Viomi Technology Co., Ltd. Sponsored ADR Class A Stock

Hello, and welcome to the 30th Deutsche Bank Depository Receipts Virtual Investor Conference, dbVIC. My name is Zafar Aziz from the DR Investor Relations Advisory team at Deutsche Bank. I'm pleased to announce our next presentation will be from Viomi Technology. Before handing over to our presenters, some points to note. Please submit your questions at any time throughout the presentation. Finally, all of today's presentations will be recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome our speakers from Viomi Technology.

Thank you for having us, and hello, everyone. Welcome to Viomi Technologies business update session. Today, we have Mr. Sam Yang with us, and I myself is Claire Ji and IR of the company. And Sam is the Head of our Capital and Investment Department. And I will first share the updated financials as well as recent strategic developments of the company, and Mr. Sam will join us for the Q&A session. Before we continue, let's take a second to check out the safe harbor statement and begin our today's sharing. And here is the snapshot of the company.

For the full year 2025, our core business remains solid, achieving total revenue of RMB 2.4 billion representing a year-on-year increase of 14.6%. Net income attributable to ordinary shareholders of the company stood at RMB 141.6 million with a net profit margin of 5.8%. Diluted EPS was RMB 0.67. We maintained a healthy strong cash position with free cash assets totaling RMB 1.14 billion.

And as of today, we have filed nearly 2,000 global patent applications, including nearly 700 inventions spanning 14 countries and regions. We have built highly competitive technological capacities 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.

Let's take a look -- deeper look at the financial performance of the year 2025. Our sales fluctuation between the first and second half were primarily driven by the impact of the government subsidy policies and with rapid growth in the first half followed by a decline in the second half. But overall, our financial performance stayed resilient against the external fluctuation and our gross profit margin was stay stable around 25% -- our revenue consists of 3 business segments. First one is the home water systems, which accounts for around 70% of our total revenue. And then is the consumables, which accounts for about 10% and the kitchen appliance and others, which takes up around 20%.

Among this, the home water systems is our core business segment, and we believe that the penetration rate of the water purifier continues to grow, the share of the consumables revenue will steadily increase, thereby driving an improvement in the overall profitability. And under the current revenue structure, our net profit margin is around 6%. And in 2025, due to the company's increased efforts in overseas expansion, we saw a slight decline compared to the -- in the net profit, which compared to the previous year.

And as of December and as of the end of 2025, the company's total cash assets on the balance sheet amounted to RMB 1.3 billion, which is equal to USD 188 million. And here's the update for our recent dividends and stock buybacks. On March 25, 2026, we declared a special cash dividend of USD 0.066 per ADS. With an aggregate amount of USD 4.5 million. For the repurchase program, by the end of 2025, we have already purchased about 1.03 million ADS amounting to approximately USD 2.5 million, reflecting our commitment to enhancing the shareholders' value.

And over the past year or so, we have continuously enriched our smart water purification solutions and developed a differentiated technology pathway for mineral -- natural mineral water. And our strength in product technology innovation have been validated, and we have also made solid progress in expanding overseas markets and most importantly, despite internal and external uncertainties, we have been able to maintain a stable financial performance.

And Viomi has been dedicated in the water purification industry for over a decade. And since 2014, when we partnered with Xiaomi to launch the first water purifier, which redefined the industry to our renewed strategic refocus on water purification last year, and we have built a solid moat in manufacturing, R&D and innovation for home water purification. And today, we are entering the second decade of global water.

Viomi is striving to become a provider of smarter and healthier water solutions for users worldwide. And our solution mainly includes 3 product lines, which is the whole home water filtration system and under-sink aisle products and the countertop product series. Currently, the under-sink aisle products make up for the largest share of our revenue, and we are further diversifying our product portfolio to offer customers in different countries and regions a wider range of the product series. And here is the new product series we launched in 2025.

And in May, we launched the Kunlun 4 Pro in the domestic market, which is the differentiation path we are focusing on in the domestic market. And in the U.S. Amazon in September, we launched the premium flagship product, Master M1. To further deepen our strategic cooperation. And in Southeast Asia market, we launched the compact model, the countertop product, INNO, which is tailored for the local market and featuring both mineralization and cooling functions.

And in December, we released the leader series of the whole house filtration series, which include integrated filtration, softening and mineralization functions. And we use AI technology to make water better. These innovations, including timely filter replacement reminders, one-click reordering and DIY replacement options make smarter water purification products reliable, hassle-free and affordable essential for daily life.

And our water purifier gigafactory is located in Foshan, Guangdong with 80% of core components manufactured in-house. It features one of the industry's most integrated and highly automated production lines for water purifier. And we achieved key milestones in the global expansion of our Viomi water purifier gigafactory, commencing full operations of our overseas premium product lines -- this production line integrates modular functions such as instant heating and cooling and ice making and providing agile supply chain support to meet the differentiated needs of markets in North America, Europe and Southeast Asia.

Different countries, actually, people have different drinking habits. So that's why we have this most automated and integrated in-house manufacturing to support our global expansion. And here is our distribution channel. We have the omnichannel distribution network to power our global market access and achieving international market penetration and comprehensive domestic coverage through strategic customers -- strategic partnership with leading e-commerce platform, new media channel and offline outlets, covering the nationwide service center to support the after-sales services for our customers.

And in 2025, we made remarkable progress in our overseas expansion. Our Vortex series achieved on sales on Black Friday in the United States and ranking fourth in the under Think Tank segment on Amazon and 19th in the sales volume among the entire water purifier sector. We also held an online new product launch in Malaysia, where our brand ambassador, Shila attended in person to experience our new product and further enhancing our brand influence in the Southeast Asia.

The global market of the whole water purification is entering a high growth area with different market penetration in major countries and regions. And currently, China is still on a low market penetration level, which has greater potential. And also the U.S. market is the largest market currently, but with different product formats. And we think our current advantage in the product innovation can be a major competitor in the U.S. market. And to conclude today's sharing, we will pursue our global water vision with greater determination, targeting breakthroughs in 4 key areas.

First, for overseas markets, we will deepen our presence in the core strategic markets such as North America and Southeast Asia and which we will bring different products to more localized products to expanding our brand influence in broader markets. And also, we will -- to advance our differentiation in the domestic market, we will strengthen -- further strengthen the health-centric position of equipment series with its Alkaline mineral concept.

And most importantly, we will continue to strengthen our collaborations with global strategic partnerships, fully leverage the scale effect of the water purifier gigafactory to elevate both scale and efficiency. And through this committed long-term approach, Viomi will continue to create value for global users and deliver sustainable returns to our shareholders. So this is so much for the sharing part, and we can go to the Q&A session now.

[Technical difficulty]

This is Sam. I think the question was about how the performance of our North America. So let me just give you a heads up about the North America. So this year for '26, our key performance actually key focus is the North America. That is the Canada plus U.S. And we have already launched the sales in Canada and for the America, we have the Amazon sales and which is good and comparing to last year. And also, we are going to launch the offline sales for the North America.

Sorry...

And now this is yes, and we have the sales in the America market and offline right now, we have in Miami, and we welcome you guys to visit us in the...

Okay. We have -- sorry, I just got disconnected. And I think we are already in the Q&A session, and we have many questions. Do we have answers? What are the time lines and the risk for U.S. and the Malaysian market launches on platforms like Amazon?

Yes. Can you hear us?

Yes, I can hear you.

Okay. So talking about the product line, we have already launched for the North America and Malaysia. So here is the main product we are launched to the 2 main market that is. So let's talk about the American market, we have the V6 and V8. And also this year, we have launched the V6 and V8 Pro. And they are selling well right now in Amazon.

And we are going to launch more products that is for the U.S. market, that is the CYTO and also the coffee machine. And it's going to be next year -- the second half actually. And talking about the Malaysia, we have already launched the INNO that is countertop. Also, we are going to launch Under-sink also. So it will be a lot of choices for both markets.

The next question is about the tariffs. What are the tariffs shaping your thoughts on global production locations? I think mainly focused on the U.S. and Southeast Asia.

Yes, for the tariff. Right now, we have the tariff is actually it's not only to Avi the tariff applies to all the products that are coming from China to the U.S. So right now, the water purifier, the tariff is talking about 35%, and it changed a lot of times. So since the very beginning, it's low and then more and the top, I think it's 55% and now it reduced to 35% actually.

And we have already think about this and considering the tariff is only on the cost basis, that is -- if we talk about the whole sales price, so that impact can be manageable. And also, we have considered the other choices, which is our own plan. And if we talk about the other countries, we think that is manageable.

Can you talk -- speak to your internal expansion partner with Xiaomi? How do you plan to address ongoing profitability challenges?

Talking about Xiaomi, this is a long strategic partnership with Xiaomi we have before and we have now and we will have in the future. So we have a very strong collaboration on the product R&D. And also, we have a very strong supply chain to support Xiaomi worldwide growth and expanding. And talk about last year, '25, we have a very strong growth with Xiaomi's business.

