Q2 2025 Zepp Health Corp Earnings Call
Operator 2: Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Q2 2025 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, Grace.
Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's second quarter earnings call.
2025 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, Miss Grace Xiong, Director of Investor Relations for the company.
Please go ahead Grace.
Grace Zhang: Hello, everyone, and welcome to Zepp Health Corporation's Q2 2025 Earnings Conference Call. The company's financial and operating results were issued in a press release by the news wire services earlier today and are posted online. You can also view the earnings press release and slides referred on this call by visiting the IR section of the company's website at ir.zepp.com. 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 U.S. Private Securities Litigation Reform Act of 1995.
Hello everyone and welcome to Step House Corporation's second quarter 2025 earnings conference call. The company's financial and operating results were issued in a press release rather than news wire services earlier today and are posted online. You can also view the earnings press release and the slides.
For more information, please visit the Investor Relations section of the company's website at irs.com.
Participating in today's call are Mr. Wong Wong Wong.
Our children of the board of directors and Chief Executive Officer, Miss Leon Deng, our Chief Financial Officer.
Grace Zhang: Forward-looking statements involve inherent risks and uncertainties. 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 are included in the company's annual report on Form 20-F for the fiscal year ended 31 December 2024 and other filings as filed 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 earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. Zepp's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I'll now turn the call over to our CEO, Mr. Wang Huang. Please go ahead.
The company's management will begin with prepared remarks and the call Will conclude with a Q&A session Mr. Mike young. Our chief operating officer will join us for the Q&A session. Before we continue please note that today's discussion will contain 4, we're looking statements made under the Safe Harbor. Provision of the US private Securities, litigation Reform, Act of 1995 for. We're looking statement involving inherent risks and uncertainties as such the company's actual results. Might may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties are included in the company's annual report on form 20f for the physical year and the December.
31st 2024.
And other filings as filed 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 steps earning press release and this conference call include discussion of both audited GAAP financial information as well as non-GAAP financial information.
That press release contains a reconciliation of the unauthorized non-GAAP measures to the most directly comparable GAAP measures.
On now, I turn the call over to our CEO, Mr. Wang Huang.
Please go ahead.
Wayne Wang Huang: Thank you everyone for joining us today. I am excited to share that Zepp Health delivered an exceptional performance in Q2 2025. Achieving a remarkable 46% year-over-year increase in revenue to $59.4 million. All revenue contributed by Amazfit brand. This is impressive not only on its own merits, but also as it marks our first quarter of year-over-year revenue growth since Q2 2021, a significant milestone in our business transformation. This is just the beginning of our growth trajectory. We are confident these initiatives are forging a robust operational and financial foundation to support sustained long-term growth. After years of refining product competitiveness, building brand awareness, and fostering user trust, our strategic vision has never been clear or more resolute. Our core product lines vividly embody our guiding philosophy: train, recover, evolve.
Thank you, everyone, for joining us today. I'm excited to share that Zepp Health delivered exceptional performance in the second quarter of 2025, achieving a remarkable 46% year-over-year increase in revenue to $59.4 million.
All revenue contributed by brand.
This is impressive, not only on its own merit, but also as it marks our first quarter of year-over-year revenue growth since the second quarter of 2021—a significant milestone in our business transformation. This is just the beginning of our growth trajectory.
We are confident these initiatives are forging a robust operational and financial foundation to support sustained long-term growth.
After years of refining product competitiveness.
Building brand awareness and fostering user trust. Our strategic vision has never been clearer or more resolute.
Wayne Wang Huang: In Q2, our Adventure series, the T-Rex smartwatch, maintained its competitive edge with sustained volume growth. It is setting new standards in the premium outdoor smartwatch category with extreme durability, unmatched battery life, and advanced sports modes like HYROX Race, and Training mode. Our Adventure series is strengthening our credibility among endurance sports professionals and high-performance users, an audience pivotal to our long-term premiumization strategy. Moreover, we introduced a new integrated solution for training and recovery with Balance 2 smartwatch and the Helio Strap. The Balance 2 is designed for multi-sport athletes, offering advanced tracking for various sports, heart rate variability, and recovery insights.
