Viomi Technology Co., Ltd

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Co. Ltd's earnings conference call for the second half and full year of 2025. 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. Clare Gee, the IR Director of the company. Please go ahead, Clare.

Hello, everyone, and welcome to Wellme Technology Company Limited's earnings conference call for the second half and the full year of 2025. As a reminder, this conference is being recorded. The company's financial and operating and 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.biomi.com. Participating in today's call are Mr. Xiaoping Chen, the founder chairman of the board of directors and the chief executive officer, and Sam Yang, the head of our capital and investment 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 that the company's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Security 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 this and other risks and uncertainties is included in the company's annual report on the Form 20 Act and other filings assailed with U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law. Please also note that well-meant earnings press release and this conference call include discussions on an automated gap financial information as well as and audited non-GAAP financial measures. In addition, Valmy's price release contains a recommendation of an under-audited non-GAAP measure to an audited most directly comparable GAAP measure. I'll now turn the call over to our funder, Mr. Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, forward immediately by English translation. Mr. Chen, please go ahead.

Hello, everyone. Thank you for joining us in the second half of the year and the first quarter of the year. In the second half of the year in 2025, with China's public persuasion and the company's strategic investment in the development and construction of new products and brands overseas, we achieved a sales income of 9.5 billion yuan, and a gross profit of about 21.25 million yuan. From the whole year, the core business base is still stable. Last year, we achieved a total sales income of 24.3 billion yuan, China China China China The demand for diversified users leads to technical breakthroughs. With AI technology, users can bring better product experience, and become the world's leading water supply technology company. In the North American market, the performance of our Amazon channel is outstanding. In the second half of last year, it made a three-digit growth in return. In the black five, the 19th place in the water supply list, and in the bottom five, the fourth place. The high-end flagship mineral water purifier, Master One, has also further announced product development. In the Southeast Asian market, we are working with the main channels in Malaysia to achieve strategic cooperation and continue to evolve. In the field of local localization, we are launching a small-scale, large-scale, and smart-functional Inno mining power panel machine. In terms of brand construction, we have invited famous actors and singers from different countries to serve as brand directors, attend online press conferences, and enter the Jishui Super Factory to purchase the brand image of technology health. In April of this year, we will introduce a new brand image, a high-end brand image, . . . . . Europe, Southeast Asia, and other overseas markets to provide consistent supply chain support. By the end of 2025, the global patent will break through 1,950, with a total of 14 countries and regions. In the field of AI intelligent computing, macroeconomic precision regulation, and intelligent innovation, we will build a systematic technical foundation for global business expansion and solid foundation. In terms of shareholder feedback, we announced a special share of $0.88 per share in July 2025. In October of this year, the company received a return of $20 million in shares in the first round. By December 31, 2025, a total of 1.03 million shares were bought back, a total of about $2.5 million. In the recent performance announcement, we have further announced that we will send $0.066 of special shares to each ADS and a total of about $31 million of RMB shares. Thank you for your long-term trust and support. We use the common growth of the real estate and shareholders to provide long-term value to the public. In 2026, we will carry out the strategic goals of Global Water more firmly, and achieve breakthroughs in the following four aspects. The first is to focus on overseas, deepen the strategic market, and expand to more countries and regions, rely on the rapid advantage of water-intensive factories, and continue to introduce cultural new products, and increase the influence of brands to more markets. The second is to stick to the difference-making route, The country continues to strengthen the health and mental health of the Kunlun series, to technologically diversify and product innovation, foster quality improvement, and enhance Yunmei's industry position in the technology market. Third, Jada AI and technology deep integration, let technology innovation become the core mission of the company's transition cycle and continuous growth. Fourth, deepening cooperation, continue deepening cooperation with strategic partners in the field, to release Jada AI and technology deepening cooperation, to release Jada AI and technology deepening cooperation, to release Jada AI Thank you, Mr. Chen.

