Zepp Health Earnings Presentation Fourth Quarter and Full Year 2024 Investor Relations 26 March 2025 Table of Contents 01 06 4Q24 Revenue and Gross Margin Trend 07 Adjusted Operating Expenses 08 Net Income/ Earnings Performance Liquidity Position 09 10 2 Empowering Health, Inspiring Joy 4Q24 Financial and Operating Results 02 FY24 Financial and Operating Results 03 Revenue 04 4Q24 Gross Margin 05 Business Outlook FY24 Gross Margin 4Q24 Financial and Operating Results $59.5 Million Revenue • Meeting guidance ...

Financial Data and Key Metrics Changes - The company reported a 10% year-over-year growth in Amazfit revenue, marking the first growth after two years of transformation [6] - Gross margin for Q1 2025 was 37.3%, higher than both Q4 2024 and Q1 2024, despite a negative impact from tariffs [28][29] - Operating expenses for Q1 totaled $31.5 million, an increase from $29.3 million in Q4 2024 and $27.8 million in Q1 2024 [30] Business Line Data and Key Metrics Changes - Amazfit branded products achieved a 10.2% year-over-year growth, reflecting strong market reception for new models Active2 and BIP6 [27] - The initial sales momentum of Active2 and BIP6 surpassed previous versions, securing top positions in major markets [12][15] Market Data and Key Metrics Changes - The U.S. market accounts for approximately 15% of the company's revenue, with tariffs currently having minimal impact on operations [9] - In Italy, the company's market share for no SIM smartwatch units reached 23.3%, ranking second in the core wearable smartwatch market [13] Company Strategy and Development Direction - The company is focusing on diversifying its supply chain and optimizing cost management to mitigate risks from geopolitical complexities [6][26] - Plans to strengthen presence in entry-level markets and deepen collaboration with offline channel partners are in place [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving year-over-year growth in overall sales for the first time since 2021, driven by product innovation and partnerships [22][56] - The company remains vigilant regarding macroeconomic challenges but expects operational efficiencies to offset tariff impacts [37] Other Important Information - The company successfully refinanced a significant portion of its short-term debt into long-term instruments, improving liquidity [35] - The anticipated tariff impact for 2025 is estimated to be around $2 million to $3 million, which is expected to be offset by operational efficiency gains [37] Q&A Session Summary Question: Impact of tariffs on U.S. exports produced in Vietnam - The company expects a full-year tariff impact of $2 million to $3 million, which will be offset by global operating efficiency gains [40][41] Question: Market pricing strategies - The company is monitoring competitors and will adjust pricing strategies on a case-by-case basis, but does not plan to be the first mover [47] Question: Operating expenses reduction timeline - A significant reduction in operating expenses is expected in Q2, as Q1 expenses were influenced by product launch events [48] Question: New product launches for the year - The company aims to refresh all major product lines throughout the year, with multiple new product launches planned [50][54]

Financial Data and Key Metrics Changes - The company reported a 10% year-over-year growth in Amazfit revenue, marking the first growth after two years of transformation [7] - Gross margin for Q1 2025 was 37.3%, higher than both Q4 2024 and Q1 2024, despite a negative impact from a 20% U.S. tariff on China-made products [28][29] - Adjusted operating loss for Q1 2025 was $17.2 million, compared to a loss of $13.1 million in the same period of 2024 [33] Business Line Data and Key Metrics Changes - Amazfit branded products achieved a 10.2% year-over-year growth, reflecting strong market reception of newly launched models Active2 and BIP6 [27] - Sales of Amazfit products increased by more than 10% compared to the same quarter last year, indicating a successful strategic shift [11] Market Data and Key Metrics Changes - The U.S. market accounts for about 15% of the company's revenue, with minimal impact from tariffs currently [10] - In Italy, the company's market share of non-SIM smartwatch units reached 23.3%, ranking second in the core wearable smartwatch market [14] Company Strategy and Development Direction - The company is focusing on diversifying its supply chain and optimizing cost management to mitigate risks associated with geopolitical complexities [8] - Plans to strengthen presence in entry-level markets and deepen collaboration with offline channel partners are in place [22] - The company aims to launch a significant number of new products in 2025 and 2026 to restore growth and profitability [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving year-over-year growth in overall sales for the first time since 2021, driven by product innovation and partnerships [22] - The anticipated tariff impact for 2025 is estimated to be around $2 million to $3 million, which is expected to be offset by global operating efficiency gains [37] Other Important Information - The company successfully refinanced a significant portion of its short-term debt into long-term instruments, improving liquidity and balance sheet flexibility [35] - Cash balance as of March 31 was $104 million, a decrease from $110 million in Q4 2024, but managed through improved working capital [33] Q&A Session Summary Question: Impact of tariffs on U.S. exports produced in Vietnam - Management expects a full-year tariff impact of $2 million to $3 million, which will be offset by global operating efficiency gains [40][41] Question: Market pricing strategies - The company is not planning to be the first mover in raising prices and will monitor competitors before making adjustments [46][47] Question: Operating expenses reduction timeline - A significant reduction in operating expenses is expected in Q2, with Q1 being an outlier due to product launch events [48][49] Question: New product releases for the year - The company aims to refresh all major product lines throughout the year, with multiple new product launches planned [50][51]

Core Insights - Zepp Health Corporation reported a 10% year-over-year growth in Amazfit revenue for Q1 2025, despite a challenging macroeconomic environment [1][3][6] - The company successfully launched new smartwatch models, Amazfit Active 2 and Bip 6, which have received positive market reception and are expected to drive further sales growth [1][2][6] - The management anticipates a year-over-year revenue increase for Q2 2025, projecting net revenues between US$50 million and US$55 million, representing a growth of approximately 23% to 35% compared to Q2 2024 [3][21] Financial Performance - Total revenue for Q1 2025 was US$39 million, with Amazfit-branded products growing by 10.2% year-over-year [3][6] - Gross margin improved to 37.3%, up from 36.8% in the same period last year, despite facing additional tariffs [3][7] - The net loss for Q1 2025 was US$19.7 million, compared to a net loss of US$14.8 million in Q1 2024 [15][33] Operating Expenses - Total operating expenses for Q1 2025 were US$32.7 million, a 6.9% increase year-over-year, driven by higher selling and marketing expenses [12][9] - Research and development expenses decreased by 7.8% year-over-year to US$12.4 million, reflecting a focus on resource efficiency [8] - Selling and marketing expenses rose by 28.5% year-over-year to US$13.8 million, primarily due to investments in digital campaigns and product launches [9][12] Cash and Debt Management - The company had a cash balance of US$104 million as of March 31, 2025, after repaying US$11.5 million in short-term debt [3][4] - Long-term borrowings now represent about 70% of total debt, with US$67.8 million of debt retired since early 2023 [4][18] - Improved working capital management contributed to a tighter cash conversion cycle, allowing for continued investment in growth opportunities [16][18] Market Strategy and Outlook - Zepp Health is committed to leveraging open-source technologies and enhancing AI capabilities to improve product offerings and user experience [2] - The company is expanding its brand presence through partnerships with athletes and community events, aiming to strengthen user connections and broaden its market reach [2][21] - Management remains focused on optimizing the supply chain and investing in AI-driven experiences to maintain leadership in the wearable market [2][21]

Market Capitalization Overview - The market capitalizations of various companies are listed, with notable figures including 74.11 billion, 88.55 billion, and 76.47 billion [2] - Companies such as SON, VIPS, and TAL have market caps of 72.19 billion, 60.28 billion, and 55.72 billion respectively [2] Stock Performance - Stock price changes are highlighted, with SON showing a decrease of 0.95 (-1.99%) while VIPS increased by 0.15 (+0.85%) [2] - Other companies like TAL and Lufax also experienced minor fluctuations, with TAL decreasing by 0.04 (-0.49%) and Lufax increasing by 0.96 (+3.75%) [2] Additional Company Insights - Companies such as Huya and Yatsen have market caps of 8.06 billion and 3.27 billion respectively, with stock price changes of -0.03 (-0.77%) and 0.00 (0.00%) [2] - The performance of companies like New Oxygen and Huami Technology is also noted, with market caps of 83.07 million and 37.63 million, showing no change in stock price [3] Summary of Smaller Companies - Smaller companies like Tuniu and Cheetah Mobile have market caps of 1.08 billion and 1.17 billion respectively, with Tuniu experiencing a slight decrease of -0.01 (-1.20%) [3] - The market cap of Baosheng E-commerce is reported at 2.02 billion, with a stock price increase of 0.17 (+5.18%) [3]