Training recover, evolve.
In the second quarter, our adventure series.
The T-Rex smartwatch.
Maintained its competitive edge with sustained volume growth.
It is setting new standards in the premium outdoor smartwatch category with extreme durability, advanced battery life, and advanced sports modes, including hydros race and training mode.
Our adventure series is strengthening our credibility among endurance sports professionals and high-performance users and audiences pivotal to our long-term premiumization strategy.
Moreover.
We introduced a new integrated solution for training and recovery with balance to the smartwatch and the Helio shaft.
The balance is designed for multiple athletes, offering advanced tracking for various sports.
Wayne Wang Huang: Priced at $299, this flagship integrates 40,000 plus golf maps worldwide with a 1.5-inch high brightness sapphire crystal display for clear outdoor visibility, 100-meter water resistance for scuba diving, industry-leading GPS accuracy with patented circularly polarized antenna technology for urban canyons, and AI-powered Zepp Coach for runners. This all-in-one device consolidates capabilities, typically requiring multiple watches from competing brands. As the most premium offering in Amazfit's mainstream lineup to date, the Balance 2 flagship expands our user base and sets a solid foundation for future growth. The Helio Strap, Amazfit's first screen-free fitness, recovery, and sleep tracker, has garnered extensive praise from KOLs and high customer acclaim, helping us tap into a new underserved market niche. It offers subscription-free 24/7 health monitoring and advanced AI-driven smart training and recovery metrics and is an attractive alternative to competitors' products, which traditionally require premium subscriptions priced at above $200 per year.
Har variability and Recovery insights.
Price at 299.
This flagship integrates 40,000 plus golf maps worldwide, with a 1.5-inch high-brightness sapphire crystal display for clear outdoor visibility.
100-meter water resistance for scuba diving.
In industrial leading GPS, accuracy, with patterns circularly polarized at Tenno technology, for urban canyons.
And AI-powered zap, coach for runners.
These all-in-one devices consolidate capabilities, typically requiring multiple watches from competing brands.
As the most premium offering in amazing mainstream lineups today, the balance to flagship expands our user base and establishes a solid foundation for future growth.
The Hilo shop amazes with its first screen-free fairness recovery and sleep tracker.
Have garnet.
Extensive praise from KOLs and high-cut customers.
Um, a claim.
Helping us tap into a new UN underserved market niche.
It offers substitutions, free 24/7 house marketing, and an advanced AI journal, along with smart training and the Recovery Matrix.
N is an attractive alternative to competitors.
Products.
Which traditionally require premium subscriptions.
Wayne Wang Huang: Helio Strap complements the Balance 2 with continuous heart rate monitoring and 27 workout modes. Both devices sync effortlessly through the Zepp app. Its 24/7 operation, data function, and integration into a complete ecosystem distinguishes us from prominent competitors. Most recently, Helio Strap has been recognized by professional review influencers, The Quantified Scientist, as the most accurate heart rate monitoring device among all the watches and fitness trackers they have tested, surpassing industry well-known brands. At the same time, our entry-level Bip 6 and lifestyle-oriented Active 2 series continue to see steady growth across major global markets, earning strong support from retail and Amazon partners, including better sales placement, increased ordering volume, and deeper co-marketing efforts. This helps further expand brand awareness and reinforce the resilience of our tiered product strategy.
Priced at above $200 per year.
Dealership compliments the balance to, with continuous heart rate monitoring, and 27 workout months, both devices. Think it's a fact.
Effortlessly through the Zap app.
247 operation data function and integration into a complete ecosystem distinguish us from others.
prominent competitors.
Most recently, the Helio shaft has been recognized by professional review and influences the Quantified Scientists as the most accurate heart rate monitoring device among all the watches and fitness trackers that they have tested.
Surpassing industry. Well known brands.
At the same time.
Our entry-level bip, 6 and lifestyle-oriented active 2 Series continue to see steady growth across major global markets.
Placement.
Increased ordering volume and deeper cold marketing efforts.
This helped further expand brand awareness and reinforce the resilience of our tiered product strategy.
