Zepp Health Corporation Reports Third Quarter 2022 Unaudited Financial Results

BEIJING, Nov. 21, 2022 /PRNewswire/ — Zepp Well being Company (“Zepp” or the “Firm”) (NYSE: ZEPP) at the moment reported revenues of RMB1.2 billion (US$169.5 million); a GAAP diluted internet loss per share of RMB0.07 (US$0.01); and a GAAP diluted internet loss per ADS of RMB0.28 (US$0.04) for the third quarter ended September 30, 2022. Every ADS represents 4 Class A extraordinary shares.

“Whereas difficult macro dynamics persist, we additional improved our prime line on a quarter-over-quarter foundation and restored progress in gross sales of our self-branded merchandise within the third quarter, due to our unremitting efforts in product innovation in addition to our sturdy channel and go-to-market capabilities. For instance, within the North American market, we noticed income progress of 23% year-over-year and 54% quarter-over-quarter,” mentioned Wang Huang, Chairman and CEO of Zepp Well being. “We’re additionally inspired by the preliminary launch of Zepp Readability, our listening to assist product line, and Zepp Aura, our private AI composer service for enhancing sleep high quality. These launches symbolize necessary milestones in our growth into the healthcare service sector, which we consider will usher in a brand new section of progress for Zepp. Leveraging our proprietary and evolving Zepp Digital Well being Administration Platform, we stay assured in our capability to create and ship new, progressive health and healthcare services and products, serving to extra customers reside a wholesome life.”

Chief Monetary Officer Leon Deng added, “Amid international financial and geopolitical uncertainties and extended pandemic-related impacts on our operations, our third quarter revenues got here in at RMB1.2 billion, in step with our earlier steerage and down 24.9% year-over-year. Nonetheless, we’re happy to see that for the primary time this 12 months we logged income progress of 4.2% year-over-year and 35.6% quarter-over-quarter in our self-branded merchandise owing to our upgraded and expanded self-branded product portfolio. Furthermore, as we continued to reinforce our operational effectivity with streamlined group and disciplined expense management, our reported internet loss for the quarter narrowed to RMB17.1 million and adjusted internet loss narrowed sequentially to RMB8.8 million, regardless of severance cost of RMB10 million. Our money place stays sturdy, with RMB1.01 billion in money, money equivalents and restricted money, whereas our stock decreased additional in contrast with the top of final quarter. Trying to the long run, value construction optimization stays our major focus. With extra disciplined value discount measures and ROI-based operations, we’ll attempt to return to profitability to create incremental shareholder worth.”

Third Quarter 2022 Monetary Abstract

^{[1] The US$ numbers in 2021 are referenced with the prior 6-Ok disclosures, translations of that are made at a fee of RMB6.4434 to US$1.00, the efficient midday shopping for fee for September 30, 2021, as set forth within the H.10 statistical launch of the Federal Reserve Board.
[2] Adjusted internet revenue/(loss) attributable to Zepp Well being Company is a non-GAAP measure, which excludes share-based compensation bills. See “Reconciliation of GAAP and Non-GAAP Outcomes” on the finish of this press launch.
[3] Adjusted diluted internet revenue/(loss) is the abbreviation of adjusted internet revenue/(loss) attributable to Zepp Well being Company, which is a non-GAAP measure and excludes share-based compensation bills attributable to Zepp Well being Company and is used because the numerator within the computation of adjusted primary and diluted internet revenue/(loss) per ADS attributable to Zepp Well being Company.}

Third Quarter 2022 Monetary Outcomes

Revenues

Whole items shipped within the third quarter of 2022 decreased by 41.4% year-over-year to five.8 million, in contrast with 9.9 million within the third quarter of 2021. This was primarily brought on by a 50.0% cargo lower in Mi Band.

Revenues for the third quarter of 2022 reached RMB1.2 billion (US$169.5 million), a lower of 24.9% from the third quarter of 2021. Revenues generated from Xiaomi merchandise and self-branded merchandise have been RMB560.7 million and RMB645.1 million, respectively. The lower in complete revenues was primarily pushed by a 43.2% decline in gross sales of Mi Band. Our self-brand product gross sales elevated by 4.2% from the third quarter of 2021 and elevated by 35.6% in contrast with the second quarter of this 12 months. We have now launched Amazfit Trex 2, GTR 4, GTS 4, GTS 4 mini and Bip U Professional, which we count on might acquire traction through the quarter of vacation season.

Impression of COVID-19 and Russia-Ukraine Battle on Our Enterprise

The length and impression of the pandemic stays unpredictable.

In the meantime, the continued battle between Russia and Ukraine affected demand for and gross sales of Xiaomi wearable merchandise and our self-branded merchandise within the affected areas. As Europe is among the greatest gross sales areas for the Firm, the battle additionally affected freight prices, shopper confidence in Europe and the worth of the Euro. At present, the scenario doesn’t have a cloth hostile impression on the Firm.

