Full Press Release Details
Health Corporation Reports Fourth Quarter and Full Year 2023 Unaudited Financial Results
Calif., March 18, 2024 /PRNewswire/ -- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP)
today reported revenues of US$84.5 million (RMB0.6 billion); a basic and diluted net loss per share of US$0.005 (RMB0.03); and a basic
and diluted net loss per ADS of US$0.02 (RMB0.14) for the fourth quarter ended December 31, 2023; adjusted basic and diluted net
income per share of US$0.002 (RMB0.01); and adjusted basic and diluted net income per ADS of US$0.01 (RMB0.06). Each ADS represents four
Class A ordinary shares.
Wayne' Huang, Chairman and CEO of Zepp, commented, "In the fourth quarter, we continued to make substantial progress
in our strategic transformation, a journey characterized by both achievements and challenges. Our approach to balancing profitability
with scale has yielded promising results, achieving a second consecutive quarter of profitability and reaching an all-time high in gross
margin. These accomplishments demonstrated the strength of our product capability, along with the success of our branding and go-to-market
strategy. As we conclude 2023, these accomplishments not only underscore our resilience and adaptability but also set a solid foundation
for sustained growth and innovation in the years ahead."
Wayne continued, "This
quarter was also pivotal for us as we expanded and enhanced our product portfolio with significant launches that have notably elevated
our market presence. Introducing the Amazfit Active and Amazfit Active Edge series represents a leap forward in our mission to blend sophisticated
design with cutting-edge technology. The subsequent launch of our first smart ring, the Amazfit Helio Ring, at CES further underlines
our dedication to providing advanced and accessible solutions that enhance well-being. These developments epitomize our commitment to
delivering cutting-edge smart wearable healthcare solutions that go beyond meeting basic needs - they aim to inspire and bring joy
to our users. Our efforts extend past hardware to include continuous advancements in the software, highlighted by the recent launch of
Zepp OS version 3.5. This update integrates Zepp Flow , a Natural-Language User Interface (LUI) powered by LLM AI, with our operating
system, offering seamless natural language communication to provide users with exactly what they want. From setting an alarm, deactivating
the 'always on' display feature to providing feedback on last night's sleep quality and analyzing the readiness score from the previous
day's activities, and offering recommendations for improvement in the following day, all can be done by interacting with the watch using
human natural language and without the need to memorize any predefined commands. These updates are pivotal in enhancing user interaction
and underline our commitment to pushing the boundaries of what's possible in wearable technology."
Mr. Leon Deng, Zepp's
Chief Financial Officer, added, "Our financial performance in the fourth quarter closely aligned with our guidance, with sales revenue
coming in at the lower end of our expectations. This was influenced by several external factors, including our strategic focus on profitability
over scale and foreign exchange fluctuation. Despite these challenges, we achieved another record high gross margin, supported by the
strong performance of our self-branded products and a favourable product mix. Meticulously managing our operating costs, we have maintained
our disciplined approach to spending while continuing to invest in R&D and marketing to sustain our long-term competitiveness. In
the fourth quarter, the Company recorded US$3.5 million valuation allowance of deferred tax asset, which is non-cash in nature and does
not materially affect our operations. Although GAAP net loss was US$1.2 million with the Non-GAAP net profit of US$0.5 million, the adjusted
EBIT for the fourth quarter of 2023 was US$4.0 million, while it was a loss of around US$7.4 million in the same period of 2022.
our working capital efficiently, achieving a record low inventory level and further reducing our debt levels. Our cash balance remains
at US$140.5 million, and we will continue to buy back stock under our share repurchase plan. As we reflect on the full year of 2023 and
look ahead to 2024, these achievements highlight our commitment to operational excellence and strategic foresight while seizing future
opportunities and driving further innovation in the wearable technology sector."
Fourth Quarter and Full Year 2023 Financial Summary
| For the Three Months Ended | For the Full Year Ended | |||||||||||||||
| Number in millions, except for percentages and per- share/ADS amounts | Dec. 31, 2023 | Dec. 31, 2022 1 | Dec. 31, 2023 | Dec. 31, 2022 1 | ||||||||||||
| Revenue RMB | 599.7 | 1,071.7 | 2,495.3 | 4,142.9 | ||||||||||||
| Revenue US$ | 84.5 | 155.4 | 351.5 | 600.7 | ||||||||||||
| Gross margin | 34.7 | % | 20.7 | % | 26.4 | % | 19.4 | % | ||||||||
| Net loss RMB | (8.3 | ) | (75.7 | ) | (212.6 | ) | (289.0 | ) | ||||||||
| Net loss US$ | (1.2 | ) | (11.0 | ) | (29.9 | ) | (41.9 | ) | ||||||||
| Adjusted EBIT RMB 4 | 28.2 | (51.3 | ) | (142.9 | ) | (261.1 | ) | |||||||||
| Adjusted EBIT US$ | 4.0 | (7.4 | ) | (20.1 | ) | (37.9 | ) | |||||||||
| Net loss attributable to Zepp Health Corporation RMB | (8.4 | ) | (75.5 | ) | (212.1 | ) | (288.3 | ) | ||||||||
| Adjusted net income/(loss) attributable to Zepp Health Corporation RMB 2 | 3.6 | (60.3 | ) | (152.4 | ) | (239.2 | ) | |||||||||
| Net loss attributable to Zepp Health Corporation US$ | (1.2 | ) | (11.0 | ) | (29.9 | ) | (41.8 | ) | ||||||||
| Adjusted net income/(loss) attributable to Zepp Health Corporation US$ | 0.5 | (8.7 | ) | (21.5 | ) | (34.7 | ) | |||||||||
| Diluted net loss per share RMB | (0.03 | ) | (0.31 | ) | (0.87 | ) | (1.17 | ) | ||||||||
| Diluted net loss per ADS US$ | (0.02 | ) | (0.18 | ) | (0.49 | ) | (0.68 | ) | ||||||||
| Adjusted diluted net income/(loss) per share RMB 3 | 0.01 | (0.25 | ) | (0.63 | ) | (0.97 | ) | |||||||||
| Adjusted diluted net income/(loss) per ADS US$ | 0.01 | (0.14 | ) | (0.35 | ) | (0.56 | ) | |||||||||
| Units shipped in millions | 2.1 | 4.5 | 12.1 | 20.3 |
The US$ numbers in 2022 are referenced with the prior 6-K disclosures, where translations from RMB to US$ are made at a
rate of RMB6.8972 to US$1.00, the effective noon buying rate on December 30, 2022 as set forth in the H.10 statistical release of the
Federal Reserve Board.
Adjusted net income/(loss) attributable to Zepp Health Corporation is a non-GAAP measure, which excludes share-based compensation
expenses. The tax effect from the adjustment of the Share-based compensation expenses is nil. See "Reconciliation of GAAP and Non-GAAP
Results" at the end of this press release.
Adjusted diluted net income/(loss) is the abbreviation of adjusted net 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 computation of adjusted basic and diluted net loss per ADS attributable to Zepp Health Corporation.
4 Adjusted EBIT is a non-GAAP financial measure, which
is defined as net loss, excluding (i) share-based compensation expenses, (ii) income tax (benefit)/ expense, (iii) interest income, (iv)
Fourth Quarter 2023 Financial Results
for the fourth quarter of 2023 reached US$84.5 million (RMB0.6 billion), a decrease by 44.0% from the fourth quarter of 2022. The
decrease was primarily due to the decrease in the sales of Xiaomi wearable products.