And I'll quickly translate our funder's remarks before discussing our financial performance. Hello, everyone. Thank you for joining us today on our earnings conference call for the second half and the full year of 2025. In the second half of 2025, amid the face-down of the national subsidy scheme for home appliance trading and the company's strategic investment in oversea market expansion, new product development, and brand building, we delivered a total revenue of 951 million RMB and a net income attributable to ordinary shareholders of the company of 21.2 million RMB. For the full year, our core business remained solid. achieving total revenue of 2.4 billion RMB, representing the year-over-year increase in 14.6%. Net income attributable to ordinary shareholders of the company stood at 141.6 million RMB, with a net profit margin of 5.8%. Over the past year, our global water strategy has continued to achieve milestones highlighted by the establishment of a multinational professional team covering North American, Southeast Asia, and Europe. Empowered by a global perspective across R&D and the market expansion, we have constantly achieved technological breakthroughs addressing users' diverse drinking water demand. By leveraging AI technology to enhance user experience, we are establishing as a world-leading water technology company. In the North American market, our Amazon channel delivered an outstanding performance in the second half, achieving triple-digit growth in sales on a sequential basis. During the past Friday promotional season, our products ranked 19th in the water purifier category and fourth in the under-sink RO technique segment. Our premium flagship products the Master Wine Mineral Water Purifier further enriched our product portfolio. In the Southeast Asia market, we continue to deepen our strategic cooperation with offline channels in Malaysia through the launch of the Compact Inno Mineral Water Dispenser, tailored for the local market and featuring both mineralization and cooling functions. On the brand building front, we are engaged famous actress, and singers from different countries to serve as brand ambassadors. They participate in offline launch events and visit our facilities, strengthening our brand technology and health image. In April, 2026, we will unveil our new brand series at the WQA convention in Miami, showcasing our latest AI technologies and innovations as one of the most influential professional events in the global water treatment industry and presenting our redefined vision of better water to partners in North America and around the world. In manufacturing and R&D, we kept boosting our competitive edge. We achieved a key milestone in the global expansion of Wyoming's water purifier Gigafactory, commencing full operations of our overseas premium production line. This production line integrates module functions, such as instant heating and cooling, and providing agile supply chain support to meet differentiated needs and the markets in North America, Europe, and Southeast Asia. As of the end of 2025, our global patent application has surpassed 1,950 spanning 14 countries and regions. We have built highly competitive technological capabilities in areas such as AI-driven water quality algorithms, precision mineral control, and intelligent self-cleaning, laying out a solid foundation for the continued expansion of our global business. In terms of shareholder returns, we declared a special dividend of 0.088%. U.S. dollars per ADS in July 2025, in August of the same year. We also authorized a new share repurchase program of 20 million U.S. dollars by the end of 2025. We had repurchased a total of 1.03 million ADS, amounting to approximately 2.5 million U.S. dollars in our recently purchased and published earnings release. we declare another special dividend of 0.066 US dollars per share with an aggregated amount of 31 million RMB for shareholder returns as a gesture of gratitude for the long-standing trust and support of our shareholders. We deeply value the journey we take with our shareholders and remain committed to creating long-term value for them. In 2026, We will pursue our global water vision with greater determination, targeting breakthroughs in four key areas. First, for overseas markets, we will deepen our precise and core strategic markets, such as North America and Southeast Asia. We are actively expanding into more countries and regions, leveraging the agility of our water purifier gigafactory. We will continue to launch new localized production, extending our brand influence into broader markets. Second, to advance our differentiations in the domestic market, we will further strengthen the health-centric positioning of the Quinlan series with its alkaline mineral concept. Third, on the technology front, we will deepen the integration of AI across water purification scenarios, making technological innovations the co-engine that enables Wellme to navigate market cycles and achieve sustained growth. Fourth, we will continue to strengthen collaborations with global strategic partners, fully leverage the scale effects of Water Purifier Gigafactory to elevate both scale and efficiency. Through this committed long-term approach, Wellme will continue to create value for global users, and deliver sustainable returns to our shareholders. Thank you. And that concludes our funders' remarks. I will now turn the call over to our Head of Capital and Investment Department, Mr. Sami Yang, to discuss our financial performance. Thank you.

