Q1 2024 Zepp Health Corp Earnings Call

May 20, 2024

Speaker Change: [music].

Operator: Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's first quarter 2024 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 Chong, Director of Investor Relations for the company. Please go ahead, Grace.

Hello, Ladies and gentlemen, thank you for standing by those that Health Corporation first quarter 2024 earnings Conference call.

Speaker Change: At this time all participants are in the center of Tonight.

Speaker Change: Today's conference call is being recorded.

Speaker Change: I will now turn the call over to you Hey, great job director of Investor Relations for the company. Please go ahead great.

Grace Chong: Hello, everyone, and welcome to Zepp Health Corporation's first quarter 2024 earnings conference call. The company's financial and operating results were issued in a press release by the Newswire services earlier today and are posted online. You can also view the earnings press release and slides referred to on this call by visiting the Investor Relations section of the company's website at ir.zepp.com.

Speaker Change: Hello, everyone and welcome to gut Health Corporation's first quarter 'twenty 'twenty four earnings conference call the company's financial and operating results. What you should be a press release that our newswire services earlier today and are posted online.

Speaker Change: You can also view the earnings press release and slides referred to on this call by visiting the IR section.

Speaker Change: The company web site at IR does that that call.

Grace Chong: Participating in today's call are Mr. Wang Huang, 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 Yang, our Chief Operating Officer, will join us for the Q&A session. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Security Solicitation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

Speaker Change: Participating in today's call are Mr. Huang Wang song.

Our chairman of the board of Directors and Chief Executive Officer.

Speaker Change: Make sure they understand our chief financial Officer, the company's management.

Speaker Change: The prepared remarks, and the call will conclude with a Q&A session.

Speaker Change: Mr. Mike Yeung, our Chief operating officer will join us for the Q&A session.

Grace Chong: 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 on Form 20-F for the fiscal year ended December 31, 2023, and other filings as followed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that ZEPP's early press release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial information. ZEPP's press release contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. I'll now turn the call over to our CEO, Mr. Wang Huang.

Speaker Change: Before we come to you.

Please note that today's discussion will contain forward looking statements made on their desk, there's hub operation, Let's say U S private securities.

Speaker Change: Litigation Reform Act of 90 95.

Speaker Change: Forward looking statements woke me pardon me at all.

Speaker Change: As such the company's actual results may be materially different kind of years past.

Speaker Change: Okay.

Speaker Change: Great information regarding debt and other risks and uncertainties are included in the company's annual report on one side yes.

Speaker Change: Fiscal year ended December 31st plenty plenty three and other colleagues followed with U S Securities and Exchange Commission.

Speaker Change: The company does not assume any obligation to update any forward looking statement, except as required under applicable law.

Speaker Change: Also note that.

Speaker Change: That's already press release and this conference call include discussions of our audited GAAP financial information as well as our audited non-GAAP financial information that's gradually.

Speaker Change: A reconciliation of the audited non-GAAP measures.

Speaker Change: At its most directly comparable GAAP measures.

Speaker Change: I'll now turn the call over to our CEO, Mr Wild wall.

Speaker Change: Please go ahead.

Wang Huang: Hello, everyone. Welcome, and thank you for joining our call. Before delving into this quarter's performance, I'd like to recap.

Speaker Change: Hello, everyone.

Speaker Change: And thank you for joining our call.

Speaker Change: Before delving into the East Coast performance, Alright, you recapped.

Wang Huang: Our Transformation Journey and Dr. stage for the year ahead, as we are shifting focus to self-branded products and diversifying our offerings today. Our self-branded product sales contributed over 85% of total revenue. Our growth margin has nearly doubled over the past two years, this recent quarter showing 37% compared to 16% in Q1 2023.

Speaker Change: Our transformation journey and stature.

Speaker Change: Stage for the year.

Speaker Change: As we are shifting focus to self branded products.

Speaker Change: And diversifying our offerings today.

Speaker Change: Our south branded product sales contributed over 85% of total revenue.

Speaker Change: Our gross margin has nearly doubled over the past two years.

Speaker Change: This recent quarter, showing 37% compared to 16% Q1, 'twenty Kenny Street.

Wang Huang: Notably, the MAU of our ZEPP application is over 10 minutes, making an early success in our transformation journey. In our self-branded smartwatch category, we offer a diverse range of series tailored to various market needs. These include the lifestyle series featuring product lines such as balanced and active, the adventure series encompassing product lines like T-Rex, the performance series, comprising products such as cheetah and falcon, and lastly, The Essential series housing popular product lines like BEEP and BAD.

Speaker Change: Notably.

Speaker Change: And May you all play out.

Speaker Change: What that application is over 10 million.

Speaker Change: Making an early success in our transformation journey.

Speaker Change: This thing our self branded smart watch category we.

Speaker Change: Offer die.

Speaker Change: First rich a furious tailor too.

Speaker Change: Various market niche.

Speaker Change: These include the lifestyle shoes.

Speaker Change: Featuring product lines, such as balanced and active.

Speaker Change: The adventure series income per city product lines like T Rex.

Speaker Change: The performance serious competition products, such as Cheetah and Falcon.

Speaker Change: And lastly.

Speaker Change: The exchange show series, how think Paul Perrault pad, along like beef and bad.

Wang Huang: Each of these series is strategically positioned with clear competitiveness and price range in mind. This strategic alignment enables us to compete effectively as a key player in the smart wearables market, offering our customers a comprehensive suite of solutions tailored to their diverse needs. As we are heading into 2024 and 2025, to continue on our transformation journey towards a self-reliant company driven mainly by its self-branded product sales, we are adjusting our product strategy at the same time. Today, I would like to draw your attention to a few key elements being, to begin this.

Speaker Change: Each of these theories is strategically positioned with Korea competitor.

Speaker Change: And price range in mind.

Speaker Change: These strategic alignment enables us to compete effectively.

Speaker Change: Key player in this market variables market.

Speaker Change: L Frank our customers.

Speaker Change: Has the F shoot.

Speaker Change: Sure Tango two there.

Speaker Change: Steve.

Speaker Change: As we are heading into 'twenty, 'twenty, four and 'twenty to 'twenty five.

Speaker Change: To continue on our transformation journey toward.

Speaker Change: It sounds from your life company, Julian mainly by South branded product sales.

Speaker Change: We are adapting our product strategy.

Speaker Change: Same time today.

Speaker Change: Sure your attention to a few key elements being.

Julian South: To begin this allo fresher balanced model within the last five years has solidified our strong market share in the price range of 200 to $249.

Wang Huang: Our flagship balance model within the lifestyle series has solidified a strong market share in the price range of $200 to $249 for Smart Watches in Europe and U.S. Markets, marking a $50 increase from the original GT Series $199 price point. Although our price is increased, we noticed that many customers have switched from brands such as Samsung and Apple for the unique features of balance. We are also delighted to observe that the balance model has not only gained popularity among consumers but has also received high praise from key opinion leaders on social media platforms, demonstrating our cutting-edge product capability.