And this year, considering about the subsidy of -- it's taking off in China, so it quite a little bit challenging in the first half, and we can foresee that it's going to come back in second half. So if looking forward, we still think that this is a very strong performance partnership with Xiaomi, and we can see a steady growth with Xiaomi.

Okay. Thank you. And the next question is about Viomi's balance sheet remains very solid after dividends and buybacks. How much financial flexibility do you have to keep rewarding shareholders while funding your global water plan?

Yes. Very good question. Actually, if you look at the dividend plan we have for previous years, including this year, we have -- we did 3x the dividend repatriation. So that is to return our shareholders -- and you can see if we consider the stock price, the return is about -- right now, it's about 5% to 6% return.

So it's not 0. And if we're looking forward, we are trying to make the company with the steady growth. That is we are looking for a bright future. Actually, we are expanding the global market, and we explore more opportunities in the product line. And also, we are trying to figure out the core market customer demand, and we are studying and we are going to capture that opportunities in the global market. And that is a sustainable growth for the investors. And that's all the management are focusing right now to expand the global presence and also we are looking for a steady and strong growth in overseas market.

Okay. And Viomi mentioned the cost optimization following the end of subsidy support. What early evidence do you see that these measures are starting to work?

Talking about the earnings, actually, we can see for the moment. If we look about the long-term development, that is our strategy this year is we care more about the growth. So once you have the growth, you have the future. We cannot afford that we look about -- actually, we need to balance the growth and the earnings. So this year, we care more about the growth. So that's why we are expanding the global market. That's why we put more product lines to be launched this year. And also we care about the shareholders' return. So let's just focus on the growth.

Also, there's a question about the forecast. External forecast still see upside for earnings and the share price into late 2026. What are the key execution milestones you need to hit to realize that potential?

I think if we look about the China market share and the global market share, we can give you a heads up that for the global market, especially in the U.S. market, if you look at the Amazon's performance that it's already delivered that it's very strong growth compared to last year. And we can foresee that with the new product to be launched in Amazon, it's going to be stronger. If we look at the offline channel that in the U.S. market, so today and tomorrow is going to be WA, that is the biggest show in the U.S. market.

And more and more customers are coming and they will approve our product. And once the can determine that we can just ship the products as per the orders they can give. So that's the process we can foresee for the U.S. market. And if we talk about the Malaysia and even Singapore, and we can foresee that for the Q1, and we have a very good performance that more and more orders are coming and we can support our customer needs.

And right now, the customers demanding actually are expanding. So we are doing more and more effort to fulfill the orders that are coming from Singapore and also the Malaysia. And if we talk about the China market, the China market we have because the subsidy is taking off, is gone. And we can foresee that for the offline is growing right now, and we have more and more orders is coming. And talk about the online sales is a little bit challenged. So that's the whole picture. And hopefully, that we can -- just like I said before, for the first half, we have a little bit challenge. And for the second half, we can tip back.

Yes. Thank you. And I think we are running out of time, and we have answered almost all the questions. And thank you all for today's participating. And for any further inquiries, please contact our IR team at [email protected]. And thank you.

Thank you.

Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Co. Limited's Earnings Conference Call for the Second Half and Full Year of 2025.

[Operator Instructions] Today's conference call is being recorded.

I will now turn the call over to your host, Ms. Claire Ji, the IR Director of the company. Please go ahead, Claire.

Hello, everyone, and welcome to Viomi Technology Company Limited's Earnings Conference Call for the Second Half and Full Year of 2025. As a reminder, this conference is being recorded. The company's financial and operating results [Audio Gap] posted online. You can download the earnings press release and sign up for the company's e-mail 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; I'm 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 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 this and other risks and uncertainties is included in the company's annual report on Form 20-F and other filings as filed 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 Viomi's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. In addition, Viomi's press release contains a reconciliation of unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I will now turn the call over to our Founder, Mr. Xiaoping Chen. Mr. Chen will deliver his remarks in Chinese, followed immediately by English translation. Mr. Chen, please go ahead.

Thank you, Mr. Chen.

[Foreign Language]

And I'll quickly translate our founder's remarks before discussing our financial performance.