Core Insights - Zepp Health Corporation has filed its annual report on Form 20-F for the fiscal year ending December 31, 2024, with the SEC [1] - The company is a leader in smart wearables and health technology, focusing on optimizing health, fitness, and wellness for users [3] Company Overview - Zepp Health Corporation, listed on NYSE as ZEPP, has shipped over 200 million units of its products and operates in more than 90 countries and regions [3] - The company was founded in 2013 as Huami Corp and rebranded to Zepp Health Corporation in February 2021 to emphasize its health focus [3] - Zepp Health's product offerings include leading consumer brands such as Amazfit, Zepp Clarity, and Zepp Aura, supported by its proprietary Zepp Digital Management Platform [3] Investor Relations - The annual report is accessible on the company's investor relations website and the SEC's website, with hard copies available upon request for shareholders and ADS holders [2]

Financial Performance - For the year ended December 31, 2024, total revenues amounted to $182.6 million, with third-party revenues at $182.6 million and inter-company revenues at $0[52]. - For the year ended December 31, 2023, total revenues were $352.9 million, with third-party revenues at $352.9 million and inter-company revenues at $0[52]. - The total revenues for the year ended December 31, 2022, were $613.6 million, with a net loss attributable to Zepp Health Corporation's shareholders of $43.2 million[53]. - The net loss attributable to Zepp Health Corporation's shareholders for the year ended December 31, 2024, was $75.7 million, compared to a net loss of $31.0 million for the year ended December 31, 2023[52][53]. - The total cost and expenses for the year ended December 31, 2024, were $229.9 million, resulting in a loss from subsidiaries and VIEs of $69.7 million[52]. Cash Flow and Dividends - The company declared and distributed cash dividends of approximately $6.3 million to shareholders and ADS holders in April 2022[40]. - The company aims to retain available funds and future earnings to operate and expand its business[40]. - Cash transferred from the Hong Kong company to PRC subsidiaries, the VIEs, and their subsidiaries was $(6,025) thousand in 2022, $(26,338) thousand in 2023, and $(46,990) thousand in 2024[38]. - Net cash paid by the VIEs to subsidiaries in operating activities was $(72,262) thousand in 2022, $(63,305) thousand in 2023, and $(87,304) thousand in 2024[38]. - The company does not plan to declare or pay any dividends in the near future, intending to retain funds for business operations and expansion[217]. Assets and Liabilities - As of December 31, 2024, total assets amounted to $528,593,000, a decrease from $635,519,000 as of December 31, 2023, representing a decline of approximately 16.8%[55][56]. - Total liabilities as of December 31, 2024, were $275,865,000, compared to $282,767,000 as of December 31, 2023, indicating a reduction of about 2.5%[55][56]. - Total equity increased to $252,728,000 as of December 31, 2024, from $352,752,000 as of December 31, 2023, reflecting a decrease of approximately 28.4%[55][56]. - Cash and cash equivalents decreased from $133,669,000 in 2023 to $91,069,000 in 2024, a decline of about 31.8%[55][56]. Regulatory and Compliance Risks - The company faces significant risks related to its corporate structure, particularly regarding compliance with PRC regulations affecting its VIEs[64]. - The PRC tax authorities may scrutinize VIE contractual arrangements, potentially leading to additional tax liabilities and penalties that could negatively impact financial condition[163]. - The company may require CSRC approval for offshore offerings, and failure to obtain such approval could lead to sanctions and adversely affect operations[170]. - The PRC government has implemented new regulations for overseas securities offerings, requiring companies to file with the CSRC for future equity securities issuances[171]. - The company is subject to significant discretion from PRC authorities, which may impose fines or revoke business licenses if deemed necessary[173]. Market and Operational Risks - Supply chain risks include potential shortages and long lead times for key components, which could disrupt operations and affect financial performance[74]. - The company relies on contract manufacturers for production, which poses risks related to operational difficulties and potential disruptions[79]. - The ongoing geopolitical tensions and trade policies, particularly between the U.S. and China, may adversely affect the company's business and financial condition[142]. - The company may face increased labor costs and inflation, which could adversely affect profitability due to severe competition in the smart wearable device market[129]. Shareholder and Governance Matters - As of February 28, 2025, holders of Class B ordinary shares represent 51.0% of total outstanding shares and 91.2% of total voting power, giving them decisive influence over corporate matters[220]. - Officers, directors, and principal shareholders collectively hold 93.5% of total voting power, which may adversely affect the trading price of the company's ADSs[222]. - The company has anti-takeover provisions that could limit shareholders' opportunities to sell shares at a premium, potentially discouraging third-party control attempts[221]. - The dual-class voting structure may limit the ability of Class A shareholders to influence corporate matters[219]. Technology and Innovation - The company has applied AI expertise to emerging industrial medical imaging technologies, enhancing its analytics capabilities[28]. - The company has received certification for its blood pressure measurement software as a Class II medical device in 2023, indicating a focus on medical applications[71]. - The company aims to expand its brand recognition through its Amazfit and Zepp brands, targeting the mid- to high-end market since 2015[72]. Currency and Exchange Rate Risks - Fluctuations in exchange rates, particularly the Renminbi against the U.S. dollar and Euro, may adversely affect the company's operational results and investment value[185]. - The effectiveness of hedging against currency fluctuations is limited, and the company may not be able to adequately hedge its exposure[188]. - Significant revaluation of the Renminbi could negatively impact the conversion of U.S. dollars received from offerings into Renminbi for operations[187]. Strategic Partnerships and Market Expansion - The company is actively seeking strategic partnerships to enhance product performance and expand sales channels, including a partnership with HYROX, the World Series of Fitness Racing[121]. - The company is expanding into international markets including Italy, Spain, Germany, the UK, the US, Japan, India, and Brazil, incurring significant expenses for marketing and brand recognition[103].

Market Capitalization Summary - The market capitalization of various companies is highlighted, with notable figures such as 71.94 billion for an unnamed company and 69.52 billion for another [2]. - Companies like Bilibili and TAL Education have market capitalizations of 64.03 billion and 61.59 billion respectively [2]. - The lowest market capitalizations listed include 0.90672 million for Happy Car and 0.17235 million for Easy Electric [3]. Stock Performance - Stock performance shows fluctuations, with companies like Zai Lab experiencing a decrease of 0.36 (-2.72%) and 0.13 (-3.87%) for another unnamed company [2]. - Positive movements are noted for companies such as 51Talk, which increased by 0.99 (+2.74%) [2]. - The performance of companies like Huya and Xunlei shows declines of 0.11 (-4.00%) and 0.10 (-3.11%) respectively [3]. Company Highlights - Notable companies include JD.com with a market cap of 71.94 billion and TAL Education at 61.59 billion, indicating strong positions in the market [2]. - Other companies like 9F Inc. and Yatsen Global have market caps of 4.98 billion and 3.28 billion respectively, showcasing a diverse range of market sizes [2]. - The report also mentions companies with smaller market caps, such as 1.34 million for Baozun and 1.07 million for Leopard Mobile, indicating a broad spectrum of company valuations [3].

Financial Data and Key Metrics Changes - Overall sales in Q4 2024 rose by more than 40% quarter over quarter, aligning with guidance [10] - Gross margin for the year 2024 reached 39% compared to 26.2% for the full year 2023 [10][40] - Cash on hand at the end of 2024 was $112 million, providing ample runway for investments [11] Business Line Data and Key Metrics Changes - The successful launch of the T-Rex 3 significantly boosted market demand and sales growth [12] - The T-Rex 3 is noted for its durability, battery life, and AI integration, establishing a strong position in the market [13] - The upcoming Amazfit Active 2 and Bip 6 series are expected to expand market reach and drive sales growth [16] Market Data and Key Metrics Changes - Global smartwatch sales fell by 7% in 2024, with Apple shipments declining by 19% [31] - Sales in China grew from 19% to 25% of the market, marking a significant shift [31] - The Indian market saw a decline from 30% to 23% due to quality issues with ultra-cheap devices [32] Company Strategy and Development Direction - The company is focusing on a brand transition to a high-margin business model and enhancing global marketing [9] - The strategy includes launching one to two new products each quarter in 2025 to drive demand [37][122] - Partnerships with athletes and organizations like HYROX are aimed at increasing brand visibility and market share [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory despite macroeconomic challenges [27] - The company anticipates a recovery in the global market driven by AI features and health data [34] - The outlook for Q1 2025 includes expected revenue growth of 14% to 29% year over year [55] Other Important Information - The company is committed to a share repurchase program in 2025, reflecting confidence in long-term value [28] - Inventory levels were reported at $57 million, the lowest since 2018, indicating strong inventory management [52] - The company has successfully refinanced short-term debts into long-term instruments, improving financial stability [53] Q&A Session Summary Question: Impact of new tariffs on smartwatch imports - Management indicated minimal impact due to proactive supply chain management and dual sourcing strategies [30][61] Question: Percentage of manufacturing outside China - Approximately 20% to 25% of the overall portfolio is manufactured outside China [63] Question: Impairment loss details - The impairment loss was due to investments in upstream and downstream technology companies that did not perform as expected [66][70] Question: Shift in demand towards lower-priced players - Management noted that while the market declined, there are bright spots in the outdoor and sports smartwatch segments, with strong performance from brands like Garmin [75][80] Question: Long-term strategy and vision - The company is diversifying its product portfolio and exploring B2B opportunities while focusing on building a global health ecosystem [90][91] Question: Relationship with Xiaomi - The relationship remains strong, but the company is transitioning to focus on self-branded products for profitability [96][100] Question: Stock liquidity concerns - Management acknowledged the illiquidity of the stock and emphasized ongoing buyback programs and growth strategies to improve market perception [106][110] Question: New product roadmap for 2025 - The company plans to launch multiple new products across different price segments, which is expected to drive revenue growth [118][122]

Financial Data and Key Metrics Changes - Overall sales in Q4 2024 rose by more than 40% quarter over quarter, aligning with guidance despite macroeconomic headwinds and supply bottlenecks [3][21] - Gross margin for 2024 reached 39%, compared to 26.2% for the full year 2023, indicating significant margin expansion [4][23] - Cash on hand at the end of 2024 was $112 million, providing ample runway for market investments [4][30] - Adjusted operating loss for Q4 2024 was $7.4 million, the narrowest in the past four quarters, demonstrating sequential improvement [27][28] - GAAP net loss for Q4 2024 was $36.9 million, including various impairments and deferred tax asset valuation allowances [28] Business Line Data and Key Metrics Changes - The successful launch of the T Rex3 smartwatch significantly boosted sales, establishing a strong market demand [4][21] - The Amazfit Active2 and BIP6 series are expected to expand reach in the entry-level segment, enhancing sales growth in Q2 2025 [7][11] - The T Rex series has outperformed competitors, achieving higher profitability and steady growth [11][12] Market Data and Key Metrics Changes - Global smartwatch sales fell by 7% in 2024, primarily due to a decline in Apple Watch shipments, which fell by 19% [18][19] - Sales in China grew from 19% to 25% of the market, marking a significant shift in market dynamics [19] - The Indian market saw a decline from 30% to 23%, attributed to quality issues with ultra-cheap devices [19] Company Strategy and Development Direction - The company is transitioning towards a brand-empowered, high-margin business model for Amazfit products, focusing on technological innovation and global marketing [3][4] - The strategy includes diversifying the product portfolio beyond smartwatches to include health solutions and lifestyle products [8][12] - Partnerships with athletes and emerging sports organizations are aimed at enhancing brand visibility and market positioning [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory of ZEP Health, emphasizing the importance of a robust product pipeline and strategic partnerships [15][14] - The company anticipates a recovery in the global smartwatch market in 2025, driven by AI features and health data emphasis [20] - Management highlighted the importance of maintaining cost management while investing in R&D and marketing for long-term competitive advantage [25][26] Other Important Information - The company plans to continue its share repurchase program in 2025, reflecting confidence in long-term value [15][31] - Inventory levels were reported at $57 million in Q4, the lowest since 2018, indicating effective inventory management [30] Q&A Session Summary Question: Impact of new tariffs on Chinese smartwatch imports - Management indicated minimal impact on U.S. consumer pricing or gross margin due to proactive supply chain management, with 20% to 25% of overall manufacturing coming from non-China regions [17][35][36] Question: Details on impairment losses and tax increases - The impairment losses were due to investments in upstream and downstream technology companies that did not perform as expected, leading to a $13 million impairment [38][40] Question: Market demand shift towards lower-priced players - Management noted that while the overall market declined, segments like outdoor and sports smartwatches, particularly the T Rex series, gained market share [43][44] Question: Long-term strategy and vision for a global health ecosystem - The company is diversifying its product portfolio and exploring B2B opportunities, aiming to create a comprehensive health ecosystem [52][54] Question: Relationship with Xiaomi and its impact - Management emphasized a strong relationship with Xiaomi while focusing on transforming into a self-branded company to improve profitability [56][58] Question: Stock liquidity and market valuation - Management acknowledged the stock's illiquidity and outlined plans for a stock buyback program, expressing confidence in the company's growth trajectory [62][64]