Zepp Health Corporation Reports Second Quarter 2022 Unaudited Financial Results BEIJING

Health Corporation Reports Second Quarter 2022 Unaudited Financial Results

August 25, 2022 /PRNewswire/ -- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today reported

revenues of RMB1.1 billion (US$165.5 million); GAAP diluted net loss per share of RMB0.44 (US$0.07); and GAAP diluted net loss per ADS

of RMB1.74 (US$0.26) for the second quarter ended June 30, 2022. Each ADS represents four Class A ordinary shares.

"Our second quarter revenues improved from

the first quarter, which highlights our execution capabilities, product strength and disciplined business management approach, in the

face of macro economic challenges. We achieved RMB1.1 billion in revenues, representing a 46.4% increase quarter-over-quarter. Our year-over-year

revenues decreased by 39.6%, mainly due to the different product launch timing compared with last year, especially when Mi-band 7 was

launched at the end of the second quarter due to continued chip shortage." said Wang Huang, Chairman and CEO of Zepp Health. "The

improvement of our second quarter from first quarter also illustrated our effective product strategy and our ability to extend and solidify

our market position. I am optimistic we can deliver stronger results in the second half of 2022 as we have witnessed strong sales traction

from our self-branded smartwatches, including Amazfit T-Rex 2, Amazfit Bip 3 and Amazfit Bip 3 Pro, since their launch toward the end

of the second quarter. As a company passionately committed to technological innovation, we are constantly expanding our technology footprint

to attract more users to join our flourishing Zepp OS ecosystem. From June 1 to August 31, we are hosting the first-ever Zepp

OS Global Online Hackathon to create closer bonds with developers worldwide and foster smartwatch innovation."

Chief Financial Officer, Leon Deng, added, "Second

quarter results demonstrated our resilience against multiple macroeconomic headwinds. During the period, our improved revenues and effective

expense control initiatives helped us further narrow our operating loss by RMB44.8 million quarter-over-quarter. I am confident that our

strict management of costs and expansion of product portfolio will position us for long-term success."

Quarter 2022 Financial Summary

1 The US$ numbers in 2021 are referenced with the prior

6-K disclosures, which translations from RMB to US$ are made at a rate of RMB6.4566 to US$1.00, the effective noon buying rate for June

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

Adjusted net 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 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.

Second Quarter 2022 Financial Results

Total units shipped in the second quarter 2022 decreased by 45.2% year-over-year

to 6.3 million, compared with 11.5 million in the second quarter of 2021. This was mainly caused by a 50.0% decrease in units of products

built for Xiaomi, due to different product launch timing compared with last year.

Revenues for the second quarter of 2022 reached

RMB1.1 billion (US$165.5 million), a decrease of 39.6% from the second quarter of 2021. The decrease was mostly because the Mi band 7

was launched two-month later than Mi Band 6 in the comparison period. Our self-brand product sales were affected by lower consumer discretionary

spending. We launched Amazfit Trex 2 and Bip new series, which showed early success in June and continued to gain traction heading

into the third quarter.

Impact of COVID-19 and Russia-Ukraine Conflict

The COVID-19 pandemic has had, and continues to

have, a significant impact around the world in the second quarter of 2022, prompting governments and businesses to take unprecedented

measures, such as restrictions on business operations, temporary closures of businesses, travels, and quarantine and shelter-in-place

The fresh lockdowns in China affected the retail

store sales and brought challenges to our supply chain globally. Shortages of electronic components and chips for different industries

persisted and accordingly affected the supply and production cycle for the Company. Furthermore, the lockdowns of several megacities in

China, especially Shanghai, weakened consumer demand, as well as posted big challenges to the Company's supply chain for the quarter,

causing delays for our products to arrive at target markets, and this continued into the second quarter. Given the evolving nature of

the COVID-19 pandemic at the time of this release, the Company cannot predict the extent of future negative impacts on market conditions

or the Company's operations.

The continued conflict situation between

Russia and the Ukraine affected the demand for and sales of Xiaomi wearable products and our self-branded products in the affected

regions. As Europe is one of the biggest sales regions for the Company, the conflict also affected freight cost, consumer confidence

in Europe and the EUR currency value. Revenue from sales of products in Russia and Ukraine accounted for approximately 4% of our

total revenues in 2021. Currently the situation does not have a material adverse impact on the Company.

margin in the second quarter of 2022 was 17.9%, lower by 4.1% compared with 22.0% for the same period of 2021 and lower by 2.2% compared

with 20.1% for the first quarter of 2022. Lower gross margin in the second quarter of 2022 resulted from higher outbound freight

cost globally versus the same period last year, adverse currency depreciation impact, and promotions for our previous generation products

to prepare for the new product launches.

Research and Development

Research and development expense in the second

quarter of 2022 was RMB129.0 million, decreasing 19.5% year-over-year, and comprising 11.6% of revenues, versus 8.7% for the same period

last year. This was mainly driven by expense optimization. Furthermore, the Company is holding Zepp OS Global Online Hackathon around

the world and have attracted thousands of third-party developers to develop their apps and programs on the Company's developer community

website. Now users could find several mini games on our GT3 smartwatch. Zepp OS is a platform to form economic scale to streamline the

R&D expenses and integrate different programs.

Selling and Marketing

and marketing expense in the second quarter of 2022 was RMB108.3 million, increasing 3.4% year-over-year, and comprising 9.8% of

revenues, compared with 5.7% of revenue for the same period in 2021. The increase was due to the e-commerce online advertisement promotions

for our self-branded products to match with competitors.

General and Administrative

and administrative expense was RMB71.7 million in the second quarter of 2022, increasing 7.9% year-over-year, and comprising 6.5%

of revenues, compared with 3.6% in the same period in 2021. It was largely attributable to exchange rate fluctuation.

Total operating expenses for the second quarter

of 2022 were RMB308.9 million, a decrease of 6.8% year-over-year, which accounted for 27.9% of revenues for the period, as compared with

18.1% in the second quarter of 2021. In 2022, the Company will continue to work on cost optimization to adapt to the macro environment

and strive for profitability realization for the future.

Operating Income/(Loss)

Operating loss for the second quarter of 2022

was RMB110.6 million, which decreased by RMB182.2 million from operating income of RMB71.6 million for the same period in 2021. The loss

was mainly caused by the decreased revenue scale, which could not cover the relatively fixed operating expenses in the quarter.

Net loss attributable to Zepp Health Corporation

for the second quarter of 2022 was RMB106.9 million, compared with RMB92.6 million net income in the second quarter of 2021.

Liquidity and Capital Resources

As of June 30, 2022, the Company had cash

and cash equivalents and restricted cash of RMB997.1 million (US$148.9 million), compared with RMB1,052.9 million as of March 31,

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

Share Repurchase Program Update

The Company had 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 June 30, 2022,

the Company has used US$8.8 million to repurchase 2,163,282 ADSs. The Company intends to continue with the repurchase program.

the third quarter of 2022, the management of the Company currently expects:

This outlook reflects

continued uncertainty pertaining to the potential effects of the COVID-19 pandemic on sales and on electronic component delays, as well

as the expected sales seasonality of both self-branded and Xiaomi products. It 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

Company's management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, August 25 (8:00

p.m. Beijing Time on August 25, 2022) to discuss financial results and answer questions from investors and analysts.

Listeners may access the call by dialing: