversea market like your product go to the other — other countries, and what’s the condition now? And my second question is, can you share some more colors on the key drivers of the IoT product portfolio and the business focus for 2021? That’s my two questions. Thank you.

Shun Jiang — Chief Financial Officer

Yeah. So I’ll first touch upon the export business. So export business, we have just recently started to put a more strategic emphasis on. The initial markets that have — had shown quite good initial success, including — includes towards the Southeast Asian as well as Eastern European markets. The initial product categories that we’ve been selling to these markets are more towards the small appliances side of the business and in particular our sweeper robot business, right. So a large portion of our existing export markets consist of our — of our — of our existing Viomi branded sweeper robot products.

Going forward, we have recently hired a new team just to focus on this export business. I think we will continue to leverage upon our success in the small appliances business, particularly for sweeper robots to increase our SKUs for this product categories for the export markets as well and also look to expand our export range, for example, into water purifiers as well as perhaps some other white good products as well.

So, your second question on IoT products. So, I think this is how we look at our IoT portfolio and IoT strategy, right? So it forms — this 5G and IoT concept forms a very important part of our brand and product differentiation. So — and over the past several years, we’ve been very much devoted to implementing IoT — 5G IoT strategic framework in terms of product protocols as well as algorithms, right? You would have seen we’ve launched quite a number of 5G and IoT related products over the past several months. We feel that such newly launched products are very important part of our brand identity and how consumers and customers and end consumers are able to differentiate our brand and products from peers. These products, of course, also build upon our comprehensive IoT @ Home platform, enhancing overall connectivity and also creating network effects and synergies with our existing IoT enabled product portfolio within our concept of [Indecipherable], IoT @ Home, which is our vision for the 5G IoT interconnected home scenario. So we will — leveraging upon this platform, we will then continue to strengthen and build upon such a platform and being able to entrench really our brand identity and then getting a head start in being able to adapt to rapidly changing consumer trends and lifestyle demands.

Xiaoping Chen — Founder, Chairman of the Board of Directors and Chief Executive Officer

[Foreign Speech]

So penetration into 5G IoT will consist of two key phases over the next year or so. So number one, for all our screen-based products, in particular, the large-screen refrigerator and interactive smart screen, all of these will transition into 5G IoT — next-generation 5G IoT technology in the first half of next year. And then throughout the year, we will gradually implement this technology across our entire product portfolio to achieve close to full penetration across our product portfolio by the end of next year.

Xudong Chen — CICC — Analyst

Okay. Thank you.

Shun Jiang — Chief Financial Officer

Thank you.


The next question comes from Joy Wei of 86Research. Please go ahead.

Joy Wei — 86Research — Analyst

Thanks for taking my questions. I have a follow-up on your 5G IoT strategy. So, you have been putting out pretty comprehensive 5G IoT portfolio. So how do the management project the tipping point of 5G IoT? Will 5G IoT market see a big growth in 2021? And so what level of investment is needed in order to achieve the leading position in this market in terms of like R&D, capex, marketing spending, etc.? And secondly, can management elaborate more on your Internet service monetization opportunity as you — as we have seen that you made a lot of partnership with Internet companies? Thank you.

Shun Jiang — Chief Financial Officer

Yeah. Thanks. I’ll — I’ll initially take two of these questions, and Mr. Chen may have some supplements. So the first question on the tipping point of IoT — 5G IoT. So in terms of the tipping point, we believe the industry transformation will be an ongoing process, and we’re currently still in the early adopter phase, right? However, we do expect consumer and market attention to tip extremely quickly. And I think a very good example of this is what we have recently seen in the electric vehicle market, right? And this is why have been devoting additional efforts towards marketing, especially, as well as product development and innovation in firmly establishing ourselves as a first mover in this — in 5G IoT within this industry.

So you can think of 5G IoT as a subset of the overall kind of home appliances industry at the moment similar to how electric vehicles are a subset of the overall automobile industry. And I think it is — it is a very defined trend that the penetration as well as the contribution of these next-generation technologies will increase over time. And when the tipping point will be, we think it’ll be in the near term, right, which is why we’ve been making such brand positioning as well as R&D investment.

So Mr. Chen will or supplement a couple of points on this aspect for the next question.

Xiaoping Chen — Founder, Chairman of the Board of Directors and Chief Executive Officer

[Foreign Speech]

Yeah. So just to supplement on your first question on the tipping points, Mr. Chen added three points. So number one, as you may know, all of the telecom companies, especially the three large telecom companies in China are very much rapidly rolling out the base stations. So 5G IoT coverage is definitely expanding at a rapid rate, right. So once the coverage becomes very mainstream, and of course, consumers will adopt these processes more.

Second is, of course, the product adaptation and the product base. So, to be able to leverage these technologies, we believe that you need screen-based products to be able to provide users with content and the best experience to capitalize on the 5G and IoT experience, which is why I think the 21Face refrigerator, our interactive smart screen TV, these, as well as our HomePad — recently launched HomePad switch products, these will become very important enablers of 5G IoT in the home environment.

And then third, of course, the 5G IoT, also following on from the rollout, of course, the speed that this technology is able to offer — will be able to offer much more content and a better experience for consumers as opposed to the previous-generation technology which of course will further accelerate adaptation — or adoption. So that’s — that was the first question.

