Zepp Health Corp. Q3 FY2024 earnings call

• Self-branded sales grew 10% QoQ and contributed over 95% of total revenue, with Q3 marking the highest sequential growth in Amazfit product sales for the year. • Hit the highest gross margin in history due to a better product mix with higher gross margins. • T-Rex 3 smartwatch launched in September at IFA Berlin was well-received but faced supply constraints. • New products like Amazfit UP Open Wearable Stereo earbuds and Helio Ring expanded the product ecosystem. • Zepp OS 4.0 and redesigned Zepp App enhanced user experience with health-focused features. • Partnered with Wild.AI for female health insights and expanded the Amazfit athlete team. • Partnered with HYROX for fitness racing events, integrating dedicated app for health metrics. • Focus on cost management, reducing operating expenses from ~RMB 180M in 2022 to ~RMB 100M by end of 2024.

Self-branded sales increased by 10% quarter-over-quarter and contributed more than 95% of the company's total revenue. Q3 gross margin reached 41%, the highest in the company's history. The Amazfit product sales saw the highest sequential growth for the year, with self-branded sales driving the expansion.

• Q4 revenue guidance is in the range of USD 55 million to USD 70 million, with self-branded products expected to contribute over 90% of revenue, representing a 29% to 65% growth compared to Q3 2024. • Continue share buyback program throughout 2026. • Confident in maintaining momentum from Q3 and capitalizing on emerging opportunities.

• Supply constraints on T-Rex 3 due to strong-than-expected demand, impacting Q3 top line. • Global macroeconomic headwinds affecting discretionary consumer spending. • Competition offering larger discounts to acquire users. • Foreign exchange rate fluctuations impacting financial results.

Q: You're expecting a major spike in revenue in Q4. Could you provide more details on other avenues or products where you expect real growth?

A: T-Rex 3 will be a major contributor, plus newly launched OWS earbuds and Helio Ring provide a comprehensive health solution. Q4 is traditionally a strong selling season with events like Double 11, Prime Day, Black Friday, and Christmas.

Q: Where exactly is the bottleneck in terms of the supply constraints for T-Rex 3?

A: Demand for T-Rex 3 spiked sharply, outpacing initial production, but factories are running 24/7 to resolve supply constraints in Q4.

Q: What really happened with the ForEx loss in Q3 and how does it affect Q4?

A: RMB to dollar appreciated significantly in the last 15 days of Q3, causing a ForEx loss, but Q4 is expected to have a tailwind from FX, and stripping out FX impact, profitability improved in Q3.

Q: How sustainable is the expected growth in sales looking further ahead?

A: T-Rex 3 is a successful product, and 2025 will have a more balanced new product launch window with renewals of Bip, Active, and Balance series, leading to sustainable growth in subsequent quarters.