Q4 2021 Zepp Health Corp Earnings Call
Hello, Ladies and gentlemen, thank you for standing by for <unk> Corporation's fourth quarter and full year 2021 earnings conference call.
At this time all participants are in listen only mode. Today's conference call is being recorded I will now turn the call over to your host MS. Grace Zhang Director of Investor Relations for the company. Please go ahead great.
Hello, everyone and welcome to <unk> corporations fourth quarter and full year 2021 earnings conference call the company's financial and operating results. What you shouldn't have a press release via Newswire services earlier today and are posted online you can also view the earnings press release and the slide.
<unk>, which we will refer on this call by visiting the IR section of the company's website at IR does that dot com participating in today's call are Mr. Huang Wang our chairman of the board of Directors, and Chief Executive Officer, and Mr. Liang Jun Zhang.
Our Chief Financial Officer, the company's management will begin with prepared remarks, and the call will conclude with a Q&A session.
Before we continue please note that today's discussion will contain forward looking statements under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and all certainties as such the company's actual results may be materially different from the views expressed today further information regarding this and other risks and uncertainties is included in the company's annual report.
Our form 20-F for the fiscal year ended December 31st 2020, and other filings as filed with U S Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under law.
Cause football law.
Also note that that's earnings press release and this conference call include discussion.
Oh, all audited GAAP financial information as well as our audited non-GAAP financial information.
<unk> press release contests reconciliation of the audited non-GAAP measures to the audited most directly comparable GAAP measures I'll now turn the call over to our CEO . Mr Hall. Please go ahead.
Yeah.
Hello, everyone. Thank you good morning, I'll call intend to attend you one being made a significant in disguise despite the challenging macro environment.
Our full year revenue reached 612 5 billion RMB to U S B.
Gentry Exco tests, our KOL gross strategies index marks consumer health and fitness sector, leading.
We maintained our profitability and at the same time.
So our self branded product shipments by 60%.
The past year in the face.
Worldwide Chip stoppages EXPAREL asked there.
And omicron Colgate volumes.
In the second half of 'twenty one.
I'm very proud of that as off the fourth quarter of 2021 .
Have cumulative temporary shipped over 252 hundred mailing house management devices.
Our injection.
These achievements reflect our increasing global appear in our dedication to improving our users' lives through technological advancement.
Let me expand on our global progress.
The momentum of our overseas expansion remains robust.
With over 80% of our self branded products sold in the nation.
No debris.
Our self branded products shouldn't Lynn Bourdon.
For the North American region increased by a pulse of problems similar today.
200% year over year.
We enter major Nick Teo sales channels, including more than 1000 offline pockets doors as well as who we see.
Basketball European market.
Oh, Schumann's, Italy, and raws increased by more than 100% in the fourth quarter, thanks to our countries, but the big jet strategy.
Yeah, now ranking number five.
Indeed, a doubt smartwatch market. According to the fourth quarter 291, I do see in market data.
We have been among the top five.
In the global market top sports never called Us.
Demonstrating our enhanced product capability.
Florida Shang.
Brian did luck nation in the quoting.
Smart watch industry.
As we work to enlarge our global footprint.
We remain steadfast in our mission to connect health with technology.
N.
We continue to develop for a pilot.
But the priority technology.
Including AI chips.
Ah metrics sensor and data airplanes.
To improve user experience.
And create new usage scenarios as we grow our portfolio.
Health devices for consumer books.
For example.
To further optimize user experience.
Should launch an AI asleep. So this should help you with the sleeping.
Orders.
Based on our powerful AI algorithms.
All of that path.
Compose and the command high car T music is designed to enhance.
Lip quality, improving user sleep hygiene, and overall health and wellness.
In addition, these.
These agonism space use those services are playing an integral role in expanding our modern health ecosystem.
ZIP house user base continues to grow.
Surpassing 40 million active users by the end of 2021 .
We are also exploring opportunities in the industrial segment.
Including investments in Mexico, and Europe 42.
Which has.
Both are at olive would hold.
In imaging technology.
Enter the portable and my business to Atlanta, the same mission that drives our smart wearable business to empower our users to quantified their health data.
Rich can assist them in managing health conditions and potentially to help detect earlier wanting stein for certain disease.
In the future you're trying to integrate these investments along with our data analysis and smart vegetable business into our extensive health care services.
Bolstering, our critical needs and creating value for our users.
