Full Press Release Details
Zepp Health Corporation Reports Third Quarter
2021 Unaudited Financial Results
BEIJING, November 16, 2021 /PRNewswire/ --
Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today reported revenue of RMB1.6 billion (US$249.3
million); GAAP diluted net income per share of RMB0.19 (US$0.03); and GAAP diluted net income per ADS of RMB0.74 (US$0.11) for the third
quarter ended September 30, 2021. Each ADS represents four (4) Class A ordinary shares.
"Despite global supply chain and chip shortage
challenges affecting many companies, we are pleased to meet our guidance range for the third quarter of 2021," said Wang Huang,
Chairman and CEO of Zepp Health. "Even without any new product launches, unit shipment volumes of Amazfit and Zepp branded products
increased 89% year-over-year, demonstrating continuing global expansion of our brands. We began the fourth quarter with new technology
and products, including our new OS for independent apps and the launch of the next generation 3 of our best-selling GT series watch line."
"Today, our board approved a $20 million
share repurchase program." Mr. Huang added, "The Share Repurchase Program is well aligned with our commitment to maximizing
value for all of our stakeholders and reflects the Company's confidence in its sustainable growth and long-term strategy, supported by
the strong balance sheet and cash position."
Chief Financial Officer, Leon Deng, added "In
addition to the strong growth of the Company's own branded products, third quarter topline performance reflected the different timing
for the launch of Xiaomi's new Mi Band in the second quarter this year, as well as impacts of supply chain slowdowns and chip shortages.
Despite these challenges, we successfully managed to continue our expense control, which reduced total operating expenses by 31.2%."
Third Quarter 2021 Financial Summary
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| GAAP in millions, except for percentages and per share/ADS amounts | Sept. 30, 2021 | Sept. 30, 2020 1 | Sept. 30, 2021 | Sept. 30, 2020 1 | ||||||||||||
| Revenue RMB | 1,606.1 | 2,235.1 | 4,588.5 | 4,460.8 | ||||||||||||
| Revenue US$ | 249.3 | 329.2 | 712.1 | 657.0 | ||||||||||||
| Gross Margin | 20.2 | % | 20.6 | % | 21.5 | % | 21.5 | % | ||||||||
| Net income attributable to Zepp Health Corporation RMB | 49.3 | 81.1 | 101.5 | 113.5 | ||||||||||||
| Adjusted net income attributable to Zepp Health Corporation RMB 2 | 65.5 | 120.8 | 168.9 | 165.5 | ||||||||||||
| Diluted net income per share RMB | 0.19 | 0.31 | 0.38 | 0.44 | ||||||||||||
| Diluted net income per ADS US$ | 0.11 | 0.18 | 0.24 | 0.26 | ||||||||||||
| Adjusted diluted net income per share RMB 3 | 0.25 | 0.46 | 0.64 | 0.64 | ||||||||||||
| Adjusted diluted net income per ADS US$ | 0.15 | 0.27 | 0.40 | 0.38 | ||||||||||||
| Units Shipped | 9.9 | 15.9 | 27.8 | 32.4 |
1 The US$ numbers in 2020 are referenced with the prior
6-K disclosures,which translations from RMB to US$ are made at a rate of RMB6.7896 to US$1.00, the effective noon buying rate for September
30, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board.
net income 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.
Adjusted diluted net income is the abbreviation of adjusted net income 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 income per ADS attributable to Zepp Health Corporation.
Third Quarter 2021 Financial Results
Total units shipped in the third quarter of 2021
decreased by 37.7% year-over-year to 9.9 million, compared with 15.9 million in the third quarter of 2020. This was driven by a 45.3%
decrease in unit shipments of Xiaomi wearable products partially offset by a 88.9% increase in unit shippments of Amazfit and Zepp branded
Revenues for the third quarter of 2021 reached
RMB1.61 billion (US$249.3 million), a decrease of 28.1% from the third quarter of 2020, primarily as a result of decrease in sales of
Xiaomi werable products as compared with the same period in 2020, which was due to the different launch time of Mi Band 5 and 6. Meanwhile,
the revenue from our self-branded products increased, primarily driven by the sales of the Company's popular premium GT series,
basic Bip and Pop models and rugged T-Rex.
