Full Press Release Details
Zepp Health Corporation Reports Third Quarter
2024 Unaudited Financial Results
MILPITAS, Calif., November 18, 2024 /PRNewswire/
-- Zepp Health Corporation ("Zepp" or the "Company") (NYSE: ZEPP) today reported revenues of US$42.5 million;
a basic and diluted net loss per share of US$0.05; and a basic and diluted net loss per ADS of US$0.82 for the third quarter ended September 30,
2024; adjusted basic and diluted net loss per share of US$0.05; and adjusted basic and diluted net loss per ADS of US$0.78. Each ADS represents
sixteen Class A ordinary shares.
Mr. Wang 'Wayne' Huang, Chairman and CEO
of Zepp, commented, "I'm pleased to report that this quarter our Amazfit branded sales had a 10% quarter-over-quarter increase,
the highest sequential growth we've achieved this year, overcoming the supply constraints of our newly launched products. This positive
momentum demonstrates that the most challenging phase of our transformation is now behind us, and we are optimistic that this growth will
continue into the fourth quarter as our new outdoor product, the T-Rex3 smartwatch, has received better than expected market feedback
worldwide. It combines military-grade durability, cutting-edge outdoor features, and unparalleled battery life, making it the perfect
companion for those seeking adventure in their everyday lives and becoming one of the most competitive smartwatch products in the sports
and outdoor categories."
Wang added, "Furthermore, introducing the
Amazfit UP OWS (Open Wearable Stereo) earbuds has expanded our product ecosystem and enhanced the user experience allowing them to hear
background sounds clearly while using UP earbuds for outdoor activities to enhance their safety. Additionally, we have made significant
advancements in our software capabilities, with the latest updates on Zepp OS and the redesign of our Zepp App interface to enhance functionality
and user engagement which received positive feedback from media and users widely.
These developments reaffirm our commitment to
innovation and meeting the evolving needs of our customers. We are particularly proud to be named as the official wearable partner and
timekeeper of HYROX, the World Series of Fitness Racing, reaching over 300,000 participants per season across EU and US regions.
On the marketing front, we are expanding the size of our Amazfit Athletes, this quarter we newly partnered with Spain Padel Athlete Bea
Gonzalez, American Hyrox Hunter and Meg and others. These developments reaffirm our commitment to innovation and meeting the evolving
needs of our customers. Looking ahead, we remain confident in our strategic direction. With a strong pipeline of new products, continued
investments in R&D and marketing, and an unwavering focus on operational excellence, we are well-positioned to drive sustainable growth
and create long-term value for our shareholders."
Mr. Leon Deng, Zepp's Chief Financial Officer,
added, "In the third quarter, our financial results continued to demonstrate the effectiveness of our refined operational strategies
and rigorous cost management. We reported the highest sequential revenue growth in the year, overcoming the supply constraints of our
newly launched T-Rex 3 and achieved the highest gross margin in our company's history, reflecting our ongoing improvements in product
mix and operational efficiencies. While we maintained a consistent approach in aligning our operating expenses with strategic objectives,
during this quarter, we frontloaded certain marketing expenditures, helping to build brand awareness and promote our sales in the long
run. As a result, we reported a net loss, largely driven by cost coverage issues and negative foreign currency results, but with the successful
new product launches, we are confident in the recovery of our profitability growth momentum. Furthermore, our cash balance remained at
a similar level compared to the previous quarter, partially attributed to our tight working capital management. This achievement not only
demonstrates our capability to adapt swiftly to fluctuating market demands but also positions us to reduce operational risks and enhance
financial flexibility. Last but not the least, we will continue executing our share repurchase program to demonstrate our confidence on
the company's long-term strategy."
Third Quarter 2024 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, 2024 | Sept. 30, 2023 | Sept. 30, 2024 | Sept. 30, 2023 | ||||||||||||
| Revenue (US$) | 42.5 | 83.1 | 123.1 | 269.9 | ||||||||||||
| Gross margin | 40.6 | % | 33.9 | % | 39.3 | % | 23.5 | % | ||||||||
| Operating (loss)/income (US$) | (12.5 | ) | 1.4 | (38.3 | ) | (31.1 | ) | |||||||||
| Net (loss)/income (US$) | (13.3 | ) | 0.3 | (38.9 | ) | (29.8 | ) | |||||||||
| Adjusted EBIT (US$) 1 | (12.3 | ) | 3.0 | (33.8 | ) | (25.0 | ) | |||||||||
| Net (loss)/income attributable to Zepp Health Corporation (US$) | (13.3 | ) | 0.3 | (38.9 | ) | (29.7 | ) | |||||||||
| Adjusted net (loss)/income attributable to Zepp Health Corporation (US$) 2 | (12.6 | ) | 2.2 | (35.0 | ) | (22.7 | ) | |||||||||
| Basic/diluted net (loss)/income per ADS (US$) 3 | (0.82 | ) | 0.02 | (2.40 | ) | (1.95 | ) | |||||||||
| Adjusted basic/diluted net (loss)/income per ADS (US$) 4 | (0.78 | ) | 0.14 | (2.16 | ) | (1.49 | ) | |||||||||
| Units shipped in millions | 0.7 | 2.8 | 3.2 | 10.0 |
Adjusted EBIT is a non-GAAP financial measure, which is defined as net loss, excluding (i) share-based compensation expenses,
(ii) income tax (benefit)/ expense, (iii) interest income, (iv) interest expense.
2 Adjusted net (loss)/income 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.
One ADS represents sixteen Class A ordinary shares. The ADS figures give effect to the ADS to share ratio change, as described
in "Third Quarter 2024 Financial Results-Shares Outstanding".
4 Adjusted diluted net (loss)/income is the abbreviation
of adjusted net (loss)/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 loss
per ADS attributable to Zepp Health Corporation.
Third Quarter 2024 Financial Results
Revenues for the third quarter of 2024 reached
US$42.5 million, a decrease by 48.9% from the third quarter of 2023. The decrease was primarily due to the decrease in the sales of Xiaomi
wearable products, as well as the decrease in sales of self-branded products, as supply was constrained by the production capacity for
new product launches and macroeconomic weakness. However, compared with the second quarter of 2024, revenue of self-branded products increased
by 9.9%, which is the highest quarter-over-quarter increase in 2024, the increase was primarily driven by the market reception of our
recent launches, especially the newly introduced Amazfit T-Rex 3, and our core products such as Balance, Active, have seen continued popularity
Total units shipped in the third quarter of 2024
was 0.7 million, compared with 2.8 million in the third quarter of 2023.
Gross margin in the third quarter of 2024 was
40.6%, compared to 33.9% in the same period of 2023. We reached another record-high quarterly gross margin since the third quarter of
2023, supported by the strong performance of our self-branded products and a more favourable product mix, with a higher proportion of
new products and less clearance sales, which typically have lower margins. This was the sixth consecutive quarter of gross margin expansion.
Research and Development Expenses
Research and development expenses in the third
quarter of 2024 were US$10.9 million, an increase by 4.8% year-over-year. This accounted for 25.6% of revenues, compared to 12.5% for
the same period in 2023. The increase was a result from our investment in new technologies, including AI, to maintain our competitive
edge against our peers. At the same time, we focused on refined research and development approaches, as we consistently evaluated resource
efficiency to ensure maximum return on investment and productivity.
Selling and Marketing Expenses
Selling and marketing expenses in the third quarter
of 2024 were US$11.9 million, an increase by 21.9% year-over-year. This accounted for 28.0% of revenues, compared to 11.7% for the same
The increase was primarily due to the launch of
various marketing campaigns for our products, as well as the expansion of our Amazfit Athletes team by partnering with renowned athletes
to build brand recognition. At the same time, we consistently pushed on retail profitability and channel mix improvement, which included
meticulous refinement of our retail channels and strategic staffing arrangements across sales regions. We are committed to investing efficiently
in marketing and branding to ensure our sustainable growth.
General and Administrative Expenses
General and administrative expenses were US$7.0
million in the third quarter of 2024, an increase by 5.4% year-over-year. This accounted for 16.5% of revenues, compared with 8.0% in
the same period in 2023. The increase was largely attributable to foreign exchange rate fluctuations. Foreign exchange rate fluctuations
loss was US$1.0 million in the third quarter of 2024, compared with fluctuations gain of US$0.7 in the same period of 2023.
Total operating expenses for the third quarter
of 2024 were US$29.8 million, an increase by 11.2% year-over-year. Adjusted operating expenses, which exclude share-based compensation,
were US$29.1 million. The increase was primarily due to the launch of various marketing campaigns for our new products, as well as the
expansion of our Amazfit Athletes team by partnering with renowned athletes to build brand recognition. We will maintain our cost-conscious
approach in the upcoming quarters. Concurrently, we remain committed to investing in R&D and marketing activities to ensure our long-term
Operating Income/(Loss)
Operating loss for the third quarter of 2024 was
US$12.5 million, compared to operating income of US$1.4 million for the third quarter of 2023. Adjusted operating loss for the third quarter
of 2024 was US$11.9 million, compared to adjusted operating income of US$3.3 million for the third quarter of 2023. The loss was mainly
due to lower sales volume, which resulted in an inability to fully cover operating expenses.
Net loss attributable to Zepp Health Corporation
for the third quarter of 2024 was US$13.3 million, compared to net income of US$0.3 million in the third quarter of 2023. Adjusted net
loss attributable to Zepp Health Corporation, which excludes share-based compensation expenses attributable
to Zepp Health Corporation, was US$12.6 million, compared to adjusted net income of US$2.2 million in the third quarter of 2023. Net loss
attributable to Zepp Health Corporation for the third quarter of 2024 included a foreign exchanges loss of US$1.0 million, compared to