Viomi Technology Co., Ltd Q4 FY2025 Earnings Call

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. 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 will be posted online. You can download the earnings press release and sign up for the company's e-mail distribution via 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, 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 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 statements and other risks and uncertainties is included in the company's annual report on Form 20-F and undergoing a sale with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required by law. It's also noteworthy that Viomi's earnings press release and this conference call include discussions of GAAP financial information as well as unaudited non-GAAP financial measures. Additionally, Viomi's press release contains the reconciliation of the unaudited non-GAAP measures to the most directly comparable GAAP measures. I'll 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.

Mr. Chen will deliver his remarks in Chinese followed immediately by an English translation. Mr. Chen, please go ahead.

Thank you, Mr. Chen, and I'll quickly translate our founder'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 full year of 2025. In the second half of 2025, amid the phasedown of the national subsidy gain for home appliance trading and the company's strategic investments in overseas market dimensions, new product development and brand building, we delivered total revenue of RMB 951 million and the 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 a year-over-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%. 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 across R&D and market expansion. We have achieved technological breakthroughs addressing users' diverse drinking water demand. By leveraging AI technology to enhance user experience, we are establishing Viomi as the world-leading water technology company. In the North American market, our Amazon channel delivered 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 the under-sink RO segment. Our premium flagship product, the Master 1 mine water purifier, further enriches 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 mineral water dispenser tailored for the local market, featuring both mineralization and cooling functions. On the brand building front, we are engaging individuals from different countries to serve as brand ambassadors. Participants in offline launch events will help strengthen our brand's technology and health image. In April 2026, we will debut 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 are enhancing our competitive edge. We achieved a key milestone in the global expansion of Viomi's water purifier Gigafactory by commencing full operations of our overseas premium production line. This production line integrates functions such as instant heating, cooling, and ice-making, providing agile supply chain support to meet the differentiated needs of the markets in North America, Europe, and Southeast Asia. As of the end of 2025, our global patent applications have surpassed 1,950, spanning 14 countries and regions. We have built highly competitive technology capabilities in areas such as AI-driven water quality algorithms, precision mineral control, and intelligent self-cleaning, laying a solid foundation for the continued expansion of our global business. In terms of shareholder returns, we declared a special dividend of USD 0.088 per ADS in July 2025. In August of the same year, our board authorized a new share repurchase program of USD 20 million. By the end of 2025, we had repurchased a total of 1.03 million ADSs, amounting to approximately USD 2.5 million. In our recently published earnings release, we declared another special dividend of USD 0.066 per share, with an aggregate 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 four key areas. First, for overseas markets, we will deepen our process in core strategic markets, such as North America and Southeast Asia. We are actively expanding into more countries and regions, leveraging the capacity 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 Viomi series with its alkaline mineral concept. Third, on the technology front, we will deepen the integration of AI across water purification scenarios, making technological innovation the core engine that enables Viomi to navigate market cycles and achieve sustained growth. Fourth, we will continue to strengthen collaboration with global strategic partners, fully leveraging the scale effect of the 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 returns to you, our shareholders. Thank you. And that concludes our founder's remarks. I'll 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, Mr. Chen, and Claire. Thank you to everyone for joining us today. Let's take a look at our other 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 three categories. Revenues from home water systems were RMB 628.2 million, a decrease of 32.1% from RMB 925.7 million for the same period of 2024, primarily due to the decline in the sales of water purifiers. Revenues from consumables were RMB 112.2 million, a decrease of 17.9% from RMB 136.7 million for the same period of 2024, primarily due to decreased sales of water purifiers. 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 Viomi as well as the introduction of new products in this category. Gross profit was 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 and home business 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, partially offset by a 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 in 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 in employee compensation costs. Net income 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 31st, 2025, the company had cash and cash equivalents of RMB 806.6 million, restricted cash of RMB 164.4 million, short-term deposits of RMB 258 million, and short-term investments of RMB 82.6 million. Next, let's briefly discuss key financial results 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 RMB 1,686.6 million, an increase of 12.6% from RMB 1,298.4 million for 2024. Revenues from consumables were RMB 235.4 million, a decrease of 15.2% from RMB 277.7 million for 2024. Revenues from kitchen appliances and other orders 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 this session and answer questions. Operator, please go ahead.