Now.
Turning to our market available business.
Our newly launched could you tease treaty.
Smart watches.
Which are our first product in.
Incorporating brown pressure mastery functionality.
Just card tree.
And then revealed by debt and M. P. A national medical products administration of China.
And we already achieved initial results in this process.
They have exceeded our expectation.
In terms of market recognition and patented abuse.
We have sold exception or eval.
Ranking number one in both J D and T mobile Smart watch category immediately after the command sales.
In addition, the GT tree was named editor is like commended smartwatch by Germany's Bridget magazine.
Not only our smartwatch is attracting.
Consumer attention and are playing.
All of our other products are also rapid degree gaining popular narrative and industry recognition.
Sample.
Wireless active noise cancellation has that amazed at how basketball.
The East and Henri Award.
In the health and wellness category.
Yes, Ken do you tend to Chew innovation awards.
Our progress in 2021 went far beyond our hardware products in terms of technology achievements.
Unveiled our longtime too.
To ask chip in July the first debatable artificial intelligence.
Intelligence caused us, though there still will call Elizabeth lives architecture.
Its superpower KOL computing performance tends to poach, hi, Lo calculation, such as graphics and UI operation.
With low power consumption.
We also released our example, as in the fourth quarter, one of the industry's most compact and energy efficient market watch operating system at.
55 megabyte.
Bell.
128.
Size up at post a watch OSA.
Furthermore.
Zappos as well as the foundation for our open mini program, bringing book.
H B.
Envision their comprised thousands and thousands of developers and countless meanie smartwatch application.
Our girl.
It's too Paul.
Comprehensive that ecosystem.
That will empower our users to manage their health.
More efficient play.
And enjoy their lives to the fullest.
Our the ticket harnessing this tell me has been fruitful.
Achieving many impressive milestones over the years.
You may have seen really no name that means fit at towards that lie to optimize the user experience.
Does that life perp.
Here at tens of millions of the Mi band users.
And often more comprehensive services.
Such as the leap.
We mentioned earlier.
Going forward, though does that lie.
And sell me health and sports App via both the Mi band.
Moreover, the Mi band seven will be launched this year as expected.
And we will further expand our cooperation with Xiaomi from smart bed and small scale part of to future chips and sensors.
Together. This tell me, we look forward to bringing more and more innovation to all of you with us.
I ride to conclude by saying that I'm incredibly proud of our team.
Rich has persevered and.
Excelled against the backdrop of a very challenging two year period.
These obstacles however.
It has made us stronger.
A day a brand recognition.
Along with our sales and distribution outreach has expanded considerably compared to this two years ago.
In 2022, do you continue to build our own brands and enhanced our product experience as we pursue a path of vertical integration.
The Atlanta Leslie.
Working to strengthen our capabilities in chips cloud services albinism operating systems and products.
In the meantime, we.
We also extend our lead.
H two other house and medical related to harvest.
<unk> introduced a brand new house.
<unk>.
Mr Christian service.
Which altogether.
Our core news stage as a company offering comprehensive health care solutions and services.
I remain confident in <unk> future. That's a V continue to lead the industry in technology and product innovation and bring that to the house floor technology to all of allergy with us.
Lastly.
We are pleased to announce a special cash dividend.
U S dollar Zillow pause zillow two five.
Ordinary share O U S dollar.
The low 0.1 huh.
Just to thank our shareholders for their ongoing support.
The continuation of our share buyback program.
We are convinced that as we try to execute our.
<unk>, we will maximize our shareholders value in the long term.
Thank you all this that I would now turn the call over to Liam.
Cool the older there with the highlights of our fourth quarter financial results.
Thank you well.
I'd like to start by highlighting some of the key metrics driving that development as Walter mentioned, our full year 'twenty 'twenty. One revenue was 6.25 billion RMB, representing 1% in comparable revenue growth.
Our self branded products play an important role in our 2021 results.
Our full year shipments increased by 60%. Despite the challenges of searching COVID-19, outbreaks and the chip shortage, which impacted shipments of both our self branded wearables and Xiaomi wearable products.
Although we cannot fully predict how the supply chain issues will evolve we're hopeful that we'll start to see improvements in the second half of 'twenty to 'twenty two.
While we see that increase in unit shipments of our brands.
This growth was offset by a decrease in unit shipments of Xiaomi wearable products.
<unk> remains as our valued partner and now were me patents still ranked number one in market share with 30 point 35, 6% of the total global smartphone market.
At the same time, we're also excited to expand and diversify our business and build our own brands with the goal of achieving sustainable long term growth.
Total revenue in Q4 was RMB, one 7 billion, representing a nominal year over year decrease of 15, 8% again. This decrease was mostly driven by the decrease you mean that sells in the meantime, COVID-19 and ship shortages also constraint the growth.
Of our self branded products.
Like many other companies we have been facing ongoing external challenges since the second half of 2021, many of which still persist today.
COVID-19, not only impacted ourselves due to west Brett I'll offline store closures, especially during the holiday season, but also dampened our Korea services.
For example, with the January 2022 locked out of China's Tianjin and Shenzhen parts, which are critical to our global supply chain and product.
Availability disrupted deliveries and sells worldwide.
Well over the global semiconductor shortage constrained our supply chain.
He couldn't really because many big semiconductor producers are prioritizing the auto industry elite customers and manufacturers.
All of these factors negatively influenced our Q4 and full year 2021 performance I some continues into 2022.
I have to say that we're very proud of our self branded products growth, especially in light of all these headwinds.
Our self branded products contributed over 47% of total revenue compared to 31% in 2020 as well as over half of our gross profit in fiscal year 2021.
We believe our self branded products will continue to gain momentum.
We further develop our product capabilities and he has our branch market recognition globally.
Now, let's look at gross margin, which can be affected by product mix product launch timing and product life cycles, including Moto upgrades, our fourth quarter 'twenty 'twenty. One gross margin was 19, 3% a slight improvement of 30 basis points compared with the same period.
2020.
This improvement was supported by refinement of our product mix, including the increasing proportion of self branded products, which contributed over 60% of total gross profit in Q4.
Turning now to costs operating expenses have been a key focus of mine since joining the company in the third quarter of 2020, both in terms of absolute members as well as a percentage of ourselves.
A portion of operating expenses are fixed so it takes time and creativity to gradually reduce their expenses well, we'll have to carefully balanced cost controls with expenditures to fuel growth.
I'm pleased to report that we have already seen a decreasing trend in total operating expenses since Q3 2020.
That will continue to be my focus.
Going forward, we'll continue to maintain operating expenses at approximately their carbon cost level in order to drive profitability.
Fourth quarter 2021, operating expenses decreased slightly in absolute terms compared with the same period in 2020.
However, at 18, 7% hotels, they represented a percentage increase when compared with the fourth quarter of 2020.
Do you have any which operating expenses.
Eight 8% hotels.
This was mostly driven by the growth in ourselves and marketing expenses in the fourth quarter of 2021, which increased by 32% year over year, representing nine 2% of ourselves.
Paired with five 9% of sales for the same period in 2020.
This relative increase reflects our efforts to feel growth, including brand building initiatives such as up your game campaign designed to drive the global growth of ourself rent at a nice rate of death, Wearables as well as the launch of our G. T. Three series of smart watches.
Furthermore, we carefully manage our research and development cost as well as G&A expenses in the fourth quarter.
We're still investing in R&D sales and marketing and G&A to support growth, but we have taken a more balanced approach to these expenses.
R&D expenses were down 27, 6% year over year, representing five 6% of cells for the fourth quarter of 2021 compared with six 6% for the same period last year. This reflects effective expense control in the company's R&D activities as well as the.
The recognition of certain government subsidies.
Our G&A expenses year on year is flat attribute to our effective cost control of operating activities.
We'll continue to refine this balanced strategy of supporting our brand building efforts and growth while controlling cost as we progress through 2022.
Next let's look at net profit, which was lower than last year as a result of higher relative to expenses.
As a percentage of sales as well as lower either business income due to a RMB $56 5 million partial sell down of equity stake and maintain a leading electric toothbrush company in 2020.
Consequently, net income attributed to that house for the fourth quarter of 2021 was RMB 36 million compared with RMB 115 million in the fourth quarter of 2020.
Thanks to our implementation of off more exacting working capital management practices, our balance of cash and cash equivalents remained strong improving to RMB 1.47 billion as of December 31st 2021.
Our working capital ratio also continued to strengthen.
In 2021, the board approved the deployment of up to USD 20 million as part of I shared with purchase program. So.
So far we have repurchased.
6 million worth of shares.
Given our confidence in our growth strategy and financial trajectory.
Continue with this program.
That's why I mentioned earlier.
We also announced a one off dividend program of approximately RMB 40 million equivalent to 29% of our full year 2021 night income, which will fund with our current cash on hand.
I'd like to finish by addressing some key seltzer durations reflected in our guidance for the first quarter of 2022.
The supply chain challenges, resulting from chip shortages and delivery uncertainties from the fresh Q1, China's Covid lockdowns.
Cause us to continue to guide conservatively.
In addition from a seasonality perspective, the first quarter typically generates the lowest lateral off revenue for the company after the strong holiday season.
And consumer anticipation of Xiaomi, its new wearable products in the second quarter may negatively impact our Q Whitehouse.
Given the seasonality and supply chain issues I already mentioned as well as the uncertainties are.
Surrounding the conflict between Russia, and Ukraine for the first quarter of 'twenty. Two we currently expect net revenues to be between RMB 0.7, 5 billion and RMB 1 billion compared with RMB 1.15 billion for the first quarter of 2021.
Given this outlook, we will continue to apply 2021 strict cost control measures into 2020 two.
That outlook is based on our current market conditions and reflects the company's management's current and preliminary estimates of market and operating conditions and customer demand.
Which are all subject to change.
This concludes our prepared remarks, well now open the call to questions. Operator. Please go ahead.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then two.
For the benefit of all participants on today's call. If you wish to ask a question to the company's management and Chinese. Please immediately repeat your question in English at this time, we will pause momentarily to assemble our roster.
The first question is from a young well T N N security. Please go ahead.
Hi, Hi management can give them taking their first screen.
Since we're supposed to quota.
I have two questions firstly about your gross margin.
Oh window since the beginning of the North sea at least the semiconductor shortage.
I mean, our courage some poorer company's gross margins decreased affected right.
Chip shortage.
Hmm.
This call too.
The ZIP host gross margin increased year over year.
I think that's beyond my expectation.
Are you sure some of you about the chip shortage impact on your gross margin.
Any programs to throw to your function chip. Thank you.
Yeah no. Thank you for the question on the gross margin I think.
The answer is twofold number one we actually proactively change our mix towards proportionally our focus the self branded products, which carries an average twice the gross margin if we sell a xiaomi branded products right. So.
So if you look at 2020, we have the mix, which is more skewed towards 70% of xiaomi products and 30% of self branded products.
I know when we end the year of 2021, and we're actually operating around half half.
And then the self branded products trend, while also continuing to grow into 2022 .
So because of that change then you get the mix improvement on the old broke gross margin.
Coming back to your question on the chip shortage.
We have announced in the previous quarters that we did certain risk buys ahead of this material.
Situation materialized.
Which also has an impact on our inventory level, but in mid two short term, we didn't see too much of a material impact on the gross margin because of the risk by weight it.
On the function to our chip.
Actually its flight is progressing very well according to our schedule. So this year. Your youll see later this year that there are certain flagship products, which we're going to launch a new product introduction, which will carry the washout to a chip.
And at the same time, we're also going to license a variant of the light washout to chip to a bigger a variety of Oh.
Chinese watchmakers through our Ito investments becomes where license there also to them and and and we're also going to get certain profit out of that licensing deal as well.
Oh, Okay, a follow up question about your gross margin.
Blooming.
Ah you're both a show me pull back and that's L brands program.
Gross merchandise a.
Decreased.
But the mix is a mixed phase.
In this quarter.
So I think xiaomi.
Xiaomi gross margin has been a decreasing trend for the company for a few years right.
You probably also read the news that our Xiaomi is actually targeting a cost plus a 5% something like that right.
So xiaomi is a gross margin is actually in the low teens that type of a number.
And that's has decreased.
Quarter over quarter by one percentage points something like that right.
But our self branded gross margin has been quite good.
Strong and hold up over the year.
Okay.
And my second question is about two or marketing strategy.
The <unk> global.
Global environment is a more uncertain so what's your.
Marketing strategy changes from this year to two two.
Our global environment no.
Yeah, no so I think.
The the the short answer to it is no, but we do see the.
The risk of Russia, and Ukraine situation, which we also mentioned in our earnings call. They we have a strong market share in Russia, and Ukraine, and all of those neighborhood countries and and until.
Honest to Russia, and Ukraine are radically new if I take 2021 full year as the basis they stand for around 4% of our total AR rapidly right.
