Hello and welcome to the Deutsche Bank Virtual Investor Conference, dbVIK. This is Zafra Zi 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 presentations will be recorded and can be accessed via 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, and I am the IR relationship of the company. Hello, everyone. Welcome to Viomi Technology's business update session. Today we have Mr. Sam Yang with us. He's from the head of capital and investment department. I will first share the recent development as well as updated financials of the company. 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. Yeah, as far 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, which is scheduled to be on next Monday, which is November 10th.
Although, however, the completion of our strategic reorganization last year marked a pivot milestone as we sharpened our focus on our cool home water solution businesses and given our strong performance in last year. The continuing operations achieved a net revenue of RMB 2.1 billion and RMB 144 million in net profit. 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 synergetic growth in both scale and profitability. Our strategic focus is to concentrate all resources and efforts on the home water solution business, continuously enhancing more intelligent and comprehensive water purification products.
Guided by global expansion of the direction for sustained innovation, we will provide more diversified product portfolios tailored to leading 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 under-sink and installation-free products. 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 redefined the industry. To our renewed strategic focus on water purification last year, we have built a solid moat in manufacturing, R&D, and innovation in the 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 seven- leading technology pathways and are continuously enhancing our module functionalities to upgrade our product competitiveness and diversify our product portfolios. 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 alkaline mineral water right at home. We use AI technology to do that. We have a 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 Gigaf actory is designed to have an annual water purifier production capacity of 5 million units and an annual filter production capacity of 30 million units, with a total investment of $150 million. As of today, 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 etc. We also have national coverage of service centers to guarantee our after-sale services. Our global strategic partners, including Xiaomi, Jingdong, and Senheng, work with our dealers nationwide. With our products, our sales are sold by the dealers on the Viomi offline stores. In 2025, we have made remarkable progress in overseas expansions.
In March, we signed a strategic cooperation agreement with Senheng, a leading and the largest, actually, the offline retail company in Malaysia. Our Viomi water purifier will be widely available in their offline stores across the nation. In August, our Volta Series ranked sixth on Amazon's under-sink 10-class water purifier list. Also in September, we bring new products to Amazon, which is the high-end mineral water purifier MASTER M1 . In October, recently, we unveiled the compact countertop INNO S eries in Malaysia and officially announced the singer Shila as our brand ambassador in Malaysia. That was just what happened last week. The global market of the home water purification is entering a high growth era with differential market penetration in major countries and regions. So far, the U.S.
market is the largest market with a $6.7 billion market scale, while the Chinese market has great potential with a comparatively low market penetration now. We've seen 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 driving factors for increasing market penetration. To conclude about sharing, Viomi is focused on the water purification sector, a field where we possess distinct competitive advantages and stable 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. Actually, today, I will not go into further details in the 2024 financials. We welcome all of you online to follow our first half-year results, which will be released next week.
To conclude with an update on our recent dividends and the stock buybacks. In July this year, we declared a special cash dividend, demonstrating our intention to share the opportunity. Improvements that we achieved during a think-through restructuring with our shareholders. In October, we got approval from the Board for a new repurchase program with a total amount of $20 million. As our founder and Chief Executive Officer, 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 can meet to grow together with our valued shareholders. Thank you all for listening to our sharings, and we will have Mr. Yang 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?
Yeah. In China, let's just talk about it for China for the moment now. If we're talking about China, the penetration rate right now is still low. The industry CAGR is talking about 8% every year. 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. If we talk about the U.S. side, the CAGR is talking about 8% also. If we talk about Amazon, it's a 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 Malaysia, it's a little bit higher. It's talking about a lower double digit CAGR every year, and we are at the same rate. Let's talk about the next question.
Thank you. 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 filter replacement orders?
For Malaysia, right?
Maybe I'll answer.
For the Malaysia.
Yeah, maybe I'll answer this question directly. The models we sold in Malaysia are Viomi- branded products. We have this series named INNO Series. It's a very compact design, and it's a countertop water purifier. Actually, at this moment, we. The idea. I assume you asked about any additional use of the app for the filter replacement, especially for the Viomi- branded products. We haven't got to that phase yet. Because this new generation of water purifier only has. Standardized to have two filters, and which already has an extended lifespan of the filters. We think this more encourages people to get more involved in the water purifier products, and it helps to grow the penetration of these products. Yeah, that's it. We'll have the other question. What is the competition for your solution and impact of your hobby to AI-driven water solutions?
I think you can just answer this question, Claire.
Yeah, this is the new question.
Yeah, you didn't get the question.
What is our competition for our? Okay, sure. No problem. What is about the competition of our solution? The major thing is we have dedicated in this sector for over 10 years. From the technology point, we have this diversified mineral technology, which is one of a kind in the Chinese market. Also, I think our technology, what we brought, especially the Master M1 Se ries we brought on Amazon, is so far ahead of the market technology at the average pace. Also for the AI-powered factors, there's a lot of things you can experience when the product has this AI functionality because it can provide you remote and real-time monitoring of water quality and also the intelligently adjusts 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 this product, we are ahead of the market average technology pace. We think that's one major thing that this product can bring extra convenience to consumers and can promote the penetration both in China and globally.