Thank you, Ms. Chen and Claire. Thank you to everyone for joining us today. Let's take a look at our unordered financial result for the second half of 2025. We recorded net revenue of $950.6 million RMB, decrease of 25.9% from $1,282.4 million RMB for the same period of 2024. primarily due to the decrease in home water systems. Now let's look at the performance across three categories. Revenues from home water system were 628.2 million RMB, a decrease of 32.1% of 925.7% million renminbi for the same period of 2024, primarily due to the water pure price. Revenues from consumables were 112.2 million renminbi, a decrease of 17.9% from 133.7 million renminbi for the same period of 2024. primarily due to the decreased sales of water purified filters to Xiaomi. Revenues from kitchen appliances and others were 210.2 million RMB, a decrease of 4.5% from 220 million RMB for the same period of 2024. Primarily due to the reduction in orders from Xiaomi as well as conjunction of Viadmi brand product in this category. Cost profit were 223.8 million renminbi compared to 289.5 million renminbi for the same period of 2024. Cost margin was 23.5% compared to 2017. 22.6% from the same period of 2004. The slight increase in gross margin was merely due to the elimination of the impact one-off costs incurred during the diversification of certain IoT at-home business and assets. Total operating expenses were $248 million, an increase of 12%. from 221.5 million RMB for the same period of 2024 due to increased selling and marketing expenses and a partial offset by decreasing G&A expenses. In greater detail, R&D expenses were 76.3 million RMB, an increase of 12.7 from 67.7 million RMB for the same period of 2024, mainly attributable to an increase of investment in new product development. Selling and marketing expenses were 148.6 million RMB, an increase of 29.8% from 114.6 million RMB for the same period of 2024. mainly due to an increase in brand promotion investment, as well as higher personnel costs resulting from channel expansion. G&A expenses were 23.1 million renminbi, a decrease of 41.2% from 39.3 million renminbi for the same period of 2004, primarily due to a decrease of employee composition costs . The income was 21.2 million renminbi. And then the non-GAAP net income was 28.2 million renminbi. Additionally, our balance sheet remained healthy. As of December 31st, 2025, the company had a cash and cash equivalent of 806.6 million renminbi. Restricted cash of 164.4 million renminbi. Short-term deposit of 258 million renminbi. And short-term investment of 82.6 million renminbi. Next, let's briefly discuss key financial result and audit for the full year 2025. Net revenues were 2,428.2 million RMB, an increase of 14.6% from 2,119,000 RMB for 2024. Revenues from home water systems were 1,686,000,000 RMB, an increase of 12.6% from 1,498,000,000 RMB for 2024. Revenues from consumables were 235,000,000 RMB. a decrease of 14.2% from 277.7 million renminbi for 2024. Revenues from kitchen appliances and others were 506.2 million renminbi, an increase of 47.6% from 342.9 mini renminbi for 2024. Cross profit was 615 mini renminbi compared to 548.7 mini renminbi for 2024. Cross margin was 25.3% compared to 25.9% for 2024. Total operating expenses were 529.4 million RMB, an increase of 24.6% from 424.9 million RMB for 2024. In greater detail, R&D expenses were 165.6 million RMB, an increase of 15.9% from 142.9 million RMB for 2024. Selling and marketing expenses were 277.7 million RMB, an increase of 31.5% from 211.2 million RMB for 2024. G&A expenses were 86.1 million RMB, an increase of 21.6% from 70.8 million for 2084. Net income attributable to ordinary shareholders of the company was 141.6 million RMB. And a non-GAAP net income attributable to ordinary shareholders of the company was 155.7 million remedies. Thank you.

This concludes our prepared remarks. We will now open the call for Q&A. Mr. Chen, our founder, and Mr. Sam Yang will join this session and answer questions. Operator, please go ahead.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star one and one again. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please stand by for the first question. First question today is from Jin Yu Zhang from CICC. Please go ahead.

Okay. Good evening, Valmy's management team, and thank you very much for hosting this earnings call and giving me the opportunity to raise questions. Well, I have three questions covering brand development overseas strategy and profitability growth. So first and foremost, could you share the overall performance of the company's self-owned brand, Valmy, in 2025? And additionally, what are the key investment priorities and initiatives for Wyoming's brand building this year? Thank you.

Thank you, Jin Yu. I will speak Chinese first, and then Claire will translate for me. If we look at our free brand in 2025, our scale will mainly come from the domestic market. In fact, in the entire online channel, our ranking in JD is relatively high. Our annual ranking is 10th. In addition, in Amazon in the United States, in this channel, our ranking in JD is 19th. If we look at it more closely, we divide North America into online and offline. In the future, we will use different brands and locations to promote our brand's sales. In the future, we will attend the WOC in Senegal. We will also attend the WQA in Miami. We will use new products and new series. This is the first step of our exploration in North America. It is also a new definition of Better Water to our global partners in North America.

Okay, and to answer a question, in 2025, our brand revenue was primarily from domestic online channels, and we have ranked as 10th place among the annual brands listed on Jindong. And we also ranked 19th place in sales on Amazon USA, which is a great progress. And moving forward, we will adapt a differentiated strategy in North America by launching distinct brands and positionings on online and offline channels, particularly in April. We will participate in the World of Coffee Fair in San Diego, and we will debut our new brand series at WQA convention in Miami. And this marks the first step into North American offline market and showcasing the partners across the US and the world, our redefined vision of better water.

Thank you. Thanks to Sam and Claire. It's very clear. So here moving to my second question on overseas expansion. So Wyoming has successfully entered the U.S. and the Malaysia markets. So what are the differences in your market strategies between these two regions? And what key challenges have you encountered? And how do you plan to

mitigate them and also could you outline the overseas expansion goals for 2026 thank you uh Amazon has launched the RU system. It's selling well. Next, we will launch a series of new products for North America. It will cover the whole house. It's not just the RU system. In Malaysia, we mainly focus on offline. The offline product form is mainly based on the platform. Of course, Malay people prefer to drink ice water, so we will add ice water. It will be more in line with the local drinking water demand. And we will further expand the offline partner with the product line. Of course, the overseas market has a lot of uncertainty. Of course, the geopolitics is actually changing a lot. To answer your question, we have built local teams for both

United States and Malaysia. And especially in the United States, we launched the Xiaomi-branded EnderSync water purifiers on Amazon, which is the online channel. And next, we will bring new brands and products tailored for the US offline market in the second quarter. And this will cover not only the Anderson products, but also the whole house of nutrition systems. And in Malaysia, our focus is offline, with countertop units of the main product format, adding features like ice and cold water that match the local drinking habits. And that will extend more offline partnerships and diversify our product lineup. For the overseas markets in total, in the future, there are still plenty of uncertainties overseas, and the geopolitical tensions continue to create highways. Still, we see strong opportunities globally, and we believe we are well positioned. That's why the global extension will remain a key part of our long-term strategy. And for 2026, we expect triple-digit growth in the overseas revenue. Thank you.

Yes, very clear. Thank you, Sammy and Claire. So my last question comes to the company's profitability. Well, we see the company's profitability improved notably in 2025 after focusing on the water business. So for 2026 and moving forward, like next two to three years, what are the core pathways for further enhanced profitability and sustain this positive momentum? Thank you.

Let me answer this first. Regarding this, we mainly have three paths. First of all, we want to expand the scale of our independent brands overseas. At the moment, our net profit is at an average level. But the scale of our independent brands is not very high. So we want to expand the scope of our independent brands overseas. This will help to improve our free brand. This will further improve our profitability. The second is the improvement of free brand revenue. This is a long-term driving force that can continuously improve profitability. The sales of free brand products are constantly increasing. It is expected that in the next one to two years, there will be continuous revenue. The third one is to further enrich our product statement. We will use the products on the table, including different functional machines, such as, for example, Geely's commanding system, as well as products with complex functions. OK, to translate the answers, there are three main paths.

