Zepp Health Corporation reports second quarter 2021 results

Zepp Health Corporation today reported revenue of RMB1.8 billion (US$284.2 million), an increase of 61.4% from the same period last year; GAAP diluted net income per share of RMB0.35 (US$0.05); and GAAP diluted net income per ADS of RMB1.41 (US$0.22) for the second quarter ended June 30, 2021. Each ADS represents four (4) Class A ordinary shares.

“We were pleased to top the high end of our guidance range for the second quarter, which included an 81% increase in our own Amazfit and Zepp branded product revenue and a 53% increase in revenue from products designed and built for Xiaomi,” said Wang Huang, Chairman and CEO of Zepp Health. “Unit shipment volume for our own branded products grew 114% year-over-year in the second quarter, demonstrating continued expansion of our brands globally. Despite the drag of the pandemic on the industry, first half revenue from our own Amazfit and Zepp branded products increased 83% year-over-year, and in June, we were acknowledged by IDC that our Amazfit and Zepp smartwatch products have become one of the top four global adult smartwatch brands in its 2021Q1 report. Our confidence in the second half of 2021 is strengthend by the Company’s announcements at our mid-July developers conference of our third generation proprietary smart watch chip, the Huangshan 2s; a new watch OS for third-party apps; and blood pressure monitoring algorithm on our watches; which will give our products new features and functionalities that will appeal to many consumers.”

Added Chief Financial Officer, Leon Deng, “Second quarter results reflected strong growth of the Company’s own branded products, different timing this year for launch of Xiaomi’s new Mi Band product, easing of Covid restrictions in some geographies during the quarter, and continued expense control, all driving revenue growth and profitability.”

Second Quarter 2021 Financial Results

Revenue
Total units shipped in the second quarter of 2021 increased by 29.2% year-over-year to 11.5 million, compared with 8.9 million in the second quarter of 2020. This was driven by a 114.3% increase in unit shipments of Amazfit and Zepp-branded products and a 22.0% increase in unit shippments of Xiaomi wearable products.

Revenues for the second quarter of 2021 reached RMB1.8 billion (US$284.2 million), an increase of 61.4% from the second quarter of 2020. In the second quarter of 2021, revenue from both Xiaomi wearable products and from self-branded products increased compared with the same period in 2020, primarily driven by the launch of Mi Band 6 and sales of the Company’s popular premium GT series, basic Bip and Pop models and rugged T-Rex.

Both sequential and year-over-year quarterly revenue changes can be affected by fluctuations in seasonal purchase patterns as well as by timing of new product introductions. The Company launched Mi Band 6 in the April of 2021 and Mi Band 5 in June of 2020.

Impact of COVID-19 on Our Business
The global impact of the COVID-19 pandemic continued in the second quarter 2021, although abating in varying degrees in different markets as vaccinations became more widely available and some restrictions were lifted. However, given the current state of the COVID-19 virus mutation at the time of this release, the Company cannot predict the potential, if any, future negative impact on market conditions or the Company’s operations.

Gross Margin
Gross margin in the second quarter of 2021 was 22.0%, compared with 22.3% in the same period of 2020. The gross margins on self-branded products are generally higher than Xiaomi wearable products. In line with previous Mi Band product launches, the newly introduced Mi Band 6 in this quarter accounted for a larger increase in Xiaomi unit volume shipped in the quarter. Gross margin and gross profit are affected by product mix as different products have different margin contributions. These changes can also be influenced by the stage of the product in its lifecycle, product iterations and new product introductions.

Research & Development
Research and development expense in the second quarter of 2021 was RMB160.3 million, increasing 36.8% year-over year, and comprising 8.7% of revenue, versus 10.3% in the same period last year. The increase was primarily driven by increased investment in R&D talents associated with developing new core proprietary technologies and new products.

Sales & Marketing
Sales and Marketing expense in the second quarter of 2021 was RMB104.7 million, increasing 46.7% year-over-year, and comprising 5.7% of revenue, compared with 6.3% of revenue in the same period in 2020. The increase was driven by higher salary and wages costs for marketing and sales personnel as well as advertising and promotional expenses to expand product recognition globally.

General & Administrative
General and Administrative expense was RMB66.4 million in the second quarter of 2021, increasing 19.9% year-over-year, and comprising 3.6% of revenue, compared with 4.9% in the same period in 2020. The increase was mainly attributable to higher personel compensation costs for retaining current employees to support company’s long-term growth together.

Operating Expenses and Net Income
Total Operating Expense for the second quarter of 2021 was RMB331.4 million, an increase of RMB87.5 million from the same period in 2020, comprising 18.1% of revenue, compared with 21.5% in the second quarter of 2020.

Beginning in the third quarter of 2020, the Company adopted a balanced approach to expense control while still maintaining an investment priority in new technologies, new product development and global growth capabilities.

The operating expenses increase was mainly attributed to share-base compensation. In the second quarter 2021, the company granted a new batch of restricted shares and options with 4 to 5-year vested period to the employees, causing a RMB34 million increase to total operating expenses, with the aim to motivate its employees to work together toward long-term strategic goal of the Company.

Operating income for the second quarter of 2021 was RMB71.6 million, an increase of 660.8% from RMB9.4 million for the same period in 2020.

Net income attributable to Zepp Health Corporation for the second quarter of 2021 was RMB92.6 million, compared with RMB13.3 million in the second quarter of 2020. The increase was partially attributable to RMB13.5 million investment income and RMB24.8 net income from equity method investments. PR Newswire