Hello, ladies and gentlemen, thank you for standing by for Viomi Technology Co., Ltd. earnings conference call for the first quarter of 2022. 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., Ltd. Earnings Conference Call for the first quarter of 2022. As a reminder, this conference is being recorded. The company's financial and operating results were issued in press release earlier today and posted online. You can download earnings press release and sign up for the company's email distribution list by visiting the IR section of the company's website at ir.viomi.com. Participating in today's call are Mr. Xiaoping Chen, 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 US 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 filed with the US Securities and Exchange Commission. 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 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. I will now turn the call over to our founder and CEO, Mr.
Sheldon Cheng. Mr. Cheng will deliver his remarks in Chinese, followed immediately by English translation. Mr. Cheng, please go ahead.
[Foreign Language] 大家好，感谢大家来参加我们2022年第一季度的业绩电话会。我们在第一季度实现的销售收入约7.1亿人民币，符合我们此前的预期。销售收入同比出现了下滑，主要是两个原因。第一个是相比去年同期小米扫地机的高销售基数，我们今年已经完全停止了小米扫地机的业务，主要聚焦于自有品牌的扫地机的业务。第二是我们今年以来受到各地疫情反复和管控的原因，第一季度市场消费力下降，整体行业的需求也出现了较大的下滑。此外，为了打造长期的产品竞争力和品牌的知名度，我们在第一季度继续加大了研发和营销的队伍。
[Foreign Language] 2022年初，我们的研发人员的数量较2021年同比增长了47%，主要是AI和算法团队的扩充。截止今年3月31号，我们的全球累计专利申请数已经超过达到5,232件，已经授权的专利有3,142件。为了配合第一季度的新品发布，我们投放了大量的电梯和平面广告，加强科技潮牌的品牌传播。所以对于长期增长的需求，我们对研发和营销费用的投入使得我们在第一季度出现了亏损。同时，我们也看到，由于对产品研发和创新的持续投入，我们高端产品的占比在不断地增长。经过一年多产品结构的调整以及生产环节的严格降本，我们的经营质量得到进一步的改善。
[Foreign Language] 第一季度的毛利率提高到了26.3%，又一次实现了同比和环比的双提升，证明我们不断地提高产品的力和品牌力的提升。我们在今年3月份的新品发布会上发布了升级以后的一站式全屋智能解决方案，1等于N是4，既整合全智能全屋智能产品和五感组网、主动智能、空间感知和自然交互等四大能力，以及方案设计、OTA升级和Plus会员体系以及增值业务等四大类服务。目前我们的一站式全屋智能方案已经取得阶段性的成果，这源于我们聚焦产品创新，提升服务体系以及拓展全屋智能的战略渠道。 首先，在产品端，我们通过加大AI化得来提升我们的产品主动智能。
[Foreign Language] 在今年3月份的战略新品发布会上，我们推出了一系列的高端AI产品，比如Royal系列的AI离子杀菌洗碗机，AI语音控制的面板HomePad Plus等新品已在多渠道上市，并获得良好的市场反馈。我们即将上架更多的新产品，包括有活性锰涂甲醛功能的全域新风空调Space Pro，以及通过超微气泡气溶胶的澎湃海量的2000G吸拖机Super 2，AI激光互动屏，Royal Pro系列的冰箱和洗衣机等。产品的持续创新离不开我们的研发和人才的不断累积。我们的研发成果也获得了行业和权威机构的认可。今年4月份，我们应用于智能烟机的一项视觉检测模块获得第二十三届中国专利优秀奖。
