Zepp Health Corporation Reports Fourth Quarter and Full Year 2022 Unaudited Financial Results BEIJING, CHINA

Health Corporation Reports Fourth Quarter and Full Year 2022 Unaudited Financial Results

CHINA, March 21, 2023 /PRNewswire/ -- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today

reported revenues of RMB1.1 billion (US$155.4 million); a GAAP basic and diluted net loss per share of RMB0.31 (US$0.04); and a GAAP basic

and diluted net loss per ADS of RMB1.23 (US$0.18) for the fourth quarter ended December 31, 2022. Each ADS represents four Class A ordinary

"Despite the macro challenges that weighed

on our overall performance in 2022, our self-branded products achieved a 28.5% quarter-over-quarter increase in revenue and continued

gross margin expansion in the fourth quarter." said Wang Huang, Chairman and CEO of Zepp Health. "The encouraging growth margin

improvement reflects our increasing brand recognition among global consumers, along with optimization of our product and channel mix.

We are thrilled to see that, our self-branded products contributed 77.4% of our total revenues in the fourth quarter of 2022. This significant

progress indicates that we have successfully transformed our business from one with revenue largely contributed by one single customer

into a self-reliant, global consumer smart wearable and healthcare solution provider. We now offer a vast range of products that cover

outdoor, sports, business, and entry-level consumer needs."

"We have continued to enrich our portfolio

of smart health devices by leveraging our proprietary technologies. During the last quarter, on top of refreshing our GT range of products,

we launched Amazfit Falcon, a premium multi-sport GPS watch featuring our proprietary smart coaching algorithm, Zepp Coach, to help users

train scientifically and safely. We have also seamlessly integrated ChatGPT to elevate users' AI interactions with our smart wearables

and deliver tailored services as well as to optimize our operational efficiency. We firmly believe that these AI interaction functionalities

will unlock the full potential of our smart devices in the future. As we look to 2023, we are focused on achieving profitability and reinforcing

our business resilience through cost-cutting initiatives. We remain confident in our ability to deliver additional shareholder value while

providing our users with more refined and comprehensive healthcare and fitness technology products and services."

Chief Financial Officer Leon Deng added,

"Our fourth quarter revenue came in at RMB1.1 billion, in line with the guidance, down 35.5% year-over-year, mainly as a result

of the sales decline of Xiaomi band products. Still, we are very pleased that our self-branded products registered two consecutive high

double-digit growth from the second quarter of 2022. As we continued to successfully launch our margin-accretive new products and finetune

our sales channels, we achieved a gross margin of 20.7% in the fourth quarter, the highest in 2022. Moreover, our declined revenue and

keen focus on disciplined expense management resulted in a 5.7% year-over-year and a 3.7% quarter-over-quarter decrease in operating expenses

during the quarter. Despite our progress in controlling costs, our net loss for the period was RMB75.5 million and adjusted net loss was

RMB60.3 million, compared to RMB8.8 million in the third quarter, due to reduced revenue resulting from the shrinking basic band market

and RMB30.1 million valuation allowance recorded for deferred tax asset, which is non-cash in nature and does not materially affect our

operations. Our operating loss has decreased to the lowest level this year, and our inventory levels have reduced by 18% compared to year-end

2021 as we continue to optimize our business operations. At the same time, we continue to generate positive cash flow via working capital

management and we see further potential to optimize. Going forward, we will continue to right-size our organization and streamline our

cost base further to achieve profitability in the near future."

Quarter and Full Year 2022 Financial Summary

Fourth Quarter 2022 Financial Results

for the fourth quarter of 2022 reached RMB1.1 billion (US$155.4 million), a decrease of 35.5% from the fourth quarter of 2021.

The decrease in total revenues mainly resulted from a 65.5% decline in sales of Mi Band. Our self-brand product sales decreased by 13.5%

from the fourth quarter of 2021 and increased by 28.5% compared with the third quarter of 2022. The sales of our new products, including

Amazfit Trex 2, GTR 4, GTS 4, GTS 4 mini, and Bip U Pro, have increased in this quarter. However, this growth was more than offset by

the surge in COVID-19.

1 The US$ numbers in 2021 are referenced

with the prior 6-K disclosures, translations of which are made at a rate of RMB6.3726 to US$1.00, the effective noon buying rate for

December 30, 2021, as set forth in the H.10 statistical release of the Federal Reserve Board.