Julian South: Smart watches in Europe, and U S market.

Julian South: Marking a $50 increase from the origin no GT series $199 price point.

Julian South: Although our price increase.

Julian South: Notice that many customers bitch.

Julian South: Pitch from brands, such as Samsung and Apple for that deal.

Julian South: Neat features a ballot.

Speaker Change: We are also delighted you observed that the balanced model has not only gain popularity among consumers.

Speaker Change: <unk> has also received high praise from key opinion leaders on social media platform demonstrated our cutting edge product capabilities.

Wang Huang: Our customers are particularly impressed by the long battery life and the sleek, attractive industrial design of our watches. We were the pioneer in the smartwatch industry to incorporate large language model AI technology for handling interactions and responding to user messages. This positions us well ahead of our competitors; our products, our product differentiation, and artificial intelligence have led consumers to recognize our product value at a high price band, which has built strong product momentum in the market.

Speaker Change: Our customers are.

Speaker Change: Particularly impressed by the long battery life and the fleet attractive industrial design of our watches.

Speaker Change: We were the pioneer in the smart watch industry to incorporate lost language model AI technology, while handling interactions and responding to and use those messages.

Speaker Change: This is positioning us well.

Speaker Change: What about competitors.

Speaker Change: Our product our product differentiation and artificial intelligence.

Speaker Change: Consumers to recognize our product value at a higher price band.

Rich Hatfield Jong product momentum in the market.

Wang Huang: This gives us an opportunity to realize an exponential growth in our revenue in the upcoming peak sessions through our marketing activity. In the first quarter, we showed a considerable escalation in our brand visibility and outreach. Our dynamic digital marketing campaign, including out of home advice in Magic Apple and sponsoring the recent Rotterdam Madison has significantly expanded our audience reach, bolstering our market presence and driving our future sales. Next.

Speaker Change: This gives us an opportunity to realize an exponential growth in our revenue in the upcoming peak season.

Our marketing activities.

In the first quarter, we saw a considerable escalation in our brand visibility and outreach.

Speaker Change: Our dynamic digital marketing campaigns, including out of home I bought.

Speaker Change: Advertisements in magic, Apple and sponsoring the Lucent relative and Madison.

Speaker Change: <unk> significantly expanded our audience reach.

Speaker Change: Most of the marine our market risk and driving our future sales.

Speaker Change: Next.

Wang Huang: Our active rocker line within the lifestyle series has shown significant growth potential as well. It is an upgrade and continuation of our best-selling $99 mini product line enhanced by ZeppOver and ZeppFinish health services, along with the ZAP watch faces and apps. This innovation has delivered significant value to our users, enabling us to position the product line to achieve a $129 selling price and generate better gross margin. Unknown Attendee, Leon Deng, Wang Huang, Lisa Lee, Zepp Health; on May 2, we unveiled the new Amazfit BIFAC unit within the Accenture series.

Our active rock along the theme the lifestyle fused has shown significant growth potential as well.

Speaker Change: It is an upright and continuation of our best selling 99 medium part of lung.

Speaker Change: Enhanced by that over and that's finished.

Speaker Change: Along with that.

Speaker Change: Watch faces and apps ecosystem.

Speaker Change: This innovation.

Speaker Change: We delivered significant value to our users, enabling us to position the product line to achieve a hung.

Speaker Change: $29.

And price and generate better gross margins.

Speaker Change: More recently.

Speaker Change: Our main second.

Speaker Change: Veiled.

Speaker Change: But Neil Amaze Fitbit five per unit.

The thing that Accenture series.

Wang Huang: Through the stainless steel appearance and bigger screen, we have brought many user-favorite software functions from our mid to high-end, active, and balanced product lines to units, and we have brought richer apps and watch faces through Zappos 3.0 to you, strengthening our Stop $100 Market.

Speaker Change: Through the stainless steel appearance and bigger screen.

Speaker Change: We have brought many users prove it software functions from our mid to high end active and balanced product lines to unity.

Speaker Change: And broad richer apps and watch faces.

Speaker Change: <unk> 3.0 to you Nick.

Anthony: Sure Anthony our stop 100 dollar market.

Wang Huang: Unknown Attendeecompatible, and further expand our market share in markets such as India, Spain, and South America. Our proprietary operating system, ZeppOS, has been upgraded to version 3.5, integrating the large language model-based ZEPP flow AI system. This brings large language model AI interaction and messaging capabilities to our entire product line, a unique functionality not available in other brands' smartwatches. This has established our brand image as an innovator in the consumer electronics market, and together with the continuously over the air upgrade of the software used in our smartwatch, it greatly improves the competitiveness of our smartwatch.

Anthony: Compared to business and further expand our market share in markets, such as India, Spain, and South America.

Speaker Change: Our proprietary operating system that has been upgraded to version three <unk> five.

Speaker Change: Integrating that Roger language model base that flow AI system.

Speaker Change: This brings lots of language of motto AI into action and messaging capabilities to our entire product line.

Speaker Change: Our unique functionality not available in other brands smart watches.

Speaker Change: This has established our brand's image as an innovator in the consumer electronics market.

Speaker Change: Together these are continuously over the air upgrades of their software used in our smart watches.

Speaker Change: It greatly improves.

Speaker Change: That compared to say that half of our smart watches.

Wang Huang: As I have mentioned in previous quarters, the rapid application and innovation of large language model AI technology provides our smartwatches products with opportunities to surpass competitors, showcasing our company's execution and creativity and preparing for new opportunities in the smart wearable market. During April, the fishing and running features on the Amazfit Falcon, TX Raptor, and TX Cheetah Pro received significant enhancements, enabling users to enjoy the prime season for fishing and remming.

Speaker Change: As I have mentioned in previous quarters.

Speaker Change: The rapid application and innovation of Laci language Baidu AI technology provides to us.

Speaker Change: How smart watch is part of this opportunity is to surpass competitors.

Speaker Change: Showcasing our company's execution and creativity and preparing for new opportunities in the smart wearable market.

Speaker Change: They were in April the fishing and running features on the amazement Falcon, <unk>, and TX and Cheetah Pro let's see.

Speaker Change: Difficult to enhancements.

Speaker Change: Enabling users to enjoy the prime season for fishing and running at.

Wang Huang: At the same time, we updated our operating system to AI-powered WebOS 3.5 across different hardware platforms. All these updates are part of our commitment to providing personalized and advanced health support, empowering users to manage their well-being effectively. We will soon apply this AI capability to our sports and outdoor smartwatches, within the performance and adventure series, bringing innovative experiences to athletes and elder institutes, and significantly boosting the competitiveness and differentiation of our sports and outdoor product line. Before this summer's sports season arrives, we will launch advertisements in major global markets to amplify our market presence. We will also collaborate with major global channels like the, bringing our innovative at full range products to users during So stay tuned.

Speaker Change: At the same time, we updated our operating system to AI powered <unk> Si.