That risk we need to manage <unk> in a short to mid term. So we think we can still manage that risk, but if this work continues into oh dragged down for a year or two that definitely will have an impact to our rapid new per se right.
But were slightly different than the other China Tech company.
Because majority of our self branded products our overseas sales, so China actually stands for only a small portion of our overall mix.
So to that end apart from Russia, and Ukraine, with our marketing strategy in Western Europe , which is actually a strong foothold off our revenue and also in the United States.
Didn't change.
And that will continue to grow.
Yeah.
Okay.
Thank you.
Thank you.
Okay and if you have a question. Please press Star then one the next question is from Kevin Chen of China ran please go ahead.
Okay.
Hello.
Thank you management for taking my question.
Two questions.
Number one will be regarding our newly launched GTC series.
I was just wondering how.
How those cells to M D C.
So its condition and the general feedback so far is tracking.
He said matching up to our expectation is that.
Better than expected or slightly lagging behind.
Yeah.
Kevin. Thank you for your question now on T. T. Three us Ah well mentioned earlier is actually a very successful product.
And we received a lot of good reviews in China and overseas market.
For this product and so if you compare the G T three against our own expectation.
I think you probably also heard that we're a low but that's hard to fight the chip shortage and logistics are challenges in Q4. So the the debt I think we're not in a demand problem, where more having a supply problem for G. T. Three so called pair it with our own.
Internal expectation, we think we can still do much much more but we are actually hurt a little bit by the COVID-19 the logistic disruptions in Q4.
It also continues our nobody into Q1, but if.
If you are asking.
Asked me is that if the product is a big success I think the product is really a big success and we through the launch of the GT. Three we also see that we have the room to improve our E. S. P. Further in not only in China, but also overseas market and that will also in another round.
Help us to lift our gross margin of the company.
Alright, thank you.
Just a quick follow up but I think previously.
The chairman just mentioned that a to G. T. T series of schemes are under review for China, and then T. A just for I guess this is a cost for qualification of four four more medical applications tend to use I was just wondering do we have interpretation.
Approximate timeline of how this would you Mitra now and and once.
Once we obtain this kind of approval with this hum.
New business opportunities.
The T series.
Ah Yes for sure I think what are we also mentioned that we're not only doing it for the Chinese market. We're also doing it for the European market and also for U S Reits or we're actually doing the the certification and multiple geographies at the same time.
<unk> related to the blood pressure movement, which you can measure using our G T Sui watch.
Your blood pressure, which we think is actually a very unique and elegant solution compare with our competitors.
So so yes, the Chinese to review I think it's going to be a much shorter timeline because they just go into a for example, either it's just it's going to be a software and algorithm certification. So we expect that our approval should be able to obtain.
By somewhere in the course of this year.
And then the CE and FDA review might take a little bit longer but should not be too much longer.
And then once we get those certification for sure that will give us edge offering new services and also a new unique selling point versus the peers.
Okay got it that's good to hear.
My second question is regarding the European market as a whole.
Because I think previously you've mentioned that the situation in Russia, and Ukraine right. Now I was just wondering what about the rest of Europe do you see any changes in consumer demand or or its just right now we're facing more of a logistical issue fourth for these markets.
Yeah, no. So I think for apart from Russia, and Ukraine, we're actually seeing a very healthy growth.
For the Western European markets are so so neither needless to say that we are already market leader in countries, like Italy, and Spain, and we're actually expanding very fast in countries like Eastern Europe for example, Poland Czech Republic.
As well as a in a very strong foothold of western Europe , like Germany and UK.
U K patent box and Nordics.
So we still think that there's going to be a lot of potential in Europe for us to grow because we have different product offerings and we have many exciting a product offerings, which are targeting more at a sports and outdoor activities at which we're going to launch a bear.
Sue so hopefully with this new mix of new product introductions.
Able to grow our.
European market, even bigger than what it is now.
Alright, Thank you very clear thank you.
The next question is from client Chung of Credit Suisse. Please go ahead.
Hi, Thank you management for taking my question. My first question. It's on Xiaomi, obviously are we continue to see the downtrend there.
In terms of Xiaomi products shipments I'm, just trying to get a sense of you know it manage it and view on specifically on kind of the the risk bearing products do you see at the end of the cycle or do you think is it just a extension of the replacement cycle that is driving.
