Zepp Health Corporation (ZEPP) on Q1 2021 Results - Earnings Call Transcript
Operator: Hello, ladies and gentlemen, thank you for standing by for Zepp Health Corp.'s First Quarter 2021 Earnings Conference Call. . I will now turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace. Grace Zhang: Hello, everyone, and welcome to Zepp Health's first quarter earnings conference call. The company's financial and operating results were issued in a press release via newswire services earlier today and are posted online. You can also view the earnings press release and the slides to which we will refer on this call by visiting the IR section of the company's website, ir.zepp/investor. Participating in today's call are Mr. Huang Wang, our Chairman of the Board of Directors and Chief Executive Officer; and Mr. Leon Deng, our Chief Financial Officer. The company's management will begin with prepared remarks, and the call will conclude with a Q&A session. Mr. Mike Yeung, our Chief Operating Officer, will join us for the Q&A session. Huang Wang: Hello, everyone. Thank you for joining our call. Our first quarter results demonstrate both the resilience of our strategy and the popularity of our brand while, at the same time, we are challenged by supply chain and the market channel dynamics that were in play due to the global pandemic. The highlight of the first quarter was the performance of our self-branded products. Shipments of self-branded products more than doubled in the first quarter compared with the same period a year ago. They also contribute to 64% of our total revenue. As the product acceptance on our key product lines, such as Amazfit, Pop, Bip and the GT series as well as our newly launched T-Rex product line continued to strengthen, these results were achieved amidst challenging market conditions. In the first quarter, our overseas multichannels continued to be adversely impact by COVID-19. Supported by the robust performance of our self-branded products, in Q1, we recorded 5.4% year-over-year growth in total revenues to RMB1.1 billion despite a decrease in shipments for Mi Band 5 ahead of the launch of Mi Band 6. As all of the pandemic-related issues continued to drop their ratio and out of the market, I would like to bring the focus back to our products, especially some new product launches as well as functionality and partnerships which were -- we expect to push both our brands' popularity as well as revenues upward. First, executing on our mission to connect health with technology, in the first quarter, we continued to build out our comprehensive health and fitness ecosystem by enriching our product portfolio. Leon Deng: Thank you, Wang. As I did last quarter, I want to focus on highlighting what I think are handful of most important metrics, starting with sales. Generally, from a seasonality perspective, Q1 has always been a soft quarter for us. However, we had an exceptional quarter in revenue this year from our own Amazfit and Zepp-branded products, which increased 84% in revenue year-over-year. Unit growth of self-branded products was even higher at 104%, emphasizing the impact and popularity of our higher-end products, such as the GT series. You cannot dismiss Zepp Health as just a maker of inexpensive watches and bands. We are a real global player, competing successfully at a wider range of price points. Given the continuing impact of COVID, I think the overall revenue growth of 5% in Q1 is very solid and reached the top end of our guidance range. In a few areas such as the U.S., COVID seems to be abating, but in many of our key markets, including many European countries, India and South American countries, COVID spread and restrictions continue to have an impact on our business in the first quarter. Also affecting the quarter, in China, subsidies and exemptions from social insurance contributions ended, impacting our costs. As is often the case, timing of new product introductions in this quarter for Xiaomi impacted the quarter. Xiaomi product revenue was down 40% year-over-year in the first quarter, largely driven by the anticipation of the introduction of the Mi Band 6 in the second quarter. The reviews has been positive, and expectations for shipping Mi Band 6 factors into our strong guidance for Q2. Operator: . The first question comes from Clive Cheung at Credit Suisse. Clive Cheung: I think my question largely based on the OpEx structure, which obviously, Leon already explained. But I just want to get a bit more color. Obviously, in terms of structure, it made up 27% of total revenue. This is, I think, a historical high for the company. So in terms of this kind of level of intensity, for example, in R&D, is this a once-off? What do we see -- what should we expect for the rest of the year in terms of OpEx planning? Could you share a little bit on that? Leon Deng: Yes, Clive, I mean, let me take this question. If you look at the absolute amount of OpEx starting from Q3 2020, I think we were hovering around CNY380 million, to Q4 around CNY310 million, and then to Q1 at CNY308 million, if those are numbers which I remember -- if those are correct. So from an absolute amount perspective, the OpEx number kept on trending down over 3 quarters' time, right? But OpEx, there's a fixed and a variable portion of it. What we are seeing in Q1 is largely a seasonality issue, if you may, right? Because the revenue, if you look at last year, Q3, Q4, it was around RMB2 billion range. And then in Q1, this year, it's actually around CNY1.1 billion. So yes, from a OpEx as a percentage of sales perspective, Q1 looks really high. But as the sales is going to trend up in the upcoming quarters, we believe that this percentage OpEx, as a percentage of sales, is going to go down big time in the upcoming quarters, right? And if you look at the absolute amount, I think the OpEx amount is going to hover around the same level of Q1 or even lower than Q1. I hope that answers your question. Clive Cheung: Yes. Yes, that does. And I think I want to follow up, particularly on R&D. Obviously, we know we're investing a lot in kind of the