Zepp Health Corporation Reports First Quarter 2025 Unaudited Financial Results

Health Corporation Reports First Quarter 2025 Unaudited Financial Results

Calif., May 19, 2025 /PRNewswire/ -- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP)

today announced its unaudited financial results for the first quarter of 2025.

Quarter 2025 Financial and Operating Highlights:

Mr. Wang 'Wayne' Huang, Chairman and CEO of Zepp, commented, "In

the first quarter of 2025, we are happy to see that our Amazfit revenue grew 10% year over year as we execute against a difficult macro

backdrop while sharpening our operating model for long-term resilience. Tariff relief on key smartwatch categories in the United States

and our dual-sourcing strategy between China and Vietnam helped cushion some external cost pressures, and the additional Vietnam capacity

we brought online further de-risked the supply chain. Fixed expenses were not fully absorbed in the low season, which limited gross-margin

leverage, but the progress we have made on mix upgrade keeps us firmly on the path toward sustained profitability."

Wayne added, "Over the past four months, we successfully launched

the Amazfit Active 2 and Bip 6. These smartwatches frequently rank among the top 10 on Amazon's smartwatch category in major countries

with ratings exceeding 4.6 on Amazon in the U.S. They also received enthusiastic acclaim within the Reddit community. With sales on a

consistent upward trend and production - delivery challenges on the brink of full resolution, we anticipate even higher sales for the

Active 2 and Bip 6 series in the upcoming quarters.

We remain committed to leveraging open-source technologies such as

Llama. Recently, we enhanced the responsiveness of Zepp Flow voice commands on our smartwatches, achieving a 17-fold improvement in speed.

Additionally, by adopting a hybrid AI solution combining OpenAI and Google Gemini, we reduced the cost of food recognition in our app's

food log by 90%. This enabled us to expand the service across a wider region in Europe and double the daily usage allowance for users.

Wayne concluded, "To amplify the brand, we deepened our presence

in the HYROX community via events in Chicago, Taipei and Shanghai, and welcomed global athlete partners like five-time Olympic medallist

Gabby Thomas and Italian tennis star Jasmine Paolini. Last weekend, Jasmine made history by becoming the first Italian woman in 40 years

to win the Rome Open. She, wearing the Active 2 watch, is inspiring sports enthusiasts in the spotlight. Such moments build brand voice

and user connection. Strong sales of our budget-friendly products lay the groundwork for mid-to-high-end launches, strengthen partner

confidence, broaden our user base, and expand the sales funnel. As these efforts begin to yield in results, second quarter we expect our

first year-over-year overall sales growth since 2021 as new products scale up, partnerships expand, and our global footprint broadens.

We'll remain vigilant of external challenges, keep optimizing the supply chain, and invest in AI-driven unique experiences to keep Zepp

Health leading in the wearable market. With all the new product roadmaps lined up, and we believe 2025 will be a fruitful year for Zepp

Zepp Health's CFO, Mr. Leon Deng, said, "Our results in the

first quarter of 2025 tracked closely with guidance. We are pleased to report that Amazfit products revenue has returned to growth after

a two-year transformation period. This marks a significant milestone in our ongoing strategy toward a more brand-driven growth model.

The strong performance reflects continued momentum in our core markets and the successful launches of key products, which have outperformed

prior models in terms of sales velocity and market reception. Total gross margin stood at 37.3%, higher than both the fourth and the first

quarter of 2024, even after absorbing foreign currency and tariffs headwinds. Furthermore, our total operating expense was US$32.7 million,

and adjusted operating expenses1 of US $31.5 million in the first quarter were up modestly from both the prior

quarter and prior year same quarter, reflecting disciplined investments in research and development expenses , as well as targeted brand

and marketing investments around product launches and new athlete sponsorships. As a result, our net loss is US$19.7 million, and our

adjusted net loss2 was US$18.1 million, as the first quarter is traditionally the lowest sales season for consumer electronics

industry, which could not absorb our cost base in full. Despite this, our cash balance was US$104 million, compared to US$110 million

at the fourth quarter of 2024, thanks to our enhanced working capital management and improved cash conversion cycle. Following the refinancing

completed in February, long-term borrowings now represent about 70% of our total debt, and we have retired US$67.8 million of debt since

early 2023, with another US$11.5 million repaid in the first quarter 2025. For the second quarter, we project revenue of US$50 million

to US $55 million, representing 23% to 35% growth of revenues compared with second quarter of 2024. Our share-repurchase program

remains in place for the remainder of 2025, underscoring confidence in Zepp Health's outlook. "

Adjusted operating expenses represent operating expenses excluding (i) share-based compensation expenses and (ii) amortization of intangible

assets resulting from acquisitions and business cooperation agreements. See "Reconciliation of GAAP and non-GAAP results"

at the end of this press release.

Adjusted net income/(loss) attributable to Zepp Health Corporation represents net income/(loss) excluding (i) share-based compensation

expenses, (ii) amortization of intangible assets resulting from acquisitions and business cooperation agreements, (iii) gain/(loss) from

fair value change of long-term investment, (iv) impairment loss from long-term investments, (v) income/(loss) from equity method investments,

and (vi) tax effects of the above non-GAAP adjustments. See "Reconciliation of GAAP and non-GAAP results" at the end of this

Quarter 2025 Financial Results

for the first quarter of 2025 reached US$38.5 million, a decrease by 3.6% from the first quarter of 2024. The decrease was primarily

due to the US$5.0 million decrease in the sales of Xiaomi wearable products. In the first quarter of 2025, sales of Amazfit-branded products

grew 10.2% year over year, marking a return to growth since the first quarter of 2022. This was preceded by a strong quarter over quarter

growth of 43.4% from the third quarter to the fourth quarter of 2024. The increase was mainly driven by the successful launch of Amazfit

Active 2, Bip 6, while we are still facing some supply constrains especially on the Amazfit Active 2 premium version, and it should be

fully resolved in the second quarter of 2025. Compared with fourth quarter of 2024, revenue decline is driven by the seasonality while

the first quarter is the lowest quarter of the year and supply constrains especially on the long lead-time components for Amazfit Bip

6 and Active 2 premium version, which resulted the Bip 6's launch was postponed to the end of March 2025. Looking at the second

quarter of 2025, we are expecting the Amazfit-branded sales continue to grow, with many new products launches in the pipeline.

margin in the first quarter of 2025 was 37.3%, which was higher than first and fourth quarter of 2024, We are impacted by the additional

20% tariffs imposed on China-made products in the first quart of 2025, excluding that the gross margin is 38.4%. The higher gross margin

of Amazfit-branded products was mainly driven by the higher gross margin of newly- launched products.

Research and Development Expenses

and development expenses in the first quarter of 2025 were US$12.4 million, a decrease by 7.8% year-over-year. The decrease was

as a result of our refined research and development approaches, as we consistently evaluated resource efficiency to ensure maximum return

on investment and productivity. We are committed to investing in new technologies and AI to maintain our competitive edge against our

Selling and Marketing Expenses

and marketing expenses in the first quarter of 2025 were US$13.8 million, an increase by 28.5% year-over-year. The increase was

primarily due to US$1.7 million in digital campaigns and product launch events for new products, and US$1.4 million in sales channel investments.

At the same time, we consistently pushed on retail profitability and channel mix improvement. We are committed to investing efficiently

in marketing and branding to ensure our sustainable growth.

General and Administrative Expenses

and administrative expenses were US$6.5 million in the first quarter of 2025, compared with US$6.4 million in the same period of

2024, an increase by 1.5% year-over-year. The increase was largely attributable to foreign exchange rate fluctuations of US$1.0, offset

by a US$0.8 million decrease in share-based compensation expenses.

operating expenses for the first quarter of 2025 were US$32.7 million, an increase by 6.9% year-over-year. Adjusted operating expenses,

which exclude share-based compensation and amortization of intangible assets resulting from acquisitions and business cooperation agreements,

were US$31.5 million, compared with US$27.8 million in the same period of 2025. The increase was primarily due to foreign exchange rate

fluctuations of US$1.0 million, US$1.7 million in digital campaigns and product launch events for new products, and US$1.4 million in

sales channel investments. We will maintain our cost-conscious approach, aiming for operating expenses of US$25 to US$27 million in the

upcoming quarters. Concurrently, we remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness.

loss for the first quarter of 2025 was US$18.4 million, which resulted in an inability to fully cover operating expenses, compared to

operating loss of US$15.9 million for the first quarter of 2024. Adjusted operating loss3

for the first quarter of 2025 was US$17.2 million, compared to adjusted operating loss of US$13.1 million for the same period of 2024.

The variance was mainly due to foreign exchange rate fluctuations of US$1.0 million, US$1.7 million in digital campaigns and product launch

events for new products, and US$1.4 million in sales channel investments.

Adjusted operating income/(loss) represents operating income/(loss) excluding: (i) share-based compensation expenses and (ii) amortization

of intangible assets resulting from acquisitions and business cooperation agreements. See "Reconciliation of GAAP and non-GAAP

results" at the end of this press release.

loss attributable to Zepp Health Corporation for the first quarter of 2025 was US$19.7 million, compared to net loss of US$14.8

million in the first quarter of 2024. Adjusted net loss attributable to Zepp Health Corporation was US$18.1 million, compared to adjusted

net loss of US$13.6 million in the first quarter of 2024. The first quarter is typically the season with the lowest sales, which resulted

in an inability to fully cover operating expenses.

Liquidity and Capital Resources

of March 31, 2025, the Company had cash and cash equivalents and restricted cash of US$103.8 million, compared with US$110.7

million of cash balance as of December 31, 2024, the result was driven by the net loss for the first quarter of 2025, offset by US$12.8

million tighter working capital management. This cash position provides ample runway for the Company to invest and seize potential market

Company continued to manage its working capital and inventory efficiently and recorded inventory of US$64.1 million as of March 31,