Earnings call transcript: Viomi Technology Q4 2024 sees strong revenue growth

Viomi Technology (NASDAQ: VIOT) reported robust financial results for the full year 2024, highlighted by a 29.3% year-over-year increase in net revenue to RMB 2.119 billion. Despite a decrease in gross margin from 31.9% in 2023 to 25.9%, the company reversed previous years’ losses, achieving a net income of RMB 62.3 million. However, the stock price fell by 11.4% in pre-market trading, reflecting investor concerns over the reduced gross margin and other market factors. According to InvestingPro data, the stock has shown remarkable momentum with a 317% return over the past year, though current RSI levels suggest it may be overbought.

Key Takeaways

• Viomi’s revenue increased by 29.3% year-over-year.
• The company successfully reversed previous years’ losses with a net income of RMB 62.3 million.
• Gross margin decreased to 25.9% from 31.9% in 2023.
• Stock price dropped by 11.4% in pre-market trading.
• Strategic focus on international expansion and product innovation.

Company Performance

Viomi Technology demonstrated significant growth in 2024, with a notable 29.3% increase in net revenue. The company has been expanding its product portfolio and market presence, particularly in the home water systems and kitchen appliances segments. The launch of new products, such as the Viomi Quenlin Mineral AI Water Purifier, contributed to this growth. However, the decrease in gross margin indicates rising costs or pricing pressures that the company needs to address.

Financial Highlights

• Full Year 2024 Net Revenue: RMB 2.119 billion (↑29.3% YoY)
• Income from Operations: RMB 156.3 million
• Net Income: RMB 62.3 million
• Gross Margin: 25.9% (vs 31.9% in 2023)
• Home Water Systems Revenue: RMB 198.4 million (↑39% YoY)
• Kitchen Appliances Revenue: RMB 342.9 million (↑45.2% YoY)
• Consumables Revenue: RMB 277.7 million (↓14.5% YoY)

Outlook & Guidance

Viomi is focusing on strengthening its domestic market presence while driving international market expansion, particularly in North America and Southeast Asia. The company aims to fortify its water purification product portfolio and deepen strategic partnerships. Viomi’s strategic initiatives also include leveraging AI technology and enhancing product innovation.

Executive Commentary

Xiaoping Chen, CEO of Viomi Technology, emphasized the company’s commitment to global expansion and innovation. "We are embarking on a new chapter... guided by our vision of global water," he stated. Chen also highlighted the importance of their manufacturing capabilities, saying, "Our water purifier Gigafactory is fundamental to our manufacturing and technology development capability."

Risks and Challenges

• Decreased gross margin may indicate increased production costs or pricing pressures.
• The stock price drop suggests potential investor concerns over financial performance sustainability.
• International expansion poses challenges, including regulatory compliance and market competition.
• Dependence on strategic partnerships could impact growth if alliances weaken.
• Economic uncertainties and fluctuating currency exchange rates could affect international operations.

The earnings call highlighted Viomi Technology’s strong revenue growth and strategic initiatives aimed at expanding its market presence and product offerings. However, the reduced gross margin and stock price decline underscore challenges the company faces in maintaining investor confidence and managing costs.

Full transcript - Viomi Technology ADR (VIOT) Q4 2024:

Conference Operator: Hello, ladies and gentlemen. Thank you for standing by for Viomi Technology Company Limited Earnings Conference Call for the Second Half and Full Year of twenty twenty four. At this time, all participants are in listen only mode. Today’s conference call is being recorded. I will now turn the call over to your host, Ms.

Claire G, the IR Director of the company. Please go ahead, Claire.

Claire G, IR Director, Viomi Technology: Hello, everyone, and welcome to ValeMei Technology Company Limited’s Earnings Conference Call for the Second Half and the Full Year of 2024. As a reminder, this conference is being recorded. The company’s financial and operating results were issued in the press release earlier today and are 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.biomi.com. Participating today’s call are Mr.

Xiaoping Chen, the Founder, Chairman of the Board of Directors and Chief Executive Officer and Mr. 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 and A session. Before we continue, please note that today’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 of sales 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. Please also note that Valmet’s earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non GAAP financial measures. In addition, WellMed’s press release contains a reconciliation of unaudited non GAAP measures to unaudited most directly comparable GAAP measures. I will now turn the call over to our Founder and CEO, 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. I will quickly translate our formal remarks before discussing our financial performance for the second half and the full year of 2024. Hello, everyone. Thank you for joining us today on our earnings conference call for the second half and the full year of 2024.

