Hello, ladies and gentlemen, thank you for standing by for Viomi Technology Co., Ltd.'s earnings conference call for the third quarter of 2021. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Miss 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 third quarter of 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 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, 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 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. Full information regarding these and other risks and uncertainties is included in the company's annual reports on Form 20-F, and other filings as 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 today'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.
Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, followed immediately by an English translation. Mr. Chen, please go ahead.
[Non-English content]
Thank you, Mr. Chen. I will quickly translate our founder's remarks before discussing the financial performance for the third quarter of this year. Hello, everyone. Thanks for joining our third quarter 2021 earnings conference call. Our third quarter net revenues reached RMB 1.06 billion, which was in line with our previous guidance. As we disclosed in the previous quarter's earnings conference call, there was a year-over-year decline in revenues during the third quarter, mainly due to the significant decrease in sales of Xiaomi branded sweeper robots. We maintained stable growth in most of our other product categories. During the third quarter, we enhanced our one-stop IoT home solutions platform to realize AI-driven IoT home scenarios. Currently, we have laid out a full product line of more than 60 categories.
As a result, we are the only company in the smart home industry that provides a complete one-stop IoT home solution, integrating smart home appliances, smart home devices, and software services. We also continue to optimize our product portfolio and execute our changing technology brand marketing and a larger store better merchant channel strategy. Moreover, we increased our investment in R&D and expanded our AI algorithms in-house research and development team to accelerate AI product innovation and technology accumulation, resulting in a 56% year-over-year increase in R&D expenses. To enhance brand awareness, we also invested in additional advertising and marketing resources in the third quarter. Due to the substantial increase in R&D and the marketing expenses, our bottom line declined temporarily. Our strategic adjustments and investments generated positive results, including first, the ongoing gross margin improvements.
Our third quarter's gross margin was 22.7%, representing both year-over-year and quarter-over-quarter increases. Second, brand awareness continues to rise. Third, more diversified and balanced sales channels equipped to handle sales and services of our smart home products. Our overall business is developing in a high quality and healthy direction. Based on industry data, as well as our observations of the smart home appliance industry and the market, we have identified four important industry trends. First, the consumers prefer to buy home appliances with more elaborate and advanced functions in more diversified product categories, especially those which can improve the quality of life, such as air and water purifiers, household cleaning devices, and integrated stove. Second, the demand for high-end products is growing rapidly. Third, bundle purchases have become popular, especially among the post-90s generation.
Fourth, we observed that users start to proactively get to know and to reach the smart home products. The smartification has become a benchmark for the industry and the market, driven by technology progress and the consumption upgrading. To capitalize on these trends and taking into consideration market opportunities and the corporate strategies, we have adjusted and refined our product research and development, enhanced our branding, and improved our sales channels. First, with respect to product development, we have developed our product strategy from three perspectives. First, we increased our investment in R&D as well as technology innovation and AI applications, enhancing our brand influence through product optimization. Second, we provide users with customized and bundled purchasing solutions rather than solely selling individual products, which reduce the customer acquisition costs and increase sales growth.
In the past few months, the proportion of bundle sales has increased, and orders totaling over RMB 10,000-200,000 have grown rapidly. Third, we are currently focused on scenario innovation, and we'll soon complete our smart home category to provide a more comprehensive smart home experience. To this end, this quarter, we devoted more resources in AI, algorithm, software, as well as hardware. We introduced a series of new AI products in the H1 of this year, including the all-direction SPACE air conditioner, premium sweeper robot Alpha 2 Pro, EyeBot range hood, and 800-gallon to 1,200-gallon Super series of large-flux water purifiers. We also launched the Cyber series of our smart wet and dry vacuums in September. All of these products demonstrated strong sales performance in the third quarter, driving continued gross margin recovery.
Furthermore, we introduced a new app to use in the smart home categories, such as the iLink 2T smart lock with AI-based recognition technology. We continually increase our efforts in R&D, and we will unveil high-end new smart home products and new product categories in the coming months. In addition, we will roll out exciting new AI product lines in the next year, including the smart home, smart kitchen, water purifier, and cleanliness products, among others. Second, to enhance our brand influence, we invited one of China's top celebrities, Deng Lun, to become our global branding spokesperson and established our trending technology brand positioning in the H1 of this year. In collaboration with Focus Media and Xinchao Media, we broadened our omni-channel marketing and advertising activities, including elevator advertisements, print media, television, and social media, to enhance our brand awareness and exposure.