Speaker Change: Cost discipline.

Speaker Change: Your password.

Speaker Change: All of these updates are part of our commitment to a Y D personalize and advanced health football.

Speaker Change: Empowering users to manage their well being effective.

Speaker Change: Reviews churn Pri these AI capabilities to our sports and outdoor smart watches the sustained performance and adventure series.

Speaker Change: Bringing innovative experience to at least and Aldo shoe sizes.

Speaker Change: And significantly boosting their competitiveness and differentiation of our sports and outdoor part of life.

Speaker Change: Before there is some small <unk> right.

Speaker Change: We view raunch.

Speaker Change: The types of men in major global markets.

Speaker Change: To amplify our market presence.

Speaker Change: We will also collaborate with major global channels like Big Cason, bringing our in a rate case at full range products to use us doing this some more sports crazy.

Speaker Change: To increase our sales for second half the year.

Speaker Change: We have many exciting new products in the pipeline for the upcoming months so stay tuned.

Yeah.

Wang Huang: Now turning to our exciting new innovative satellite, the Helio Ring. Our SmartRings represents a significant expansion of our user experience, allowing users who prefer not to wear watches while sleeping to obtain 24 hour comprehensive health data monitoring. This enhances recovery for x-rays and provides readiness analysis for general use, ensuring a holistic user experience with both smart watches and smart rings.

Speaker Change: Now turning to our exciting new innovative Atlanta.

Speaker Change: The <unk> rate.

Speaker Change: Our smart rings.

Speaker Change: <unk> presents a significant expansion of our user experience.

Speaker Change: Users, who prefer not to grass watches while slipping to pen 24 hour comprehensive house data monitoring.

Speaker Change: This enhances the Calgary, but actually.

Speaker Change: And Paraguay readiness.

That's it.

Speaker Change: For January UCITS.

Speaker Change: Ensuring a holistic user experience with both smart watches and smart rates.

Wang Huang: This marks the beginning of a new era in the market, with us being the first smartwatch brand to offer such a solution, praising us ahead of competitors. Last but not least, after several years of organizational transformation and streamlining our operation. Our company has become more global, with about 90% of revenue generated from outside China. Our co-executives, including myself, now oversee operations from offices based in Europe and North America, enabling swift decision making in response to market dynamics and to be more attuned to consumer and market demand.

Speaker Change: This marks the beginning of a new era in the market.

Speaker Change: Being the first smartwatch brand to offer us such as to loosen praising us ahead of competitors.

Speaker Change: Last but not the lease after several years of organization, though transformation and Jim labeling our operations, our company has becoming more global with about 90%.

Speaker Change: Revenue generated from outside China.

Speaker Change: I'll call.

Speaker Change: Exactly.

Speaker Change: Include myself now oversee our prices from offices based in Europe, and North America.

Speaker Change: In neighbouring Savitt decision, making in response to market dynamics and to be more attuned to consumer and market demands.

Wang Huang: The diversity within our team and the globalization of our R&D and marketing efforts have empowered us to develop, sell, and market our products with greater speed and precision. We believe this consumer-centered approach will set us apart in the long run. Through the above-mentioned building blocks, we realize enhanced returns on our product sales, translating into elevated growth margins for the company, while we keep our overall operating costs in check. This financial fortification tells us facilitate increase sales and profitability for our self-branded products, and this will bring sustained profitability through self-branded products in the future.

Speaker Change: The diversity the thing our team and the globalization of our R&D and marketing at first half in PA, the us to develop sell and market our products.

Speaker Change: Greater speed and precision.

Speaker Change: We believe this consumer centered approach will set us aside in longer run.

Through the above mentioned building blocks, we realize enhanced returns on our product sales.

Speaker Change: Translating into elevated gross margins for the company.

Speaker Change: While we keep our overall operating costs in check.

Speaker Change: This financial.

Speaker Change: Caisson, but tenants facilitates.

Speaker Change: Increased sales and possibly the ability for our self branded products.

Speaker Change: And this will bring sustained.

Speaker Change: Visibility introduced that branded products in the future.

Wang Huang: However, the ongoing transaction of the business is indeed longer and sometimes harder than our initial expectation, and patience is needed. However, we remain optimistic about our strategic direction on both our sales and marketing strategy and upcoming products. Our emphasis on cutting-edge products and operational excellence, combined with expanding our global reach and offering innovative and diverse products and services to our vibrant user community, prepares us for longer-term sustainable growth. We are confident that they will.

Speaker Change: However.

Speaker Change: The ongoing transaction of the business, if indeed longer and sometimes harder than our initial expectation.

Speaker Change: And patience is needed.

Speaker Change: However, we remain optimistic about our strategic direction.

Both our sales and marketing strategy.

Speaker Change: And upcoming products.

Speaker Change: Our emphasis on cutting edge product and operational excellence.

Speaker Change: Combined with expanding our global reach and offering innovative and diverse products and services.

Well, hi, Brent user community.

Speaker Change: Prepares us for longer term sustainable growth.

Speaker Change: We are confident this strategy will be established.

Wang Huang: This strategy will establish Zepp as a leading, healthy, close, self-reliant, global, smart, viable, and healthcare solution provider in Taiwan. I will now turn the call over to Leon to go over the highlights of our first quarter financial results.

Speaker Change: As a leading healthy growth separately lives grow both Marc viable and house care solution. A later time.

Speaker Change: I'll now turn the call over to Leah to go over the highlights of our first quarter financial results.

Leon Cheng Deng: Thank you, Weiya. Greetings, everyone.

Leah: Great. Thanks, everyone. Thank you for joining our earnings call I would like to start by discussing some of the key metrics from the first quarter before diving further into the financial results.

Leon Cheng Deng: Thank you for joining our earnings call. I would like to start by discussing some of the key metrics from the first quarter before diving further into the financial results. In the past quarters, we have been making healthy investments in innovation, and our investments remain focused on two things, with the first one on attracting new customers, and the second one on getting our existing customers to upgrade or add more products to better themselves.

Leah: In the past quarters, we have been making healthy investments in innovation and our investments remain focused on two things.

Leah: With the first one on attracting new customers and the second one on getting our existing customers to upgrade slash, adding more products to better themselves.

Leon Cheng Deng: There are three things I would like to highlight. First, to echo what Wei-En just mentioned, that we launched the Helio ring in our U.S. markets, and by mid-June, we'll expand into other markets with a variation of the ring, which is tailored to the mass market.

Speaker Change: There are three things I would like to highlight.

Speaker Change: First is to alcohol what way I, just mentioned that we launched the heyday of array in our U S market and by mid June we will expand into other market.

Speaker Change: It's a variation of the rain, which is tailored to the mass market.

Leon Cheng Deng: This launch gave us a foothold in a new multibillion-dollar category, which grows at a taker rate of 30% towards 2028, expanding the number of categories we play in and further diversifying ourselves. This has been a multi-year investment, and we expect it to pay off in space in Q3 and beyond. The second is increasing brand awareness through more above-the-line marketing activities in Europe and the USA to drive sales. Most recently, we have had out-of-the-home advertising in Madrid International Airport in Spain, and there will be more TV commercials on Europe's main sports channels coming up as we head into the EuroCup and the Summer Olympics.

This launch gave us a foothold into a new multi billion dollar category, which grows at a paper off 70% towards 2028.

Speaker Change: Expanding the number of categories would play and further diversifying ourselves.

Speaker Change: This has been a multiyear investment.

Speaker Change: Back to pay off in spades in Q3 and beyond.

Speaker Change: The second is increasing the brand awareness.

Speaker Change: Above the line marketing activity in Europe, and USA to drive sell through.

Speaker Change: Most recently, we have the out of home advertising in Madrid International Airport in Spain.

Speaker Change: There will be more TV commercials, and Europe's may sports channels coming up as we head into the euro costs.

Speaker Change: The Summer Olympics.

Leon Cheng Deng: More consumers will get to know us, and we have seen some early data points on the conversion rates improving. Last but not least, this quarter, we experimented with some stimulating additional product cells in our install base by delivering limited-time coupons slash gift cards to some of our most loyal, long-tenured customers. We have always tried to explore how we can better use our unique data and insights to deliver more personalized experiences for our customers.

Speaker Change: More consumers will get to know us.

Speaker Change: We have seen some early data points on the conversion rates improving.

Speaker Change: Last but not the least this quarter, we experimented some stimulating additional product sales.

Speaker Change: Our installed base by delivering limited time coupons slash gift cards to <unk>.

Speaker Change: Im off our most loyal long tenured customers.

Speaker Change: We have always trying to explore how we can better use our unique data and insights to deliver more personalized experiences for our customers.

Leon Cheng Deng: The outcome of the promotion surpassed our expectations, affirming the value of our continuous investment in advancing data systems to effectively leverage and maximize our data resources. The strategy of offering both new and existing products to our current customer base presents Allocative Revenue Potential. This instills confidence in the success of our upcoming product launches in new categories and strengthens our belief in our capacity to expand and elevate this business in the future. I want to emphasize that we remain steadfast in concentrating on what is within our control.

Speaker Change: The outcome of the promotion surpassed our expectations affirming the value of our continuous investments in advancing data systems to effectively leverage and maximize our data resources.

Speaker Change: The strategy also offering both new and existing products to our current customer base.

Speaker Change: It looks tape revenue potential.

Speaker Change: This instills.

Speaker Change: Confidence in the success of our upcoming product launch in new categories and strengthened our belief in our capacity to expand and elevate this business in the future.

Speaker Change: I want to emphasize that we remain steadfast in concentrating on what is within our control.

Leon Cheng Deng: We're embarking on a multi-year product cycle where we will reap the rewards of our research and development efforts to attract new customers and increase sales to our current customer base. We are strategically positioning the company to enhance our growth trajectory while managing expenses effectively to achieve margin expansion in the coming years. Now turning to our first quarter 2024 sales performance, which broadly aligned with our guidance, several factors influence the decline in cells.

Speaker Change: We're embarking on a multiyear product cycle, where we will reap the rewards of our research and development efforts to attract new customers and increased sales to our current customer base.

Speaker Change: We are strategically positioning the company between highest our growth trajectory, while managing expenses effectively to achieve margin expansion in the upcoming years.

Speaker Change: Now turning to our first quarter 2024 sales performance, which broadly aligned with our guidance.

Speaker Change: Several factors influenced the decline in sales.

Leon Cheng Deng: Firstly, the seasonal patterns typically in our consumer-driven sector during Q1. Secondly, the ongoing decrease in Xiaomi product sales. And thirdly, the absence of any new product launches during Q1 2024. Unlike the first quarter of 2023, when, for instance, we introduced the new GTR Mini.

Speaker Change: Firstly, the seasonal patterns typically our consumer driven sector during Q1.

Speaker Change: Secondly, the ongoing decrease in xiaomi products cells.

Speaker Change: And thirdly, the absence of any new product launches during Q1 2024. Unlike the first quarter of 2023, one for each so we'll introduce the new GTR many.

Leon Cheng Deng: Moving on to gross margin, which can be influenced by various factors, such as product mix, product launch timing, and product life cycles, including model upgrades. As Wayne has highlighted, the company's gross margin continued its impressive performance in the first quarter. At a robust 37%, our first quarter gross margin marks a new historical high, representing a sequential increase from the previous quarters achieved in the third and fourth quarters of 2023. This growth in gross margin is predominantly attributable to the higher profitability of our self-branded products, as well as a more favorable product mix, including a higher proportion of new products and lower levels of clearance.

Moving on to gross margin, which can be influenced by various factors such as product mix product launch timing and product lifecycle, including model upgrades as well has highlighted the company's gross margin continued its impressive performance in the first.

Speaker Change: Quarter.

Speaker Change: A robust 37% our first quarter gross margin marks a new historical high.

Speaker Change: Representing a sequential increase from the previous call.

Speaker Change: <unk> achieved in third and fourth quarter of 2023.

Speaker Change: This growth the gross margin is predominantly attributable to the higher profitability of our self branded products as well as a more favorable product mix, including a higher proportion of new products and lower levels of clearance.

Leon Cheng Deng: Looking ahead, together with new product launches planned for the following quarters of 2024, we anticipate this positive trajectory to persist into Q2 and throughout 2024. Now, let's turn our attention to costs. As we have discussed, cost management remains a critical area of forecast for our company, both in terms of their absolute amount and as a percentage of sales, as we continue to exercise disciplined control over our expenses during the quarter. Since Q3 2020, we have consistently reduced our overall operating costs while strategically investing in innovative products and technologies as well as geographical expansion.

Speaker Change: Looking ahead together with new product launches planned for the following quarters of 2024.

Speaker Change: We anticipate this positive trajectory to persist into Q2 and throughout 2024.

Speaker Change: Now, let's turn our attention to cost as we have discussed cost management remains a critical area of our forecast for our company both in terms of their absolute amount.

Speaker Change: As a percentage of sales.

Speaker Change: As we continue to exercise disciplined control over our expenses during the quarter.

Speaker Change: Since Q3, 2020, we have consistently reduced our overall operating costs, while strategically investing in innovative products and technologies as well as geographical expansion.

Leon Cheng Deng: As a result, adjusted operating expenses for Q1 2024 were U.S. dollars 28 million, decreased 11.4% compared with Q1 2023. Adjusted R&D expenses in the first quarter of 2024 were U.S. dollars 12.4 million, a decrease of 15.4% year-over-year. This comprised 31.2% of revenue. The decrease was primarily attributed to our refined R&D strategies as we consistently assess resources efficiently to maximize return on investment and productivity. Also, we integrated an AI-based R&D platform to improve our efficiency.

Speaker Change: As a result, adjusted operating expenses for Q1 2024.

Speaker Change: U S dollars $28 million.