Hum the slow down of the shipments and the second part to that question is with all discussion with Xiaomi on the new.
Our products are.
Could we get a sense is that done via volume drive that that could bring us back to previous Ah shipment levels are pretty big is all is just a variation of kind of current product types and kind of extending the life of the product type a little bit longer.
Thank you. This is my first question.
Hmm, Okay Gosh, let me just comment on the Shopko relationship you know that.
We actually sign the Xiaomi contract every three years and then that last year, we just renewed that.
Three year period, so the relationship with Xiaomi Ace are very strong and we actually also have different our cooperation with xiaomi beyond the band.
The different algorithms, which we're working with them right. So xiaomi states as a big shareholder of Us and we have a lot of cooperation with Xiaomi. So that's the first thing I can't guarantee you right.
Hum on the Xiaomi newer products things I touched this point.
If you.
Reach the announcements with Xiaomi also published yesterday on the change all that name change without power for life. We also mentioned that we're going to explore more into the chips are for the wearables as well as.
Use of different awkward.
As well as the new form factor off products in here, Yeah, forgive me I cannot say too much but definitely we want to actually drive the xiaomi are sellers and continue with this relationship it much further than what it is not right.
So that's Oh, I'm, Xiaomi and coming back on the my bad and and the overall bad market.
Decline I think.
Yeah, I have mentioned that a few quarters already we see our overall <unk> market as a form factor that the market has to be in decline for a few quarters already and then yes, maybe it's coming to that and it is going to be a plateau a little bit that's why.
We hope for but I think you are more looking at a flattened out our slide side the decline type of a situation for the bank market, but at the same time I felt what we mentioned in our in the in the in the earning release that as well.
The meat of the specific bad market and market share for Xiaomi band, we stay still at 35%, which is by far crushing every other competitors right.
So I hope this would give you a feeling for what it is.
Yeah. It does thank you very much and my second question is on the R&D, obviously with toned it down a little bit as a percentage of revenue.
And I would just like to ask is.
Do you think are the they kind of toning down was because it was elevated our entire yet oh.
And and and in fact is that you know obviously are one of our key advantages or key competitive advantages as you know in our research and developing those kind of health care kind of chipsets and that's just the impact.
Going forward all kind of research levels. Thank you.
No I think I I think yes R&D has this this this is very much linked to the new product introduction as well right and different yes, we have different cadence.
When we released our new products. So for example Ah.
Q3, 'twenty 'twenty, what's a very a new product introduction rich type of quarter than our R&D expenses in that quarter horse extremely hot right.
But things.
Things, we didn't have too much of new product launch in Q4, you have the G. T. Three what's the only one which were pushed out in Q4 2021.
So that's why also R&D expenses by nature is also relatively a lower compare with the same period last year.
But on the other hand, we also asked the team to do and and look at the return on investment on R&D developments. So instead of doing everything and then Iliad, it's become a waste where more prioritizing our R&D activities and using.
Modernization, the Lego blocks type of approach to it.
Do the R&D activities more effectively. So that's also is one of them may labor, whereby we can actually keep our competitive advantage while at the same time, keeping the costs under control, but if you actually pull a lie on R&D expenses.
As a percentage of ourselves for the overall company I think we stay as a R&D driven company because the R&D expenses as a percentage of sales for the debt that the whole year. If you divide that by our Telus, it's actually by far the highest among the selling expenses and G&A.
So we're still spending roughly around 8% to 9% all that sells all R&D activities, although it's going to be up or down and see different quarters, but if you pull it a lie I think we still have that edge versus the other company.
Okay. Thank you very much I actually just have one question on the Covid impact I was wondering if there has been a it's a more forward looking the fourth quarter related.
And in the first quarter that was the reason we've had there has been any impact to our manufacturing capacity given that.
Yeah, No class, you're you're you're you're very sharp on this not so a COVID-19 actually post a lot of uncertainties have negatively impacted our results right in Q4.
The southern locked down in a lot of European countries around the holiday season.
Actually step and ourselves being the offline channels right. So that also plays into why our numbers in Q4 with weaker than what we originally anticipated right and on the other hand, Colgate also create a lot of logistic nightmare for our supply chain I talked for example, especially.
That's also one of the reasons why we guide the T Y itself snapper very co Cos Ah.
Yeah in a very conservative.
The vertex way right.