On 08/31/2024, we successfully completed our business reorganization, marking a pivotal milestone for Viomi as we sharpen our focus on our cool home water solutions. This strategic shift has driven our strong performance in 2024 with a full year net revenue reaching RMB2.1 billion and income from operations totaling RMB156.3 million, both existing our previous guidance. Revenues from home water solutions grew by 39% year over year, significantly fueling our overall business expansion. Additionally, we enhanced operational efficiency, achieving a net income of RMB62.3 million, reversing the losses reported in the past two years. As we move forward, Valmet is back on a fast track to high quality growth and is well positioned to see new opportunities in the market.

With growing public awareness of the importance of healthy drinking water and supportive policies fostering product innovations, the home water purification market presents huge opportunities, leveraging over a decade of deep expertise in the water purification industry. Viomi remain committed to continuous product innovation and aims to redefine home water purification through AI technology. With our comprehensive product portfolio ranges from point of use, our series to whole house softening and purification solutions. Our advanced features equipped with under the sink and installation free products such as natural mineral water infusion, instant heating and cooling and ice making empower users with real time water quality monitoring, proactive filter replacement reminders and seamless one click reordering through our app. Furthermore, our intelligent self cleaning water circuit technology supported by AI diagnostics greatly extends its future lifespan and reduces usage costs, enhancing both efficiency and sustainability.

By addressing a wide range of household water use scenarios and catering to diverse drinking water needs across the global market, Viomi provides a smarter, more reliable and efficient water purification experience for consumers worldwide. Our August 2024 business restructures swiftly streamlined our organization, comprehensively improved our operational efficiency and strengthened our focus on water home water solution business, leveraging our core strengths to drive sustainable growth. We established the IPMI, which unifies our product, channel and brand strategies under a cohesive marketing framework By prioritizing consumer experience and align resources with market demand, we have strengthened the Well Me’s brand awareness expanded by our market share in the water purification industry. In the domestic market, Viomi leads the healthy mineral water trend. The first half of twenty twenty four saw the launch of Viomi Quenlin Mineral AI Water Purifier, integrating advanced AI technology to optimize the purification process, featuring an innovative AI powered mineralizing filter technology.

It ensures the sustained release of beneficial minerals. This produces purified water with a mineral composition closely resembling natural mineral water, providing our users with fresh mineral rich water at home. During the twenty twenty four eleven shopping cycle, our AI water purification ranked fourth, fifth and ninth on the brand leaderboard of the Douyin, Pinduoduo and Tianmou platforms respectively, further reinforcing our brand influence. In North America, we introduced the VOTAC series of under the sink RO water purifiers designed for users who value convenience and efficiency. Its self installation feature has been well received with over 80% of users reporting a smooth installation progress average only twenty minutes and the Votax tankless design and the DIY filter replacement can greatly save place and time for users.

A one:three waste water ratio and a four year long lasting filter lifespan enhanced filtration efficiency, reduced water waste and lower maintenance costs, delivering a superior user experience. This product made a strong international debut on the Kickstarter crowdfunding platform on 11/05/2024, surpassing its funding goal on the very first day with 168 backers contributing over 1200% of the target. Following this success, the Votac series officially commenced sales on Amazon in The U. S. On 12/15/2024, receiving high recognition and the positive feedback from strong consumer demand.

With to further solidify our presence in the global market, Viomi participated for the first time in CES twenty twenty five in Las Vegas in January. Our intelligent home water solutions garnered widespread recognition from industry experts and attendees, reinforcing Viomi’s reputation as a smart home water solutions innovator. In addition, we made significant strides in building strategic partnerships. First, we have renewed our agreement with Xiaomi for the next three years, reaffirming our commitment to stable a mutual beneficial collaboration. By leveraging our prospective strength, we aim to boost our business penetration in China.

Furthermore, we have strengthened our cooperation with Jindong reaching a joint marketing agreement for the Kunlun series products to promote healthy drinking water. In March 2025, we forged a strategic partnership with Malaysia’s leading home appliance retailer. Together, we will focus on expanding sales channels and promoting biomass water purification products to drive deeper market penetration in Malaysia. Viomi’s water purifier Gigafactory is fundamental to our manufacturing and technology development capability, featuring a highly integrated industrial chain and highly automated production lines. With 100% in house manufacturing and the full traceable quality control systems with core components, we maximize economics of scale.

To strengthen innovation, we have established two major laboratory systems focused on advanced technology research and product compliance and reliability. This laboratory made the stringent test standards of various global markets, allowing us to rapidly adapt to evolving and diversifying market demand, while maintaining constant and reliable product performance. As of today, Xiaomi has sold nearly 1,800 global patent applications, significantly outpacing the industry average. Looking forward, powered by the dual engines of advanced manufacturing and continuous innovation, we are well positioned to further elevate our competitive edge in the water purification industry. Wellmei is embarking on a new chapter of we move into twenty twenty five guided by our vision of global water and our commitment to providing fresh healthy drinking water to users worldwide.

To achieve this, we will focus on four key strategic initiatives. First, we will strengthen our domestic market presence through trading policy incentives and advancements in AI technology to accelerate product innovation, meeting consumers’ growing demand for an enhanced lifestyle. Second, we will drive international market expansion, further penetrating key markets such as North America and Southeast Asia Through region specific product development and enhanced brand positioning, we aim to elevate Viomi’s international market visibility. Third, we will continue to fortify our water purification product portfolio, maintaining unwavering commitment to research and development. By leading industry innovation, we strive to provide smarter, healthier water purification solutions for consumers worldwide.

Fourth, we will continue to deepen our laboratory with strategic partners, maximize the advantages of water purification giga factory. This will enable us to achieve synergy in growth and profitability, ultimately creating long term value for both our customers and shareholders. Thank you. That concludes our Refinder’s remarks. I will now turn the call over to our Head of Capital and Investment Department, Mr.

Sam Yang, and discuss our financial performance. Thank you.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Thank you, Mr. Chen and Claire. Thank you to everyone for joining us today. Before diving into the details, I would like to address the impact of business organization on our financial results. In August 2024, we completed a strategic reorganization that involves diversifying IoT at home portfolio products, excluding range hoods, gas stoves and water heaters, which we refer to as the Diversite business.

As a result, the Diversite business has been deconsolidated from our financials and its historic financial result now reported as discontinued operations in our consolidated financial statements. Unless otherwise stated, all financial and non GAAP figures discussed today are presented on a continuing business basis. With that overview established, let’s review our unaudited financial results for the January. We achieved net revenues of RMB182.4 million, an increase of 42.8% from hundred and 97,900,000.0 for the second period of twenty twenty three. This growth was primarily driven by the expansion of our home water season business.

To better reflect our strategic focus, we have reclassed our revenue streams through into three categories, effective in the second half of twenty twenty four. Home water system included the revenue from our smart water purification products, water heaters, water kettles, water quality meters and other related business. Consumables includes revenues from various water filters designed from smart water purifiers, kitchen appliances and others, includes revenues from range hood, gas stoves and other small appliances as well as installation services for Viomi’s products. Now let’s look at the performance across the three categories. Revenues from home water systems were RMB925.7 million, an increase of RMB58.2 million for the same period of 2023, primarily due to the increased demand of home water seasoned products.

Revenues from consumables were RMB136.7 million, a decrease of 24.6% from RMB181.2 million for the same period of 2023, primarily due to the decreased sales of water purifiers sold to Xiaomi. Partially offset by an increase in demand for Xiaomi brand filters. Revenues from kitchen appliances and other were RMB220 million, an increase of 67.2% from RMB131.5 million for the same period of 2023, primarily due to an increased sales of kitchen appliances sold to Xiaomi. Gross profit were RMB289.5 million compared to RMB294.5 million for the same period of 2023. Gross margin was 22.6% compared to 32.8% for the same period of 2023.

The decrease was primarily due to a higher revenue contribution from low gross margin products, leading to a shift in the product mix during the transition period. Total operating expenses were RMB221.5 million, an increase of 6.1% from RMB208.8 million for the same period of 2023 due to higher personnel expenses during strategic transition period as well as increased inputs at the market end. In greater details, R and D expenses were RMB67.7 million, a decrease of 9.9% from RMB75.1 million for the same period of 2023, mainly due to a lower depreciation and amortization expenses and personnel expenses, partially offset by increased share based compensation expenses. Selling and marketing expenses were RMB140 or RMB14.6 million, an increase of 9.6% from RMB104.6 million for the same period of 2023, mainly due to higher online promotion fees. General and administrative expenses were RMB 39,300,000.0, an increase of RMB 34.8 percent from RMB 29,100,000.0 for the same period of 2023, primarily due to higher management personnel expenses, partially offset by a decrease in estimated allowance for accounts and notes receivables.

Net income attributable to ordinary shareholders of the company was RMB 57,400,000.0 and then the non GAAP net income reached RMB63.3 million. This marks a significant turnaround for the same period of 2023. When we reported net loss of RMB29.7 million and RMB30.9 million respectively. This improvement was primarily driven by strategic reorganization that involved diversifying certain loss making business and focus on more advantaged sectors to enhance profitability. Additionally, our balance sheet remains healthy.

As of 12/31/2024, the company had a cash and cash equivalent of RMB126.2 million restricted cash RMB141.3 million short term deposit of RMB115 million and short term investment of RMB72.5 million. Next, let’s brief discuss the key financial results for the full year of 2024. Net revenues were RMB2.119 million, an increase of 29.3% from RMB168.7 million for 2023. Revenues from water home water systems were RMB198.4 million, an increase of 39% from RMB177.9 million for 2023. Revenues from consumables were RMB277.7 million, a decrease of 14.5% from RMB324.7 million for 2023.

Revenues from kitchen appliances and others were RMB342.9 million, an increase of RMB45.2 percent from RMB236.1 million for 2023. Cost profit was RMB548.7 million compared to RMB522 million for 2023. Gross margin was 25.9% compared to 31.9% for 2023. Total operating expenses were RMB424.9 million, an increase of 1% from RMB420.8 million for 2023. In greater details, R and D expenses were RMB242.9 million, a decrease of 4% from RMB148.9 million for 2023.

Selling and marketing expenses were RMB211.2 million, a decrease of 1.6% from RMB214.6 million for 2023. General and administrative expenses were RMB17.8 million, an increase of 23.5% from RMB57.3 million for 2023. Net income attributable to ordinary shareholders of the company was RMB33.4 million and a non GAAP net income attributable to ordinary shareholders of the company was RMB 79,900,000.0. Thank you.

Claire G, IR Director, Viomi Technology: Okay. This concludes our prepared remarks. We will now open the call for Q and A. Mr. Chen, our Founder and Mr.

Yang will join this session and answer questions. Operator, please go ahead.

Conference Operator: Thank you. Our first question comes from the line of Jing Jin Lee from CICC. Please go ahead with your question.

Jing Jin Lee, Analyst, CICC: Hey, thanks for the management and congratulations for the good performance. I’m Mei Jinxing from CICC. And I have two questions about the result and I’ll ask them one by one. So the first question is, after the divestment of the IoT business in 2024, we see that Viomi focuses more on water palm water solution. So what adjustments have been made in business operation and organizational management in the second half of twenty twenty four?

And what are the results so far? Yes, that’s my first question.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Yes. Thank you, Jinsheng. Let me get to your question. And the strategic reorganization we undertook in 2024 was not a sudden decision. It was a progress that began in the second half of twenty twenty three.

During that time, we elevated our water business to a strategic business unit. This move was crucial. We have established a comprehensive manufacturing, R and D and distribution systems that are operated differently and leverages our strength in water purification, ultimately enhancing our competitiveness in this sector. By the second half of twenty twenty four, we completed a strategic reorganization by divesting certain IoT at home business and related assets. We decided to retain our water purification business and a part of our kitchen appliances line to narrow our focus and streamline operations.

In addition, we launched the interpretive product marketing system or we can see it’s IPMS. This system brings together our product channel and the brand strategies in one comprehensive marketing framework. I prioritize our customer experience and align our resources within the market demand and we have been able to strengthen our brand awareness and expand the market share in the water purifying industry. This strategic shift has a very strong financial performance. Our full year net revenue reached RMB2.1 billion with the income from operation totaling RMB155 million both exceed our previous guidance.

Notably, revenue from Home Water’s systems grew by 37.5 year over year significantly driving our overall business growth. Furthermore, we improved our operational efficiency. Our overall operating expense ratio declined by about 6%. And apart from the temporary increase for the personnel expenses related to the restructuring, we achieved a net income of RMB62 million, reversing the losses that we experienced for past two years. In conclusion, the completion of the regular organization enables us to focus more on the needs of water purification for the users and enhance our product strength to build the best selling natural mineral water.

In the meantime, we will accelerate the channel expansion and globalization to advance the vision of Global Water. Thank

Brian Lantier, Analyst, Zacks Small Cap Research: you.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Next question.

Jing Jin Lee, Analyst, CICC: Okay. Yes, thank you. And my second question is, could you give us the breakdown of the Home Water solution in 2024? And how much did the volume and price increase respectively? And is there any new product trends for 2025?

Yes, that’s my second question. Thank you.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Good question. Let me just direct to answer your question. To better reflect our strategic focus, we made some changes on how we categorize our revenue starting in the second half of twenty twenty four. Firstly, our home water systems, which include our smart water purification products, water heaters, water kettles and water quality meters and similar items. This category makes up about 71% of our total revenue.