[Interpreted] Hello, everyone. Thank you for joining us today on our earnings conference call for the second half and full year of 2025. In the second half of 2025, amid the phase down of the national subsidy scheme for home appliance trading and the company's strategic investment in overseas market expansion, new product development and brand building, we delivered a total revenue of RMB 951 million and net income attributable to ordinary shareholders of the company of RMB 21.2 million. For the full year, our core business remained solid, achieving total revenue of RMB 2.4 billion, representing the year-over-year increase in 14.6%. Net income attributable to ordinary shareholders of the company stood at RMB 141.6 million 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 America, Southeast Asia and Europe, empowered by a global perspective Global across R&D and 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 Viomi 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 Black Friday promotional season, our products ranked 19th in the water purifier category and fourth in under-sink RO tankless segment. Our premium flagship product, the Master 1 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 have engaged famous actors and singers from different countries to serve as brand ambassadors. The participant in offline launch event 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 at one of the most influential professional events in the global water treatment industry and presenting our redefined vision of better -- and 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 Viomi'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 ice making, 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 [indiscernible] USD ADS in July 2025 in August of the same year. We authorized a new share repurchase program of USD 20 million by the end of 2025. We had repurchased a total of 1.03 million ADS amounting to approximately USD 2.5 million. In our recently purchased -- published earnings release, we declared another special dividend of USD 0.066 per share with an aggregated amount of RMB 31 million 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 4 key areas. First, for overseas markets, we will deepen our presence in 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 differentiation in the domestic market, we will further strengthen the health-centric positioning of the Kunlun 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 core engine that enables Viomi to navigate market cycles and achieve sustained growth. Fourth, we will continue to strengthen collaborations with global strategic partners, fully leverage the scale effect of Water Purifier Gigafactory to elevate both scale and efficiency. Through this committed long-term approach, Viomi will continue to create value for global users and deliver sustainable return to our shareholders. Thank you.

And that concludes our founder's remarks. I will now turn the call over to our Head of Capital and Investment Department, Mr. Sam 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 unaudited financial results for the second half of 2025. We recorded net revenue of RMB 950.6 million, a decrease of 25.9% from RMB 1,282.4 million for the same period of 2024, primarily due to the decrease in the home water systems.

Now let's look at the performance across 3 categories. Revenues from home water system were RMB 628.2 million, a decrease of 32.1% of RMB 925.7 million for the same period of 2024, primarily due to the decline [Audio Gap] in service for water purifiers. Revenues from consumables were RMB 112.2 million, a decrease of 17.9% from RMB 133.7 million for the same period of 2024, primarily due to the decreased sales of water purifier filters to Xiaomi.

Revenues from kitchen appliances and others were RMB 210.2 million, a decrease of 4.5% from RMB 220 million for the same period of 2024, primarily due to the reduction in orders from Xiaomi as well as contraction of Viomi brand product in this category.

Gross profit were RMB 223.8 million compared to RMB 289.5 million for the same period of 2024. Gross margin was 23.5% compared to 22.6% for the same period of 2024. The slight increase in gross margin was mainly due to the elimination of the impact of one-off costs incurred during the divestment of certain IoT at home business and our assets.

Total operating expenses were RMB 248 million, an increase of 12% from RMB 221.5 million for the same period of 2024 due to increased selling and marketing expenses and partially offset by decrease in G&A expenses. In greater detail, R&D expenses were RMB 76.3 million, an increase of 12.7% from RMB 67.7 million for the same period of 2024, mainly attributable to an increase of investment in new product development.

Selling and marketing expenses were RMB 148.6 million, an increase of 29.8% from RMB 114.6 million 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 RMB 23.1 million, a decrease of 41.2% from RMB 39.3 million for the same period of 2024, primarily due to a decrease of employee compensation costs [Audio Gap] was RMB 21.2 million and the non-GAAP net income was RMB 28.2 million. Additionally, our balance sheet remained healthy. As of December 1 -- December 31, 2025, the company had cash and cash equivalents of RMB 806.6 million, restricted cash of RMB 164.4 million, short-term deposit of RMB 258 million and short-term investment of RMB 82.6 million.

Next, let's briefly discuss key financial results and audit for the full year 2025. Net revenues were RMB 2,428.2 million, an increase of 14.6% from RMB 2,119 million for 2024. Revenues from home water systems were [Audio Gap] RMB 1,686.6 million, an increase of 12.6% from RMB 1,498.4 million for 2024. Revenues from consumables were RMB 235.4 million, a decrease of 14.2% from RMB 277.7 million for 2024.

Revenues from kitchen, appliances and others were RMB 506.2 million, an increase of 47.6% from RMB 342.9 million for 2024. Gross profit was RMB 615 million compared to RMB 548.7 million for 2024. Gross margin was 25.3% compared to 25.9% for 2024. Total operating expenses were RMB 529.4 million, an increase of 24.6% from RMB 424.9 million for 2024.

In greater detail, R&D expenses were RMB 165.6 million, an increase of 15.9% from RMB 142.9 million for 2024. Selling and marketing expenses were RMB 277.7 million, an increase of 31.5% from RMB 211.2 million for 2024. G&A expenses were RMB 86.1 million, an increase of 21.6% from RMB 70.8 million for 2024. Net income attributable to ordinary shareholders of the company was RMB 141.6 million and non-GAAP net income attributable to ordinary shareholders of the company was RMB 155.7 million.

Thank you.

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

[Operator Instructions] First question today is from Jin Yu Zhang from CICC.

Thank you very much for hosting this earnings call and giving me opportunity to raise questions. I have 3 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, Viomi in 2025? And additionally, what are the key investment priorities and initiatives for Viomi's brand building this year?

[Foreign Language]

[Interpreted] Okay. And to answer your question, in 2025, our brand revenue was primarily from domestic online channels. And we have ranked the 10th place among the annual brands listed on Jingdong, and we also ranked 19th place in sales on Amazon U.S.A., which is a great progress. And moving forward, we will adapt a differentiated strategy in North America by launching distinct brands and positioning on online and offline channels. In 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 U.S. and the world, our redefined vision of better water. Thank you.

It's very clear. So here, moving to my second question on overseas expansion. So Viomi has successfully entered the U.S. and the Malaysia market. So what are the differences in your market strategies between these 2 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?

[Foreign Language]

[Interpreted] And to answer your question, we have built local teams for both United States and Malaysia. And especially in the United States, we launched the Viomi branded under-sink water purifiers on Amazon, which is the online channel. And next, we will bring new brands and products tailored for the U.S. offline market in the second quarter. And this will cover not only the under-sink products but also the whole house filtration systems. And in Malaysia, our focus is offline with countertop units as the main product format, adding features like ice and cold water that match the local drinking habits. And next we will extend more offline partnerships and diversify our product lineup.

But for the overseas markets in total, in the future, there are still plenty of uncertainties overseas and the geopolitical tensions continue to create headwinds. Still, we see strong opportunities. globally, and we believe we are well positioned. That's why the global expansion will remain a key part of our long-term strategy. And for 2026, we expect triple-digit growth in the overseas revenue.

Yes, very clear. 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 2 to 3 years, what are the core pathways for further enhanced profitability and sustain this positive momentum.

[Foreign Language]

[Interpreted] To translate the answers, there are 3 main tasks. The first is expand 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 improvement. As more people are using Viomi water purifiers globally, the consumable revenues will start to kick in about 1 to 2 years after the equipment sales, and we start to see the trend.

And then third, 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 and for the global expansion.

We'll now take the next question. This is from [ Xi Jing Xing ] from CMS.

[Foreign Language]

I'll quickly translate the question first.

[Interpreted] 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 impact and offer us some guidance?

And also, we recently noticed the [indiscernible] business development. Can you offer some heads up about the top line contribution about the cooperation with China Gas, this kind of business development?

[Foreign Language]

Okay. I'll quickly translate the answer.

[Interpreted] 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, the 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 as 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% of online commerce platforms where others don't. We didn't offer that percentage of, and we have faced in our product competitiveness.

And to answer your questions about the cooperations with the gas companies, we recently reached the cooperation with the China Gas and Yan'an Energy companies like the -- companies like this. And the way we see is we are exploring new partnership models with these companies. And their showrooms and service centers across the country, reaching over 50 million household users. And both our products rely on -- highly rely on the installation service support and the production scenario fit perfectly with under-sink water 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.

[Foreign Language]

[Foreign Language]

Okay. I'll quickly translate the answers to you.

[Interpreted] This is a similar question to one of the previous questions. And the first one is we will extend our overseas market sales, especially in the United States and Malaysia, and we will use more diversified products to enter more channels. For example, for the United States, we will have explored offline channels for first time with new brand 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 sales has increased during the past few years, and we see the trend of consumable revenues to kick in after 1 to 2 years after the equipment sales. So this will be a long-term driving factor for the margin expansion.

And thirdly is to improve our own brand revenue contribution by both overseas 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 comes from the under-sink water purifier product format. And our profit margin is within the industry level. However, we are -- we will extend more diversified products with higher profit margins and ASPs like the whole house water filtration systems and countertop products equipped with diversified functions like cooling, ice making and so on.

We'll now take the next question. And this is from Brian Lantier from Zacks Small-Cap Research.

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 was significant, obviously, in your 6-month results. But I think if you look year-over-year, you have a 14% top line growth rate. If I'm looking out over the next 3 to 5 years, is that sort of what you view as the normalized growth rate for the business, 10% to 15% top line?