Gross Margin

Gross margin within the third quarter of 2022 was 19.1%, 1.1 proportion factors decrease than the identical interval of 2021 (20.2%) and 1.2 proportion factors larger than the second quarter of 2022 (17.9%). The third quarter’s decrease margin was pushed by larger freight prices and clearance of previous-generation merchandise and was partially offset by larger gross margin from new-product introductions. We plan to steadiness ocean versus air shipments to decrease freight prices as we see ocean payment charges declining within the transport business.

Analysis and Improvement

Analysis and improvement bills within the third quarter of 2022 have been RMB127.4 million, a rise of 17.2% year-over-year. This comprised 10.6% of revenues, versus 6.8% for a similar interval final 12 months. The rise was primarily pushed by the lower in compensation from authorities subsidies throughout the identical interval. Excluding the elements above, R&D bills remained barely down versus the third quarter of 2021 as a result of our strict product improvement value administration.

Promoting and Advertising

Promoting and advertising and marketing bills within the third quarter of 2022 have been RMB123.9 million, a rise of 36.5% year-over-year. This comprised 10.3% of revenues, in contrast with 5.6% of income for a similar interval in 2021. The rise was as a result of larger promotion prices in our most important on-line platforms and our investments in retail channels.

Common and Administrative

Common and administrative bills have been RMB52.7 million within the third quarter of 2022, a lower of 14.8% year-over-year. This comprised 4.4% of revenues, in contrast with 3.9% in the identical interval in 2021, and was largely attributable to decrease share-based compensation bills.

Working Bills

Whole working bills for the third quarter of 2022 have been RMB303.9 million, a rise of 16.3% year-over-year, which accounted for 25.2% of revenues for the interval, as in contrast with 16.3% within the third quarter of 2021. In addition to, the Firm carried out personnel optimization and disbursed RMB9.9 million for severance packages on this quarter to additional streamline the bills.

Working Revenue/(Loss)

Working loss for the third quarter of 2022 was RMB73.3 million, in contrast with working revenue of RMB62.5 million for a similar interval in 2021. The loss was primarily brought on by decrease income scale. Though income confirmed progress restoration from quarter to quarter, it couldn’t cowl mounted working bills in full. Nonetheless, working loss narrowed in contrast with the 2 earlier quarters, which have been RMB110.6 million in Q2 2022 and RMB155.4 million in Q1 2022.

Web Revenue/(Loss)

Web loss attributable to Zepp Well being Company for the third quarter of 2022 was RMB17.1 million, in contrast with RMB49.3 million internet revenue within the third quarter of 2021.

Liquidity and Capital Assets

As of September 30, 2022, the Firm had money and money equivalents and restricted money of RMB1,005.7 million (US$141.4 million), in contrast with RMB997.1 million as of June 30, 2022 and RMB1,509.5 million as of December 31, 2021.

The Firm continued to handle its working capital and stock extra effectively and realized decrease stock ranges at RMB1,375.1 million. The Firm is in search of to scale back the stock by year-end to a degree at or beneath that of the top of 2021.

Share Repurchase Program Replace

The Firm beforehand introduced in its third quarter 2021 earnings launch that the board had approved a share repurchase program of as much as US$20 million. As of September 30, 2022, the Firm had used US$9.2 million to repurchase 2,385,659 ADSs. On November 21, the board approved the Firm to increase its share repurchase program over the following twelve months. Pursuant to the prolonged share repurchase program, the Firm might repurchase its shares within the type of American depositary shares and/or the extraordinary shares by way of November 2023 with an combination worth of the remaining steadiness beneath the share repurchase program. The Firm expects to fund the repurchases beneath the prolonged share repurchase program out of its current money steadiness.

Outlook

For the fourth quarter of 2022, the Firm’s administration at present expects internet revenues to be between RMB1.1 billion and RMB1.35 billion, in contrast with RMB1.66 billion within the fourth quarter of 2021.

This outlook displays continued uncertainty pertaining to the potential results of the COVID-19 pandemic on gross sales and on digital part delays, in addition to the anticipated gross sales seasonality of each self-branded and Xiaomi merchandise. It’s based mostly on present market circumstances and displays the Firm’s present and preliminary estimates of market and working circumstances and buyer demand, that are all topic to vary.

Convention Name

The Firm’s administration crew will maintain a convention name at 7:30 a.m. Jap Time on Monday, November 21, 2022 (8:30 p.m. Beijing Time on November 21, 2022) to debate monetary outcomes and reply questions from traders and analysts. Listeners might entry the decision by dialing:

Contributors ought to dial in no less than 10 minutes earlier than the scheduled begin time and ask to be related to the decision for “Zepp Well being Company”.

Moreover, a reside and archived webcast of the convention name shall be obtainable at https://ir.zepp.com/investor.