Both sequential and year-over-year quarterly revenue
changes can be affected by fluctuations in seasonal purchase patterns as well as by the timing of new product introductions.
Impact of COVID-19 on Our Business
The global impact of the COVID-19 pandemic continued
in the third quarter 2021, primarily manifesting as parts and supply chain challenges globally. The market is experiencing shortages of
electronic components and chips for different industries, affecting the supply and production cycle for the Company, as well. Zepp Health
had increased inventories of some parts, but supply chain delays of certain parts for a month affected production of finished goods. The
Company cannot predict the potential, if any, future negative impact on market conditions or the Company's operations.
Gross margin in the third quarter of 2021 was
20.2%, compared with 20.6% in the same period of 2020. Gross margin and gross profit are affected by product mix as different products
have different margin contributions. These changes can also be influenced by the stage of the product in its lifecycle, product iterations
and new product introductions.
Research & Development
Research and development expense in the third
quarter of 2021 was RMB108.7 million, decreasing 37.1% year-over year, and comprising 6.8% of revenue, versus 7.7% in the same period
last year. This reflects effective expense control in R&D activities and compensation from government subsidy. The company optimized
its integrated product development process to effectively develop new smart devices and promoted its open platform ZEPP OS to welcome
more outside developers to upload their apps and programs on the smart watches.
Sales and Marketing expense in the third quarter
of 2021 was RMB90.7 million, decreasing 21.5% year-over-year, and comprising 5.6% of revenue, compared with 5.2% of revenue in the same
period in 2020. The decrease was due to effective expense control on marketing expenses while balancing investments to expand sales channels
and markets around the world.
General & Administrative
General and Administrative expense was RMB61.9
million in the third quarter of 2021, decreasing 32.0% year-over-year, and comprising 3.9% of revenue, compared with 4.1% in the same
period in 2020. The decrease was primarily due to the vesting of share-based compensation.
Operating Expenses and Net Income
Total operating expenses for the third quarter
of 2021 were RMB261.3 million, a decrease of RMB118.2 million from the same period in 2020, comprising 16.3% of revenue, compared with
17.0% in the third quarter of 2020.
Operating income for the third quarter of 2021
was RMB62.5 million, a decrease of 22.5% from RMB80.6 million for the same period in 2020.
Net income attributable to Zepp Health Corporation
for the third quarter of 2021 was RMB49.3 million, compared with RMB81.1 million in the third quarter of 2020.
Liquidity and Capital Resources
As of September 30, 2021, the Company had
cash and cash equivalents of RMB1,229.3 million (US$190.8 million), compared with RMB2,273.3 million as of December 31, 2020.
Share Repurchase Program
The Company's board of directors has approved
a share repurchase program whereby the Company is authorized to repurchase up to US$20 million worth of its shares (including in the form
of American depositary shares) over the next 12 months.
The Company's proposed repurchases may be made
from time to time in the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through
other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The Company's
board of directors will review the share repurchase program periodically, and may authorize adjustment of its terms and size. The Company
expects to fund the repurchases out of its existing cash balance.
For the fourth quarter
of 2021, the management of the Company currently expects:
This outlook reflects
continuing uncertainty pertaining to the potential affects of the COVID-19 pandemic on sales and on electronic component delays, as well
as 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 subject
The Company's management will hold a conference
call at 7:30 a.m. Eastern Standard Time on Tuesday, November 16, 2021 (8:30 p.m. Beijing Time on November 16, 2021)
to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:
| US (Toll Free): | +1-888-346-8982 |
| International: | +1-412-902-4272 |
| Mainland China (Toll Free): | 400-120-1203 |
| Hong Kong (Toll Free): | 800-905-945 |
| Hong Kong: | +852-3018-4992 |
Participants should dial-in at least 10 minutes
before the scheduled start time and ask to be connected to the call for "Zepp Health Corporation."
Additionally, a live and archived webcast of
the conference call will be available at https://ir.zepp.com/investor.
A telephone replay will be available one hour
after the call until November 23, 2021 by dialing: