Zepp Health(US:ZEPP)2022-03-17 16:31Financial 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]