The first question today is from Jane Zhang from CICC.

Okay. Good evening, welling from the management team, and thank you very much for hosting this earnings call and giving me the opportunity to raise questions. I have 3 questions covering brand development, overseas strategy, and profitability growth. First, could you share the overall performance of the company's own brand Viomi in 2025? Additionally, what are the key investment priorities and initiatives for Viomi brand building this year? Thank you.

Good evening, and thank you for hosting this earnings call and allowing me to ask questions. I have three questions regarding brand development, overseas strategy, and profitability growth. First, can you provide an overview of the performance of the company's own brand Viomi in 2025? Also, what are the main investment priorities and initiatives for building the Viomi brand this year? Thank you.

Okay. To answer your question, in 2025, our brand revenue was primarily from domestic online channels. We ranked 10th among annual brands listed on Jingdong and obtained 19th in sales on Amazon U.S., which is significant progress. Moving forward, we will adopt a differentiated strategy in North America by launching distinct brands and positioning in online and offline channels. In particular, in April, we will participate in the World of Coffee fair in San Diego, and we will debut our new brand series at the WQA convention in Miami. This marks our first step into the North American offline market, showcasing to partners across the U.S. and the world our redefined vision of better water. Thank you.

It's very clear. Moving to my second question on overseas expansion. Viomi has successfully entered the U.S. and Malaysian markets. What are the differences in your market strategies between these two regions? What key challenges have you encountered, and how do you plan to mitigate them? Additionally, could you outline the overseas expansion goals for 2026?

Thank you. Jane Zhang, Analyst, it's very clear. Moving to my second question on overseas expansion. Viomi has successfully entered the U.S. and Malaysian markets. What are the differences in your market strategies between these two regions? What key challenges have you encountered, and how do you plan to mitigate them? Additionally, could you outline the overseas expansion goals for 2026?

To answer your question, we have built local teams for both the United States and Malaysia. Especially in the United States, we launched the Viomi branded under-sink water purifiers on Amazon, which is an online channel. Next, we will introduce new brands and products tailored for the U.S. offline market in the second quarter. This will not only include endorsed products but also a complete health and nutrition system. In Malaysia, our focus is on offline sales with countertop units being the main product format, adding features like hot and cold water to match local drinking habits. We will expand more offline partnerships and diversify our product lineup. However, there are still many uncertainties overseas, including geopolitical tensions that continue to create headwinds. Still, we see strong global opportunities and believe we are well-positioned; thus, global expansion will remain a key part of our long-term strategy. For 2026, we expect triple-digit growth in overseas revenue.

Lastly, in terms of the company's profitability, will we see notable improvements in profitability after focusing on the water business in 2025? Looking ahead to 2026 and the next 2 to 3 years, what are the core pathways for further enhancing profitability and sustaining this positive momentum? Thank you.

Global expansion will continue to play a crucial role in our long-term strategy. For 2026, we anticipate significant growth in revenue from international markets. In regard to the company's profitability, will there be significant improvements after prioritizing the water business in 2025? As we look to 2026 and the following 2 to 3 years, what are the main strategies for boosting profitability and maintaining this positive trend? Thank you.

To translate the answers, there are three main paths. The first is expanding the overseas market and accelerating the growth of our Viomi-branded business. Currently, our margins are still at a low level, mainly because our Viomi-branded products still constitute a relatively small part of the business. By penetrating international markets and increasing the shares of our branded sales, we can improve profitability. The second path involves consumables revenue. Revenue from our own branded products will be a long-term driver of margin improvement, as more people begin using Viomi purifiers globally. Consumable revenues will generally begin to increase 1 to 2 years after the equipment sale, where we are beginning to see a positive trend. The third path is to broaden our product lineup, which means adding more countertop options like ice-makers and multifunctional countertop water dispensers, as well as higher-margin whole home nutrition systems. These new categories will help us reach more customers and build a stronger, more complete product portfolio for global expansion. Thank you.

We'll now take the next question. This is from Shi Xining from CMS.

Thank you.

