Net Profit Reaches RMB2.48 billion, Significantly Beats Market Consensus
(Hong Kong, November 19, 2018) - Xiaomi Corporation (“Xiaomi” or the “Group”; Stock Code: 1810), an internet company with smartphones and smart hardware connected by an Internet of Things (“IoT”) platform at its core, today announced its unaudited consolidated results for the third quarter of 2018 ended September 30, 2018 (“3Q2018”).
Upholding its unique and powerful "triathlon" business model, Xiaomi's operating performance was robust in the third quarter of 2018. The Group recorded revenue of approximately RMB50.846 billion, representing a year-on-year increase of 49.1%, among which international revenue grew 112.7% year-on-year to RMB 22.3 billion, accounting for 43.9% of its total revenue. Net profit for the third quarter was approximately RMB 2.481 billion. Adjusted profit (Non-IFRS Measure) was approximately RMB 2.885 billion, representing a year-on-year increase of 17.3%, and a quarter-on-quarter increase of 36.3%.
3Q2018 Financial Highlights
Xiaomi Founder, Chairman and CEO Mr. Lei Jun, said: “In the third quarter of 2018, we successfully built on Xiaomi’s impressive heritage, opening up several new avenues on our journey to achieve significant breakthroughs. The strategies to which Xiaomi adheres, such as strengthening the performance of the high-end market, accelerating the development of new retail channels and focusing on AI development and application, all yielded remarkable results during the reporting period. Furthermore, Xiaomi’s new high-potential businesses, including the monetization of internet services apart from smartphones in China, the globalization of our IoT products and our entrance into the white goods market, have all showed promising beginnings. Thanks to all these achievements, we are extremely confident about Xiaomi’s future.”
3Q2018 Results Review
Rapid growth across all business segments. In the third quarter of 2018, Xiaomi’s smartphones segment recorded revenue of approximately RMB35.0 billion, representing an increase of 36.1% year-on-year, which was mainly driven by increases in both smartphone sales volume and the average selling price (“ASP”). As of October 26, 2018, Xiaomi’s smartphone shipments exceeded 100 million units, successfully achieving our full-year target more than two months ahead of schedule. Revenue from the IoT and lifestyle products segment grew the fastest year-on-year by 89.8% to RMB10.8 billion.
Meanwhile, revenue from our smart TV and laptop sales increased by 100.3% to RMB4,227.2 million in the third quarter of 2018. In addition, several of our ecosystem products, such as the Mi Band, Mi Electric Scooter and Mi VR headset, experienced robust sales growth. Revenue from the internet services segment grew 85.5% year-on-year to RMB4.7 billion in the third quarter of 2018, driven primarily by increasing monetization on Mainland China. Advertising revenue grew by 109.8% year-on-year to RMB3.2 billion, driven by the continuous optimization of our recommendation algorithm, users’ increasing engagement of our internet services, and higher pre-installation revenue.
Consolidated our position in the high-end smartphone market in Mainland. In the third quarter of 2018, Xiaomi continued to optimize its product portfolio to strengthen its presence in the mid- to high-end smartphone market in mainland China. During the reporting period, our smartphone average selling price (“ASP”) on Mainland China continued its ascent from the previous quarter, increasing 16% year-on-year and 4% quarter-on-quarter. Our smartphone ASP outside mainland China also increased by 18% year-on-year, attributable to the increase in the proportion of shipments to Western Europe. The rising proportion of mid- to high-end smartphone users has laid a better foundation for the monetization of Xiaomi’s internet services segment in the future.
International revenue grew 112.7% year-on-year, contributing to a higher percentage of total revenue. According to Canalys, our smartphone shipments for Western Europe grew 386% year-on-year and we were ranked fourth in terms of smartphone shipments in the third quarter of 2018. Our smartphone shipments for India and Indonesia grew 31% and 337%, respectively, helping us achieve the number one market share position by shipments in India and catapulting us to number two in Indonesia. We were ranked in the top five in the smartphone markets of 30 countries and regions in terms of shipments in the third quarter of 2018.
Continuously strengthening our user network and monetization ability. As a result of the increased sales of smartphones and user adoption, monthly active users (“MAU”) of MIUI increased 43.4% from 156.5 million in September 2017 to 224.4 million in September 2018. The average revenue per MIUI user (“ARPU”) for the quarter under review increased by 29.4% year-on-year to RMB21.1. Moreover, the monetization of our overseas internet services businesses is showing early promise. In the third quarter of 2018, the Group’s overseas internet services revenue accounted for 4.4% of all internet services revenue. Xiaomi is also seeing a more significant contribution to internet services revenue from non-smartphone devices, with TV internet services revenue accounting for 5.4% of its total internet services revenue in the third quarter of 2018.
Artificial intelligence + IoT (“AI + IoT”) forms one of Xiaomi’score strategies. In the third quarter of 2018, Xiaomi further enhanced its advantages in the global AI + IoT market. As of September 2018, Xiaomi’s AI assistant (“小愛同學”) had more than 34 million monthly active users, making it one of the most used AI voice interactive platforms on Mainland China. At the 2018 World Artificial Intelligence Conference, Xiaomi’s AI assistant (“小愛同學”) was shortlisted for the SAIL Award, the conference’s most prestigious award. As of the end of the third quarter of 2018, the number of connected IoT devices (excluding smartphones and laptops) on Xiaomi’s IoT platform reached approximately 132 million units, an increase of 13.8% from the previous quarter. There were about 1.98 million users who owned more than five Xiaomi IoT devices, excluding smartphones and laptops, representing an increase of 16.5% quarter-on-quarter.
Xiaomi is also focusing on building an efficient new retail system by continuously developing efficient offline channels while enhancing its online channels. As of September 30, 2018, Xiaomi had 499 Mi Homes on Mainland China, mainly in first- and second-tier cities. Moreover, to further penetrate China’s lower tier cities and rural areas, by the end of the third quarter of 2018, Xiaomi had more than 1,100 authorized stores in total, compared with more than 360 authorized stores by the end of the second quarter of this year. Xiaomi’s overall operation remained highly efficient, with its operating expense ratio decreasing by 0.3 percentage points quarter-on-quarter to 8.5% for the third quarter of 2018.
In addition, Xiaomi adopted a multi-brand strategy to better target different user segments. In response to users’ pursuit of ultimate smartphone performance, Xiaomi launched POCOPHONE, its new sub-brand. The brand’s very first smarphone was announced in India on August 22, 2018 and now the device is available in most of its international markets. Xiaomi also launched a gaming smartphone brand, Black Shark, through one of its investee companies. Black Shark brings together powerful hardware, polished software, and gamercentric services to deliver the ultimate gaming experience to users.
On November 19, 2018, the Company and Meitu, Inc. entered into a strategic cooperation framework agreement. Under the agreement, Xiaomi will receive 30-year exclusive global licensing of Meitu’s branded smartphones and certain smart hardware products. Leveraging Xiaomi’s leading capabilities in hardware, software, AI research and development of internet services, as well as its strong supply chain and production capacity management, and efficient new retail network, the cooperated smartphone business is expected to achieve rapid sales growth. At the same time, Meitu’s brand impression will also help us to gain more female users and to continue to expand and diversify our user base.
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