On your second question on monetization of some of these IoT products, so, we believe there are many opportunities for — for monetization, right. So at the moment, we want to — we are very much focused on enhancing the consumer experience and increasing penetration as well as overall installed base of our products, to get consumer buying, especially the early adopters, on the capabilities as well as the experience of our products. So that’s why we’ve — as you would have seen over the past couple of quarters, we have significantly expanded upon the content that is available — available on our 5G IoT enabled products, especially the 21Face refrigerator, right, so potential monetization avenues come from, for example, advertising or partnerships with various FMCG suppliers, and think of it as focus media screen or an — or a actionable –immediately actionable advertising screen at the center of a home environment. And of course, this follows on to e-commerce transactions or GMV take rates, an example, acting upon such advertising or even through the data accumulated through the constant usage of the — of these products are able to provide, say, recommendations as well as opportunities for consumption for our consumers, right. And also, in terms of these partnerships with the content providers, going forward, we could even have, for example, a small take rate on some of their subscriptions or take rate from purchases from third-party platforms as well.

So I think in the short term, we will continue to devote most of our resources on enhancing the content applications as well as strengthening and enhancing the user experience, while building out our — our installed base. And once the installed base is at a critical mass, then we believe that the monetization part is actually the part.

Joy Wei — 86Research — Analyst

Okay. Thank you.


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

Vincent Yu — Needham & Company — Analyst

Thank you, management. Congrats on the good quarter. I have three questions. The first one is to follow on the export business question. Any comments on the product pricing for the export business? Will there be any pricing premium versus the domestic markets? And do we have any revenue contribution expectations in 2021? Second question is about the Singles’ Day sales. Can you share any comments on the preliminary results for our Singles Day sales? Can you share any figure on growth rates and did our newly released products [Indecipherable] in sales and how were they received? And also, for this promotion, what do we think its impact on our gross margin trends for the fourth quarter? And third question is on the product line, as you mentioned a little bit and I want to ask — see if we can get more details. Looking to 2021, is there any product category in the — in particular, we are most excited about? Thanks.

Shun Jiang — Chief Financial Officer

Yeah. Thank you. I’ll take those questions. So the first one on the export market. As discussed, it represented around 10% of our Viomi-branded business in the third quarter, which is around 45% of our overall revenues and has been growing extremely quickly, but of course our overall business has also been growing extremely quickly. At the moment, it’s focused mainly on smaller appliances, in particular, sweeper robots. But as discussed, we’re also looking to expand not only our regional coverage, but also the product categories that — that we will export going into next year, right? So we probably believe that at the current stage that the export business will grow faster than the domestic business for next year and will likely be close to 10% of our overall revenues for next year.

In terms of pricing, I think currently, it’s predominantly sweeper robot products. We have a range of sweeper robot products as well for the mass market as well as mid to high-end as well. There is no significant or material difference in terms of the ASPs for the export versus the domestic business, right?

So for your second question on the Double Eleven sales as well as kind of the performance of some key product categories, so as discussed during the call, towards the — towards the latter part of the third quarter, and in particular the fourth quarter, we made a gradual shift towards greater emphasis on quality of growth and are currently undergoing a product premiumization and SKU optimization phase, which is reflected in our fourth quarter guidance. So the Double Eleven sales festival, I would say, was still successful and very much focused on some of our core newly identified growth categories, right? So some of our best-performing products were some of the various newly launched products and key focus products such as the water purifiers and sweeper robots which, as discussed, experienced double or in some cases multi-fold breakout growth in the second half of this year as well as during the Double Eleven sales festival.

So, in terms of how this affects overall margins, so, as we’ve discussed already, gross margins are generally seasonally lower in the second and fourth quarters due to the sales festival, but given this year, I think the fourth quarter — the fourth quarter margins, while we currently do expect to be slightly lower than the third quarter, should definitely be higher than the very much higher than the second quarter, right, very much as a result of our overall SKU premiumization and product category streamlining initiatives.

So heading into 2021, as also discussed, given these initiatives, we do expect, together with these kind of more positive shifts in product trend, for example, our own branded water purifiers and sweeper robots have northwards of 25% plus gross margins, they will continue to drive not only top line growth but also drive certain degree of margin expansion next year as well compared to this year, right.

And then lastly, in terms of new product categories that we are excited about, I think we’ve discussed this quite a bit and probably won’t repeat, but obviously the main categories, Viomi-branded water purifiers, sweeper robots, our 21Face refrigerators as well as the constant rollouts of some of these more innovative differentiated and mid to high-end products, for example, in our core categories such as the — the washing machine and the new wash and dryer that we launched in our sale — in our product launch event in in October.

Vincent Yu — Needham & Company — Analyst

Thank you very much.


As there are no further questions, now I’d like to turn the call back over to Cecilia Li for any closing remarks.

Cecilia Li — Senior Investor Relations Manager

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

Shun Jiang — Chief Financial Officer

Thank you, everyone.

Xiaoping Chen — Founder, Chairman of the Board of Directors and Chief Executive Officer

[Foreign Speech]


[Operator Closing Remarks]


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