Zepp Health Corp. Q4 FY2024 earnings call

• Expedited transition to a high-margin brand model and enhanced global marketing footprint despite macroeconomic headwinds. - T-Rex 3 launch was a turning point, driving strong sales growth with its durability, long battery life, and AI integration. - Launched Amazfit Active 2 and Bip 6 series at CES 2025, with Active 2 receiving positive reviews. - Expanded ecosystem with AI-powered nutrition tracking device Amazfit Vital and related features in the Zepp app. - Strategic partnerships with athletes like Gabby Thomas and Jasmine Paolini, and with HYROX, enhancing brand visibility. - Continued development of Zepp OS and utilization of in-house designed chips for better performance and supply chain stability. - Plan to continue share repurchase program in 2025.

In 2024, Zepp Health's overall sales in the fourth quarter rose by over 40% quarter over quarter. The gross margin for 2024 reached 39% compared to 26.2% in 2023. The successful launch of the T-Rex 3 was a significant driver, generating strong market demand and sequential sales growth. In 2025, the launch of the Amazfit Active 2 and Bip 6 series is expected to boost sales growth, particularly in the entry-level segment.

• Q1 2025 revenue expected in the range of $40 to $45 million, representing a year-over-year growth of 14% to 29% in self-branded product sales. - 2025 to have one to two new products per quarter, introducing a different seasonality pattern impacting demand. - Expect positive margin trend to continue supported by new product launches.

• Macro-economic headwinds and supply bottlenecks impacting business. - Tariffs on Chinese smartwatch imports to the U.S. with minimal impact expected due to supply chain diversification but still a risk. - Impairment of strategic investments in past years due to macro headwinds and prudence principle. - Technical accounting treatment on deferred tax assets, though non-recurring and non-cash.

Q: Regarding new tariffs on Chinese smartwatch imports to the U.S., could you expand on minimal impact due to supply chain management?

A: We have a dual sourcing strategy for over two to three years, mitigating tariff impact by using non-China manufacturing for U.S. sales, with 20%-25% of portfolio from non-China regions.

Q: Can you give more color on taxes and impairment loss on investments?

A: Impairment losses from strategic investments in upstream/downstream companies due to macro headwinds and prudence principle; deferred tax asset adjustment is technical, non-cash and one-off.

Q: How is the company tracking against the vision of building a global health ecosystem, especially with most revenue from wearables?

A: Diversifying product portfolio to include rings, earbuds, hearing aids; rolling out services like sleep monitoring; long-term plan includes B2B partnerships with insurance and enterprises.

Q: What's the perspective on the relationship with Xiaomi?

A: Strong relationship, but strategic shift from OEM/ODM to self-branded profitable company; self-branded sales aim to cover expenses first, then expand with Xiaomi or B2B later.

Q: Provide more info on 2025 product roadmap and impact on growth?

A: 2025 to have new products almost every quarter, including entry-level Active and Bip series, mid to high-end T-Rex series, and mid-level Balance series, driving revenue growth.