On December 12th, in US Eastern Time, the U.S. Securities and Exchange Commission (SEC) announced that Huami Technology, a company under Xiaomi's ecosystem, has filed an initial public offering (IPO) prospectus. This filing marks a significant step in Huami’s journey toward becoming a publicly traded company.
The latest version of the prospectus does not yet include a specific pricing for the IPO. However, it reveals some key financial figures. In the first three quarters of 2017, Huami reported revenue of 1.296 billion yuan and a net profit of 95.37 million yuan. This compares to 943 million yuan in revenue and a loss of 19.04 million yuan during the same period in 2016. In 2016, the company generated 1.556 billion yuan in annual revenue and achieved a profit of 23.94 million yuan. Notably, the third quarter of 2017 saw a 27% year-on-year increase in revenue to 474 million yuan, although this represented a 3% decline compared to the previous quarter.
As for ownership, the prospectus highlights that Huang Wang, CEO of Huami, holds 39.4% of the shares, making him the largest individual shareholder. Shunwei Capital follows with 20.4%, while the Xiaomi Fund, People Better Limited, owns 19.3%. Additionally, a company controlled by Lei Jun, the founder of Xiaomi, holds 39.7% of the shares, slightly surpassing Huang Wang’s stake.
Huami was founded on December 27, 2013, as a joint venture between Xiaomi and Hefei Huaheng Electronics, with a focus on smart wearable devices. In 2014, the company received significant investment from Lei Jun and Shunwei Capital. Popular products such as the Xiaomi Band and Xiaomi Smart Scale were developed by Huami. The company also operates its own brand, AMAZFIT, offering sports watches and smart toothbrushes under the Oclean line.
According to the prospectus, Xiaomi-branded products dominate Huami’s revenue. In the first three quarters of 2017, Xiaomi-related items, including the Xiaomi Band, contributed 106.8 million yuan, or 82.4% of total revenue. Meanwhile, sales of its own branded products reached 34.23 million yuan, accounting for 17.6%.
In the risk section, Huami acknowledges that Xiaomi is its most important customer and distribution channel. A deterioration in the relationship between the two companies, or a drop in Xiaomi wearable product sales, could significantly impact Huami’s performance. As of September 30, 2017, Xiaomi’s wearable product sales accounted for 97.1%, 92.1%, and 82.4% of Huami’s revenue, respectively.
Huami also emphasizes the importance of commercialization, stating that failure to develop and launch new products, services, and technologies in a timely manner could have a material adverse effect on its business. The company’s growth depends on its ability to innovate and introduce new generations of existing product lines and advanced smart wearable technologies, along with enhanced functionality and value-added services.
In short, Huami must invest more in independent innovation and brand management to ensure long-term success. Before Xiaomi itself goes public, Huami may be the first among the Xiaomi ecosystem companies to list, which could add value to the entire group and influence the overall market perception of Xiaomi.
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