Zepp Health(ZEPP) - 2024 Q4 - Earnings Call Transcript

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]