Full Press Release Details
Health Corporation Reports Third Quarter 2023 Unaudited Financial Results
the Netherlands, November 20, 2023 /PRNewswire/ -- Zepp Health Corporation ("Zepp" or the "Company")
(NYSE: ZEPP) today reported revenues of RMB0.6 billion (US$82.5 million); a basic and diluted net income per share of RMB0.01 (US$0.002);
and a basic and diluted net income per ADS of RMB0.05 (US$0.01) for the third quarter ended September 30, 2023. Each ADS represents
four Class A ordinary shares.
Wang Huang, Chairman and CEO of Zepp, commented, "In the third quarter, we achieved a business turnaround, returning to profitability
after six loss-making quarters. Despite a year-over-year revenue decline, our high-margin self-branded products' contribution
to our top line grew to approximately 80%. This accomplishment reaffirms the effectiveness of our operational strategy and early success
in our business model transformation."
Mr. Huang continued,
"We sustained our self-branded products' strong performance in this quarter, thanks to our expanded AI-empowered product portfolio
and elevated brand influence around the globe. In September 2023, we launched Amazfit Balance (previously GT series) at IFA Berlin
with seamlessly integrated health, fitness and lifestyle features, including Zepp Pay and Zepp Aura, enabling users to strike the ultimate
balance between life, work and wellness. Furthermore, with the launch of Amazfit Active and Amazfit Active Edge in the fourth quarter
of 2023, both tailored for modern-day city consumers, we expect to continue propelling sales growth of our self-branded product in the
upcoming quarters. Looking ahead, our strategy of leveraging leading vertically integrated technology to rapidly and flexibly provide
high-quality, competitive, high-margin products will continue to be effective and demonstrate results.
Mr. Leon Deng, Zepp's
Chief Financial Officer, added, "In the third quarter, we achieved revenues of RMB602.1 million, in line with our guidance range.
Despite a year-over-year revenue decline of 50.1%, primarily due to lower Xiaomi-branded products sales, we marked a significant milestone
by returning to profitability in this quarter. Our net income for the third quarter reached RMB3.0 million, a remarkable turnaround from
the RMB17.1 million net loss in the same period last year. Notably, we are making strides in our journey to transform the Company from
its heavy reliance on Xiaomi-branded products to becoming a self-sustaining enterprise that focuses on our Amazfit brand."
income could be attributed to enhanced operating efficiency and the increasing contribution of our self-branded products sales, which
led to an overall gross margin of 33.9%, the highest gross margin since the Company's inception in 2013. Simultaneously, our total
operating expenses for the third quarter amounted to RMB193.2 million, a 36.4% reduction compared to the same period last year. This was
achieved through our disciplined cost control measures."
report our fifth consecutive quarter of positive cash flow from operations. Our inventory levels remained relatively steady at RMB787.0
million as of September 30, 2023. Additionally, we successfully reduced our debt level by RMB117.3 million in the third quarter of
2023, and at the same time we remained strong cash and cash equivalent position of RMB1 billion by the end of this quarter. Looking ahead,
we will continue to optimize our retail channels and product mix to maintain our margins trend, with a steadfast focus on disciplined
expense management for sustained shareholder profitability."
Third Quarter 2023 Financial Summary
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| Number in millions, except for percentages and per- share/ADS amounts | Sept. 30, 2023 | Sept. 30, 2022 1 | Sept. 30, 2023 | Sept. 30, 2022 1 | ||||||||||||
| Revenue RMB | 602.1 | 1,205.8 | 1,895.6 | 3,071.1 | ||||||||||||
| Revenue US$ | 82.5 | 169.5 | 259.8 | 431.7 | ||||||||||||
| Gross margin | 33.9 | % | 19.1 | % | 23.7 | % | 18.9 | % | ||||||||
| Net income/(loss) attributable to Zepp Health Corporation RMB | 3.0 | (17.1 | ) | (203.7 | ) | (212.8 | ) | |||||||||
| Adjusted net income/(loss) attributable to Zepp Health Corporation RMB 2 | 16.0 | (8.8 | ) | (156.0 | ) | (178.9 | ) | |||||||||
| Diluted net income/(loss) per share RMB | 0.01 | (0.07 | ) | (0.84 | ) | (0.86 | ) | |||||||||
| Diluted net income/(loss) per ADS US$ | 0.01 | (0.04 | ) | (0.46 | ) | (0.48 | ) | |||||||||
| Adjusted diluted net income/(loss) per share RMB 3 | 0.06 | (0.04 | ) | (0.64 | ) | (0.72 | ) | |||||||||
| Adjusted diluted net income/(loss) per ADS US$ | 0.03 | (0.02 | ) | (0.35 | ) | (0.41 | ) | |||||||||
| Units shipped in millions | 2.8 | 5.8 | 10.0 | 15.8 | ||||||||||||
| -Xiaomi-branded | 1.7 | 4.1 | 6.8 | 11.5 | ||||||||||||
| -Self-branded | 1.1 | 1.7 | 3.2 | 4.3 |
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
RMB7.1135 to US$1.00, the effective noon buying rate on September 30, 2022 as set forth in the H.10 statistical release of the Federal
Adjusted 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.