health care technology. So do we have a budget for the full year in 2021? Leon Deng: Yes. I think from a -- as a percentage of sales perspective, R&D, there's a seasonality, as I just mentioned, right? But overall, I think you can look at the R&D as a percentage of sales very much similar to what we spent in year 2020. And obviously, we just mentioned we don't want to stop any time-critical investments, which we believe that in the future, we can reap more benefits on that. Operator: The next question is from Andre Lin at Citi. Andre Lin: And given you have CNY1.7 billion to CNY1.8 billion revenue guidance, could you share with us some of the breakdown between Mi Band as well as self-branded products or any guidance on the unit growth there? Leon Deng: So Andre, yes, I can give you a feeling for what it is, right? So if you look at our self-branded products, I think, as management, we're quite happy to see the trend continues. Actually, it started in Q3 last year. And in Q4, we had a good run-up of our self-branded products. I think, it's around close to CNY1 billion revenue in Q4. But in Q1, I think that trend also continues, right? So if you remember, our seasonality on a full year sales weight perspective, Xiaomi has been the 70% of our revenue and the self-branded has always been the 30%. I think starting from Q4, we see that trend structurally changing of more self-branded products taking the weight higher in that mix, right? So I think Q1 is probably a little bit to the extreme. We are -- our self-branded products actually stands roughly 70% of the overall mix for us in Q1. But obviously, as I mentioned, the Xiaomi partnership has been close and very close for us because Mi Band 6, as we launched, I think, by the end of Q1, has received very good ratings. And also the sales has been very good. I think we achieved 1 million unit sales just a few days after we launched the product, right? So to answer your question, if you look at Q2, obviously, the Mi Band 6 sales is going to fuel some of that growth, which we projected. But also our self-branded products will also take the same shape, and it's going to be a strong growth for our self-branded products in Q2 as well. I hope that gives you some feeling on why we guided such a number for Q2. Andre Lin: Understood. And could you share a bit on the rough breakdown or on the shipment unit growth so that we can have a better feeling on the gross margin implication? Leon Deng: I think you -- I think -- so Q1, this year, if you look at Xiaomi and self-branded, it's 70% self-branded and 30% Xiaomi. I think for Q4, probably you're going to be looking at 60 -- 50% to 60% Xiaomi, and the rest will be self-branded. Andre Lin: So that also applied to the second quarter revenue. Leon Deng: Yes. So if you look at second quarter revenue, Andre, Xiaomi will be -- stands for 50% to 60% of what we guided for Q2, and the rest will be self-branded. Operator: . The next question comes from Michelle Zhang at China Renaissance. Michelle Zhang: So I'd like to understand about like the GM guidance for both your Xiaomi and Zepp-branded products going forward. Like whether we should expect it to be stable or that there's still a trend for them to go up a bit? Leon Deng: Michelle, we'd never guide our GM for our guidance going forward but I can give you a feeling, right? So as I mentioned in -- before, the self-branded products gross margin for the past 5 quarters have been always been 1.5x to 2x the Xiaomi product margin, right? And the Xiaomi product margin, we have disclosed before is in the 15% to 17% range of -- I think, is around that range, right? So going forward, and I think you can see this impact in the past quarters already gradually changing, right, our gross margin has been going down from Q3 to Q4. And then now in Q1, it start to trend up. I think we're expecting this trend to continue in the second quarter as well as into the second half of this year. Michelle Zhang: Okay. And my second question is about like your revenue breakdown, like in terms of your geography and also your online, off-line distribution channel. Leon Deng: I beg your pardon? Michelle Zhang: Yes. My second question is about your sales breakdown in terms of like your geography and also the proportion of your online and off-line distribution. Also, the trend going forward. Leon Deng: Okay. Okay. Thank you. No, so Xiaomi is -- it's a business. It's -- in our book, it's actually a business-to-business bit for us, right? So I think putting Xiaomi aside, if you look at the self-branded products -- so here, I'm only talking about the self-branded products, right, Europe is actually our biggest market, and then I think follows by China, U.S. and the rest of the world, right? And as you know that there's certain restrictions and lockdowns in Europe, and that continues in Q1. So we were hampered a little bit by the sales -- or the off-line channel sales in Europe, right? And that also applies to many of the -- many parts of the world where we operate. So to answer your second part of the question, at this moment, majority of the self-branded products are selling through the online channel, right? But we expect that as the COVID is abating in, for example, United States and also, we see a good trend in Europe because their lockdown has been relaxed to a certain extent, we believe that the off-line channel sales will also play a bigger role in the second half of this year. Operator: The next question comes from to Asyo Inch . Okay. At this time, there are no further questions. I'd like to turn the call back over to company -- to the company for closing remarks. Grace Zhang: Well, thank you once again for joining us today. If you have further questions, please feel free to contact Zepp Health Investor Relations department. This concludes this conference call. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Zepp Health Corporation Undergoes Strategic Stock Reverse Split
- Zepp Health Corporation (NYSE:ZEPP) announces a one-for-four stock reverse split to adjust its stock structure and improve market representation.
