Letter to the Shareholders

Dear Shareholders,

This year marks VIVOTEK’s 25th anniversary. Over the past quarter-century, we have pioneered the transformation of the security industry, evolving from end-to-end analog systems to infinitely scalable digital network solutions. By making display stream compression our core technology, we have played a pivotal role in driving the development of high-demand internet applications, while providing a solid foundation for the explosive growth of artificial intelligence through an extensive repository of image data available for mining. Last year, VIVOTEK disclosed four key industrial trends, centered around AI image processing. These trends focus on expanding the connectivity of IoT devices, identifying opportunities to automate conventional surveillance service processes, and addressing the demands for energy efficiency, sustainability, and privacy protection. Some of these upgrades are not only ongoing but, driven by innovations in semiconductors and AI technologies, have achieved rapid and unforeseen advancements.

As a frontrunner in the security industry, VIVOTEK has consistently adapted to geopolitical changes, establishing partnerships across more than 120 countries through its commitment to superior quality and cutting-edge technology. By deeply cultivating local markets, we have built a strong reputation for the brand. In addition to integrating artificial intelligence to enhance our capabilities in image processing and compression, we have collaborated with world-renowned system chip manufacturers and cloud service brands to gain valuable insights into user pain points and key industry knowledge. This has enabled public sectors and business owners across all five continents to successfully complete projects in transportation, healthcare, retail, and tourism, utilizing VIVOTEK’s products and system integrators. Over the past 25 years, our expertise in internet technologies, including image processing and real-time streaming, has also positioned us as an indispensable contract manufacturing partner for emerging startups and system chip semiconductor manufacturers.

In response to the industry’s labor shortage and the need for technological innovation, VIVOTEK continues to engage in the research and development of deep learning AI. We have launched the VORTEX cloud service platform to enhance deep search capabilities centered around facial recognition, license plate recognition, and feature identification, significantly reducing the time for manual search process to mere seconds. This platform also integrates our long-standing industry experience and partnerships, offering advantages such as intelligent behavioral pattern analysis, enhancement of both low-light and high-contrast images, hybrid cloud architecture, and remote management, all of accelerate intelligent upgrades for security systems in small- and medium-sized businesses. According to the 2024 Security Report, the global security market, driven by AI, is expected to reach a market size of US$34.8 billion by 2027, with an estimated compound annual growth rate (CAGR) of 23.6%. Moreover, the global physical security market is expected to surpass US$200 billion by 2032. To stay at the forefront of trends in artificial intelligence and IoT, VIVOTEK is committed to advancing anomaly prediction and risk management through intelligent imagery analysis on the VORTEX platform. We are also working to automate security services, installation, and maintenance through the same platform.

The global supply chain has undergone significant changes due to geopolitical and environmental sustainability requirements, posing immense challenges to businesses in terms of operation and risk management. To mitigate risks associated with manufacturing in a single location, VIVOTEK leverages its extensive research and development capabilities alongside Delta Group’s smart manufacturing expertise and resources to upgrade its production line in Taiwan, thereby enhancing capacity and reducing costs. Simultaneously, we are expanding our production capacity overseas, working toward the goal of achieving a balanced distribution of production capacity between domestic and overseas facilities. As a leader in sustainability within the security sector, VIVOTEK has intensified communication with stakeholders and is actively implementing green technologies and energy-saving measures as part of its efforts to advance long-term carbon reduction strategies. For seven consecutive years, the Company has independently published sustainability reports ahead of the enforcement of relevant regulations, while significantly contributing to the areas of environmental sustainability, social responsibility, and corporate governance (ESG).

Concerning environmental efforts, the Company has committed to the global corporate renewable energy initiative, RE100. In 2023, the Company procured 2.44 million kWh of green electricity and successfully obtained 1,482 renewable energy certificates, resulting in a reduction of over 1,200 metric tons of carbon emissions. To further improve energy efficiency, the Company upgraded its office lighting to LED and achieved a non-hazardous waste recycling rate exceeding 90%. These initiatives demonstrate the Company’s continuous breakthroughs in sustainability.

Regarding social responsibility, VIVOTEK has leveraged its expertise in security and introduced the Safety Map initiative. Beginning with the Community Safety Map in 2021, followed by the Security Map Planning Order for facilities serving individuals with disabilities in 2022, and Safety Map for the Well-being of Students in 2023, VIVOTEK has consistently prioritized the enhancement of public safety, with particular attention to the security of living environments for vulnerable groups. In late 2024, the Company further expanded its efforts to Dacheng New Village in Hualien, initiating safety improvement plans aimed at combining smart security with local revitalization efforts, thereby making a positive impact on the local community.

Regarding corporate governance, VIVOTEK consistently adheres to the Global Sustainability Standards while upholding the core values of integrity, accountability, care, and innovation. These efforts have resulted in the Company achieving a Level-2 rating in the 10th Corporate Governance Evaluation and a strong debut at the 17th Taiwan Corporate Sustainability Awards (TCSA), where it earned the Sustainability Report Award for the Information, Communication, and Broadcasting Industry and the Taiwan Corporate Sustainability Excellence Award.

The cumulative consolidated revenue for the year 2024 was NT$7.33 billion, a decrease of nearly 20% compared to 2023. The overall consolidated net profit was NT$320 million, with a Return on Equity (ROE) of 8.8%. This was primarily due to continued inventory reduction in key markets, such as the United States, during the first half of the year, followed by increased demand in the second half. Starting in September, the same-period growth rate turned positive for four consecutive months. Despite the considerable challenges posed by political, economic, and regulatory factors this year, we remain focused on strengthening our core business to enhance industry competitiveness. We will continue to collaborate with our North American channel partners to promote our hybrid cloud product line, while deepening our partnerships with global system integrators and central control software providers. Our goal is to drive demand for applications in the transportation, retail, and smart building sectors, leveraging proven results and a strong reputation to propel sales momentum, while enhancing customer satisfaction through our technology and service offerings. In addition to continuous investments in smart manufacturing and overseas production capacity, we have optimized our inventory costs and material cost ratios, resulting in profitability as reflected in our quarterly reports. Improvements in operational efficiency have also laid a solid foundation for growth this year.

In the future, VIVOTEK will continue providing trustworthy intelligent security systems with a focus on speed, transparency, quality, and teamwork. We plan to expand our global sales channels through localization efforts while offering customer-centric services that closely align with market demands and integrate artificial intelligence into practical applications to meet customer demands. Internally, we aim to enhance operational resilience and optimize costs. With “Care” as our core value, we are committed to increasing employee satisfaction, enhancing shareholder returns, driving social sustainable development, and becoming a leading brand in the global security industry.

Lastly, we extend our sincere wishes for your good health and success in all your endeavors.

Chairman: Bill Lo

General Manager: Alex Liao