[Foreign Language] 同年，我们的技术社会和集成模块技术获得第八届广东专利银奖。云米品牌也今年入选广东省重点商标保护名录。在硬件研发方面，物联网和AI算法方面，我们人才队伍也不断地扩充。我们日前获得广东省成立广东省博士工作站，并获得广东省博士后工作站的遴选资格，未来将有机会和高校和专业机构一起为社会培养行业顶尖人才，孵化全屋智能项目，推动智能家居的行业整体发展。 第二，我们在上次的业绩报告会中向市场分享了我们基于一站式全屋智能的解决方案，针对不同类型的家庭完善套系化的解决方案，并向高端市场推出深度定制化的套系设计方案。
[Foreign Language] 在过去的两个月里，我们的高端套系方案正在迅速落地。日前，我们线下门店与北京、广州、长沙、河北、昆明等地的客户签订了多个20万到40万的全屋套系的订单，并实现从卖产品到卖解决方案的这么一个转型。此外，我们和京东物流也深化了合作范围，为我们加强计划、物流、仓配、安装一体化的综合服务，提升我们的套系化方案从场景设计到安装交付的全链路的效率提升，也让消费者享受到更完善的售后服务能力。 第三，我们看到全屋智能的发展已经从行业延伸到了外部渠道，基于家庭智场景的智能生态正在逐步形成。我们与渠道的战略合作也在进一步的升级。
[Foreign Language] 我们上周与天猫达成全屋智能新组装的战略合作联盟，双方将以一站式全屋智能解决方案为中心，构建起AI智能厨房、AI智能客厅以及AI智能阳台、智能浴室和智能卧室等应用场景的全屋智能生态。4月份，我们也与京东联手打造Viomi 420 JD Day，集中推出全屋智能套系的产品。继我们去年和联通达成战略合作以后，我们最近入选中国电信数字生态头部合作伙伴，通过渠道整合，联手推动全屋智能覆盖千万户家庭。我们还在与其他渠道与企业推进战略合作，发挥我们一站式全屋智能解决方案的先发优势，共建家庭的智能生态。
[Foreign Language] 此外，我们线下的大商大店推进进展虽然受到疫情的影响，部分的地区店面的装修和开张进度有所放缓，但整体进度仍在我们的预期以内。我们携手线下店，在人流集中的商场、KA卖场搭建大型场景沉浸式的云米体验店，为当地消费者提供完善的智能家电、智能家居以及服务的一站式全屋智能解决方案。在我们在海外的业务也受到国际战争和消费力的下降，部分经销商库存影响下，仍取得一些实质性的进展。我们与越南和马来西亚的代理商达成合作，扩大扫地机在这些地区的销售，线上自营模式也继续扩张。
[Foreign Language] 继上月份线上意大利亚马逊的自营店以后，我们随即启动了德国、法国和西班牙亚马逊的自营店。我们Alpha 2 Pro的扫地机一上架就获得欧洲消费者的好评。我们的扫地机品类在第一季度首次出海，并将在今年和明年扩大该品类的销售。 接下半年，我们将聚焦四个方面，加大研发创新和打造AI的爆品。第二，增强广告营销，加强科技潮牌的品牌占位和知名度的提高。第三，精简SKU，持续优化我们的产品结构。第四，深化渠道，执行大商大店的线下策略，提升消费体验和为品牌长期发展、长期的品牌价值奠定基础。
[Foreign Language] 我们接下来也将执行更加严格和审慎的降本措施和费用管控，持续中长期的健康增长，为消费者和股东带来长期回报。谢谢。
Thank you, Mr. Chen. I will quickly translate our founder's remarks before discussing our financial performance for the first quarter of 2022. Hello everyone, thanks for joining our first quarter 2022 earnings conference call. In the first quarter, our total net revenues reached CNY 712 million, in line with our previous guidance. The year-over-year decline in revenues is mainly attributable to two factors. First, this year we cut off the selling of Xiaomi-branded sweeper robots, which had a high prior year base for comparison.
Second, since the beginning of this year, owing to the widespread COVID-19 recurrence and strict pandemic control measures, market consumption decreased in the first quarter, along with stock demand industry-wide. To strengthen our long-term product competitiveness and brand awareness, we continue to invest in R&D and increase marketing and advertising spending.