- The company also adjusts the ratio of its American depositary shares (ADSs) to Class A ordinary shares, moving from one ADS representing four Class A ordinary shares to one ADS representing sixteen Class A ordinary shares.
- These strategic moves are contingent upon SEC approval and aim to streamline Zepp Health's stock and ADS structure, potentially impacting its market performance positively.
Zepp Health Corporation (NYSE:ZEPP), a leader in the smart wearables and health technology industry, is set to undergo a significant transformation with a stock reverse split scheduled for Monday, September 16, 2024. This move involves a one-for-four reverse split, meaning that for every four shares held by an investor, they will be consolidated into one share. This decision reflects the company's strategic efforts to adjust its stock structure and impact its market representation.
Based in Milpitas, California, Zepp Health has announced a change in the ratio of its American depositary shares (ADSs) to its Class A ordinary shares. The adjustment will result in one ADS representing sixteen Class A ordinary shares, a notable change from the previous ratio of one ADS for four Class A ordinary shares. This modification is essentially a one-for-four reverse ADS split for the company's ADS holders, aligning with the broader reverse split strategy.
The implementation of this reverse split is contingent upon the approval of a post-effective amendment to the ADS Registration Statement on Form F-6 with the SEC. This strategic move is aimed at streamlining Zepp Health's ADS structure, which is anticipated to significantly influence its stock's performance in the market. The company's proactive approach to adjusting its stock structure demonstrates its commitment to maintaining a strong market presence and providing value to its shareholders.
Currently, ZEPP is trading at $0.80, marking a decrease of 2.45% with a change of -$0.02 from its previous close. The stock has experienced fluctuations, ranging between a low of $0.78 and a high of $0.84 for the day. Over the past year, ZEPP's shares have seen highs and lows, reaching up to $2.10 and dipping to $0.52, respectively. With a market capitalization of approximately $47.93 million and a trading volume of 46,324 shares on the NYSE, Zepp Health continues to navigate the competitive landscape of the smart wearables and health technology sector.
Zepp Health Corporation Undergoes Strategic Stock Reverse Split
- Zepp Health Corporation (NYSE:ZEPP) announces a one-for-four stock reverse split to adjust its stock structure and improve market representation.
- The company also adjusts the ratio of its American depositary shares (ADSs) to Class A ordinary shares, moving from one ADS representing four Class A ordinary shares to one ADS representing sixteen Class A ordinary shares.
- These strategic moves are contingent upon SEC approval and aim to streamline Zepp Health's stock and ADS structure, potentially impacting its market performance positively.
Zepp Health Corporation (NYSE:ZEPP), a leader in the smart wearables and health technology industry, is set to undergo a significant transformation with a stock reverse split scheduled for Monday, September 16, 2024. This move involves a one-for-four reverse split, meaning that for every four shares held by an investor, they will be consolidated into one share. This decision reflects the company's strategic efforts to adjust its stock structure and impact its market representation.
Based in Milpitas, California, Zepp Health has announced a change in the ratio of its American depositary shares (ADSs) to its Class A ordinary shares. The adjustment will result in one ADS representing sixteen Class A ordinary shares, a notable change from the previous ratio of one ADS for four Class A ordinary shares. This modification is essentially a one-for-four reverse ADS split for the company's ADS holders, aligning with the broader reverse split strategy.
The implementation of this reverse split is contingent upon the approval of a post-effective amendment to the ADS Registration Statement on Form F-6 with the SEC. This strategic move is aimed at streamlining Zepp Health's ADS structure, which is anticipated to significantly influence its stock's performance in the market. The company's proactive approach to adjusting its stock structure demonstrates its commitment to maintaining a strong market presence and providing value to its shareholders.
Currently, ZEPP is trading at $0.80, marking a decrease of 2.45% with a change of -$0.02 from its previous close. The stock has experienced fluctuations, ranging between a low of $0.78 and a high of $0.84 for the day. Over the past year, ZEPP's shares have seen highs and lows, reaching up to $2.10 and dipping to $0.52, respectively. With a market capitalization of approximately $47.93 million and a trading volume of 46,324 shares on the NYSE, Zepp Health continues to navigate the competitive landscape of the smart wearables and health technology sector.
