Viomi Technology Co Ltd (VIOT) Q3 2020 Earnings Call Transcript

Viomi Technology Co Ltd (VIOT 2.00%)
Q3 2020 Earnings Call
Nov 25, 2020, 7:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Company Limited 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 Company Limited 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 the 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. 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

As such, the company's actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the company's annual report on Form 20-F and other filings filed with the U.S. 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 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 auditing non-GAAP measures to the unaudited most directly comparable GAAP measures. Now, I will call the -- 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 language]

Shun Jiang -- Chief Financial Officer

Thank you, Xiaoping. This is Shun, Viomi's CFO. I will 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 RMB 1.49 billion, exceeding our previous guidance once again. Over the past 2 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. In May, among 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 our 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 the increasing penetration 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 live 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, [Foreign language] and its first series of double reverse osmosis water purifiers called Super, demonstrating our commitment 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 2 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 nascence for rapidly growing export markets. Leveraging upon our expensive 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 iBot washing machines is able to assess water quality and cleanliness to suggest optimal load settings. And a next-generation AI new wind 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 are focused on stand-alone franchise Viomi Experience Stores for our off-line presence. As we continue to increase our brand penetration and recognition, we have initiated plans to greatly increase our overall point of sales, particularly through cooperation with various O2O outlets of major e-commerce retailers, such as JD and Tmall. We are 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 Limited to promote our IoT Products and Concepts in Hunan province. Looking back at the 2 years since our IPO, we have more than doubled our revenues, reaching close to RMB 6 billion for this year from just over RMB 2.5 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 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 RMB 1.49 billion, an increase of 39% 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 RMB 861.9 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 RMB 1.06 billion from RMB 614.8 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 multifold increases, both on a year over year as well as quarter-over-quarter basis, and represented around 4% to 5% of overall revenues in the quarter.

Revenues from our home water solutions part of the business decreased by 32.2% to RMB 145.4 million. The decline 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 of 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 a 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% to RMB 71.3 million primarily due to increased demand for our water purifier filter products. Revenues from small appliances and others increased by 12.6% to RMB 209.9 million.

In terms of sales channel breakdown, as discussed above, 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 off-line 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 [Foreign language] sale festival, followed by Youpin with just over 20% contribution and then Suning and Tmall. Gross profit increased by 6.8% to RMB 254.3 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-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 toward 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 purifiers 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 11 and Double 12, [Foreign language], the negative impact on our overall gross margin should be somewhat mitigated this fourth quarter partially due to our overall product portfolio streamlining and optimization initiatives. Hence, although we do expect gross margin in the fourth quarter to be slightly lower than the third quarter, the difference 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 RMB 226.4 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, R&D expenses increased by 22% to RMB 52.7 million. Selling and marketing expenses increased by 34.2% to RMB 152.2 million and G&A expenses increased by 70.3% to RMB 21.4 million primarily 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 RMB 34.9 million and non-GAAP net income attributable to ordinary shareholders of the company was RMB 57.4 million. Additionally, our balance sheet remained healthy. As of September 30, 2020, we had cash and cash equivalents of RMB 715.6 million, restricted cash of RMB 39.7 million, short-term deposits and short-term investments of around RMB 179.6 million.

Now, let's turn to our outlook. For the fourth quarter of 2020, we currently expect net revenues to be between RMB 1.9 billion and RMB 2.0 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 RMB 5.84 billion and RMB 5.94 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 customer 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 & Answers:

Operator

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

Hanli Fan -- Morgan Stanley -- Analyst

Hi. Thank you Mr. Chen, Cecilia and Mr. Jiang.

This is Hanli from Morgan Stanley. Thanks for the briefing. I have 2 questions. The first question is on some recent business update, particularly by channel, so your off-line channel and online channel post COVID-19.

So what's your kind of off-line 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 slowdown 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 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 margins.

So how will the gross margin as well as your expenses would affect your kind of like bottom-line margin, net margin? So those are my 2 questions. Thanks for management.

Shun Jiang -- Chief Financial Officer

Thanks, Hanli. I'll take those 2 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 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 off-line 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 toward growing our off-line points of sales. So -- also as discussed just now, we have historically focused more on stand-alone franchise Viomi Experience Stores for our off-line presence. As we continue to increase our brand presence and recognition, we have initiated plans to greatly increase our overall points of sales in the off-line channels, particularly through cooperation with many of the O2O outlets of the major e-commerce retailers such as JD and Tmall.

