Zepp Health Corp. Reports First Quarter 2021 Unaudited Financial Results BEIJING

Zepp Health Corp. Reports First Quarter 2021

Unaudited Financial Results

BEIJING, May 13, 2021 /PRNewswire/ -- Zepp Health

Corp. (NYSE: ZEPP) today reported revenue of RMB1.1 billion (US$175.1 million); GAAP diluted net loss per share of RMB0.16 (US$0.02);

and GAAP diluted net loss per ADS of RMB0.64 (US$0.10) for the first quarter ended March 31, 2021. Each ADS represents four (4) Class

high end of our guidance range, leveraging the growing revenue from sale of our self-branded Amazfit and Zepp products, which grew 84%

year-over-year in the first quarter, despite the continuing pandemic prevailing in many of our key markets," said Wang Huang, Chairman

and CEO of Zepp Health. "First quarter results included normal seasonality, and anticipation of the Xiaomi Band 6, which will benefit

the second quarter. With the sales records of our self-branded products in the first quarter, and many exciting product enhancements yet

to come, we are well positioned and optimistic about the upcoming quarters this year."

Added Chief Financial Officer, Leon Deng, "Our

strong guidance for the second quarter reflects our expectation of continued strength of our Amazfit and Zepp brands, as well as new Xiaomi

shipments. While we continue to manage expenses, the ongoing pandemic has brought challenges to our expense coverage, and we keep investing

in the growth of our business. We expect to return to GAAP profitability in Q2 this year."

in 2020 are referenced with the prior 6-K disclosures.

2 Adjusted net income/(loss)

attributable to Zepp Health Corp. is a non-GAAP measure, which excludes share-based compensation expenses. See "Reconciliation of

GAAP and Non-GAAP Results" at the end of this press release.

3 Adjusted diluted net income/(loss) is the abbreviation of

Adjusted net income/(loss) attributable to Zepp Health Corp., which is a non-GAAP measure and excludes share-based compensation

expenses attributable to Zepp Health Corp., and is used as the numerator in computation of adjusted basic and diluted net

income/(loss) per ADS attributable to Zepp Health Corp..

First Quarter 2021 Financial Results

Total units shipped in the first quarter 2021

decreased by 17.1% year-over-year to 6.3 million, compared with 7.6 million in the first quarter of 2020. This was driven by a 34.3% decrease

in units of products built for Xiaomi, partially offset by a 111.1% increase in unit shipments of Amazfit and Zepp branded products.

Revenues for the first quarter of 2021 reached

RMB1.1 billion (US$175.1 million), an increase of 5.4% from the first quarter of 2020. In the first quarter of 2021, revenue from Xiaomi

products decreased by 39.9% and revenue from self-branded products increased by 84.4%, each compared with the same period in 2020, primarily

driven by the company's popular premium GT series, the basic Bip and Pop models, and the rugged T-Rex. Both sequential and year-over-year

quarterly revenue changes can be affected by the seasonality of purchase patterns as well as by timing of new product introductions.

Impact of COVID-19 on Our Business

The impacts of COVID-19 continued in the first

quarter 2021, including some production delays that affected inventory availability for some new products. In key European, Indian and

South American markets for Zepp Health products, continued battles with infection rates and lockdowns dampened the company's first

quarter 2021 sales. The company's costs and profitability were affected in the first quarter by the termination of subsidies to

enterprises that were affected by the pandemic granted by the Chinese government, as well as exemptions for social insurance contributions,

which were in effect in 2020.

Gross margin in the first quarter of 2021 was

22.5%, consistent in the same period in 2020. Gross margin in the first quarter of 2021 was affected by model run-outs and product mix.

Gross margin and gross profit were affected by product mix as different products had different margin contributions, and these could change

over the life of a product.

Research & Development

Research and development expense in the first

quarter of 2021 was RMB152.3 million, increasing 28.7% year-over year, and comprising 13.3% of revenue versus 10.9% in the year-ago period.

The growth was mainly attributed to higher salary and wages costs mainly driven by more headcounts, offsetting by the better resource

consumption management during testing process. We have implemented expense control in R&D activities since second half-year of 2020,

and we have seen positive results in 2021.

Sales and Marketing expense for the first quarter

of 2021 was RMB90.8 million, increasing 65.5% year-over-year, and comprising 7.9% of revenue, compared to 5.0% of revenue in the same

period in 2020. Higher sales and marketing expense in 2021 was driven by increased advertisement promotion expenses and sales and marketing

headcounts. S&M expense decreased sequentially by RMB26.1 million from the fourth quarter 2020.

General & Administrative

General and Administrative expense was RMB65.3

million in the first quarter 2021, increasing 28.3% year-over-year, and comprising 5.7% of revenue, compared to 4.7% in the same period

in 2020, mainly attributed to higher salary and wages costs and higher depreciation and rental fee due to office expansion. We have also

implemented expense control in G&A activities since the second half-year of 2020, and we have seen positive results in 2021.

Operating Income/(Loss) and Expenses

Total Operating Expense for the first quarter

2021 was RMB308.4 million, which increased by 37.6% from the same period in 2020, comprising 26.9% of revenue in the first quarter 2021,

compared to 20.6% in the first quarter 2020. Higher expenses reflect investments in new product development and global market expansion.

Total operating expense declined sequentially

in each of the last two quarters from the third quarter 2020 as the company had instituted new expense control efforts. The company will

continue to exercise control on expenses in the future, to improve operating efficiency as a whole.

Operating Loss for the first quarter 2021 was

RMB50.2 million, which decreased by RMB70.7 million from operating income RMB20.5 million for the same period in 2020.

Liquidity and Capital Resources

On March 31, 2021, the Company had cash and cash

equivalents of RMB1,090.5 million (US$166.4 million), compared with RMB2,273.3 million as of December 31, 2020. In the first quarter 2021,

the company used RMB863.7 million to invest in Jiangsu Yitong High-Tech Co., Ltd..

For the second quarter

of 2021, the management of the Company currently expects:

- Net revenues to be between RMB1.7 billion and RMB1.8 billion, compared with RMB1.14 billion in the second quarter of 2020.

The above outlook is

based on the current market conditions and reflects the Company management's current and preliminary estimates of market and operating

conditions and customer demand, which are all subject to change.

The Company's management will hold a conference

call at 8:00 a.m. Eastern Time on Thursday, May 13, 2021 (8:00 p.m. Beijing Time on May 13, 2021) to discuss financial results and answer

questions from investors and analysts. Listeners may access the call by dialing:

Participants should dial-in at least 10 minutes

before the scheduled start time and ask to be connected to the call for "Zepp Health Corp.".

Additionally, a live and archived webcast of the

conference call will be available at https://ir.zepp.com/investor.

A telephone replay will be available one hour

after the call until May 20, 2021 by dialing:

About Zepp Health Corporation (NYSE: ZEPP)

Zepp Health changed its name from Huami Corp.

(HMI) on February 25, 2021 to emphasize its health focus with a name that resonates across languages and cultures globally. The company's

mission continues to be connecting health with technology. Since its inception in 2013, Zepp Health has developed a platform of proprietary

technology including AI chips, biometric sensors, and data algorithms, which drive a broadening line of smart health devices for consumers,

and data analytics services for population health. Zepp Health is one of the largest global developers of smart wearable health and consumer

fitness devices, shipping 46 million units in 2020. Zepp Health Corp. is based in Hefei, China, with U.S. operations, Zepp Health USA,

based in Cupertino, Calif..

Use of Non-GAAP Measures

We use adjusted net income, a non-GAAP financial

measure, in evaluating our operating results and for financial and operational decision-making purposes. Adjusted net income represents

net income excluding share-based compensation expenses, and such adjustment has no impact on income tax. Adjusted net income attributable