As a result, our R&D related personnel and experts at the beginning of this year grew by nearly 47% compared to the beginning of 2021. Primarily due to the expansion of our AI and algorithm patent pool. As of March 31st, 2022, our accumulated global patent applications and the registered patents reached 5,232, and 3,142 respectively. Furthermore, to support the release of our new products in the first quarter, we launched a large number of elevator and print ads to promote our trending technology branding positioning.
Our investments in R&D and marketing to spur long-term growth caused a temporary loss in the first quarter. However, we also noted an increase in sales contribution from our premium products, thanks to the increased investment in R&D and innovation.
In addition, we further improved our operating quality through product quality adjustment and strict manufacturing cost control. Our gross margin for the first quarter increased to 26.3%, again representing a year-over-year and quarter-over-quarter improvement and demonstrating our enhanced product and brand strength.
At our strategic new product launch done in March, we rolled out our upgraded one-stop IoT@Home solutions 1.4.4, which includes our whole home product volume for major smart home capabilities such as automatic networking, active intelligence, spatial awareness, and natural interactions, our four additional services for our users, namely smart home solution design, OTA upgrade, a plus membership system, and value-added services.
Our upgraded one-stop IoT@Home solutions has already achieved solid initial results. Thanks to our focus on product innovation, service system improvements, as well as expanded sales channels for whole home intelligence.
First, with regard to our products, we have enhanced their active intelligence through innovative AI applications. We introduced a series of new high-end AI products that we launched in March, many of which have received favorable market feedback and reviews, including the Royal series of AI dishwashers and our AI screen-based control interface, HomePad Plus.
More of our new products will be on the market soon, such as our All Space AI Air Conditioner Space Pro, the 2000G large-flux water purifier, Super 2, and AI Laser Interactive Smart Screen, and our Royal Pro series of double-screen refrigerator and AI twin-tub washing machine. Our ongoing product innovation would not be possible without our growing and talented R&D team. Our R&D achievements have also been recognized by industry and professional institutions.
In April, our AI-enhanced zero-detection module technology won the Excellence Award at the 23rd China Patent Awards. Also, in the same month, we won the Silver at the 8th Guangdong Patent Awards for our water purifiers with an integrated water module technology. Furthermore, the brand was added to the key trademark protection list in Guangdong Province. Our hardware R&D, IoT, AI, and algorithm team is also expanding with an increasing number of PhD talents.
We were just listed as Guangdong PhD Workstation by the government and have obtained a selection qualification to establish a Guangdong postdoctoral workstation this year. As a result, going forward, we will have greater opportunities to cultivate top talent for our society, incubate smart home programs, and promote overall development of the smart home industry in cooperation with universities and professional institutions.
Second, as we mentioned during our last earnings call, we have improved our bundled smart home solution offerings based on our one-stop IoT home solution, and recently launched comprehensive, highly customized design solutions for the premium market. Over the past two months, sales of our premium bundled smart home solution offerings have accelerated rapidly.
Our offline merchants recently signed new whole home solution orders ranging from CNY 200,000 to CNY 400,000 with customers in Beijing, Guangzhou, Changsha, Hebei, and Kunming, successfully shifting our business from selling products to selling solutions. In addition, we deepened our cooperation with JD Logistics to access a broader range of services, including planning, logistics, warehousing, and installation.
This enables us to improve efficiency throughout our cycle from solution design and delivery to installation, as well as provide our customers with a more enjoyable after-sales service experience.
Third, we have expanded our strategic partnerships with sales channels as smart home development continues to expand from industry to external channels, and smart ecosystem based on home scenarios is taking shape. Last week, we reached a strategic cooperation with Tmall concerning our portfolio of one-stop smart home solutions. Together, we will promote a whole home smart ecology with an AI smart kitchen, living room, balcony, restroom, and bedroom.
Furthermore, in April, we cooperated with JD.com to host a Viomi 420 JD Day and introduced new whole home smart products on its platform. Finally, after forming a strategic partnership with China Unicom last year, we were recently listed as one of China Telecom's top digital ecology partners, promoting channel integration and bringing an intelligent lifestyle to tens of millions of households in China.
