Viomi Technology Co., Ltd ($VIOT)

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.