I'll quickly translate the question first. Can you analyze the impact of the national subsidy reduction on the domestic market, especially given that we see in the second half of 2025 that the negative impact caused revenue decline? Can you forecast the future impacts and offer us some guidance? Also, we recently noticed the EMS and the business development. Can you provide some heads-up about the top-line contribution of our cooperation with China gas and similar business developments?

I'll quickly translate the question first. Can you analyze the impact of the national subsidy reduction on the domestic market, especially given that we see in the second half of 2025 that the negative impact caused revenue decline? Can you forecast the future impacts and offer us some guidance? Also, we recently noticed the EMS and the business development. Can you provide some heads-up about the top-line contribution of our cooperation with China gas and similar business developments?

To translate the answer: As you can see, the impact of the national subsidy on water purifiers was evident in 2025. Due to the high base last year, the domestic market will face challenges in the first half of 2026. For products like water purifiers, however, where penetration remains relatively low, customer demand is still growing. We expect 2026 to return to this category's normal growth pace, remaining relatively resilient despite soft consumer spending. More people are increasingly choosing to use water purifiers, and we believe that trend is irreversible. Starting in 2026, water purifiers will no longer be covered by national subsidies. You may see some brands still offering discounts through online platforms while we have maintained our product competitiveness. Regarding our cooperation with gas companies, we recently reached agreements with China Gas and other energy firms. We see this as an opportunity to explore new partnership models with these companies, reaching over 50 million households through their showrooms and service centers. Our products are well-suited to these low-tier markets, and 2026 will be a pilot year for this partnership, which we expect to yield incremental growth. Thank you.

We have maintained our product competitiveness. Regarding our cooperation with gas companies, we recently reached agreements with China Gas and other energy firms. We see this as an opportunity to explore new partnership models with these companies, reaching over 50 million households through their showrooms and service centers. Our products are well-suited to these low-tier markets, and 2026 will be a pilot year for this partnership, which we expect to yield incremental growth. Thank you.

We recently reached agreements with China Gas and other energy firms. We see this as an opportunity to explore new partnership models with these companies, reaching over 50 million households through their showrooms and service centers. Our products are well-suited to these low-tier markets, and 2026 will be a pilot year for this partnership, which we expect to yield incremental growth. Thank you.

I'll quickly translate the answer. The first strategy is to expand our overseas market scale, especially in the United States and Malaysia, while diversifying our products to enter more channels. For the United States, we will establish more offline channels, introducing new brands and products with higher margins. The second strategy focuses on increasing consumable revenues, given their promising potential for enhancing profitability from our own branded water purifiers. We expect to see this trend grow in the coming years, driven by increased product usage. Thirdly, we aim to improve our own brand's revenue contribution through both overseas expansion and product portfolio expansion. Today, most of our revenue is generated from under-sink water purifier formats; we will diversify our offerings with higher profit margins and average selling prices, introducing products such as whole house water nutrition systems and multifunctional countertop products. Thank you.

We'll now take the next question, 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. Big picture, while the impact of the subsidies is significant, if you look year-over-year, your 14% top-line growth rate is noteworthy. Looking out over the next 3 to 5 years, do you see this as a normalized growth rate for the business, between 10% to 15% top line?

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. Big picture, while the impact of the subsidies is significant, if you look year-over-year, your 14% top-line growth rate is noteworthy. Looking out over the next 3 to 5 years, do you see this as a normalized growth rate for the business, between 10% to 15% top line?

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. Big picture, while the impact of the subsidies is significant, if you look year-over-year, your 14% top-line growth rate is noteworthy. Looking out over the next 3 to 5 years, do you see this as a normalized growth rate for the business, between 10% to 15% top line?

To translate the answer to your question: According to our estimation, we expect the industry's normal growth rate to be at a high-single-digit level without the impact of the national subsidy. While we anticipate Viomi's brand growth will exceed the industry average, primarily due to enhancing our brand equity and expanding our international market presence, a significant portion of our revenue stems from key accounts, such as Xiaomi, which will align with their performance. The growth rate is sensitive in the current environment. Overall, we project the company could attain a nominal growth rate of low-double-digit growth by 2027.

Thank you. This concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

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 Relations Consultant. Thank you.

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