As one of the first movers in one-stop smart home solutions, we will continue to promote partnerships with additional channels and companies to jointly develop the smart home ecology for families. Despite an adverse impact of the pandemic on our larger store better merchant offline strategy execution with certain degrees of delays in our store opening and furnishing, the overall progress was still within our expectations.
We joined hands with offline merchants to build large immersive Viomi stores in shopping malls and KA stores with massive foot traffic to offer local customers complete setup, smart home appliances services with a one-stop solution. As to our overseas business, despite the effects of international warfare, weaker consumer spending, and inventory backlog of certain distributors, we still achieved substantive progress.
First, we reached a collaboration with international sales agents in Vietnam and Malaysia to expand the sales of our sweeper robots in these regions. Second, we continued to broaden the online presence of our self-operated stores. After launching our self-operated store on Amazon Italy in March, we opened self-operated stores on Amazon Germany, Amazon France, and Amazon Spain, where our Alpha Two Pro sweeper robot was well received among European consumers.
Third, in the first quarter, we launched our smart wipe and dry vacuums in overseas markets, and will continuously expand their sales over the next year. In the second half of this year, we will continue to focus on four perspectives. The first, we will strengthen the product innovation and develop key AI applications. Second, we will increase our advertising and marketing investment to strengthen our trending technology brand and positioning.
Third, we will streamline our product lines and optimize our product portfolio. Fourth, we will enhance our sales channels and execute our larger store better merchant offline strategy to lay a solid foundation for elevating consumer experience and developing long-term brand value. Together with Viomi and more disciplined cost and expense control measures, we will deploy these tactics to support healthy growth in the mid to long term and remain committed to creating value for our customers and shareholders in the long run.
That concludes our founder's remarks. Let's now turn to our detailed first quarter 2022 financial reviews, as well as our second quarter outlook. So for the first quarter, net revenues were CNY 712.1 million compared to CNY 1,255.6 million for the first quarter of last year.
Net revenues were in line with our previous guidance. In addition to the overall weaker consumption environment, the decrease was mainly due to two factors. The first is the complete cut-off of our selling of Xiaomi brand of robot this year, as well as its high prior year base for comparison. The second is the continued product portfolio adjustment for margin expansion across product categories. In detail, revenue from IoT at Home portfolio decreased by 60.8% to CNY 360.2 million, from CNY 919.2 million for the first quarter of last year.
The decline was primarily due to the complete cut-off of selling Xiaomi's branded robot, and the continued product portfolio adjustment for margin expansion in other categories. Both of which also contributed to the overall gross margin improvement for IoT at Home portfolio category.
Revenues from Home Water Solutions decreased slightly by 2.6% to CNY 101 million from CNY 103.8 million for the first quarter of last year. The decline was primarily due to the continued product portfolio adjustment involving a decrease in small flux water purifiers, which was partially mitigated by the increased sales contribution of large flux water purifiers. As a result of the product portfolio adjustment, the company once again achieved year-over-year gross margin improvement in this category.
Revenues from consumables increased by 10.8% to CNY 71.8 million from CNY 64.8 million for the first quarter of last year, primarily due to the increased demand for the water purifier filter products.
Revenue from small appliances and others increased by 6.7% to CNY 179.1 million from CNY 167.8 million for the first quarter of last year. Gross profit was CNY 187 million compared to CNY 265 million for the first quarter of last year. Gross margin increased to 26.3% from 21.1% for the first quarter last year. It's primarily driven by the company's continued efforts to shift their business and product mix towards higher gross margin products.
Total operating expenses increased by 15.9% to CNY 254.8 million from CNY 219.8 million for the first quarter of last year, primarily due to the increase in R&D expenses and selling and marketing expenses.
In more detail, R&D expenses increased by 20.5% to CNY 79.1 million from CNY 65.6 million for the first quarter of last year, mainly due to the increase in R&D headcount and the related salaries expenses. Selling and marketing expenses increased by 15% to CNY 158.8 million from CNY 138 million for the first quarter of last year, mainly due to the increase in advertising and marketing expenses to promote the company's brand awareness.
G&A expenses increased by 4.7% to CNY 17 million compared to CNY 16.2 million for the first quarter of last year, primarily due to the increase in related personnel salaries expenses.
Net loss attributable to ordinary shareholders of the company was CNY 50 million compared to net income attributable to ordinary shareholders of the company of CNY 49.1 million for the first quarter of last year. Non-GAAP net loss attributable to ordinary shareholders of the company was CNY 41.7 million compared to Non-GAAP net income attributable to ordinary shareholders of the company of CNY 55.3 million for the first quarter of last year. Additionally, our balance sheet remained healthy.
As of March 31, 2022, the company had cash and cash equivalents of CNY 868.4 million, restricted cash of CNY 64.2 million, short-term deposits of CNY 10 million, and short-term investments of CNY 411.8 million. Now let's turn to our outlook.
For the second quarter of 2022, we currently expect the net revenues to be between CNY 850 million and CNY 1.05 billion. We estimate that year-over-year change in revenues will be mainly due to the high comparison base from the Xiaomi-branded sweeper robot business for the second quarter of last year, which the company has completely cut off this year. As well as the impact of the overall market demand in the second quarter of this year.
The above outlook is based on current market conditions and the risks attendant to current and preliminary estimates of marketing and operating conditions as well as the customer demand, all of which are subject to change. This concludes our prepared remarks. We will now open the call for the Q&A session. The head of our finance team, Mr.
Wickham Thai will join the session and answer questions. Operator, please go ahead.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to the company's management in Chinese, please immediately repeat your question in English. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Hildy Ling from Morgan Stanley. Please go ahead.
Thank you. How about the trends in terms of by product perspective, how are they trending? Also about the trends in terms of the pricing and the volume. The second question is about our strategy and expectation for second half of the year and our strategy behind it. Compare with our strategy and expectations set at the beginning of the year, how has that changed given the macro volatility? Have we adopt any plan of strategy change in this regard because of the macro changes? Thank you very much.
Okay. Thank you for these questions. For the first question, entering into April and May, we saw the consumption environment is weak due to the impacts from recurring pandemic, and thus our sales performance is also impacted. While we observed the sales contribution of our premium products with higher gross margins are increasing. Second, among our new products released last year and this year, we saw sales of space and [millennial series] of air conditioners increase due to seasonal demands.
As well as their popular functions during COVID-19 period, such as all space cooling, UV sterilization and fresh air system. We find certain smart devices such as smart locks also receive good market feedback and sales performance.
We saw the sales of some large appliances such as refrigerators, washing machines, are relatively weak due to the lack of heavy services of installation and logistics as a result of the various quarantine control measures. Going forward, this year we expect the overall average price to maintain stable compared to the last year with certain fluctuations for the various categories. As we expect the overall sales volume is increased when entering into the second half.
Well, again, this is still depending on the consumer demands and the pandemic situation in the next months. Regarding the second question of our expectation of the second half. Okay.
With the increasing quarantine regions and continued weak macro environment since April, we expect the consumption trend won't demonstrate material rebound, but should relieve compared to the first half of this year. As we saw, the government has taken some measures to stimulate consumption, and we are also taking some measures to cut down the expenses and cost of our products. Thank you.
Oh. Thank you very much, management. I don't have further question. Thanks.
Our next question comes from Rudi Wei from CICC. Please go ahead.
This is Rudi Wei from CICC, and thank you very much for the management presentation. Actually, I have two questions here, and maybe I can ask them one by one. The first is that one of your strategy is to increase the gross profit margin by optimizing the product structure. So many low-end products have been out of production. So I wonder whether this process is almost completed at this stage. And to which extent do you think that the gross profit margin can be improved in the future?
Okay. Thanks for the discussion. The product portfolio optimization is still ongoing for us as we need to balance the overall sales and the sales growth of new premium products, as well as introduce the alternative products for low-end markets. Currently we are adjusting the product lines for multiple categories, including air conditioner, refrigerators and sweeper robot. With respect to the gross margin, as you can see, the margin has been improving in the past year.
In 2022, we are confident to maintain an overall margin level of over 20% and may with seasonal fluctuation due to inventory cleanup for some categories during the promotional seasons. With the product portfolio optimization, we expect the gross margin still to improve on a year-over-year basis. Thank you.
Okay, thank you. My second question is about our water purifiers product. Since we have been doing water purifiers business for a long time, market has been declining actually in recent years. Actually your water purifier business also seems stagnant. We noticed that it seems more brands are introducing water purifier products recently. Also we noticed the increase of your consumables businesses related to water purifiers. I wonder whether you have the same feeling that more brands are doing this business. What do you think of the recent future of the water purifier market?
As we can see in the recent two years, the growth of the overall demands of water purifiers is not as far as some other cleaning categories, but it is still a potential market with increasing penetration rate. We also observe from our frontline research as well as from the industry data the consumer needs change over time and the industry develops towards a few trends. Firstly, we have seen the market contribution of large flask water purifiers with over 800 gallon are increasing.
The market is gradually phasing out some small flask water purifiers and more companies starting increasing their introductions of large flask water purifiers as well. Secondly, smartification has been one of the required demands of consumers. Third, water purifiers with multiple functions are more needed by the market, namely instant heating, mineralization and UV sterilizations, et cetera.
The desktop purifiers you mentioned is also a trend in the industry. We have developed and introduced desktop purifiers, and in the second half of this year and the next, we will introduce additional SKUs with multiple functions. Thank you.
Okay, thank you very much. That's all from me.
The next question comes from [Lu Xuanzi] from Guojin Securities. Please go ahead.
They are highly demanding on obstacle avoidance and multiple functions and smartification. In terms of functions, we focus on automatic dust collecting and self-cleaning, which are also the trend for current market. In addition, we developed different versions for consumers with diverse needs, such as sweeper robot with UV sterilization and SKU designed for families with pets. More importantly, as we offer one-stop smart home solution with the bundle sales of smart appliances and devices, our sweeper robot is able to connect it with whole home smart products for interactions, remote control and inspection.
As the only one movable appliances, the sweeper robot can scan the home and create home maps for our future development, such as the security detection system. For the second question regarding the offline sales.
Our offline sales as well as the new store opening are indeed impacted by the recurring pandemic and current control in some regions, and the logistics was delayed in some cities. To mitigate the decline sales from offline channels due to the COVID-19, we shift more marketing and sales resources towards online channels, particularly some social platforms such as Douyin. In addition to small and cleaning products, we have started to sell water purifiers on Douyin through live streaming and have been seeing good sales performance.
We also depend on cooperation with platforms including Tmall and JD.com to jointly promote whole-home smart device portfolio. Our large store and better merchant offline strategy is on track though the COVID-19 impacted the store opening and furnishing to some degree. We are also seeking cooperation opportunities with diverse third-party offline channels.
We recently reached strategic partnership with China Telecom and with Gujia Home, which is Gujia Jiaju, to integrate offline resources and promote our smart product portfolio.
Okay. I will translate our founder's comments. At this moment, it's a little hard to forecast the pandemic situations in the rest of this year. As you can see, we don't know how long the pandemic situations and some containment control measures will last. We think it do take some time for the consumers to recover their consumption confidence. Meanwhile, we will take very prudent way to improve our operations, as well as to maintain a very healthy gross margin level, as well as the healthy cash level. We are confident in the mid to long term, the Chinese economy will recover.
In the meantime, we will just invest in R&D and such expenses to maintain a very stable development. Thank you.
Thank you very much. I have no other questions. Thank you.
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 contact information on our website or The Piacente Group, our investor relations consultant. Thank you all. Have a good night.
This concludes this conference call. You may now disconnect your line. Thank you.