And next, we have the consumables. This is actually we bundled sales in water purification and also we sell it separately. And this part attributed to 30% of the total revenue. And the last, there is teaching appliances and orders. This includes the revenue from range hood, gas tariffs and small appliances as well as the installation services for the Viomi products.

It brings about 16% of our total revenue. On a positive note, we kicked off our Quinlan series water purifiers in the first half of twenty nineteen, with this middle to end to high actually positioning, we have a very strong emphasis on the healthy drinking water that is the mineral water. And we have seen a noticeable increase in our DSP. Looking ahead to twenty twenty four, twenty twenty five, we are excited by the deepening our growth strategy. In the domestic market, we keep refined middle to high end product line and focus on healthy and continue to enhance the equipment series.

During the 11, our AI water purifier ranked fourth, fifth and ninth on the brand ports of the Douyin, Pinduoduo and Tmall platforms respectively, further reinforcing our brand influence. On the international side, we plan to enhance our product line up and focus on customized development tailored actually to the North America’s customer and also cover the Southeast markets. This includes adding new features like ice making and instant cooling among artists. At the same time, we expand to other key international markets. We’re also localizing and promoting our existing product series to better meet the customer needs for the local.

Thank you.

Brian Lantier, Analyst, Zacks Small Cap Research: Thank you.

Jing Jin Lee, Analyst, CICC: Okay. Thanks for management, Amit.

Conference Operator: We’ll now move on to our next question. Our next question comes from the line of Brian Lantier from Zacks Small Cap Research. Please go ahead. Your line is open.

Brian Lantier, Analyst, Zacks Small Cap Research: Good evening. Thank you. If I could ask a couple of questions on the expansion strategy. I guess, first, how comfortable are you with the strategy in The U. S?

And then second, regarding the expansion in Southeast Asia, have you named the partner, the home appliance partner in Malaysia? And I guess second, will there be additional will that be the strategy targeting additional Southeast Asian countries going forward? Thank you.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Yes, thank you. Actually, the because of our new vision is the global water. So the global water is our new strategy. We choose to enter The U. S.

Market and also we have entered the Southeast market. At the First Step actually we successfully launched the product actually, WebTalks eight on the Kickstarter, that is a great success and we achieved 10 times our expectation. And following that success, we introduced two products to Amazon and which has reached high recognition from the customers and it’s a continuing performance. It’s good. And talking about the other areas about the Southeast, We have established a strategic partnership with the biggest retailer in Malaysia and this will bring us an ongoing good performance we believe.

And with that strategic cooperation and we are going to launch more and more new products to that new

Brian Lantier, Analyst, Zacks Small Cap Research: market. Okay, great. And have you identified any long term gross margin goals for the different revenue categories? For example, hot water systems versus kitchen appliances and consumables. I’m assuming in the long run consumables will have the widest margin as the Gigafactory gains efficiency.

But I’m not sure if you target or released or identified any of those gross margin goals in the long run.

Sam Yang, Head of Capital and Investment Department, Viomi Technology: Yes. Of course, margin is crucial actually. As you may note that we have obtained the average gross margin for the industry, the water purifier. And we believe this gross margin will become better this year because of the bottom metrics actually we are going to launch. And as I explained earlier that we are going to launch more and more equipment series, which has good gross margin for the customer and also for the market.

Also, we have the consumables. And you know, this market is the gross margin for this category is very decent. So we are going to keep and talk about the others, I think we are going to meet the average of the industry. Thank you.

Brian Lantier, Analyst, Zacks Small Cap Research: Great. Thank you.

Conference Operator: 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.

Claire G, IR Director, Viomi Technology: Okay. And Mr. Chen would like to give a conclusion. Mr. Chen, please go ahead.

Okay. I’ll briefly translate our founders’ remarks conclusion. And thanks to everyone attending our conference call Right after we complete our restructuring and fully focused on the home water business, we are using AI to upgrading our brand positioning and we will invest more in the brand recognition promotion to increase our brand recognition globally. And about our water purifier Gigafactory, we have the most integrated industry lines and the most automated production lines among the industry. And we will continue to maximize the advantages of our water purifier giga factory.

And also we will keep fast speed on our overseas expansion in the major markets like United States and Southeast Asia. And in conclusion, home water business is very decent business and it’s sustainable to meeting the healthy drinking demand of Ninkan in a sustainable way. So we think the business is everlasting for like a hundred and that’s all. Thank you. And thank you once again for joining us today.

If you have any further questions, please feel free to contact us through the contact information on our website or our investor relationship consultant, the PSNT Group.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

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