And the first is extend overseas. markets and accelerate the growth in our Viomi branded business. Currently, our margin is still on a low level, mainly because our Viomi branded products still makes up a relatively small part of the business. So by pushing into the international markets and growing the shares of our own branded sales, we can improve the profitability. And the second path is about the consumables revenue. The consumable revenues from our own branded products will be a long-term driver of the margin improvements. As more people are using Xiaomi water purifiers globally, the consumable revenues will start to kick in about one to two years after the equipment sells, and we start to see the trends. We will broaden our product lineup, which is adding more countertop options like ice makers, multifunctional countertop water dispensers, and higher margin whole home filtration systems. These new categories will help us reach more customers and build a stronger, more complex product portfolio for the global expansion. Thank you.

Yes, very clear. Thank you very much for your time and detailed answers. I have no further questions. Thank you, Jingyu.

Thank you, Jingyu.

Thank you. Well, now take the next question. This is from Shi Jingxing from CMS.

Please go ahead. First of all, I would like to clarify that we saw that in the second half of last year, after the national stock went down, the income level fell. In fact, this year, in the second half of this year, we are still facing a high trend of the second half of this year. So maybe I would like to ask, under the pressure of the national stock going down this year, what are the sources and functions of our growth that can help us take a breath and look forward to it? And in this question, there is an example of a quarter. Okay, I'll quickly translate a question first.

Can you analyze the impact of the national subsidy reduction on the domestic market, especially when we see in the second half of 2025 the negative impact has caused the revenue decline? And can you forecast the future impacts and offer some guidance? recently noticed the business development. Can you offer some heads up about the top line contribution about cooperation with China Gas, this kind of business development?

Thank you. Thank you, Ms. Shi. I'll probably answer that first. In our view, in the year of 2025, water purification will have a positive impact on the water purifier, especially in the first half of last year. So, compared to the first half of last year, this year will be a bit better. However, if we look at the quality of the water purifier, there is actually another level of consideration. The quality of this product is relatively low. In China, it hasn't been released yet. We expect that in 2026, the industry will return to normal. In terms of water purification, it has the ability to resist the purification cycle. We believe that more and more consumers will choose water purification. This trend should be irreversible. In 2026, we saw that water purification was no longer available at the national level. . . . . . . . . . We think this kind of collaboration is actually a new type of collaboration that is mutually beneficial. Because first of all, they have a lot of exhibition halls and services in China. They can basically cover nearly 50 million families. And the scene they use is also fully installed, so it is particularly compatible with our sub-systems. We think that the category is also highly complementary. As you can see, the impact of the national subsidy on water purifier is obvious in 2025.

And due to the high base last year, domestic market will face challenges in the first half of 2026. For products like water purifier, however, where penetration is still relatively low, so the customer demand is still growing, we expect the 2026 to return to the category's normal growth rate, growth pace, and remain relatively resilient even of consumer spending softens. As we see, more and more people are choosing to use water purifiers, and we believe that trend is unreversible. And starting in 2026, water purifiers are no longer covered by national subsidies. You might see some brands still offering 15% off on online commerce platforms, while others don't. We didn't offer that percentage off. and we have faith in our product competitiveness. And to answer your questions about the corporations with the gas companies, we recently reached the corporation with the China Gas and the Yen and Energy, companies like this. And the way we see is we are exploring new partnership models with these companies. And their showrooms and the service centers across country reaching over 50 million household users. And both of our products rely on, highly rely on the installation service support. And the production scenario fits perfectly with underwater purifiers. And the product categories complement each other. This gives us an efficient way to enter lower-tier markets. And 2026 will be a pilot year for the partnership. This is expected to be a great opportunity for both parties. And we expect it will bring incremental growth. Thank you.

Let's start with the second question. Okay. The second question is, I also noticed that we are now... First of all, let's go back to Li Erli's topic. Thank you.

