Full Press Release Details
Zepp Health Corp. Reports Fourth Quarter
and Full Year 2020 Unaudited Financial Results
BEIJING, March 15, 2021 /PRNewswire/ --
Zepp Health Corp. (NYSE: ZEPP) today reported revenue of RMB2.0 billion, or US$302.3 million; GAAP diluted net income per share
of RMB0.44 (US$0.07), or GAAP diluted net income per ADS of RMB1.76 (US$0.27) for the fourth quarter ended December 31, 2020.
The small year-over-year decrease in fourth
quarter revenue was mainly the result of a 20.8% decrease in revenue from Xiaomi products, partially offset by 25.1% growth and
geographic expansion of Amazfit and Zepp-branded products. Unit shipments were affected by the timing of the new product introduction,
seasonality and continued impact of Covid, with some reduced production availability and lockdowns in many of our key European
markets," said Wang Huang, Chairman and CEO of Zepp Health. "I am proud that despite these challenges, our self-branded
products performed strongly across many price points. In the fourth quarter, we also made important progress in our data analytics
business, and industrial health tech, as demonstrated by a number of announcements, leading us to changing the company's
name recently to better reflect our broad mission of connecting health with technology. We are well positioned to have a strong
| Fourth Quarter and Full Year 2020 Financial Summary | |||||||||||||
| For the Three Months Ended | For the Full Year Ended | ||||||||||||
| GAAP in millions, except percentages and per share amounts | Dec. 31, 2020 | Dec. 31, 2019 1 | Dec. 31, 2020 | Dec. 31, 2019 1 | |||||||||
| Revenue RMB | 1,972.5 | 2,111.4 | 6,433.4 | 5,812.3 | |||||||||
| Revenue USD | 302.3 | 303.3 | 986.0 | 834.9 | |||||||||
| Gross Margin | 19.0 | % | 23.8 | % | 20.7 | % | 25.3 | % | |||||
| Net income attributable to Zepp Health Corp. RMB | 115.2 | 207.2 | 228.8 | 575.2 | |||||||||
| Adjusted net income attributable to Zepp Health Corp. RMB 2 | 128.4 | 213.8 | 293.9 | 630.3 | |||||||||
| Diluted net income per share RMB | 0.44 | 0.80 | 0.88 | 2.24 | |||||||||
| Diluted net income per ADS USD | 0.27 | 0.46 | 0.54 | 1.29 | |||||||||
| Adjusted diluted net income per share RMB 3 | 0.49 | 0.83 | 1.13 | 2.45 | |||||||||
| Adjusted diluted net income per ADS USD | 0.30 | 0.48 | 0.69 | 1.41 | |||||||||
| Units Shipped | 13.3 | 14.7 | 45.7 | 42.3 |
_____________________________
1 The USD numbers in 2019
are referenced with the prior 6-K disclosures.
2 Adjusted net income 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 is the abbreviation of Adjusted net income attributable to ordinary shareholders of Zepp Health Corp., which is a
non-GAAP measure and excludes share-based compensation expenses attributable to ordinary shareholders of Zepp Health Corp.,
and is used as the numerator in computation of adjusted basic and diluted net income per ADS attributable to ordinary
shareholders of Zepp Health Corp.
Added Chief Financial Officer, Leon Deng,
"Fourth quarter revenue was in-line with our guidance range, largely due to the return to Covid lockdowns in many areas of
Europe over the year-end holidays, as well as some continuing inventory availability issues for new products. Product mix and volume
impacted gross margin, but good expense discipline continued in the quarter, both in absolute amounts as well as operating expenses
as a percentage of sales. Looking ahead, investments in personnel-related costs to accelerate growth of Amazfit and Zepp-branded
products worldwide are creating a slightly higher fixed-cost base in our operating model, which we will try to offset as much as
possible by further variable cost savings. Guidance for the first quarter 2021 reflects the seasonality of business, but our outlook
for 2021 remains strong."
Management's Discussion and Analysis
Total units shipped in the fourth quarter
2020 decreased 9.5% year-over-year to 13.3 million, compared with 14.7 million in the fourth quarter of 2019. This was driven by
a 14.5% decrease in units of products built for Xiaomi, partially offset by a 31.3% increase in product units under the company's
Fourth quarter revenues reached RMB1,972.5
million (US$302.3 million), a decrease of 6.6% from the fourth quarter of 2019. Revenue from Xiaomi products decreased 20.8% and
revenue from self-branded products increased 25.1%, primarily driven by our new products including Amazfit Pop, Bip, Neo, and the
GT series. Quarterly sales of self-branded products grew mid-teens to mid-thirties percentages year-over-year each quarter of 2020,
and the company expects that trend to continue. 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.
As was true in the third quarter, in the
fourth quarter 2020, the company experienced production delays that affected inventory availability for some new products. Also,
many European countries re-instituted lockdowns, which we believe tempered holiday sales in some of the company's strongest
markets. North American markets, which were less restricted, were stronger, but were affected somewhat by product availability.
Gross margin in the fourth quarter 2020
was 19.0%, compared with 23.8% in the year-ago period. Margin on both Xiaomi and self-branded products in the fourth quarter was
lower than the year-ago fourth quarter. For self-branded products, discounting on older models and holiday promotional discounts
had a greater impact than in the year-ago quarter. Gross margin and gross profit are affected by product mix as different products
have different margin contributions, and these can change over the life of a product.
Research & Development
Fourth quarter 2020 R&D expense was
RMB129.6 million, decreasing 7.5% year-over year, and comprising 6.6% of revenue. This reflects effective expense control in R&D
activities, specifically in better resource consumption management during testing process. The company optimized its integrated
product development process to effectively develop new smart devices and analytics for consumers and industry.
Sales and Marketing expense for the fourth
quarter 2020 was RMB116.9 million, increasing 86.2% year-over-year, and comprising 5.9% of revenue, compared to 3.0% of revenue
in the year-ago period. Higher sales and marketing expense in 2020 was driven by increased headcount for sales, marketing and support
as sales of self-branded products have expanded globally. In the fourth quarter 2020, there were 27 countries in which the company
had 100,000 or more device activations, compared to 9 in the fourth quarter of 2019. Product launch activities for a higher number
of new products in 2020's fourth quarter, as well as a higher number of regions in which product launch and promotional activities
were conducted, contributed to the increase in expense.
General & Administrative
General and Administrative expense was
RMB64.5 million, decreasing 21.9% year-over-year, and comprising 3.3% of revenue, compared to 3.9% in the year-ago period.
Operating Income and Expenses
Total Operating Expense for the fourth
quarter 2020 was RMB310.9 million, up 8.9% from the year-ago period, comprising 15.8% of revenue in the fourth quarter 2020, compared
to 13.5% in the fourth quarter 2019. After rising significantly in the second quarter of 2020 to 21.5% of sales, expense reductions
reduced it to 17.0% in the third quarter and 15.8% in the fourth quarter. In value, total operating expense declined sequentially
from the third quarter 2020 to the fourth quarter 2020 by RMB68.6 million, or 18.1% due to effective expense management. The company
will continue to exercise control on expenses in the future, improving the operating efficiency as a whole.
Operating Income for the fourth quarter
2020 was RMB63.7 million, down 70.7% from RMB217.7 million from the year-ago period.
Liquidity and Capital Resources
At December 31, 2020, the Company had cash
and cash equivalents of RMB2,273.3 million (US$348.4 million), compared with RMB1,803.1 million as of December 31, 2019.
Total units shipped in the full year 2020
increased 8.0% from full year 2019, reaching 45.7 million, compared with 42.3 million in the full year of 2019. The total shipments
of Zepp Health comprised fitness bands, smart watches, smart scales, ear buds and other smart fitness devices.
Full year 2020 revenues reached RMB6,433.4
million (US$986.0 million), an increase of 10.7% from the full year of 2019. The increase in the year was driven primarily by both
sales of the Xiaomi wearable products and Amazfit and Zepp-branded products.
Reflecting global market expansion and
a broadening product line, For the full year 2020, Zepp Health self-branded products increased 20.5% in unit shipments to comprise
10.3% of total unit sales and 31.0% of total revenue, compared to 27.8% of revenue in 2019.
Gross margin in the full year 2020 was 20.7%, compared with
25.3% in the full year 2019. The decrease was mainly driven by the lower margin of Xiaomi products and lower margins on newly introduced
self-branded products.
Research & Development
Full year 2020 R&D expense was
RMB538.0 million, increasing 24.9% from the full year 2019, and comprised 8.4% of revenue, compared to 7.4% of revenue in the
full year 2019, reflecting personnel additions and expansion of R&D activities for future products and new product
categories. This was partially offset by lower resource consumption in testing procedures. The company optimized its
integrated product development process to effectively develop new smart products and services to the consumers, and believed
that smart R&D investment was a key factor to maintain its competitive position in the global market.
Sales and Marketing expense for the full
year 2020 was RMB358.7 million, increasing 97.1% from the full year 2019, and comprised 5.6% of revenue, compared to 3.1% of revenue