Zepp Health(ZEPP) - 2024 Q2 - Quarterly Report

Financial Performance - Revenues for Q1 2024 were US$39.8 million, a decrease of 55.5% year-over-year, primarily due to lower sales of Xiaomi products and no new self-branded product launches[5] - Net loss attributable to Zepp Health Corporation for Q1 2024 was US$14.6 million, a decrease of 22.8% year-over-year[12] - Revenues for the three months ended March 31, 2024, were RMB 287,231, a decrease of 55.5% compared to RMB 645,183 for the same period in 2023[35] - The net loss attributable to Zepp Health Corporation for the three months ended March 31, 2024, was RMB 105,524, compared to RMB 136,720 for the same period in 2023, reflecting a 22.8% improvement[35] - Adjusted net loss attributable to Zepp Health Corporation for the three months ended March 31, 2024, was RMB 89,749, compared to RMB 112,728 for the same period in 2023, indicating a 20.4% reduction[40] Gross Margin and Profitability - Gross margin reached a record high of 36.8%, up from 15.9% in Q1 2023, supported by a favorable product mix and strong performance of self-branded products[6] - Gross profit for the three months ended March 31, 2024, was RMB 105,674, representing a gross margin of 36.8%, compared to RMB 102,845 and a margin of 15.9% in the same period of 2023[35] Expenses - Research and development expenses were US$13.3 million, accounting for 33.5% of revenues, a decrease of 18.4% year-over-year[7] - Selling and marketing expenses were US$10.7 million, a decrease of 10.1% year-over-year, accounting for 26.9% of revenues[8] - Total operating expenses decreased to RMB 219,410 for the three months ended March 31, 2024, down from RMB 253,753, a reduction of 13.5%[35] - Total adjusted operating expenses for the three months ended March 31, 2024, were RMB 203,635, a decrease from RMB 229,761 in the same period of 2023[40] - Share-based compensation expenses for the three months ended March 31, 2024, were RMB 15,775, down from RMB 23,992 in the same period of 2023[41] Cash Flow and Debt Management - The company maintained a positive operating cash flow for the seventh consecutive quarter, with cash reserves of US$132.3 million as of March 31, 2024[13] - The company successfully retired US$46.7 million of debt since Q1 2023 and plans further reductions in the upcoming quarters[13] Future Outlook - For Q2 2024, management expects net revenues between US$40 million and US$55 million, with over 90% expected from self-branded products[16] - The company launched the Amazfit Helio Ring in May 2024, enhancing its product offerings and market competitiveness[1] Asset and Liability Management - As of March 2024, total current assets decreased to RMB 1,981,316 from RMB 2,248,780 as of December 31, 2023, representing a decline of approximately 11.9%[28] - Cash and cash equivalents as of March 2024 were RMB 895,823, down from RMB 949,036 as of December 31, 2023, a decrease of about 5.6%[28] - Total liabilities decreased to RMB 1,792,378 as of March 2024 from RMB 2,007,621 as of December 31, 2023, a reduction of approximately 10.7%[30] - The company's accumulated retained earnings decreased to RMB 625,207 as of March 2024 from RMB 730,731 as of December 31, 2023, a decline of about 14.4%[32] - Total equity as of March 2024 was RMB 2,419,919, down from RMB 2,504,510 as of December 31, 2023, reflecting a decrease of approximately 3.4%[32] Operational Metrics - Total units shipped in Q1 2024 decreased by 65.7% year-over-year to 1.2 million, compared to 3.5 million in Q1 2023[5] - Zepp Health Corporation has shipped over 200 million units of its products, available in more than 90 countries and regions[18] Non-GAAP Measures - Adjusted net income/(loss) and adjusted EBIT are used to evaluate operating results, excluding share-based compensation expenses[19] - The company emphasizes the importance of non-GAAP measures to identify underlying trends in business performance[20] Currency and Operations - The company operates primarily in China, with currency conversions made at a rate of RMB 7.2203 to US$1.00 as of March 29, 2024[23] - Interest income increased to RMB 7,277 for the three months ended March 31, 2024, compared to RMB 4,133 for the same period in 2023, a growth of 76.1%[35] - The weighted average number of ordinary shares used in computing net loss per share was 259,525,679 for both the three months ended March 31, 2024, and 2023[39]