Speaker Change: Decreased 11, 4% compared with Q1 2023.

Speaker Change: Adjusted R&D expenses in the first quarter of 2024, while U S dollar $12 4 million a day.

Speaker Change: Chris I was 15, 4% year over year.

Speaker Change: This comprised 31, 2% of their revenue.

Speaker Change: The decrease was primarily attributed to our refined R&D strategy.

Speaker Change: How should we consistently assess.

Speaker Change: S resources efficiently to maximize return on investment and productivity.

Speaker Change: Also a integrated.

Speaker Change: I based R&D platform to improve our efficiency.

Leon Cheng Deng: At the same time, we're committed to investing in new technologies and suitable AI functions to maintain our competitive edge against our competitors. Our adjusted selling and marketing expenses for Q1 2024 were U.S. dollars $10.5 million, down 10.9% year-over-year and accounted for 26.3% of total revenue. The reduction in amount was mainly due to our ongoing efforts to improve profitability and refine our sales channel mix. For the more, we initiated an out of home campaign in Madrid and sponsored the Rotterdam Marathon, actions that will contribute significantly to fostering our brand presence, particularly among our target consumers.

Speaker Change: At the same time, we're committed to investing in new technologies and student by student ball AI functions to maintain our competitive edge against our competitors.

Speaker Change: Yeah.

Speaker Change: Our adjusted selling and marketing expenses for Q1, 2024, or USD 10, 5 million down 10, 9% year over year and accounted for 26, 3% of total revenue.

Speaker Change: The reduction in the amount was mainly due to our ongoing efforts to improve profitability and refining our sales channel mix.

Speaker Change: Furthermore, we initiated out of home campaign in Madrid, and sponsored the Rotterdam Marisol.

Speaker Change: Actions that will contribute significantly to bolstering, our Brad pressures, particularly among our target consumers.

Leon Cheng Deng: We're committed to making smart investments in marketing and branding activities that will fuel our longer-term growth. Our adjusted G&A expenses in Q1 2024 were U.S. dollars $5.3 million, lowered by 1.5% year-over-year owing to disciplined cost control initiatives. We have maintained a prudent approach with the overall adjusted operating cost at or below 28 million, consistent with Q3 and Q4 2023 levels and in line with our guidance. Looking ahead, we remain committed to cost management.

Speaker Change: We're committed to making smart investments in marketing and branding activity that will fuel our long term growth.

Speaker Change: Our adjusted G&A expenses in Q1 2024.

Speaker Change: $5 3 million lowered by one 5% year over year owning to disciplined cost control initiatives.

Speaker Change: We have maintained a prudent approach with the overall adjusted operating costs.

Speaker Change: At or below $28 million, consistent with Q3, and Q4 2023 levels and in line with our guidance.

Speaker Change: Looking ahead, we remain committed to cost management.

Leon Cheng Deng: Although we anticipate that costs will stay at their current levels or lower in the coming quarters, we continue to invest in R&D activities and marketing expenses to bolster our long-term competitiveness while closely scrutinizing discretionary spending. We lost a lot in our operating results in the first quarter, primarily due to seasonal-driven cost coverage issues. However, this performance represents an improvement over 2023 Q1. Adjusted loss narrowed by 20.4% versus Q1 2023. Now turning to the balance sheet, at March 31st, 2024, our overall cash balance stands at US dollars 132.3 million, providing us with ample runway to invest and capitalize on potential market opportunities.

Speaker Change: Debating that costs will stay at their current levels are lower in the coming quarters.

Speaker Change: We continue to invest in R&D activity and marketing expenses.

Speaker Change: To bolster our long term competitiveness, while closely scrutinizing discretionary spending.

Speaker Change: Well it has lost a loss in our operating results in the first quarter.

Speaker Change: <unk> due to seasonal cost coverage issues.

Speaker Change: This performance represents an improvement over 2023 tier one adjusted loss narrowed by 24% versus Q1 2023.

Speaker Change: Now turning to the balance sheet at March 31st 2024, our overall cash balance stands at <unk> dollars one.

Speaker Change: $132 3 million.

Speaker Change: Providing us ample runway to invest and capitalize on potential market opportunities.

Leon Cheng Deng: On the working capital management front, we remain steadfast in our commitment to practicing disciplined working capital management. Despite the P&L loss, we have achieved positive operating cash flow for the seventh consecutive quarter. In Q1 2023, we initiated the retirement of portions of our short slash long term debt portfolio. Since then, and including Q1 2024, we have successfully retired U.S. dollars 46.7 million of debt, while our operating cash flow continues to strengthen.

Speaker Change: On the working capital management front, we remain steadfast in our commitment to practicing disciplined working capital management.

Speaker Change: Spite the P&L loss, what we have achieved positive operating cash flow for the seventh consecutive quarter.

Speaker Change: In Q1 2023, we have initiated the retirement of portions of our Scott Slash longterm debt portfolio.

Speaker Change: Including Q1, 'twenty 'twenty four.

Speaker Change: Have successfully retired U S $46 7 million of debt.

Speaker Change: Our operating cash flow continues to strengthen we intend to do more in the coming quarters.

Leon Cheng Deng: We intend to do more in the coming quarters. In keeping with our commitment to delivering long-term value to our shareholders, we'll continue our buyback program throughout 2024. In conclusion, while we face some challenges in Q1, our focus on optimizing our revenue structure, reducing our reliance on a single customer, expanding our self-branded products, and diversifying our product offering positions, as well as becoming a self-reliant global smart wearable and healthcare solution provider is driving our long-term sustainable growth.

Speaker Change: In keeping with our commitment to delivering long term value to our shareholders. We'll continue our buyback program throughout 2024.

Speaker Change: In conclusion, while we faced some challenges in Q1, our focus on optimizing our revenue structure, reducing our reliance on a single customer.

Speaker Change: Spanning our self branded products and diversifying our product offering positions us well to become a self reliant global smart wearable and health care solution provider.

Speaker Change: Driving our long term sustainable growth.

Leon Cheng Deng: In Q2 2024, we anticipate revenue to range between U.S. dollars 40 to 55 million with an uptick quarter over quarter expected in sales on our self-branded products. We will continue the stock repurchase program to demonstrate the confidence of our strategy.

In Q2 2024.

Speaker Change: Dissipated revenue to range between U S dollars $40 million to $55 million with the uptick quarter over quarter expected in cells on our self branded products.

Speaker Change: We will continue with the stock repurchase program to demonstrate the confidence of our strategy.

Leon Cheng Deng: Thank you once again for your time. I would now like to open the call to any questions. Operators, please go ahead.

Speaker Change: Thank you once again for your time I would now like to open the call for any questions.

Speaker Change: Operators. Please go ahead.

Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. For the benefit of all participants on today's call, if you wish to ask your question to the company's management in Chinese, please immediately repeat your question in English. Your first question comes from Sid Rajiv with the Sentimental Resource Corps. Please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone please pick up your handset before pressing the king.