[Foreign Language]

[Foreign Language]

[Interpreted] I will translate. Answers to your question. According to our estimation, we see the industry's normal growth rate would be at a high single-digit level if without the impact of the national subsidy and so on. And while the Viomi brand 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 business such as Xiaomi. This will be aligned with the key accounts, their business performance. And in the current environment, the growth is precious. So overall, we anticipate that the company has the potential to enter into a nominal growth rate of low double-digit growth in 2027. Thank you.

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 consultant, PSMT Financial Communications. Thank you.

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

Hello, and welcome to the Deutsche Bank Virtual Investor Conference, dbVIC. This is Zafar Aziz from the Deutsche Bank team. I'm pleased to welcome our next presentation by Viomi Technology from China. Before I introduce our speaker, a few points to note. Please click on the questions box to ask a question. All of today's presentation were recorded and can be accessed by the Deutsche Bank website, adr.db.com. I'm happy now to hand over to Viomi Technology.

Thank you. Thank you for having us. My name is Claire Ji I'm the IR relationship of the company, and hello, everyone. Welcome to Viomi Technologies business update session. Today, we have Mr. Sam Yang with us, and he's from the Head of Capital and Investment Department. And I will first share the recent development as well as updated financials of the company, and Mr. Sam will join us for the Q&A session. Before we continue, let's take a second to check out the safe harbor statement and begin our today's sharing.

Yes. As you know, due to the delayed submission of our 2024 annual report, the earnings release for the first half of 2025 will be also postponed and which is scheduled to be on next Monday, which is November 10. And although however, the completion of our strategic reorganization last year, marking a perfect milestone as we sharpen our focus on our core home water solutions businesses. And our strong performance in last year. And the continuing operations achieved net revenue of RMB 2.1 billion and RMB 144 million in net profit. And also, we expect the revenue of the first half of 2025 to exceed RMB 1.4 billion, representing an increase of over 70% year-over-year.

The company has now fully entered a new phase of high-quality development characterized with synergistic growth in both scale and profitability. And our strategic focus is to concentrate all resources and efforts on home water solution business, continuously enhancing more intelligent and comprehensive water purification products and guided by global expansion of the direction for sustained innovation, we will provide more diversified product portfolios tailored to living habits across different countries and regions while ensuring steady improvement in operational foundations.

We provide revolutionized home water experience with AI-powered home water solutions, including whole home [indiscernible] and installation-free products. And Viomi has dedicated to the water purification industry for over a decade. Since our founding in 2014, when we partnered with Xiaomi to launch the first smart water purifier that redefine the industry. Through our renewed strategic refocus on water purification last year, we have built a solid moat in manufacturing, R&D and innovation in home water business.

Today, as we entered our second decade for global water, Viomi is striving to become a provider of smarter and healthier home water solutions for users worldwide. We established 7 leading technology pathways and are continuously enhancing our module functionalities to upgrade our product competitiveness and diversify our product portfolio. And in 2025, we launched a new product series in the Kunlun series, featuring mineral rich and alkaline water by integrating the natural geological process that forms mineral water in nature into our Kunlun filters. We enable consumers to enjoy naturally [ occurring ] mineral water right at home. And we use AI technology to do that.

We have proprietary platform to achieve remote real-time monitoring of water quality and usage, provide timely filter replacement reminders and one-click reordering and DIY replacement options. This innovation makes smart water purification products a reliable, hassle-free and affordable essential for daily life. Our global leading integrated water purifier gigafactory is designed to have an annual water purifier production capacity of 5 million units and annual future production capacity of 30 million units with total investment of USD 130 million. And up to date, our investment progress has reached more than 60%.

We have built out the omnichannel distribution network to power global market access. In the domestic market, we sell our Viomi branded products through all the major online channels like Jingdong ,Tmall , Pinduoduo and et cetera. We also have national coverage of service centers to guarantee our after-sales services. Our global strategic partners, including Xiaomi, Jingdong and [indiscernible], we work with our dealers nationwide and with our products are sold by the dealers on the Xiaomi offline stores. In 2025, we have made remarkable progress in overseas expansion.

In March, we signed a strategic cooperation agreement with [indiscernible], a leading and the largest actually the offline retail company in Malaysia, and our Viomi water purifier will be widely available in their offline stores across nation. And in August, our Volta series ranked sixth on Amazon and the Under-Sink tank water purifier list. And also in September, we bring new products to Amazon, which is the high-end mineral water purifier Master 1.

And in October, recently, we unveiled the Compact Countertop Inno series in Malaysia and officially announced the single Shila as our brand ambassador in Malaysia. That was just happened last week. And the global market of the home water purification and is entering a growth -- high-growth era with differential market penetration in major countries and regions. So far, the U.S. market is the largest market with USD 6.7 billion market scale, while the Chinese market has great potential with a comparably low market penetration. And we see growing public concerns about drinking water quality, increasing awareness of health and environmental protection and consumers diversified demand in water, such as better taste, better quality.

These are the proven factors for increasing market penetration. And to conclude about sharing, Viomi is focused on the water purification sector, a field where we possess distinct competitive advantages and sustainable market growth. We will continue to strengthen our technological and R&D capacities as well as our production and manufacturing expertise and steadily advancing the global water vision. And actually, today, I will not go into further details in the 2024 financials.

And we welcome all of you online to follow our first half year results, which will be released next week. And to conclude with an update on our recent dividends and stock buybacks. In July this year, we declared a special cash dividend with demonstrating our intention to share the opportunity improvements that we achieved during since the restructuring with our shareholders. And in October, we got the approval from the Board for a new repurchase program with a total amount of USD 20 million. And as our Founder and Mr. CEO, Mr. Chen stated, our strategic transformation and initiatives are designed to ensure the company's long-term sustainable growth and to enhance shareholder value. We commit to growing together with our valued shareholders.

Thank you all for listening our sharing, and we will have Mr. Sam to join us for the Q&A session now.

Thank you, Claire. Let's start the Q&A.

Okay. Okay. We got our first question. Can you speak to projected growth rate for household water purification solutions?

Yes, In China, let's just talk about for China for the moment now. If we're talking about China, the penetration rate right now is still low. And the industry growth CAGR is talking about 8% every year. And this year for 2025, it's a little bit higher. If this is related to our company, we think that the rate is higher than the industry. But if we talk about the U.S. side, the CAGR is talking about 8% also. So -- but if we talk about the Amazon, it's double digit every year. So we are at the same rate as the industry. So that's the U.S. side. If we talk about the Malaysia, it's a little higher. It's talking about lower double-digit, CAGR every year, and we are at the same rate. And let's talk about the next question.

Okay. And this question is about our products in Malaysia. Are the models sold in new markets like Malaysia Viomi branded or Xiaomi labeled? Also, are you seeing additional use of your app for future replacement orders?

For Malaysia?

Yes, maybe I'll answer this question directly. And the models we sold in Malaysia are Viomi branded products, and we have this series named Kunlun series. It's a very compact design and it's a countertop water purifier. And actually, at this moment, the idea -- I assume you asked about any additional use of the app for the user replacement, especially for the Viomi branded products, we haven't got to that phase yet because we are -- this new generation of water purifier only have like -- the standard has 2 filters and which already has extended lifespan of the filters. And we think this more encourage people to get more involved in the water purifier products, and it helps to grow the penetration of these products. Yes, that's it. And we'll have the other question. What is the competition for your solution and impact of your [indiscernible] AI-driven water solutions?

I think you can just answer this question, Claire.

Yes, this is a new question. Okay. Sure. No problem. And what is about the competition of our solution is the major thing is we have dedicated in this sector for over 10 years. And from the technology point, we have this diversified mineral technology, which is one of a kind in Chinese market. And also, I think our technology, what we brought, especially the Master 1 series we bought in Amazon is so far ahead of the market technology and the average pace.

And also for the AI-driven factors, there's a lot of things you can experience when the product has this AI functionality because it can provide you the remote and real-time monitoring of water quality and also intelligently adjust the mineral in the water. So you can see the smart display and the water quality, the filtered water quality on your vessels and on your mobile phones also. So these products, we are ahead of the market average technology pace, and we think that's one major thing. That this product can bring actual convenience to consumers and can promote the penetration both in China and globally.

Yes. There's another question. What were the drivers of the 29% year-over-year growth for the last year? And do you expect this momentum to continue into this year? Yes, it's a good question. Let me just answer it. For last year, actually, what we did is we are more focused on our core business. This is the main reason we get that driver that -- and the second one is about the whole team is more focused on the product innovation so that we can just launch the products in Amazon at the end of the last year. And for this year, we expect it's going to continue, and we will deliver double-digit growth and which is very strong for this year. And the key drivers this year is 3 pillars actually.

The first one is about the product innovation. We launched the Inno and we launched the mineral water series, and we have the heating functions, and we have the icing functions. So it's a lot of innovation we launched this year, which has delivered a good result for the first half actually. We had 70% -- over 70% growth. And the second pillar is about the strategic partnership with Xiaomi, and we have more and more products produced actually, we have fulfilled the customer needs. And our relationship with Xiaomi is strengthening that -- which actually we believe we will continue for the coming 2 years.

