Zepp Health Corporation Reports Third Quarter 2022 Unaudited Financial Results BEIJING

Zepp Health Corporation Reports Third Quarter 2022 Unaudited

BEIJING, November 21, 2022 /PRNewswire/

-- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today reported revenues of RMB1.2 billion (US$169.5

million); a GAAP diluted net loss per share of RMB0.07 (US$0.01); and a GAAP diluted net loss per ADS of RMB0.28 (US$0.04) for the third

quarter ended September 30, 2022. Each ADS represents four Class A ordinary shares.

"While challenging macro

dynamics persist, we further improved our top line on a quarter-over-quarter basis and restored growth in sales of our self-branded products

in the third quarter, thanks to our unremitting efforts in product innovation as well as our strong channel and go-to-market capabilities.

For example, in the North American market, we saw revenue growth of 23% year-over-year and 54% quarter-over-quarter," said Wang

Huang, Chairman and CEO of Zepp Health. "We are also encouraged by the initial launch of Zepp Clarity, our hearing aid product

line, and Zepp Aura, our personal AI composer service for improving sleep quality. These launches represent important milestones in our

expansion into the healthcare service sector, which we believe will usher in a new phase of growth for Zepp. Leveraging our proprietary

and evolving Zepp Digital Health Management Platform, we remain confident in our ability to create and deliver new, innovative fitness

and healthcare products and services, helping more users live a healthy life."

Chief Financial Officer Leon

Deng added, "Amid global economic and geopolitical uncertainties and prolonged pandemic-related impacts on our operations, our

third quarter revenues came in at RMB1.2 billion, in line with our previous guidance and down 24.9% year-over-year. However, we are

pleased to see that for the first time this year we logged revenue growth of 4.2% year-over-year and 35.6% quarter-over-quarter in

our self-branded products owing to our upgraded and expanded self-branded product portfolio. Moreover, as we continued to enhance

our operational efficiency with streamlined organization and disciplined expense control, our reported net loss for the quarter

narrowed to RMB17.1 million and adjusted net loss narrowed sequentially to RMB8.8 million, despite severance payment of RMB10

million. Our cash position remains strong, with RMB1.01 billion in cash, cash equivalents and restricted cash, while our inventory

decreased further compared with the end of last quarter. Looking to the future, cost structure optimization remains our primary

focus. With more disciplined cost reduction measures and ROI-based operations, we will strive to return to profitability to create

incremental shareholder value."

Third Quarter 2022 Financial Summary

1 The US$ numbers in 2021 are referenced with the

prior 6-K disclosures, translations of which are made at a rate of RMB6.4434 to US$1.00, the effective noon buying rate for September

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.

Third Quarter 2022 Financial Results

Total units shipped in the third quarter of 2022 decreased

by 41.4% year-over-year to 5.8 million, compared with 9.9 million in the third quarter of 2021. This was mainly caused by a 50.0% shipment

decrease in Mi Band.

Revenues for the third quarter of 2022 reached

RMB1.2 billion (US$169.5 million), a decrease of 24.9% from the third quarter of 2021. Revenues generated from Xiaomi products and self-branded

products were RMB560.7 million and RMB645.1 million, respectively. The decrease in total revenues was mainly driven by a 43.2% decline

in sales of Mi Band. Our self-brand product sales increased by 4.2% from the third quarter of 2021 and increased by 35.6% compared with

the second quarter of this year. We have launched Amazfit Trex 2, GTR 4, GTS 4, GTS 4 mini and Bip U Pro, which we expect may gain traction

during the quarter of holiday season.

Impact of COVID-19 and Russia-Ukraine Conflict on Our Business

The duration and impact of the pandemic remains unpredictable.

Meanwhile, the continued conflict between Russia

and Ukraine affected 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 costs, consumer confidence in Europe and the value

of the Euro. Currently, the situation does not have a material adverse impact on the Company.

Gross margin in the third quarter of

2022 was 19.1%, 1.1 percentage points lower than the same period of 2021 (20.2%) and 1.2 percentage points higher than the second quarter

of 2022 (17.9%). The third quarter's lower margin was driven by higher freight costs and clearance of previous-generation products

and was partially offset by higher gross margin from new-product introductions. We plan to balance ocean versus air shipments to lower

freight costs as we see ocean fee rates declining in the shipping industry.

Research and Development

Research and development expenses in the third quarter of 2022 were

RMB127.4 million, an increase of 17.2% year-over-year. This comprised 10.6% of revenues, versus 6.8% for the same period last year. The

increase was mainly driven by the decrease in compensation from government subsidies during the same period. Excluding the factors above,

R&D expenses remained slightly down versus the third quarter of 2021 due to our strict product development cost management.

Selling and Marketing

Selling and marketing expenses in the

third quarter of 2022 were RMB123.9 million, an increase of 36.5% year-over-year. This comprised 10.3% of revenues, compared with 5.6%

of revenue for the same period in 2021. The increase was due to higher promotion costs in our main online platforms and our investments

General and Administrative

General and administrative expenses were

RMB52.7 million in the third quarter of 2022, a decrease of 14.8% year-over-year. This comprised 4.4% of revenues, compared with 3.9%

in the same period in 2021, and was largely attributable to lower share-based compensation expenses.

Total operating expenses for the third

quarter of 2022 were RMB303.9 million, an increase of 16.3% year-over-year, which accounted for 25.2% of revenues for the period, as compared

with 16.3% in the third quarter of 2021. Besides, the Company conducted personnel optimization and disbursed RMB9.9 million for severance

packages in this quarter to further streamline the expenses.

Operating Income/(Loss)

Operating loss for the third

quarter of 2022 was RMB73.3 million, compared with operating income of RMB62.5 million for the same period in 2021. The loss was

mainly caused by lower revenue scale. Although revenue showed growth recovery from quarter to quarter, it could not cover fixed

operating expenses in full. Still, operating loss narrowed compared with the two previous quarters, which were RMB110.6 million in

Q2 2022 and RMB155.4 million in Q1 2022.

Net loss attributable to Zepp Health Corporation

for the third quarter of 2022 was RMB17.1 million, compared with RMB49.3 million net income in the third quarter of 2021.

Liquidity and Capital Resources

As of September 30, 2022, the Company

had cash and cash equivalents and restricted cash of RMB1,005.7 million (US$141.4 million), compared with RMB997.1 million as of June

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 RMB1,375.1 million. The Company is seeking to reduce the

inventory by year-end to a level at or below that of the end of 2021.

Share Repurchase Program Update

The 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 September 30, 2022,

the Company had used US$9.2 million to repurchase 2,385,659 ADSs. On November 21, 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 November 2023 with an aggregate value of the remaining balance

under the share repurchase program. The Company expects to fund the repurchases under the extended share repurchase program out of its

existing cash balance.

For the fourth quarter of 2022, the Company's

management currently expects net revenues to be between RMB1.1 billion and RMB1.35 billion, compared with RMB1.66 billion in the fourth