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 [indiscernible] posted online. You can download the earnings press release and sign up for the company's e-mail distribution led by visits 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 uncertain 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 U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required by law. Let's also note that Viomi's earnings press release and this conference call include discussions of noted GAAP financial information as well as unaudited non-GAAP financial measures. In addition, Viomi's press release contains the recognition of not unaudited non-GAAP measures to unaudited 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.

[Foreign Language].

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 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 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 the 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 back Friday promotional season our products ranked 19th in the water purifier category and fourth in under zinc RO segment. Our premium flagship product, the master 1 mine water purifier further enrich our product portfolio. In the Southeast Asia market, we continue to deepen our strategic cooperation with off-line channels in Malaysia through the launch of the compact in mineral water dispenser tailored for the local market…

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 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 elution of the for water pure price. Revenues from consumables were RMB 112.2 million, a decrease of 17.9% from RMB 133.7 million (sic) [ RMB 136.7 million ] for the same period of 2024, and primarily due to the decreased sales of water purifiers to Xia. Revenues from teaching 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 induction of Viamibrin 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 diversement of certain IoT and home business and our assets. Total operating expenses were RMB 248 million revenue, 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 a decrease in G&A expenses. In greater detail, R&D expenses were RMB 76.3 million, an increase of 12.7% from…

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.

[Operator Instructions] 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. So first and Poms,could you share the overall performance of the company sell owned brand Viomi in 2025? And additionally, what are the key investment priorities and initiatives for Viomi brand building this year. Thank you.

[Foreign Language].

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 annual brands listed on Jingdong and we overran 19 rate in sales on Amazon U.S., 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 off-line 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 Rami 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].

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. off-line market in the second quarter. And this will cover not only the endorsing products, but also the whole health of nutrition systems. And in Malaysia, our focus is offline with countertop units of the main product format, adding features like eye and the cold water that match the local drinking habits and next will expand more offline partnerships and diversify our product lineup. But for the overseas market 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 a triple-digit growth in the overseas revenue.

And so my last question comes to the company's profitability. Will we see the company's profitability improved notably in 2025 after focusing on the water business. So for 2026, or -- and moving forward, like next 2 to 3 years, what are the core pathways for further enhanced profitability and sustain this positive momentum. Thank you.

[Foreign Language].

Okay, to translate the answers. There are 3 main paths. The first is expand overseas market and accelerate the growth in our Viomi-branded business. Currently, our margin is still on a low level, mainly because our Viomi-branded product 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 consumables revenue. The consumable revenue from our own branded products will be a long-term driver of the margin improvement. As more people are using Viomi purifier globally, the consumable revenues will start to kick in about 1 to 2 years after the equipment sale, and we start to see the trend. And third, we will broaden our product lineup, which is adding more countertop options like icemakers multifunctional countertop water dispensers and a higher-margin whole home nutrition systems. These new categories will troubles reach more customers and build a stronger, more complete product portfolio and for the global expansion. Thank you.

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

[Foreign Language].

I'll quickly translate the question first. Can you analyze the impact of the national fast reduction on the domestic market, especially when we see in the second half of 2025, the negative impact has caused revenue decline. And can you forecast the future impacts and offer us some guidance? And also, we recently noticed the EMS and the business development. Can you offer some heads-up about the top line contribution of our cooperation with China gas, this kind of business development.

[Foreign Language].

Okay. I'll quickly translate the answer. As you can see the impact of the national subsidy on water purifier is obvious in 2025. And due to the high base last year, domestic market will face challenges in the first half of 2026. For products like water purifier, however, where penetration is still relatively low. So the customer demand is still growing. We expect the 2026 return to the category's normal growth rate -- growth pace and remain relatively resilient even of consumer spending softness. 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 may -- you might see some brands still offering 15% of online commerce platforms were destined. We didn't offer that percentage of and we have stayed in our product competitiveness. And to answer your questions about the cooperations with the gas companies, we recently reached a cooperation with the China gas and the ENN Energy companies like the companies like this. And the way we see is we are exploring new partnership models with this company. And their showrooms and service centers across the country, reaching over 50 million household users, and both our products highly relied on the installed elation service support and the production scenario as perfectly with undersink water purifiers and the product categories containment 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 answer to a similar question to one of the previous questions. And the first one is we will expand our overseas market scale, especially in the United States and in Malaysia, and we will use more diversified products to entering more channels. For example, for the United States, we will have broad off-line channels for Versa 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 very promising guarantee of the improvement of profitability. And we have our own branded water pure visa 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 driven factors for the margin expansion. And thirdly is to improve our own brand revenue contribution by both overseas expansion and product portfolio expansion. And lastly, we will have more diversified product lines. As of today, we still -- most of our revenue comes from the under sink water purifier product format and our profit margin is within the industry level. However, we will expand more diversified products with higher profit margins and ASPs like the whole house water nutrition systems and the countertop products equipped with diversified functions like cooling, ice making and so on. Thank you.

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 off-line distribution in the U.S. And then just sort of big picture, looking out the impact of the subsidies is 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].

Okay. I will translate the answer to your question. According to our estimation, we see the industry's normal growth rate would be at a high-single-digit level. without the impact of the national subsidy and so on. And while the 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 of 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. And 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.