And the third pillar is about the overseas market that -- you can see that we have Amazon last year launched the new products that this year, we have a very good result. It's grown very strong. So -- and we are going to launch our earnings release next Friday, actually, and you can see the format that we can see. And let's go to the next question. What...

Okay. Sam, I read the question and you can answer that. Yes.

Okay.

Sure. What are your priorities and milestones for international expansion over the next 12 months?

For the next year, actually for the national-wide and for the worldwide, let's just talk about the worldwide first. If we talk about the worldwide, what we are focusing is the U.S. market and the Malaysian market. And we are going to launch more and more new products actually in Amazon. And recently, we just launched the M1, which is more like the mineral water, and we are going to launch more to U.S. market.

And we are going to establish the offline sales channel in the U.S. So we will have the online and also the offline for the U.S. market. And we will build up our brand awareness in the U.S. market. And for the Malaysia, what we did is we just did a new product actually launched just in the Malaysian market. And also, we have a brand speakers now in Malaysia. And what we are going to do in Malaysia is we are going to find more distributors to sell our product in Malaysia and which is centralized in the -- actually can cover Indonesia and Thailand and also Singapore and for other areas actually.

So Malaysia is very important for the company. And if we're talking about China, China is -- what we are going to do is we centralize on the mineral water function and also we provide more and more functions into the products actually. So we will -- we will have a new -- we already have a new brand speakers right now in China. And so that will enhance our brand awareness.

Yes, sure. And the next question is about our Gigafactory. And what operational risk are associated with scaling up manufacturing capacity at the Gigafactory? And how is Viomi managing this risk?

Yes. I think it's very good. Right now, the Gigafactory, what we build up is the world-class level, and we have a very high automation. And it can produce 2 million finished goods a year and 10 billion -- finished a year. So the challenges and risk right now is about -- I think it's more like the challenge. The first one is about the -- how to speed up with the sales. It takes time to get the production ready for the sales that -- which is booming actually it's very quick. And so we need to prepare the material. We need to prepare the labor, and we need to get the machine running without any problem.

So that's the planning side. We need to do it well. And the second part is about how to manage the risk of the purchase. Once you have that sales order and you need to produce it at a reasonable cost, so you need to book the material in hand in advance so that you can just get a reasonable price. That's the second challenge. And the third one is about the automation side. You cannot do everything by the automation because once you have the automation, that means you can produce a lot of product.

And if the product cannot meet the needs of the customer, that means a waste. So you need to be very national and rational and also you need to be very cautious about the automation. So every investment into the automation, we need to evaluate, and we should keep it at the speed as our sales growth. Thank you.

Sure. And our next question is about the future replacement. Can you share more about the life span and the DIY aspect of wellness future products? How does this impact customers' retention and recurring revenues?

For the DIY side, what we did is -- just for the U.S. side, we have a very -- just like the little model, which means that every user can install our equipment, the water purifier very quickly. And even you don't know anything, you can just see the video or just see the manual, how to install it in 40 minutes. So it's very easy.

And also for the filers, every user can just change the filers in 2 seconds. It's very easy, super, super easy. And -- if we talk about the China side, we have the DIY model for almost over 10 years. So it's very popular and everybody gets used it. And we are going to launch more and more models that just like the DIY and get user-friendly and every people -- every person once you use it, you will love it.

Yes. I may add some point to this question. I think probably the major concern is maybe you see the sign of the decline of our recurring revenue, especially the consumables -- that's mainly due to the technology innovation because so far, most of the products have longer lifespan, which majorly represents the longer lifespan of the filters. And the DIY, as Sam mentioned, definitely improve people's retention for using the water purifiers, and they tend to change the filters when the lifespan ramps up, and they can do it on their own, so it's easy and no actual cost affect the filters cost.

About our consumable revenues on book that most products so far have only 2 futures, which slowed down the frequency of the futures. And this is what we see as industry evolution stage. So this may be last for a few years, but we still have this positive outlook for the recurring revenues in the future. And our last question is about government initiatives -- incentives for home appliance replacement, which helps to drive the domestic demand in 2025. And do you have any insight into better these programs may be renewed in 2026?

I'll answer this question directly. Yes, you're correct. The government subsidy is the major factor for our growth in the 2025 so far. And as we can see for -- starting from the third quarter, some provinces has slowed down their pace in this incentives. And this is no longer a nationwide incentive actually. And we expect the revenue growth may be slowed down for the second half of 2025. And we cannot say for sure whether this program can be renewed for 2026, but we remain prudent on this point. Yes. Okay. I think we are running out of time now.

Okay. Thank you. Thank you for joining us tonight.

Yes. Thank you all for this.