Speaker Change: If at any time you have a question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: The benefit of all participants on today's call. If you wish to ask a question for the company's management and Chinese. Please immediately repeat your question in English.

Speaker Change: Your first question comes from my teeth with sentimental resource School.

Speaker Change: Please go ahead.

Sid Rajiv: Hi gentlemen, I am pleased to see the growth in gross profit and improvement in EPS. I have a few questions.

Speaker Change: Hi, gentlemen, please to see the growth in gross profit and improvement in EPS I have a few questions.

Sid Rajiv: You're expecting growth in four-year revenue from self-branded units with results back and loaded. But Leon just mentioned that you might see an uptick in revenue in Q2, but just to give you more color. Would we see self-branded units softer in Q2, Q3, and a spike in Q4, or would you start seeing improvement earlier on?

Speaker Change: We're expecting growth in full year revenue from self branded units with the cells back end loaded.

Speaker Change: Leon just mentioned that you might see an uptick in revenue.

Speaker Change: Q2, but just to give.

Speaker Change: Wondering if you could give more color would receive celebrating units are softer in Q2 Q3, and the spike in Q4 or you would start seeing improvement all year long.

Leon Cheng Deng: Unknown Attendee, Leon Deng, Wang Huang, Lisa Lee, Zepp Health Hi, let me take this question. Normally, our business follows a seasonal pattern whereby Q1 is always the lowest in the year for us, and then from Q2 onwards, the business will start to recover, and Q3 and Q4 are traditionally the high seasons for us. So you will see an uptick in revenue in Q2. That's why we also guided a higher range than Q1, and then I think you will see a material increase in revenue starting from Q3 and Q4 because, number one, this also heads into the traditional high seasons for Europe and the USA. And also, it coincides with our new product launch window, which is also around June, July all the way towards September.

Speaker Change: Hi.

Speaker Change: Let me take this question so I think youll.

Leon Cheng Deng: Thank you. Since you don't provide segmented revenue, I was wondering if you could give or if you're able to share the top two revenue-generating product lines and what percent of revenue they contribute?

Speaker Change: Normally our business follows a seasonal pattern whereby Q1 is always the lowest.

Speaker Change: In the year for US and then from Q2 onwards, the business will start to recover in Q3 and Q4 traditionally the high seasons for US. So you will see a uptake.

Speaker Change: Uptake of our.

Speaker Change: The revenue in Q2, that's why we also guided to a higher range than Q1 and then the.

Speaker Change: I think the.

We'll see a material increase of the rapid new starting from Q3 and Q4 because number one this also into the traditional high season for Europe, and the USA and also it coupled with our new product launch window, which is also around the June.

In July all the way through towards the September.

Speaker Change: Masters.

Speaker Change: Thank you.

You don't provide segmental revenue I was wondering if you could give us or if you are able to share the top two revenue generating product line.

Speaker Change: And what percent of revenue do they contribute.

Leon Cheng Deng: I think the majority, as Wayne just mentioned, so we have a few different theories which cover different types of product ranges where we play, right? I think if you are thinking about the biggest revenue contributor is definitely the essential product ranges, which are the Bips and the Bent, which are also, from a quantity perspective, the best selling product series for us, right? That should account for around 40% of the total revenue base for ourselves. And then the next one to it would be the balance and the active line, which are, in essence, our Samsung and Apple competitors.

Speaker Change: I think majority.

Speaker Change: Wayne just mentioned so we have.

Speaker Change: Yes.

Speaker Change: A few different.

Speaker Change: Theories, which covers different type of products wrenches, where we play right.

Speaker Change: I think.

Speaker Change: If you are thinking about the biggest revenue contributor is definitely.

The essential.

Speaker Change: Product ranges, which are the <unk>.

Speaker Change: The band We chart also from a quantity perspective, the best selling product series for us right that should.

Speaker Change: Account for about 40% of the total revenue base for ourselves.

Speaker Change: And then the next one two it would be the balance and the active lives, which are in excess of our Samsung and Apple competitors. These are the the also the biggest part.

Leon Cheng Deng: These are also the biggest portion of our revenue, where it's coming from, and I think we just mentioned we were able to increase the ASP of these products by roughly 30 to 50 US dollars on average over the past one year and one year and a half period. And these parts of the product sales would account for roughly another 30 to 40% of our total revenue. And the remainder, 20 to 30%, actually goes to our so-called performance and adventure series, which are the running watches, for example, the Cheetah Pro, and also our outdoor ranges, the famous T-Rex ones.

Speaker Change: <unk> of our revenue, where it's coming from.

Speaker Change: And I think Wayne just mentioned, we were able to increase the AOSP off based products by roughly 30 to 50 U S dollars.

Speaker Change: Rich.

Rich: Over the past, one year, and one year and a half here rich and this part of the product sells would account for roughly another 30% to 40% of our total revenue and the remainder of 20% to 30% actually goes to our sow cost performance and adventure.

Speaker Change: Theories, which are the.

Speaker Change: The running watches for example, the top CRO and also our outdoor wrenches the famous T Rex ones.

Leon Cheng Deng: So these are also our very high ASP product ranges, which we use to compete with, for example, the Apple Watch Ultra and the Garmin Watch. So I think that, overall, should give you some idea of our product mix.

Speaker Change: These are also our very high ASP product ranges.

Speaker Change: Which we used to compete with for example, the Apple watch Altra and the gummy watches.

Speaker Change: That's.

Speaker Change: Overall should give you some really our product mix.

Leon Cheng Deng: Yeah, sure. How about geographical distribution? I think last year you had 25% of revenue from North America, and Europe accounted for 50%. Is it similar, or has it skewed more to North America?

Speaker Change: Not sure how about the geographical distribution.

Speaker Change: Last year, you had a 25% of revenue from North America.

Speaker Change: Europe accounted for 50% is it similar a lot of times, it's skewed more to North America.

Leon Cheng Deng: I think at this moment, if you look at Q1, that still is the case; Europe stands for 50%, Asia Pacific and North America stand for another 50%, in general. But we do see growth potential in Asia Pacific and the US coming up this year. Although I think the impact of that you will see more clearly towards the second half of the year. That's why we also say our result is a little bit back-end loaded. We do see that probably we're going to fortify Europe, and then growth will be more coming from Asia Pacific and North America.

Speaker Change: I think at this moment, if we looked at Q1 that still is the case Europe stands for 50% Asia Pacific and North America, that's for it in another 50%.

Speaker Change: Each year in Europe, but we do see.

Growth potential in Asia Pacific and.

Speaker Change: U S coming up this year.

Although I think the impact of that you will see more clearly towards the second half of the year. That's why we say also our result is a little bit backend loaded.

Speaker Change: We do see a probably we're going to fortify Europe and then the growth will be more coming from <unk>.

Speaker Change: Asia Pacific and North America.

Sid Rajiv: Okay, just one question. Any updates on the non-compliance letter from the NYC? I know you're doing your buybacks. Of course, you have the reverse split that you can do anytime and resolve this issue. Anything else that you have in the pipeline? Any updates?