A phone replay shall be obtainable one hour after the decision till November 28, 2022 by dialing:

About Zepp Well being Company (NYSE: ZEPP)

Zepp Well being modified its identify from Huami Corp. (HMI) on February 25, 2021 to emphasise its well being focus with a reputation that resonates throughout languages and cultures globally. The Firm’s mission continues to be connecting well being with expertise. Since its inception in 2013, Zepp Well being has developed a platform of proprietary expertise together with AI chips, biometric sensors, and information algorithms, which drive a broadening line of good well being units for shoppers, and information analytics companies for inhabitants well being. Zepp Well being is among the largest international builders of good wearable well being and shopper health units, transport 36 million items in 2021. Zepp Well being Corp. is predicated in Hefei, China, with U.S. operations, Zepp Well being USA, based mostly in Cupertino, California. 

Use of Non-GAAP Measures

We use adjusted internet revenue/(loss), a non-GAAP monetary measure, in evaluating our working outcomes and for monetary and operational decision-making functions. Adjusted internet revenue/(loss) represents internet revenue/(loss) excluding share-based compensation bills, and such adjustment has no impression on revenue tax. Adjusted internet revenue/(loss) attributable to Zepp Well being Company is a non-GAAP measure, which excludes share-based compensation bills attributable to Zepp Well being Company, and is used because the numerator in computation of adjusted internet revenue/(loss) per share and per ADS attributable to Zepp Well being Company.

We consider that adjusted internet revenue/(loss) and adjusted internet revenue/(loss) attributable to Zepp Well being Company assist determine underlying developments in our enterprise that might in any other case be distorted by the impact of sure bills that we embrace in internet revenue/(loss) and internet revenue/(loss) attributable to Zepp Well being Company. We consider that adjusted internet revenue/(loss) and adjusted internet revenue/(loss) attributable to Zepp Well being Company supplies helpful details about our working outcomes, enhances the general understanding of our previous efficiency and future prospects and permits for higher visibility with respect to key metrics utilized by our administration in its monetary and operational decision-making.

Adjusted internet revenue/(loss) and adjusted internet revenue/(loss) attributable to Zepp Well being Company, shouldn’t be thought of in isolation or construed as a substitute for internet revenue/(loss), primary and diluted internet revenue/(loss) per share and per ADS attributable to Zepp Well being Company or another measure of efficiency or as an indicator of our working efficiency. Buyers are inspired to overview the historic non-GAAP monetary measures to essentially the most immediately comparable GAAP measures. Adjusted internet revenue/(loss) and adjusted internet revenue/(loss) attributable to extraordinary shareholders, introduced right here might not be similar to equally titled measures introduced by different firms. Different firms might calculate equally titled measures in a different way, limiting their usefulness as comparative measures to our information. We encourage traders and others to overview our monetary info in its entirety and never depend on a single monetary measure.

Trade Charge

The Firm’s enterprise is primarily carried out in China and the numerous majority of revenues generated are denominated in RMB. This announcement comprises forex conversions of RMB quantities into US$ solely for the comfort of the reader. Until in any other case famous, all translations from RMB to US$ are made at a fee of RMB7.1135 to US$1.00, the efficient midday shopping for fee for September 30, 2022 as set forth within the H.10 statistical launch of the Federal Reserve Board. No illustration is made that the RMB quantities might have been, or could possibly be, transformed, realized or settled into US$ at that fee on September 30, 2022, or at another fee.

Secure Harbor Assertion

This announcement comprises forward-looking statements. These statements are made beneath the “protected harbor” provisions of the U.S. Personal Securities Litigation Reform Act of 1995. These forward-looking statements may be recognized by terminology corresponding to “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “assured” and comparable statements. Statements that aren’t historic information, together with statements concerning the Firm’s beliefs and expectations, are forward-looking statements. Ahead-looking statements contain inherent dangers and uncertainties. Various elements might trigger precise outcomes to vary materially from these contained in any forward-looking assertion, together with however not restricted to the next: the cooperation with Xiaomi, the popularity of the Firm’s self-branded merchandise; the Firm’s progress methods; developments and competitors in international wearable expertise market; adjustments within the Firm’s revenues and sure value or expense accounting insurance policies; governmental insurance policies referring to the Firm’s business and common financial circumstances in China and the worldwide. Additional info concerning these and different dangers is included within the Firm’s filings with the US Securities and Trade Fee. All info supplied on this press launch and within the attachments is as of the date of this press launch, and the Firm undertakes no obligation to replace any forward-looking assertion, besides as required beneath relevant legislation.

For investor and media inquiries, please contact:

In China:
Zepp Well being Company
Grace Yujia Zhang
Electronic mail: [email protected]

The Piacente Group, Inc.
Yang Track
Tel: +86-10-6508-0677
Electronic mail: [email protected]

SOURCE Zepp Well being Corp.