Zepp Health Corporation Reports Second Quarter 2023 Unaudited Financial Results AMSTERDAM

Zepp Health Corporation Reports Second Quarter

2023 Unaudited Financial Results

AMSTERDAM, August 21, 2023 /PRNewswire/ --

Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today reported revenues of RMB0.65 billion (US$89.4

million); a basic and diluted net loss per share of RMB0.29 (US$0.04); and a basic and diluted net loss per ADS of RMB1.15 (US$0.16) for

the second quarter ended June 30, 2023. Each ADS represents four Class A ordinary shares.

"In the second quarter of 2023, we were

delighted to witness our strategic transformation from a company heavily reliant on a single customer for revenue to becoming a self-reliant,

global smart wearable and healthcare solution provider yielding early success, as our self-branded products contributed 68% of our top

line and 85% of our total gross profit. The increased mix of our margin-accretive self-branded products, together with our optimized retail

channels, drove our overall gross margin to 22.0%, reaching the highest level since the second quarter of 2021. Our Amazfit brand's

gross margin percentage experienced a remarkable 51% increase year-over-year, which demonstrated the strength and resilience of the brand."

said Mr. Wayne Wang Huang, Chairman and CEO of Zepp. "With unwavering commitment to enhancing user experiences, expanding our

offerings and fostering a thriving user community, we anticipate sustained quarter-over-quarter revenue growth on self-branded products

in the third quarter, fueled by the launch of new products."

"During the second quarter, we leveraged

on AI technology and our integrated supply chain to expand our product portfolio and enhance existing product lines with intelligent features.

Notably, we introduced Amazfit Cheetah, our dedicated running smartwatch series, featuring AI Chat for personalized coach-to-athlete interactions

and industry-leading GPS technology. Looking ahead, we remain committed to refining our AI-powered products and services, solidifying

our global reputation for excellence and affordability in all markets. As post-pandemic opportunities arise, we are confident that our

dedication to innovation and customer satisfaction will fuel our trajectory of success in the smart wearable and healthcare industry."

Mr. Leon Deng, Zepp's Chief Financial

Officer, added, "Our second quarter revenues came within our guidance range at RMB648.3 million, down by 41.5% year-over-year due

to lower Mi Band sales. Nevertheless, our self-branded sales showed resilient recovery, achieving a 12.7% sequential growth during the

second quarter, and a mild decline of 7.3% versus last year."

"Moreover, we delivered on our quarterly

expenses run rate target and successfully reduced our GAAP and non-GAAP operating expenses to RMB215 million and RMB204 million, respectively,

thanks to our continued ROI-oriented expenses management strategies across supply chain, R&D, products and marketing. our operating

loss for the second quarter shrank to RMB72.4 million as a result of higher self-branded products gross margin and tighter expenses control,

compared with RMB110.6 million loss in the same quarter last year. Meanwhile, our inventory has decreased to RMB743 million, reaching

the lowest level in three years.

We have managed to maintain a positive operating cash flow, which we utilize to reduce the Company's

debt level accordingly. Going forward, we will persist with our prudent stance towards expenses, while investing responsibly with great

discipline in research and development and marketing activities to reinforce our long-term position. We are optimistic about returning

to profitability in the near future."

Second Quarter 2023 Financial Summary

Second Quarter 2023 Financial Results

Revenues for the second quarter of 2023 reached

RMB0.65 billion (US$89.4 million), a decrease by 41.5% from the second quarter of 2022. The decrease in total revenues was mainly due

to 67.2% and 7.3% year-over-year decreases in Xiaomi wearable products and our self-branded product sales, respectively.

Total units shipped in the second quarter of 2023

decreased by 39.7% year-over-year to 3.8 million, compared with 6.3 million in the second quarter of 2022. Over 90% of the decrease in

total units shipped was due to the decrease in Xiaomi wearable products.

2022 are referenced with the prior 6-K disclosures, where translations from RMB to US$ are made at a rate of RMB6.6981 to US$1.00, the

effective noon buying rate on June 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board.

net 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.

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.

Gross margin in the second quarter of 2023 was

22.0%, 4.1% higher than the same period of 2022. Despite the inventory

clearance efforts, we were able to improve the gross margin for self-branded products, which reached its peak since the third quarter

of 2020, by making substantial improvement in the channel and product mix.

Research and Development

Research and development expenses in the second

quarter of 2023 were RMB89.3 million, a decrease by 30.8% year-over-year. This comprised 13.8% of revenues, versus 11.6% for the same

period in 2022. The decrease was mainly driven by our research projects optimizations. We focus on the products functionality strength

on health and sports, and apply strict ROI approach in different projects and resource allocation among different product lines. This

realignment contributed to expense savings while maintaining a high level of productivity. We are committed to make adequate investments

in research and development while seeking opportunities to optimize productivity and pave the way for the Company's sustainable

Selling and Marketing

Selling and marketing expenses in the second quarter

of 2023 were RMB71.6 million, a decrease by 33.9% year-over-year. This reduction can be attributed to a series of expense efficiency improvement

measures that we have implemented since last year. These measures include streamlining retail channels and optimizing personnel allocation

in various sales regions. These allowed us to operate more efficiently while maintaining an active market presence. We will continue to

invest strategically in our brand, adopting an ROI-based marketing strategy to ensure its ongoing growth and success.

General and Administrative

General and administrative expenses were RMB54.1

million in the second quarter of 2023, a decrease by 24.6% year-over-year. This comprised 8.3% of revenues, compared with 6.5% in the

same period in 2022, and was largely attributable to our personnel optimization efforts and strict administrative expense control.

Total operating expenses for the second quarter

of 2023 were RMB214.9 million, a decrease by 30.4% year-over-year, which accounted for 33.1% of revenues for the period, as compared with

27.9% in the second quarter of 2022. Adjusted operating expenses, which exclude share-based compensation, were RMB204.2 million. They

hit a multi-year low record. The Company will continue to scrutinize its expense base and do whatever it takes to achieve the long-term

profitability we have targeted on.

Operating Income/(Loss)

Operating loss for the second quarter of 2023

was RMB72.4 million, compared with operating loss of RMB110.6 million for the same period in 2022. The loss was mainly caused by smaller

revenue scale. Although revenue showed recovery from quarter over quarter, it could not fully cover fixed operating expenses. The reduced

loss was primarily attributed to the improved gross margin and decreased operating expenses. Adjusted operating loss, which excludes share-based

compensation, was RMB61.7 million.

Net loss attributable to Zepp Health Corporation

for the second quarter of 2023 was RMB69.9 million, compared with RMB106.9 million of net loss in the second quarter of 2022. The adjusted

net loss attributable to Zepp Health Corporation was RMB59.2 million, compared with RMB94.4 million for the same period of 2022.

Liquidity and Capital Resources

As of June 30, 2023, the Company had cash

and cash equivalents and restricted cash of RMB1,064.0 million (US$146.7 million), compared with RMB1,001.5 million as of March 31,

2023 and RMB997.1 million as of June 30, 2022. The increased cash balance was largely from operating activities. In the meantime,

we have managed to reduce our debt level, including short-term and long-term bank borrowing balance, by RMB34.3 million in the second

The Company continued to manage its working capital

and inventory efficiently and reduced inventory levels to RMB742.6 million as of June 30, 2023.

Share Repurchase Program Update

The 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 repurchase program. Pursuant to the extended share repurchase

program, the Company may repurchase its shares in the form of American depositary shares and/or ordinary shares through November 2023

with an aggregate value equal to the remaining balance under the share repurchase program. As of June 30, 2023, the Company had used