We also generate high-quality content marketing on content platforms, such as Douyin, Kuaishou, and Little Red Book. Our brand search frequency on major search engines has climbed, and our internal data shows that post-nineties users and users from new T1 and T2 cities have increased over the past few months. Third, we increased our exposure and sales on new channels such as Pinduoduo, Douyin, and Kuaishou. We have built an exclusive team for these new sales channels to boost traffic and attract more young consumers. Our short-form video marketing and KOL live streaming has enhanced brand awareness and contributed to an increase in sales. The revenue contribution from these new channels has increased in the past few months as well.
Fourth, with respect to our offline channels, we continue to execute our larger store better merchant strategy to provide our users with one-stop IoT home solutions, including bulk purchases, a scenario-based shopping experience, and installation and after-sales services. This efforts have also strengthened our trending technology brand positioning. In the second half, we accelerated our nationwide 4S and 5S store portfolio expansion, including a new 460 sq m Viomi flagship store opened in Zhengzhou in September. A new 760 sq m 5S experience store opened in Shenyang CBD area in October, becoming the largest Viomi experience store in China. We will open more large-scale 4S and 5S Viomi experience stores across the nation. Finally, we are also developing our overseas business by upgrading channels, diversifying our operation models and expanding product categories.
We recently cooperated with renowned agents in Germany, Russia, Malaysia and Northern Europe to transform our overseas channels from small distributors into high quality international sales agents. We plan to optimize our overseas business operation by leveraging their local resources, reputation and import sales experience. We are also planning to explore self-operating model in more regions. Following the successful opening of our first self-operated store on US Amazon in August, we are preparing to launch our online store on European Amazon, and it will introduce sweeper robot products in the near future. Also, we will provide our overseas customers with smart wet and dry vacuum and sweeper robots with new functions. Going forward, we will expand our global business into additional countries and regions to catch the cleaning needs product sector's tremendous growth opportunity.
We have completed the first step in establishing our one-step IoT home solutions platform by building comprehensive product lines across home scenarios, and we'll now turn our focus to product modification upgrade and scenario application innovation. Looking ahead, we will continue to refine our product portfolio and further stabilize our growth margin recovery. We will also increase our investment in AI applications, enhance our trending technology branding, grow bundled sales into services, and improve our overall business operation quality, creating long-term value and returns for our users and shareholders. That concludes our founders' remarks. Let's now turn to our detailed third quarter financial reviews as well as our fourth quarter outlook. Net revenues were RMB 1.06 billion compared to RMB 1.49 billion for the third quarter of last year.
Net revenues were in line with the company's previous guidance, and the decrease was mainly due to the significant decrease in sales of Xiaomi branded sweeper robots, as well as product portfolio adjustments for margin expansion in other categories. Revenues from IoT and home portfolio decreased by 39.3% to RMB 643.1 million from RMB 1.06 billion for the third quarter of last year. The decline was primarily due to the decrease in sales of Xiaomi branded sweeper robots, and second, the product portfolio adjustments for margin expansion in some categories. Revenues from our home washer solutions increased by 7.9% to RMB 157 million from RMB 145.4 million for the third quarter of last year.
The growth was primarily driven by the company's product portfolio adjustment in this category, which contributed to increase the sales of and the demand for new and larger flux water purifiers as well as the growth margin expansion. Revenues from consumables increased by 11.7% to CNY 79.6 million from CNY 71.3 million for the third quarter of last year, primarily due to increased demand for the company's water purifier filter products. Revenues from small appliances and others decreased by 15.9% to CNY 176.5 million from CNY 209.9 million for the third quarter of last year, primarily due to the company's continued product portfolio optimization to obtain a higher gross margin in this category.
Gross profit was RMB 239.7 million compared to RMB 254.3 million for the third quarter of last year. Gross margin increased to 22.7% from 17.1% for the third quarter of last year, primarily driven by the company's continued effort to shift the business and product mix towards higher gross margin products. Total operating expenses increased by 28.2% to RMB 290.3 million year-over-year, primarily due to the increase in R&D expenses and the selling and marketing expenses.
In more details, R&D expenses increased by 56.1% to RMB 82.2 million from RMB 52.7 million for the third quarter of last year, mainly due to the increase in R&D experts and the related salaries and expenses, as well as increased investment in research and development of new products.
Sales and marketing expenses increased by 20.4% to RMB 183.4 million from RMB 152.2 million a year ago, primarily attributable to an increase in advertising and marketing activities to enhance the company's branding and market recognition. General and administrative expenses increased by 15.2% to RMB 24.7 million, compared to RMB 21.4 million for the third quarter last year, primarily due to an increase in the estimated allowance for accounts receivable, together with increased lease expenses due to the workspace expansion. Net loss attributable to ordinary shareholders of the company was RMB 29.3 million and non-GAAP net loss attributable to ordinary shareholders of the company was RMB 22.2 million. Additionally, our balance sheet remained healthy. As of September 30, 2021, we had cash and cash equivalents of RMB 771.7 million, restricted cash of RMB 25.6 million, short-term deposits of RMB 67 million, and short-term investments of RMB 163.5 million. Now let's turn to our outlook. For the fourth quarter of this year, we currently expect net revenues to be between RMB 1.2 billion and RMB 1.3 billion. We expect the sales of Xiaomi brand sweeper robots continue to decrease in the fourth quarter and the own brand sweeper robot business to achieve faster growth, which will become one of the main categories. The above outlook is based on current market conditions and reflects our current and preliminary estimates of market operating conditions and customer demand, which are all subject to change. This concludes our prepared remarks. We will now open the call for the Q&A session. The head of our finance department, Mr.
Wickham Thai will join the session and answer the questions. Operator, please go ahead.
Thank you. We will now begin the question- and- answer session. To ask the question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, 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. The first question today comes from Lillian Lou with Morgan Stanley. Please go ahead.
[Non-English content] sweeper robot [Non-English content] I have two questions. First one is on third quarter results under a nearly 30% decline in revenue. What's the rationale behind a big increase in R&D and marketing expense? How do we think about fourth quarter the balance between revenue versus the margin control? And the second question is on overseas sweeper robot business outlook; how much it could be in the fourth quarter and onwards? And any bottleneck we've been seeing from overseas transportation and also related cost. Thank you.
[Non-English content ]
I will quickly translate the comments from Mr. Xiaoping Chen. As we observed from the market, since the H2 of last year to this year, we see the users start to proactively get to know and to approach the smart home products. We think that's the time to capture the market opportunities. We also see this modification is a trend for the whole industry and the market. We wanted to invest in more R&D and selling and marketing expenses. For the top line, we proactively decreased the sales of Xiaomi sweeper robots.
As you know, the gross margin of such business is relatively lower than the others. We decrease the sales of Xiaomi sweeper robots to have a more healthy gross margin and margin recovery. In terms of expenses, the year-over-year increase of R&D expenses is around like 56%, and we also gain some increase in the selling and marketing expenses. But we think in the near future, the R&D expenses will go back to a relatively normal level, and we will still like invest in selling and marketing, but in a stable and softer extent to enhance our brand awareness. All we do is to capture the opportunities in the future and to enhance our IoT smart home solutions. That's the feedback from our founder.
[Non-English content]
How about you?
I will introduce the overseas sales progress Lillian just mentioned. For the past few months, we saw the overseas market demonstrating a relatively softer growth compared to the robust growth in the first quarter. This is due to several factors. First, due to the strong consumer demand during the post COVID-19, the distributors purchased a large volume of cleaning products, resulting in high stocking levels since the second quarter. Secondly, the shortage of containers and labor resources in the overseas ports did impact on the unloading of products and caused some order delays. We expect such situation will continue in the H2 of this year, while we were taking some measures to mitigate the impacts and drive the growth increase. On one side, from our acknowledgment of overseas market, the price of these containers won't continue to go up to a larger extent. On the other side, we will enter cooperation with more renowned international sales agents, which will help us to increase sales by leveraging their local resources and reputation. Thirdly, as the overseas consumer needs towards cleaning product more diversified, we will increase the new categories and SKUs to cater the additional demands and drive the overall overseas sales. We will continue to expand additional countries and regions where we expect to have potential market growth. Thank you.