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.
Third Quarter 2023 Financial Results
for the third quarter of 2023 reached RMB0.6 billion (US$82.5 million), a decrease by 50.1% from the third quarter of 2022. Over
70% of the decrease in total revenues was due to the decrease in the sales of Xiaomi wearable products.
Total units shipped in the third quarter of 2023
decreased by 51.7% year-over-year to 2.8 million, compared with 5.8 million in the third quarter of 2022. Over 80% of the decrease in
total units shipped was due to the decrease in Xiaomi wearable products.
margin in the third quarter of 2023 was 33.9%, compared to 19.1% in the same period of 2022. We reached a record-high gross margin,
mainly due to the improved gross margin of our self-branded products (which hit an all-time high of 40.1%) and largely driven by a better
product mix especially on our new products introductions, partially offset by the decrease in the gross margin of Xiaomi branded products.
Research and Development Expenses
and development expenses in the third quarter of 2023 were RMB74.6 million, a decrease by 41.4% year-over-year. This comprised
12.4% of revenues, versus 10.6% for the same period in 2022. The decrease could be attributed to 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 third quarter of 2023 were RMB70.6 million, a decrease by 43.0% year-over-year. This comprised 11.7%
of revenues, versus 10.3% for the same period in 2022. The amount decrease resulted primarily from our consistent push on retail profitability
and channel mix improvement, which included meticulous refinement of our retail channels and strategic staffing arrangements across sales
regions. Meanwhile, we also sponsored several events in Berlin Marathon and held press conference for the launch of the Amazfit Balance
at IFA-Berlin in the third quarter, and these efforts notably enhanced our brand image in the smart wearable device market. We are committed
to investing efficiently in marketing and branding to ensure our sustained growth.
General and Administrative Expenses
and administrative expenses were RMB48.0 million in the third quarter of 2023, a decrease by 8.9% year-over-year. This comprised
8.0% of revenues, compared with 4.4% in the same period in 2022. The decrease in absolute value was largely attributable to our personnel
optimization initiative and strict administrative expense control.
operating expenses for the third quarter of 2023 were RMB193.2 million, a decrease by 36.4% year-over-year. Adjusted operating
expenses, which exclude share-based compensation, were RMB180.3 million. We will maintain our cost-conscious approach in the upcoming
quarters, anticipating that our operating expenses will remain at current levels or decrease further. Concurrently, we remain committed
to investing in R&D and marketing activities to ensure our long-term competitiveness.
Operating Income/(Loss)
income for the third quarter of 2023 was RMB10.8 million, compared with operating loss of RMB73.3 million for the same period in
2022. The recovery in operating profit was largely due to the improved gross margin of our self-branded products and reduced operating
income attributable to Zepp Health Corporation for the third quarter of 2023 was RMB3.0 million, compared with RMB17.1 million
of net loss in the third quarter of 2022. The adjusted net income attributable to Zepp Health Corporation was RMB16.0 million, compared
with the adjusted net loss of RMB8.8 million for the same period of 2022.
Liquidity and Capital Resources
of September 30, 2023, the Company had cash and cash equivalents and restricted cash of RMB981.0 million (US$134.5 million),
compared with RMB1,064.0 million as of June 30, 2023 and RMB1,005.7 million as of September 30, 2022. We generated positive
cash flow from our operating activities for the fifth consecutive quarter. We also successfully reduced our total debt, including short-term
and long-term bank borrowing balance, by RMB117.3 million in the third quarter, 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 RMB787.0 million as
of September 30, 2023, compared to RMB742.6 million as of June 30, 2023 and RMB1,375.1 million as of September 30, 2022.
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
repurchase program. On November 20, 2023, the board further authorized the Company to extend its share repurchase program for another
12 months. 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 2024 with an aggregate value equal to the remaining balance under the share repurchase
program. As of September 30, 2023, the Company had used US$12.3 million to repurchase 4,645,732 ADSs. The Company expects to fund
the repurchases under the extended share repurchase program out of its existing cash balance.
the fourth quarter of 2023, the Company's management currently expects net revenues to be between RMB600 million and RMB850
million, compared with RMB1.07 billion in the fourth quarter of 2022.
This outlook is based
on current market conditions and reflects the Company's current and preliminary estimates of market, operating conditions and customer
demand, which are all subject to change.
Company's management team will hold a conference call at 7:30 a.m. Eastern Time on Monday, November 20, 2023 (8:30
p.m. Beijing Time on November 20, 2023) to discuss financial results and answer questions from investors and analysts. Listeners