Zepp Health(US:ZEPP)2021-11-16 18:39Financial 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]