Lillian，[Non-English content]？
[Non-English content]
[Non-English content]
The next question comes from Rudi Wei with CICC. Please go ahead.
Yes, thank you for the management presentation. This is Rudi Wei from CICC. I have a question for the promotion strategy. We have had Deng Lun as our brand spokesperson and how it works. Also, can you introduce briefly about the sales during this year's Double Eleven festival? What's your outlook for next year's consumption and sales trends?
[Non-English content]
[Non-English content]
I will translate Mr. Chen. We invite Deng Lun as our spokesperson because we think that in line with our brand positioning of trending technology, and Deng Lun is very popular among young people, especially the post-90s generation. He can boost our brand as well as help us to increase the brand awareness. We invited Deng Lun as the spokesperson. We also are investing a lot in advertising in Xinchao and Focus Media, and we also do a lot of advertising on some social media, and we also do the content marketing on some like Little Red Book. We can see that the brand awareness increased on these social media and platforms, and we also see the brand awareness increase in offline channels.
We can also see the search frequency of our brand increased in some search engines such as Baidu. From the performance we have the Double Eleven shopping festival, we can see the sales contributions of our new mid-to-high-end products increased a lot, especially the bundle sales such as the refrigerators and the smart kitchen products. Overall, we think it is very good direction for us to invite Deng Lun as our spokesperson. We also see the effects of that can see from our sales performance. We hope all of these marketing and selling activities can still continue to help to drive our brand awareness. That's it. Thank you.
Yeah, we will share the growth outlook for 2022. We estimate to deliver a stable growth for next year due to several factors. First, as we see the sales contribution of new product has increased in the past few months, and we have new series of AI products in the pipeline.
We expect the new products to drive long term and healthier business growth and enhance our brand influence. Second, we expand the offline store portfolio as well as diversify online sales channel to help increase the overall sales as well. Third, we invested more advertising and marketing resources in the H2 of this year and observed increased brand awareness and expect the improved brand recognition will help to drive the sales growth. We see some uncertainties of market and macro economy, in particular the impact from real estate industry, which may result in the decreased needs of decorating home for the next year. Thank you.
Thank you. That's all from me.
The next question comes from Vincent Yu with Needham & Company. Please go ahead.
[Non-English] Hi management, thanks for taking my question.
I have two questions. The first question is about the bundle's sale, as we mentioned multiple times in our prepared remarks. Can management share how much percent is, what percentage the bundles sale is in our third quarter revenue, or order, like a percentage of our total orders? For this bundle service, as we are seeing some weakness in the macro real estate market, what we think about the trend of these bundle sale going forward?
My second question is about our gross margin and our sales strategy as we have healthy margin while at the same time we are giving up some product items which have less gross margin. Concerning that we might encounter more pressure from the raw material side. Are we going to adopt the same strategy going forward? Or what we think about the overall margin trend for us and the ASP trend. Thank you.
[Non-English content]
I will quickly translate first. As we are developing our one-stop home solutions, we are changing or say transforming the traditional mode of selling individual products to selling solutions. For the online channels, most of our sales are still through the individual pack selling. For the offline channels, we can see that over 50% of the sales are from the bundle sales, which are like over three products. Not long ago, like one of our customers just purchased the bundles, the products like over RMB 250,000 .
In terms of the real estate impact on our industry, we can see the overall home decoration market decreases recently, and we think that also caused some impacts on the overall home appliance industry. As we roll out more mid- to high-end products as well as promote more bundle sales, we think this can mitigate the impact and can improve the purchase amount per customer. Thank you.
Yeah, regarding the price of raw materials, as the overall price of raw materials has already been at a relatively high point and not going up with a much higher chance, we don't expect the raw material cost will cause significant impacts on our operating result, and we will continue to take cost control measures to mitigate the influence. In terms of ASP, actually we have plans to develop the pricing strategies for the next year. We expect the overall trend will go up to a limited extent as we expect an increase of the sales contribution of our new products with higher ASPs and higher margins. Thank you.
Thank you.
This concludes our question- and- answer session. Now I'd like to turn the call back over to the company for any closing remarks.
Thank you once again for joining us today. If you have further questions, please feel free to 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 lines. Thank you for-