We're also continuing to -- discussions in relation to additional partnerships with retail leaders such as Hunan Friendship as well as [Foreign language] and Suning. So in terms of our stand-alone stores, we will continue to optimize our franchise structure as well as look to opportunistically open additional stores. But I think the -- most of the off-line point of sales growth will be additional partnerships with these O2O retailers as well as other retail leaders. We could potentially more than double our off-line 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 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 a 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 toward 2 new product categories that we believe will form very important growth pillars in 2021, them being Viomi-branded water purifiers and various small appliances products, particularly sweeper robots. So leveraging upon our existing know-how which we already have quite a large presence within these 2 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 toward 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 [Foreign language] and its first series of double reverse osmosis water pure 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 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 toward a comprehensive upgrade of our core product lines. This will encompass reducing our exposure or eliminating many of the earlier more volume-based, lower margin, lowest ASP SKUs within our product portfolio and focusing our efforts toward more innovative and differentiated product development within our 5G IoT framework. So as discussed just now, we've been devoting a lot of efforts toward 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 2 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 through this end, we've guided total revenues for 2020 of close to RMB 6 billion which is around 25% 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've 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 or around 20% would be our initial target for 2021. I think net margins, there's 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. OK?

Hanli Fan -- Morgan Stanley -- Analyst

OK, thank you. That's very detailed. Thank you so much.

Operator

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

Xudong Chen -- CICC -- Analyst

[Foreign language] I have 2 questions. And first one is, you just mentioned you have just started the exported business. Can you give me more color about the overseas market like your product go to the other countries, and what's the condition now? And my second question is, can you share more color on the key drivers of the IoT product portfolio and the business focus for 2021? That's my 2 questions. Thank you.

Shun Jiang -- Chief Financial Officer

Yes. 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 includes toward the Southeast Asian as well as Eastern European markets.

The initial product categories that we've been selling to these markets are more toward 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 existing Viomi-branded sweeper robot products. Going forward, we have recently hired a new team to just focus on this export business. I think we will continue to leverage upon our success in the small appliances business, particularly for sweeper robots, increase our SKUs for these 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 our IoT -- 5G IoT strategic framework in terms of products, 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 a 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 [Foreign language] right, IoT @ Home which is our vision for the 5G IoT interconnected home scenario.

So we were leveraging upon this platform. We will then continue to strengthen and build upon such a platform and then 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 demand.

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

[Foreign language]

Shun Jiang -- Chief Financial Officer

So our penetration into 5G IoT will consist of 2 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

OK, thank you.

Shun Jiang -- Chief Financial Officer

Thank you.

Operator

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

Joy Wei -- 86Research -- Analyst

Thanks for taking my question. I have a follow-up on your 5G IoT strategy. So we have been putting out a 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, could management elaborate more on your Internet service monetization opportunity as we have seen that you made a lot of partnership with Internet companies.

Thank you.

Shun Jiang -- Chief Financial Officer

Yup. Thanks. I'll initially take these 2 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? Hence, this is why we've been devoting additional efforts toward marketing, especially, as well as product development and innovation in firmly establishing ourselves as a first move-up 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 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 will be in the near term, right which is why we've been making such brand positioning as well as R&D investment. Yes. So Mr.

Chen will supplement a couple of points on this aspect on the next question.

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

[Foreign language]

Shun Jiang -- Chief Financial Officer

So just to supplement on your first question on the tipping point, 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 station. So 5G IoT coverage is definitely expanding at a rapid rate, right? So once the coverage becomes very mainstream, then 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 product, these will become very important enablers of 5G IoT in the home environment. And then third of course the 5G IoT also falling on from the rollout of course the speed that this technology is able to offer, we'll be able to offer much more content and a better experience for consumers as opposed to previous generation technology which of course will further accelerate adaptation, right -- or adoption. So 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 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 buy-in, 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 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 a focused media screen or an 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. For example, acting upon such advertising or even through the data accumulated through the constant usage 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'll 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 installed base. And once the installed base is at a critical mass, then we believe that the monetization part is actually the easy part.

Joy Wei -- 86Research -- Analyst

Thank you.

Operator

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

Vincent Yu -- Needham and Company -- Analyst

Thank you management. Congrats on 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 market? And do we have any revenue contribution expectation in 2021? Second question is about the Singles' Day sales. Can we share any comments on the preliminary results for our Singles' Day sales? Can we share any figure on growth rates? And did our newly released products participate in the 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. Actually, you mentioned a little bit, and I want to ask if we can get more details. Looking to 2021, is there any product category in particular we are most excited about? Thanks.

Shun Jiang -- Chief Financial Officer

Yup. 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 4% to 5% of our overall revenues. It 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 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, right? 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 11 sales as well as kind of the performance of some key product categories. So as discussed during the call, toward the latter part of the third quarter and in particular, the fourth quarter, we made a gradual shift toward greater emphasis on quality of growth and are currently undergoing our product premiumization and SKU optimization phase which is reflected in our fourth-quarter guidance.

So the Double 11 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 focused products, such as the water purifiers and sweeper robots which, as discussed, experienced double or, in some cases, multifold breakout growth in the second half of this year as well as during the Double 11 sales festival. So in terms of how this affects overall margins. So as we've discussed already, our 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 margins, while we currently do expect to be slightly lower than the third quarter, should definitely be higher than the -- well, 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 a 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 washing machine and the new wash and dryer that we launched in our sale -- in our product launch event in October.

Vincent Yu -- Needham and Company -- Analyst

Thank you very much.

Operator

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 Piancente 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 language]

Operator

[Operator signoff]

Duration: 57 minutes

Call 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 and Company -- Analyst

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