As all the other Chinese company and our export route H actually through Shenzhen into Hong Kong from Hong Kong goes to everywhere in the World right and then with a sudden lockdown in Hong Kong in Shenzhen and all the largest logistics flow also stopped that.
Actually posted a lot of logistics challenge and supply chain nightmares to our team. So that's why we kind of guide at a relatively lower Denver a.
Our guidance for Q1, so yes, a cobot definitely has a impact in the past it'd be worth more on the overseas market and now if I look at Q1 Q2.
The zero Copay policy in China, definitely actually disrupted the supply chain and the manufacturing a little better for us, but then as I said also our supply chain team is looking for either different ways to resolve this situation.
But that's.
Obviously, obviously take time and then would has played into some more conservatism in our guidance going forward, but we think the.
This situation should be much better as we entered the second half of this year.
Okay. Thank you very much very clear.
The next question is from Andre land of Citi. Please go ahead.
Thank you for taking my question and I have a follow up question on the reverse supply chain.
Two questions you mentioned, there's a semiconductor supplier challenge. So can you give us a color.
Oh, the situation is calling and when do you expect that semiconductor subpar tenants will all be resolved.
Yeah.
This year.
So I'm, sorry, I I think I think I have mentioned that in the in the script earlier.
We think are going into the second half of 2022, the situation should be resolved or much better than what it is right now Ah I Q4 was very serious and then we did sort of rich spice and we did certain commitment we're putting a lot of.
<unk>.
And that's after a month or two I think Q1 on certain product types. We don't have a shortage issue, but then on the other hand, you will see that also more a semiconductor companies are prioritizing their their chips towards the EV players.
So so that will have an impact into Q2 as well so we're more in.
Constrained by the supply rather than by the demand situation.
But based off the current information I have on hand, it looks like by end of Q2. So problem may outwards, the situation should be resolved to a much extent.
Oh. Thank you that's very clear and I have a follow up question is regarding our first quarter guidance can you are you.
So the more color on the shipment until our revenue guidance for those self branded products.
On top of the Ah, Doug I guess you paid.
Yeah no. So so this the the the not.
We are hurt by a lot of uncertainties in Q1, so it's really a difficult quarter and that's why we guided in a very conservative Conservative way right. I think you also see a lot of companies because of this they even stop giving the guidance, but okay, we still trying to get.
At range. Although this range is a much wider range right.
But there are a few issues number one is what I mentioned before they're locked out of Shenzhen for the upcoming seven days right and if that seven days is going to continue into 14 of our 21 days right.
Nobody knows but because of that locked out manufacturing is stopped.
Logistics has stopped them you cannot even export the product into Hong Kong. We're looking at other ways for example, going through catch aimed to export their products out of China et cetera, et cetera, right, but that was not well definitely have a negative impact in the <unk>.
Show our outlook, we have on Q1 and actually the last two weeks in the quarter has always been one of the biggest moment all shipping.
For us because it.
What has to be always a slow quarter, but then towards the end of Q1, the production and shipment start to pick up right. So that's actually plays into the relatively conservative outlook for which we issued number to ace the Ukraine and Russia.
Your situation as I mentioned that Ukraine, and Russia place around 4% of all open ourselves. So if you average it out I think every quarter depends on the quarter are you talking about 80 to a 100 million Oh itself right and.
Luckily we have the first month are out in the second the February sales, what's kind of somewhere cutting into the heart. So we actually lost a one nine and half months because of rupee depreciation and everything else. So you need to actually on an Apple to Apple comparison strip out.
The the impact on the southern Russia, and Ukraine situation, although at the same moment, we're trying to looking to different ways in and whether or not we can continue to sell into Russia right. I think this is the third one it's the chip shortage.
Just mentioned and explained many times. So these three factors kind of play into the the number which we put out there here.
If the.
The the Shenzhen.
The lockdown will be only seven days or even seven days, we kind of continue to to to manage to export.
The shipment I think will probably adopt more towards the high end of the guidance range.
But if not I think.
We're probably just a in a meadow that's.
So much color I can give you.
Yeah.
Well. Thank you that's very clear. Thank you very much I have no more questions.
As there are no further questions now I'd like to turn the call back over to the company for closing remarks.
Thank you once again for Chinese today, if you have further questions. Please feel free to contact <unk> Investor Relations.
Relations Department through the contact information provided on our website or the person group the company's Investor relations consult thank you.
This concludes this conference call you May now disconnect. Your line. Thank you.