That's a good question. The question was similar to that of Jingyu. Let me add a little more about this question. In fact, we have a few things to do for the company in 2026. The first is to continue to expand. The main way to expand is through the expansion of the overseas market. Especially in North America and the Malaysian market, we will have more products and will enter more channels. The second thing is about what we will do in these three ways. In these three ways, we will gradually increase our revenue. In fact, in the past year or two, we have sold a lot of this liquid gas. As the year goes on, our revenue will continue to accumulate. The profit is guaranteed. This is one of them. And the other one is the ratio of our free brand. We will make great progress. In the past, the ratio of our free brand was not very high. So we hope that through the overseas expansion and the expansion of the brand, we can improve the ratio of our various brands and further improve our share and improve our business capabilities. And the last one is about our products. In the entire product line, our original products are actually based on subwoofers. The subwoofer Our profit is actually at the average level of the industry. We will now launch some high-profit products. These high-profit products, including the one we made called QuanWu, and the one we made called Fuheng, we will increase the unit price and profit. So we hope that through these combinations of actions, we can ensure our profit and profit performance.

OK, I'll quickly translate answers to you. It's a similar question to one of the previous questions. And the first one is we will extend our oversea market scale, especially in the United States and Malaysia. And we will use more diversified products to enter in more channels. For example, for the United States, we will have offline channels with new brands and new products with higher margins. And the second strategy is to increase the consumable revenues. As you can see, the consumable revenues has a very promising guarantee of the improvement of profitability. And we have our own branded water purifier cells have increased during the past few years. And we see the trend of consumable revenues to kick in after one to two years after the equipment sells. So this will be a long-term driven factor for the margin expansion. And thirdly is to improve our own brand revenue contribution by both oversea expansion and the product portfolio expansion. And lastly is we will have more diversified product lines. As of today, we still Most of our revenues come from the under-sink water purifier product format. And our profit margin is within the industry level. However, we will extend more diversified products with higher profit margins and ASPs like the whole house water filtration systems and the countertop products equipped with diversified functions like cooling, ice making, and so on. Thank you.

Thank you.

Thank you. We'll now take the next question. And this is from Brian Lantier from Zach's Small Cap Research. Please go ahead.

Thank you very much. Most of my questions have already been covered. I just wanted to say I'm encouraged by the move to offline distribution in the U.S., And then just sort of big picture, looking out, the impact of the subsidies is significant, obviously, in your six-month results. But I think if you look year over year, you have a 14% topline growth rate. If I'm looking out over the next three to five years, is that sort of what you view as the normalized growth rate for the business, 10% to 15% topline?

Let me ask you a question first. We see the impact of the national stock market on the overall impact of 2025. But we also see that the overall income of 2025 is an increase of more than 14 points. I would like to ask, how does the company see the growth of the company in the next three years or a longer period of time?

Some of our investors may speak Chinese, so I'll answer in Chinese. We'll answer in English later. We see that the normal growth of the industry is actually at a high three-digit number. If we look at our free brand, we should be higher than the industry. There are several reasons for this. The first is We are constantly improving our brand's brand power. And then we are making progress in the international market. And then the other part is that our growth is with big clients. That is, we are talking about non-Mexican business. That is, our non-Mexican brand business is the same as the big clients. For example, like Xiaomi. Okay, I will translate the answer to your question.

According to our estimation, we see the industry's normal growth rate would be at a high single-digit level without the impact of the national subsidy and so on. And while the Xiaomi brand's growth rate will be higher than the industry, mainly because driven by the enhancement of our brand strength and the expansion of our international market growth. However, another major part of our business revenue is our major clients, key clients of business, such as Xiaomi. be aligned with the key accounts, their business performance. And in the current environment, the growth is the pressures. So overall, we anticipate that the company has the potential to enter into a nominal growth rate of a low double-digit growth in the 2027. Thank you.

Great, thank you. That's all I had.

Okay, thank you, Dan. Thank you, Brian. Thank you. That concludes the question and answer session. I would like to turn the conference back over to management for any additional or closing comments.

Okay, 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 our investor relationship consultants PS&T Financial Communications. Thank you.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.