Yeah. There's another question. What were the drivers of the 29% year-over-year growth for the last year? Do you expect this momentum to continue into this year? Yeah, it's a good question. Let me just answer. 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. 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. For this year, we expect it's going to continue, and we will deliver double-digit growth, which is very strong for this year. The key drivers this year are three pillars, actually. The first one is about the product innovation. We launched the INNO, and we launched the mineral water series.
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. The second pillar is about the strategic partnership with Xiaomi. We have more and more products produced, actually. We have fulfilled the customer needs, and our relationship with Xiaomi is strengthened, which is actually we believe we will continue for the coming two years. The third pillar is about the overseas market. You can see that we have Amazon last year launched the new products. This year, we have a very good result. It's grown very strong. We are going to launch our early release next Friday, actually. You can see the format that we can see. Let's go to the next question. What are our?
Okay, Sam, I'll read the question, and you can answer that. Yeah.
Okay.
Sure. What are your priorities and milestones for international expansions over the next 12 months?
For the next year, actually, for the nationwide and for the worldwide, let's just talk about the worldwide first. If we talk about the worldwide, what we are focusing on is the U.S. market and the Malaysia market. We are going to launch more and more new products, actually, in Amazon. Recently, we just launched the M1, which is more like the mineral water. We're going to launch more to the U.S. market. We're going to establish the offline sales channel in the U.S. We will have the online and also the offline for the U.S. market. We will build up our branding awareness in the U.S. market. For the Malaysia, what we did is we just did a new product, actually, launched in just in the Malaysia market. Also, we have brand speakers now in Malaysia.
What we are going to do in Malaysia is we are going to find more distributors to sell our product in Malaysia, which is centralized in actually can cover Indonesia and Thailand and also Singapore. For other areas, actually, Malaysia is very important for the company. If we're talking about China, China, what we are going to do is we centralize on the mineral water function. Also, we provide more and more functions into the products, actually. We will have a new, we already have a new brand speakers right now in China. That will enhance our brand awareness. Please continue.
Okay. Thank you. Yeah, sure. The next question is about our Gigaf actory. What operational risks are associated with scaling up manufacturing capacity at the Gigaf actory? How is Viomi managing these risks?
Yeah, it's very good. Right now, the Gigaf actory, what we built up is the water class level. We have a very high automation. It can produce 2.2 million finished goods a year and 10 billion filters a year. So the challenges and the risks right now is about, I think it's more like the challenge. The first one is about how to speed up with the sales. It takes time to get the production ready for the sales, which is booming, actually. It's very quick. So we need to prepare the material. We need to prepare the labor. We need to get the machine running without any problem. So that's the planning side. We need to do it well. 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 advance so that you can just get a reasonable price. That's the second challenge. 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. If the product cannot meet the needs of the customer, that means a waste. So you need to be very rational and rational. Also, you need to be very cautious about the automation. So every investment into the automation, we need to evaluate. We should keep it at the speed as our sales growth. Thank you.
Sure. Our next question is about the filter replacement. Can you share more about the lifespan and the DIY aspect of Viomi's filter products? How does this impact customers' vacation and the recurring revenues?
For the DIY side, what we did is just for the U.S. side, we have a very legal model, which means that every user can install our equipment, the water purifier, very quickly. 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. Also, for the filters, every user can just change the filters in two seconds. It's very easy. Super, super easy. If we talk about the Chinese side, we have the DIY model for almost over 10 years. So it's very popular, and everybody gets used to it. We are going to launch more and more models that are just like the DIY and get user-friendly. Every person, once you use it, you will love it.
Yeah. Maybe at 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. The DIY, Sam mentioned, definitely improved people's retention for using the water purifiers. They tend to change the filters when the lifespan runs out. They can do it on their own. So it's easy and no extra cost. Except the filter's cost. About our consumable revenue on book, most products so far have only two filters, which slow down the frequency of the filters. This is what we see as an industry revolution stage. So this may be last for a few years that.
We still have this positive outlook for the recurring revenues in the future. Our last question is about government incentives for home appliance replacement, which helped to drive the domestic demand in 2025. Do you have any insight into whether this program may be renewed in 2026? I'll answer this question directly. Yeah. You're correct. The government subsidy is the major driving factor for our fast growth in the 2025 so far. As we can see starting from the third quarter. Some provinces have slowed down their pace in this incentives. This is no longer a nationwide incentive, actually. We expect the revenue growth may be slowed down for the second half of 2025. We cannot say for sure whether this program can be renewed for the 2026, but we remain prudent on this point. Yeah. Okay. I think we are running out of time now.
Okay. Thank you. Thank you for joining us.
Yeah. Thank you all for this.