Zepp Health(US:ZEPP)2022-05-24 17:25Financial Data and Key Metrics Changes - The company reported Q1 2022 revenue of RMB0.8 billion, a decrease of 34% year-over-year, primarily due to reduced Mi Band 6 shipments and lower discretionary spending by consumers [7][17][21] - Gross margin for Q1 2022 was 20.1%, down from 22.5% in Q1 2021, attributed to increased freight costs and pandemic-related challenges [18][21] - Adjusted net loss for Q1 2022 was RMB75.7 million, compared to an adjusted net loss of RMB29.0 million in Q1 2021 [21] Business Line Data and Key Metrics Changes - Self-branded products contributed over 65% of total revenue in Q1 2022, indicating a shift in revenue mix towards these products [8][18] - Revenue from self-branded products in North America surged by more than 110% year-over-year, showcasing strong market performance [9] Market Data and Key Metrics Changes - The ongoing COVID-19 pandemic and geopolitical tensions have negatively impacted consumer confidence and discretionary spending, particularly in Europe and the United States [17][29] - The company anticipates a rebound in revenue for Q2 2022, projecting net revenue between RMB1.08 billion and RMB1.3 billion, compared to RMB1.84 billion in Q2 2021 [23] Company Strategy and Development Direction - The company is focusing on technological innovation in AI, health Big Data, and product portfolio expansion to capture opportunities in the healthcare services industry [14][15] - Upcoming product launches include the upgraded T-Rex 2 and new GTS and GTR series, aimed at enhancing user experience and expanding market reach [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the pandemic and supply chain disruptions but expressed optimism about long-term growth prospects [15][17] - The company remains committed to strict cost control measures and disciplined working capital management throughout 2022 [23] Other Important Information - The company has initiated a share repurchase program, buying back $6.9 million worth of shares by March 31, 2022, reflecting confidence in its growth strategy [22] - The company is exploring options to mitigate delisting risks, including a potential second listing in Hong Kong [58] Q&A Session Summary Question: Impact of COVID in Shanghai on operations and supply chain - Management indicated that the impact of the Shanghai lockdown was relatively limited compared to Shenzhen, but it still dampened sales outlook for Q1 and Q2 [27] Question: Forecast for consumer electronics and smartwatch market - Management noted a slowdown in consumer discretionary income due to inflation but remains optimistic about the wearables market's growth [29] Question: Outlook for Q2 and revenue contribution from Xiaomi - Q2 is expected to show strong quarter-on-quarter growth, driven by new product launches, with Xiaomi's revenue contribution anticipated to increase [33][34] Question: Functional upgrades for self-branded products - The company aims to increase average selling prices (ASP) through product upgrades and enhancements in features and functionalities [38][40] Question: Expansion of Zepp OS and operational expenses - Management is focused on enhancing Zepp OS with new applications and services while planning to right-size operational expenses moving forward [44][46] Question: Growth expectations for Amazfit products - Self-branded products are expected to grow in Q2, with a gradual improvement anticipated in Q3 and Q4 due to seasonal demand [51][52] Question: Buyback strategy and delisting risk - The company plans to continue its buyback program and is monitoring delisting risks closely, considering options for a second listing [57][58] Question: Future relationship with Xiaomi - The relationship with Xiaomi remains strong, with ongoing discussions for new product lines and categories [60]