2 Adjusted net income/(loss) attributable

to Zepp Health Corporation 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 Corporation, which is a non-GAAP measure and excludes share-based

compensation expenses attributable to Zepp Health Corporation and is used as the numerator in the computation of adjusted basic and diluted

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

Total units shipped in the fourth quarter of 2022

decreased by 45.8% year-over-year to 4.5 million, compared with 8.3 million in the fourth quarter of 2021. This was mainly caused by an

over 50.0% shipment decrease in Mi Band.

Impact of COVID-19 and Russia-Ukraine Conflict

was a surge of COVID-19 cases in November and December of 2022, which affected our supply chain and logistics in late 2022 and

Meanwhile, the continued conflict between Russia

and Ukraine affected freight costs, consumer confidence in Europe and the value of the Euro. Although Europe is one of the biggest sales

regions for the Company, the situation currently does not have a material adverse impact on the Company.

margin in the fourth quarter of 2022 was 20.7%, 1.4 percentage points higher than 19.3% in the same period of 2021 and 1.6 percentage

points higher than 19.1% in the third quarter of 2022. The fourth quarter's higher margin was driven by the high margin of our own

self-branded products. During the quarter, we pruned our product portfolio, analysed the profitability of our retail channels, and cut

those with lower efficiency and profitability.

Research and Development

and development expenses in the fourth quarter of 2022 were RMB114.3 million, an increase of 21.9% year-over-year. This comprised

10.7% of revenues, versus 5.6% for the same period in 2021. The increase was mainly driven by lower government subsidies recognized in

2022, amounting to RMB27.7 million, resulting in higher R&D spending in 2022.

Selling and Marketing

and marketing expenses in the fourth quarter of 2022 were RMB125.1 million, a decrease of 17.8% year-over-year. During this sales

season, we performed retail channel analysis on our product portfolio and cut the unprofitable ones.

General and Administrative

and administrative expenses were RMB53.4 million in the fourth quarter of 2022, a decrease of 17.5% year-over-year. This comprised

5.0% of revenues, compared with 3.9% in the same period in 2021, and was largely attributable to strict administrative expense control

and foreign currency fluctuation.

Total operating expenses for the fourth quarter

of 2022 were RMB292.8 million, a decrease of 5.7% year-over-year, which accounted for 27.3% of revenues for the period, as compared with

18.7% in the fourth quarter of 2021. The adjusted operating expenses were RMB277.6 million. The Company is in the midst of further internal

reorganization and personnel optimization that best suite our current business operations.

Operating Income/(Loss)

Operating loss for the fourth quarter of 2022

was RMB71.0 million, compared with operating income of RMB10.1 million for the same period in 2021. The loss was mainly caused by lower

revenue scale. Although revenue showed recovery from quarter to quarter, it could not cover fixed operating expenses in full. Adjusted

operating loss, which excludes share-based compensation, was RMB55.7 million, which narrowed to the lowest level 2022. Operating loss

was RMB73.3 million in the third quarter of 2022, RMB110.6 million in the second quarter of 2022, and RMB155.4 million in the first quarter

of 2022, respectively. Adjusted operating loss was RMB65.0 million in the third quarter of 2022, RMB98.0 million in the second quarter

of 2022, and RMB142.4 million in the first quarter of 2022, respectively.

loss attributable to Zepp Health Corporation for the fourth quarter of 2022 was RMB75.5 million, compared with RMB36.3 million of net

income in the fourth quarter of 2021. In the fourth quarter, the Company recorded RMB30.1 million valuation allowance of deferred

tax asset, which is non-cash in nature and does not materially affect our operations. The net loss for the fourth quarter of 2022 also

included share-based compensation amounting to RMB15.2 million, and severance package amounting to RMB10.1 million.

Liquidity and Capital Resources

of December 31, 2022, the Company had cash and cash equivalents and restricted cash of RMB973.3 million (US$141.1 million), compared with

RMB1,005.7 million as of September 30, 2022 and RMB1,509.5 million as of December 31, 2021.

The Company continued to manage its working capital

and inventory more efficiently and realized lower inventory levels at RMB1,021.9 million as of December 31, 2022, lower than that at the

Share Repurchase Program Update

Company previously announced in its third quarter 2021 earnings release that the board had authorized a share repurchase program of up

to US$20 million. As of December 31, 2022, the Company had used US$10.3 million to repurchase 3,218,934 ADSs. On November

21, 2022, the board authorized the Company to extend its share repurchase program over the next twelve months. Pursuant to the extended

share repurchase program, the Company may repurchase its shares in the form of American depositary shares and/or the ordinary shares through