Total units shipped in the fourth quarter of 2023
decreased by 53.3% year-over-year to 2.1 million, compared with 4.5 million in the fourth quarter of 2022. The decrease was mainly due
to the decrease in the units of Xiaomi wearable products shipped.
margin in the fourth quarter of 2023 was 34.7%, compared to 20.7% in the same period of 2022. We reached another record-high quarterly
gross margin since the third quarter of 2023, supported by the strong performance of our self-branded products and a more favourable product
Research and Development Expenses
and development expenses in the fourth quarter of 2023 were US$11.3 million (RMB80.0 million), a decrease by 30.0% year-over-year.
This accounted for 13.3% of revenues, compared to 10.7% for the same period in 2022. 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 peers.
Selling and Marketing Expenses
and marketing expenses in the fourth quarter of 2023 were US$12.2 million (RMB86.5 million), a decrease by 30.9% year-over-year.
This accounted for 14.4% of revenues, compared to 11.7% for the same period in 2022.
decrease was mainly due to our ongoing efforts to enhance retail profitability and optimize our mix of sales channels. This included detailed
enhancements to our retail channels and strategic staff allocations across our sales territories. We are dedicated to making informed
investments in marketing and branding to guarantee our continued development.
General and Administrative Expenses
and administrative expenses were US$5.1 million (RMB36.5 million) in the fourth quarter of 2023, a decrease by 31.6% year-over-year.
This accounted for 6.1% of revenues, compared with 5.0% in the same period in 2022. The decrease in absolute value was largely attributable
to our personnel optimization efforts and strict administrative expense control.
operating expenses for the fourth quarter of 2023 were US$28.6 million (RMB203.0 million), a decrease by 30.7% year-over-year.
Adjusted operating expenses, which exclude share-based compensation, were US$26.9 million (RMB190.9 million). We plan to continue our
focus on cost efficiency in the forthcoming quarters. At the same time, we are dedicated to invest in R&D and marketing efforts, which
are essential for maintaining our competitive edge over the long term.
Operating Income/(Loss)
income for the fourth quarter of 2023 was US$0.8 million (RMB5.3 million), compared with operating loss of RMB71.0 million for
the same period in 2022. The turnaround in operating profit was largely due to the improved gross margin of our self-branded products
and reduced operating expenses.
loss attributable to Zepp Health Corporation for the fourth quarter of 2023 was US$1.2 million (RMB8.4 million), compared with
RMB75.5 million of net loss in the fourth quarter of 2022. The adjusted net income attributable to Zepp Health Corporation, which excludes
share-based compensation expenses attributable to Zepp Health Corporation, was US$0.5 million (RMB3.6 million), compared with the adjusted
net loss of RMB60.3 million for the same period of 2022. The adjusted EBIT for the fourth quarter of 2023 was US$4.0 million (RMB28.2
million), compared with the adjusted EBIT with a loss amount of RMB51.3 million in the same period of 2022. In the fourth quarter, the
Company recorded US$3.5 million (RMB24.7 million) valuation allowance of deferred tax asset, which is non-cash in nature and does not
materially affect our operations.
Liquidity and Capital Resources
of December 31, 2023, the Company had cash and cash equivalents and restricted cash of US$140.5 million (RMB997.3 million),
compared with RMB981.0 million as of September 30, 2023 and RMB973.3 million as of December 31, 2022. We generated positive
cash flow from our operating activities for the sixth consecutive quarter. We also successfully reduced our total debt, including short-term
and long-term bank borrowing balance by US$11.9 million (RMB84.3 million) in the fourth quarter (RMB96.2, RMB34.3 and RMB117.3 from first
quarter to third quarter 2023, respectively), and we anticipate further reductions in our debt level in the upcoming quarters.
Company continued to manage its working capital and inventory efficiently and recorded inventory levels of US$84.9 million (RMB602.7
million) as of December 31, 2023, compared to RMB787.0 million as of September 30, 2023 and RMB1,021.9 million as of December 31,
Share Repurchase Program Update
Company announced in its third quarter 2021 earnings release that the board had authorized a share repurchase program of up to US$20 million
through November 2022. On November 21, 2022, the board authorized a 12-month extension of the Company's share