Zepp Health Corporation (NYSE:ZEPP) Q2 2022 Earnings Conference Call August 25, 2022 8:00 AM ET Company Participants Grace Zhang - Director, IR Wang Huang - Chairman of Board of Directors & CEO Leon Cheng Deng - CFO Conference Call Participants Operator Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Second Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. Today's conference is being recorded. I'd now like to turn the call ove ...

Financial Data and Key Metrics Changes - The company reported Q1 2022 revenue of RMB0.8 billion, a decrease of 34% year-over-year, primarily due to reduced Mi Band 6 shipments and lower discretionary spending by consumers [7][17][21] - Gross margin for Q1 2022 was 20.1%, down from 22.5% in Q1 2021, attributed to increased freight costs and pandemic-related challenges [18][21] - Adjusted net loss for Q1 2022 was RMB75.7 million, compared to an adjusted net loss of RMB29.0 million in Q1 2021 [21] Business Line Data and Key Metrics Changes - Self-branded products contributed over 65% of total revenue in Q1 2022, indicating a shift in revenue mix towards these products [8][18] - Revenue from self-branded products in North America surged by more than 110% year-over-year, showcasing strong market performance [9] Market Data and Key Metrics Changes - The ongoing COVID-19 pandemic and geopolitical tensions have negatively impacted consumer confidence and discretionary spending, particularly in Europe and the United States [17][29] - The company anticipates a rebound in revenue for Q2 2022, projecting net revenue between RMB1.08 billion and RMB1.3 billion, compared to RMB1.84 billion in Q2 2021 [23] Company Strategy and Development Direction - The company is focusing on technological innovation in AI, health Big Data, and product portfolio expansion to capture opportunities in the healthcare services industry [14][15] - Upcoming product launches include the upgraded T-Rex 2 and new GTS and GTR series, aimed at enhancing user experience and expanding market reach [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic and supply chain disruptions but expressed optimism about long-term growth prospects [15][17] - The company remains committed to strict cost control measures and disciplined working capital management throughout 2022 [23] Other Important Information - The company has initiated a share repurchase program, buying back $6.9 million worth of shares by March 31, 2022, reflecting confidence in its growth strategy [22] - The company is exploring options to mitigate delisting risks, including a potential second listing in Hong Kong [58] Q&A Session Summary Question: Impact of COVID in Shanghai on operations and supply chain - Management indicated that the impact of the Shanghai lockdown was relatively limited compared to Shenzhen, but it still dampened sales outlook for Q1 and Q2 [27] Question: Forecast for consumer electronics and smartwatch market - Management noted a slowdown in consumer discretionary income due to inflation but remains optimistic about the wearables market's growth [29] Question: Outlook for Q2 and revenue contribution from Xiaomi - Q2 is expected to show strong quarter-on-quarter growth, driven by new product launches, with Xiaomi's revenue contribution anticipated to increase [33][34] Question: Functional upgrades for self-branded products - The company aims to increase average selling prices (ASP) through product upgrades and enhancements in features and functionalities [38][40] Question: Expansion of Zepp OS and operational expenses - Management is focused on enhancing Zepp OS with new applications and services while planning to right-size operational expenses moving forward [44][46] Question: Growth expectations for Amazfit products - Self-branded products are expected to grow in Q2, with a gradual improvement anticipated in Q3 and Q4 due to seasonal demand [51][52] Question: Buyback strategy and delisting risk - The company plans to continue its buyback program and is monitoring delisting risks closely, considering options for a second listing [57][58] Question: Future relationship with Xiaomi - The relationship with Xiaomi remains strong, with ongoing discussions for new product lines and categories [60]

Financial Data and Key Metrics Changes - Full-year revenue for 2021 reached 6.125 billion RMB, representing a nominal year-over-year growth of 1% [6][16] - Q4 2021 total revenue was 1.7 billion RMB, a decrease of 15.8% year-over-year, primarily due to a decline in Xiaomi product sales and supply chain challenges [16][18] - Net income attributed to Zepp Health for Q4 2021 was 36 million RMB, down from 150 million RMB in Q4 2020 [23] Business Line Data and Key Metrics Changes - Self-branded products accounted for over 47% of total revenue in 2021, up from 31% in 2020, and contributed over half of the gross profit [19] - Shipments of self-branded products increased by 60% in 2021 despite supply chain challenges [16][19] - Gross margin for Q4 2021 was 19.3%, a slight improvement of 30 basis points compared to Q4 2020, supported by a higher proportion of self-branded products [19] Market Data and Key Metrics Changes - Self-branded product shipment volumes in North America increased by approximately 200% year-over-year [7] - Shipments to Italy and France increased by more than 100% in Q4 2021 [7] - Zepp Health ranked number 5 in the global adult smartwatch market according to IDC data for Q4 2021 [7] Company Strategy and Development Direction - The company aims to enhance its product capabilities and brand recognition globally while expanding its smart health ecosystem [8][14] - Plans to launch an AI sleep service and integrate investments in imaging technology to empower users in managing health data [9][14] - The company is focusing on vertical integration to strengthen capabilities in chips, cloud services, algorithms, and operating systems [14] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming supply chain challenges, expecting improvements in the second half of 2022 [17][24] - The ongoing COVID-19 pandemic and geopolitical tensions, particularly the Russia-Ukraine conflict, pose risks to revenue but are manageable in the short term [34][60] - Guidance for Q1 2022 is conservative, with expected net revenues between 0.75 billion and 1 billion RMB, down from 1.15 billion RMB in Q1 2021 [25] Other Important Information - The company announced a special cash dividend of US$0.025 per ordinary share and continued its share buyback program [15][23] - The company has seen a strong increase in its active user base, surpassing 40 million by the end of 2021 [8] Q&A Session Summary Question: Impact of chip shortage on gross margin - Management indicated that a shift towards self-branded products, which have higher gross margins, helped improve overall gross margin despite chip shortages [29][30] Question: Marketing strategy changes in uncertain global environment - Management stated that the marketing strategy remains unchanged, although they are monitoring risks related to the Russia-Ukraine situation [34] Question: Sales performance of the newly launched GT 3 series - The GT 3 series has received positive feedback and is performing well, although supply chain issues have limited potential sales [38] Question: Timeline for regulatory approval of GT 3 series - Management expects a shorter timeline for Chinese regulatory approval, with potential certifications for European and U.S. markets following [40] Question: Current state of the European market - Apart from Russia and Ukraine, the European market is experiencing healthy growth, with strong performance in Western Europe [42] Question: Risks associated with Xiaomi product shipments - Management confirmed a strong ongoing relationship with Xiaomi and noted that while the band market is declining, Xiaomi maintains a significant market share [46][47] Question: R&D expenditure trends - R&D expenses have decreased as a percentage of revenue due to fewer new product launches, but the company remains committed to R&D investment [49][51] Question: COVID-19 impact on manufacturing capacity - COVID-19 has created logistical challenges and impacted sales, particularly during lockdowns in key regions [53][54] Question: Semiconductor supply challenges - Management anticipates improvements in semiconductor supply by the second half of 2022, although challenges may persist in Q2 [56][57]

Financial Data and Key Metrics Changes - Total net revenues for Q3 2021 were RMB1.6 billion, a decrease of 28.1% year-over-year [7] - Revenue from Xiaomi products declined by 45% year-over-year, contributing to the overall revenue drop [18] - Gross margin for Q3 2021 was 20.2%, essentially flat with a 40 basis point difference from the previous year [18] - Net income as a percentage of sales declined slightly year-over-year due to lower interest income and higher interest expenses [19] Business Line Data and Key Metrics Changes - Shipments of self-branded products grew by 88.9% year-over-year, accounting for 38.6% of total net revenues [8] - Year-over-year revenue growth for self-branded products was 84%, 81%, and 38% in the first three quarters of 2021 [16] - Operating expenses decreased sequentially since last year's Q3, with sales and marketing expenses down 22%, R&D down 37%, and G&A down 32% [19] Market Data and Key Metrics Changes - Amazfit ranked number two in Southeast Asia for smart wearable brands [9] - In the US, self-branded product shipment volume more than doubled in Q3 2021 [9] - Shipments in Germany increased by 150% in Q3 2021 [9] - In Italy, Amazfit ranked number one in the adult smartwatch market as of September 2021 [10] Company Strategy and Development Direction - The company aims to increase the contribution of self-branded products to around 40% this year and potentially towards a 50-50 split next year [31] - The introduction of new products like the Amazfit GTR 3 and GTS 3 series is part of the strategy to enhance brand presence and product offerings [12] - A share repurchase program of 20 million shares was approved to demonstrate confidence in long-term growth [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for Q4 2021 due to new product launches despite ongoing supply chain challenges [21] - Supply chain issues, including chip shortages and higher freight costs, have impacted sales and are expected to continue affecting operations [17][28] - The company is focused on maintaining cost control while supporting growth initiatives [19] Other Important Information - The newly launched Zepp OS is expected to be a cornerstone of the company's health management platform [12] - The company is actively pursuing collaborations to enhance its product offerings and market reach [13] Q&A Session Summary Question: Why did the margin decline significantly quarter-on-quarter? - Management indicated that the margin did not move much quarter-on-quarter, attributing the decline to a product mix issue, with Xiaomi products accounting for a larger share of revenue [25] Question: Was the shipment shortfall due to demand or supply bottlenecks? - Management clarified that the shortfall was primarily due to supply issues, particularly chip shortages and higher freight costs, rather than a lack of demand [28] Question: What is the target for self-branded product revenue contribution? - The company aims for a split of close to 40% self-branded and 60% Xiaomi for this year, with aspirations to improve this ratio next year [31] Question: What is the expected normalized gross margin for self-branded products? - Management indicated a target gross margin range of 25% to 35% for self-branded products, influenced by seasonal patterns and new product launches [34] Question: What are the competitive advantages of the new GT 3 Pro? - The GT 3 Pro's competitive advantages include the Zepp OS, longer battery life, and attractive design, which have received positive consumer feedback [40] Question: Any updates on value-added services like insurance? - The company is continuing pilots with large insurance companies and discussing long-term contracts based on the success of these pilots [43]

Financial Performance (Q3 2021) - Revenue decreased by 28.1% from RMB 2,235.1 million in 3Q20 to RMB 1,606.1 million (US$249.3 million) in 3Q21[7, 21] - Adjusted net income attributable to Zepp decreased by 45.8% from RMB 120.8 million in 3Q20 to RMB 65.5 million (US$10.2 million) in 3Q21[13] - Gross margin slightly decreased from 20.6% in 3Q20 to 20.2% in 3Q21[21] Financial Performance (9M 2021) - Revenue decreased by 2.9% from RMB 4,588.5 million in 9M20 to RMB 4,460.8 million (US$712.1 million) in 9M21[7, 21] - Adjusted net income attributable to Zepp increased by 2.1% from RMB 165.5 million in 9M20 to RMB 168.9 million (US$26.2 million) in 9M21[13] - Gross margin remained the same at 21.5% compared to last year[21] Product Performance - Xiaomi wearable products revenue decreased by 44.7%[7] - Self-branded wearable products revenue increased by 37.9%[7] Business Outlook - The company expects net revenues to be between RMB 1.75 billion and RMB 2.0 billion for the fourth quarter of 2021, compared with RMB 1.97 billion in the fourth quarter of 2020[17]

Zepp Health Corporation (NYSE:ZEPP) Q2 2021 Earnings Conference Call August 19, 2021 8:00 AM ET Company Participants Grace Zhang - Director of Investor Relations Huang Wang - Chairman of Board of Directors & Chief Executive Officer Leon Deng - Chief Financial Officer Mike Yeung - Chief Operating Officer Conference Call Participants Clive Cheung - Credit Suisse Andre Lin - Citi Marcel Münch - DONGXii Operator Hello, ladies and gentlemen, thank you for standing by for Zepp Health Corporation Second Quarter 20 ...

Zepp Health Corp (NYSE:ZEPP) Q1 2021 Earnings Conference Call May 13, 2021 8:00 AM ET Company Participants Grace Zhang - Director, IR Huang Wang - Founder, Chairman & CEO Leon Deng - CFO Conference Call Participants Clive Cheung - Crédit Suisse Andre Lin - Citigroup Michelle Zhang - China Renaissance Securities Operator Hello, ladies and gentlemen, thank you for standing by for Zepp Health Corp.'s First Quarter 2021 Earnings Conference Call. [Operator Instructions]. I will now turn the call over to your hos ...