Speaker Change: Okay just final question.

Speaker Change: Any updates on the noncompliance letter from them I see I know Youre doing your buybacks of course, you have the reverse split that you can do any time and we will solve this issue.

Speaker Change: The thing else that you have in the pipeline any updates.

Leon Cheng Deng: Now, I think the only thing that I can say is the non-compliance letter is just a technical thing. And as you just mentioned, there are definitely technical ways which can resolve that. But the management where I'm representing is actually very confident in maintaining our U.S. main board listing status, so I think this is a thing which we also mentioned in our press release that we will try to tackle that in time. Thank you, Leon. I'm looking forward to it.

Speaker Change: No I think the only thing, which I can say is that the noncompliance letter is just a technical thing and you just mentioned, there's definitely technical waste, which could resolve that.

Speaker Change: The management.

Speaker Change: Where I'm, representing its actually very confident in maintaining our U S. Mainboard listing status. So I think this is a thing which we also mentioned in our press release that Oh, we will try to tackle that in time.

Sid Rajiv: Thank you, Leon. I'm looking forward to your Q2. Thank you.

Speaker Change: Thank you Liana I'm looking forward to Q2.

Sid: Thank you Sid.

Operator: Your next question comes from Nicolette Jones with Brookfield Investments.

Sid: Thank you. Your next question comes from Nicholas James with Brookfield investment.

Sid: Go ahead.

Sid: Okay.

Nicolette Jones: Hi Management, thank you for taking my question. I have a number of questions, so I'd like to start off, firstly, regarding the high growth margin levels, can management provide insights into whether these margins are sustainable in the upcoming quarters?

Speaker Change: Hi management, Thanks for taking my question.

Nicholas James: I have a numbers question.

Speaker Change: So I'd like to start off firstly.

Speaker Change: The high gross margin levels.

Speaker Change: Management provide insight into whether it be.

Speaker Change: Margins are sustainable in the upcoming quarters.

Leon Cheng Deng: Yeah, Nicola. So, yes, let me take this question because it's about the gross margin, right? So what you can see is that starting from Q3 2023, our gross margin for the overall company has been consistently above the line of 30%. So if I remember correctly, in Q3 2023, our gross margin was 33%. And then it turned up to 35% in Q4 2023. And now we stand at around 37% in Q1 2024. So we have shown three quarters of gross margin improvement trend because of our transformation journey, which is more focused on self-branded products. And, of course, there's a product mix issue.

Nicholas James: Yes, Nicholas So yes, let me take this question because it's about the gross margin right. So.

Speaker Change: So what do you kind of see if that's.

Starting from Q3, 2023 our gross margin for the overall company as being consistently above the line of 30%. So if I remember clearly our Q3 2023, our gross margin was 33% and then.

Speaker Change: Up to 35% in Q4 2023, and then now we stand at around 37% in Q1 2024. So we have shown three quarters of a.

<unk> gross margin improvement trend.

Speaker Change: The cost of our.

Transformation journey, which is more focusing on the self branded products and of course, there's a product mix issue. There is also a general mix issue, which allow us to actually.

Leon Cheng Deng: There's also a channel mix issue, which allows us to actually deliver higher than what we achieved in the previous years on the gross margin percentage SSLs. So if you look at Q1 2024, our gross margin is at 37%. That is more than doubling the gross margin performance which we achieved in Q1 2023 last year. And we're confident that through the new product launches, which we have lined up in the upcoming months. We also launched a few new products in May.

Speaker Change: Delivery higher than what we achieved in the previous years the gross margin.

Speaker Change: Percentage.

So if you look at Q1 2024.

Speaker Change #100: Our gross margin is that 37% that is more than doubling the gross margin performance, which we achieved a Q1 2023 last year right.

And we're confident that through the new product launches, which we have lined up in the upcoming milestones. We also launched a.

A few new products in May right and also in June there's going to be also new products as we mentioned in the presentation earlier.

Leon Cheng Deng: And also in June, there's going to be new products, as we mentioned in the presentation earlier, all the way towards Q3, Q4, together with the new product launches. And you know that new product launches actually cover or offer a higher gross margin, both from an absolute amount perspective and also from a percentage perspective than the older engines. So that's why we say it actually gives us confidence that, together with the new product launches and our consistent effort in refining our product mix and channel mix, we're confident that our gross margin percentage is going to expand in the quarters to come.

Speaker Change #101: All of the way towards Q3, Q4, together with the new product launches and you know that new product launches actually cover our offers a higher gross margin.

Speaker Change #101: Both from a absolute amongst perspective also from a percentage perspective.

Speaker Change #101: The old ranges. So that's why we say it actually gives us the confidence that.

Speaker Change #101: Together with the new product launches and our consistent.

Speaker Change #101: Effort in refining.

Speaker Change #102: Refining our product mix and channel mix were calculated that our gross margin.

Speaker Change #103: Percentage is going to expand in the quarters to come.

Speaker Change #103: Mhm.

Leon Cheng Deng: Thank you. Moving on, given that the start of 2024 was slower than expected, could the management share more color on your perspective for the four-year outlook?

Speaker Change #104: Thank you.

Speaker Change #105: Moving on.

Speaker Change #106: Stopped to kind of keep principal was slower than expected.

Demand has been some more color.

Speaker Change #107: For the full year outlook.

Leon Cheng Deng: Yeah, normally we don't guide for our four-year performance and also our revenue numbers. But I think what we're looking at is that, yes, it's a slow start for Q1. And we hope that we're going to, and you already see in the guidance that we actually guide a little bit higher for Q2. And then, as I just explained to Sid, in Q3, Q4, normally these are our high seasons. So last year, the full year, if I remember correctly, our total revenue actually stands at around $350 million for the full year.

Speaker Change #108: Yeah normally we don't guide for our full year.

Speaker Change #108: Performance and also our revenue number but I think.

Speaker Change #108: What we're looking at is that yes, it's a slow start for Q1, and we hope that we're going to.

Speaker Change #108: You already see in the guidance that we actually guide a little bit higher for Q2, and then as I just explained to sit in Q3 Q4 normally they saw our high seasons. So last year full year, if I remember clearly our total revenue actually stands at around <unk>.

Speaker Change #108: $350 million for the full year. So I think this year. We're also looking at a range somewhere between $200 million to $300 million for our topline.

Leon Cheng Deng: So I think this year, we're also looking at a range somewhere between 200 to 300 million for our top line. And we're looking at doing our best to actually turn it around, because we have told you and others that the ultimate goal which we would like to achieve is to actually sustain the company's profitability through self-branded product sales. So actually, we hope by the end of this year, we're going to deliver on that target.

Speaker Change #109: So we.

We're looking at do our best to actually Tardy.

Speaker Change #109: Because we have told you.

Speaker Change #109: You and others that we did that the ultimate goal, which we would like to achieve is to actually sustain the companies.

Speaker Change #110: Our profitability through the self branded product sales right. So actually we hope by the end of this year, we're going to deliver on that target.

Nicolette Jones: Great, thank you. Again, referring to a question that Sid asked, I'd like to understand more about the recent non-compliance notice on the New York Stock Exchange due to the trading price of your ADS falling below the required threshold. Could you elaborate on the steps that ZEPP is planning to take during the cure period to regain compliance, and are you considering a reverse share split or other options?

Great. Thank you abandonment filing to a question that's it.

Speaker Change #111: I'd like to understand more about the Beatles noncompliance letter from the New York Stock Exchange.

Speaker Change #111: Due to the tight on pricing.

Speaker Change #112: Its falling below the required threshold.

Can you elaborate on the debt that is planning to take during mature period to the games.

Yeah.

Speaker Change #113: Considering that says it well.

Speaker Change #112:

Speaker Change #112: Yes.

Leon Cheng Deng: Yes, I think I have already explained it quite clearly to you set. We believe that this is a technical thing, and there's a technical solution to it. And the company and the management are actually working very hard on resolving that, and we don't think that's going to be an issue per se. And our commitment to continuing with the US main board listing status is there. So I think we are very confident that during the cure period, we're going to resolve this matter.

Speaker Change #112: Yes, I think I think I have already explained that are quite clearly to set.

Speaker Change #112: We believe that there is just a technical thing there's a technical solution to it and the company and the management is actually working very hard on resolving that.

Speaker Change #112: And we don't think that's going to be any issue per se.

Speaker Change #114: Our commitment to.

Speaker Change #114: Continuing with the U S nameboard listing status.

Speaker Change #115: Is there so I think.

Speaker Change #115: We are very confident that.

Speaker Change #115: You read the cure period, we're going to resolve this matter.

Nicolette Jones: That's great, thank you. And then, now moving on to new developments with the Halio ring, could you elaborate on its updates regarding product features and sales volumes?

Speaker Change #116: That's great. Thank you and then now moving on to new.

Uh huh.

Hey, Leo.

Speaker Change #117: Could you elaborate on it.

Thanks, Justin.

Leo: There's plenty of them.

Leon Cheng Deng: Yeah, so I think HelioRing obviously is a new form factor for wearable devices, which we launched, we actually announced this product at CES at the beginning of this year, and by May, we started shipping the product. So we're still at the earlier stage of ramping up sales as we go. And I also mentioned before that we're going to launch this product in the Europe and Asia Pacific regions in the coming month as well.

Leo: Yeah. So I think helio rate, obviously is a new.

Leo: Form factor of the wearable devices, which we launched at <unk>.

Leon Cheng Deng: So what you will see is that we should be able to start shipping this ring in volume more towards the end of June. And then potentially, this one could slip into July, which is going to be Q3 sales.

Leo: Actually.

Leo: Now this product he CES beginning of this year and by May we start shipping that product. So we're still at the earlier stage.

Leo: Stage of ramping up the sales as we go and I also mentioned before that we're going to launch this product in Europe, and the Asia Pacific regions in the coming months as well. So what you will see is that we should be able to start shipping.

Leo: Ray in volume more towards the end of June and then potentially this this one could slip into July.

Leo: July which is going to be Q3 cells. We do have high hopes of this product because the halo rate because of the form factor because a lot of people are don't like to sleep with.

Leon Cheng Deng: We do have high hopes for this product because the HelioRing, because of the form factor, because a lot of people don't like to sleep with a watch, right? They don't like the feeling of something on their wrist, but wearing a ring would give you or would resolve that issue and still allow you to actually monitor your vitals 24-7. So during the day, you can wear the watch and the ring.

Leo: <unk> right and they don't like the feeling of something which is under arrest, but the wearing a range, which gets you all would resolve that issue and still allow you to actually monitor bicoastal 24, seven so during the day, you have where the watch and the re <unk>.

Leon Cheng Deng: And we also offer infusion functionalities that combine and merge the two statuses and become more accurate. And then at night, if you are not wearing your watch, you can just do it with only the ring. So we'll be the only smart watch brand who is going to offer that solution, which couples the ring and the watch together. So basically, you're actually getting into a one-stop shop for monitoring your vitals, taking care of your health, and actually getting a readiness analysis through our app. So actually, more and more, we would like to actually provide this type of new, innovative products to consumers so they can actually better control and prevent any issues with their health in the future.

Leo: We also offer a fusion functionalities that are both state us would come.

Leo: Bye and emerge and.

Leo: Become more accurate and then at night. If you are not wearing a watch you can't just do with only the rain. So it won't be the only spot, which Brent how are we going to offer that solution couples the rate and the watch together, so basically youre actually getting into it.

Leo: Stop shop to monitoring your vitals to take care of their house and act actually to get the readiness analysis through our App.

Speaker Change #119: I actually bought more we would like to actually provide this type of new.

Innovative products to the consumers so they can actually better control and prevent Amy Ah issues out there in the future.

Nicolette Jones: Thank you. I have just one last question for management. Could you clarify if the reported MAUs of 10 million include users from your Xiaomi collaboration?

Speaker Change #120: Yeah. Okay. Thank you I have just one last question to management.

Speaker Change #121: Could you clarify if the reported from a use of 10 million include uses from you'll Xiaomi collaboration.

Leon Cheng Deng: Unknown Attendee, Leon Deng, Wang Huang, Lisa Lee, Zepp Health Unknown Attendee, Leon Deng, Wang Huang, Lisa Lee, Zepp Health Thank you.

Speaker Change #122: No. So this number the $10 million, which has just mentioned bye bye.

Speaker Change #123: By way of an E before was only talking about the and they use for our MAGE fifth Brenda so wishes ourself rent at a Ah products.

Speaker Change #123: And including Xiaomi that would add another 20 to 25 million to it. So basically our total I may you are at this moment for the company, it's actually around 232 to 35 million users.

Speaker Change #123: Users in a year.

Nicolette Jones: Thank you management, that's very helpful. Thank you.

Speaker Change #124: Thank you management, that's that's very helpful. Thank you.

Niccolo: Thank you Niccolo.

Operator: Thank you. As there are no further questions, now I'd like to turn the call back over to the company's IR director, Grace Xiong, for closing remarks. Thank you.

Speaker Change #126: Thank you.

Speaker Change #127: There are no further questions now I'd like to turn the call back over to the company's IR director Grace Zhang for closing remarks.

Grace Chong: Thank you once again for joining us today. If you have further questions, please feel free to contact the Depth Investor Relations Department through the contact information provided on our IR website. This concludes this conference call. You may now disconnect your line. Thank you.

Zhang Grace Yujia: Thank you once again for joining us today. If you have further questions. Please feel free to come pad, that's investor Relations Department through the comparative information provided on our website.

Speaker Change #129: This concludes this conference call you May now disconnect. Your line. Thank you.

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Speaker Change #129: Okay.

Speaker Change #129: Yes.

Speaker Change #129: Yeah.