Wayne Wang Huang: Together with the new product launches in Q2, we also upgraded Zepp OS to Zepp OS 5.0, powered by AI. Zepp Flow 2.0 redefines training with voice-controlled workouts, real-time environmental data, and personalized fitness insights, delivering an intuitive hands-free experience. Through deep integration with OpenAI and Google Gemini, Zepp OS 5.0 achieved substantial advancements in both functionality and performance at a lower cost. The system now operates faster with expanded capabilities. Most notably, our food logging feature recognizes more foods and auto-categorizes their calories for users. In the meantime, our hardware and software ecosystem is expanding with integrations from third-party platforms like Strava and TrainingPeaks. We are actively working on integrating their sensors and solutions to provide more value to Amazfit users.
Together with the new product launches in the second quarter, we also upgraded Zappos to Zappos 5.0, powered by AI. This new version of Zappos redefines training with voice-controlled workouts, real-time environmental data, and personalized fairness insights, delivering an intuitive hands-free experience.
Through deep integration with OpenAI and Google Gemini, Zappos 5.0 achieved sustainable advancements in both functionality and performance at a lower cost.
The system now operates faster with expanded capabilities.
Most notably, our food locking feature recognizes more force and auto categories, along with their calories for users.
In the meantime, our hardware and software ecosystem is expanding with integrations from third-party platforms like Java and TrainingPeaks.
We are actively working on integrating their sensors and solutions to provide more value to misfit users.
Wayne Wang Huang: Operationally, our flexible supply chain and multi-region sourcing strategy have effectively shielded us from the impact amidst trade uncertainties and shifting tariff policies, reinforcing our competitive edge. By strategically diversifying our manufacturing capacity across China and Vietnam, and actively evaluating further expansion opportunities within the NAFTA region, our operational performance in H1 of this year demonstrates our ability to mitigate the majority of the tariff headwinds through greater product demands and global efficiency gains. In terms of branding and marketing positioning, our integrated region sports community strategy continues to deliver outstanding results. By strategically leveraging the influence of global celebrated athletes and collaborating closely with emerging sports communities like HYROX, we have significantly boosted our global brand recognition. These carefully curated partnerships have enhanced consumer trust, deepened emotional connections with diverse user demographics, and amplified our market presence worldwide.
Operationally, our flexible supply chain and multi-region sourcing strategy.
Have effectively sued us from the impact amid trade uncertainties and shifting tariffs policies.
Reinforcing our Competitive Edge.
By strategically diversifying our manufacturing capacity across China and Vietnam.
And actively evaluating further expansion opportunities within the NAFTA region.
Our operational performance in the first half of this year demonstrates our ability to mitigate the majority of the challenges. This has been achieved through greater product demands and global efficiency gains.
In terms of branding and marketing, positioning our integrated regional Sports Community strategy continues to deliver outstanding results.
By.
Strategically leveraging the influence of globally celebrated athletes and collaborating closely with emerging sports communities, like Hyro.
We have significantly boosted our global brand recognition.
This Carefree.
Curated Partnerships.
Has it has consumer Trust?
Definite emotional connections with diverse user demographics.
Wayne Wang Huang: In the recent HYROX events in Chicago and Hong Kong, our products made an extraordinary presence among the sports enthusiasts. We continue to cultivate a robust Amazfit athlete team, and to date, we have over 10 sports stars on board, including Gabby Thomas and Jasmine Paolini. This quarter, we are thrilled to welcome NFL first-year athlete and Pro Bowler running back, Derrick Henry and ultra runner Rod Farvard to our athlete family. We are committed to continuously creating greater value for the entire Amazfit community, our users, athletes, and all stakeholders alike. Moreover, our targeted multi-layered global marketing campaigns across platforms like YouTube, TikTok, and Instagram have created a powerful marketing matrix.
And amplified our market presence worldwide.
In the recent high-loss events in Chicago and Hong Kong.
Our product made an extraordinary presence in the sports industry.
We continue to cultivate a robust, amazing access team. And today,
We have over 10 sports stars on board, including Gabby Thomas and Jasmine Paulini.
This quarter, we are thrilled to welcome NFL first tier assets and pro, bowler running back, direct Harry, and all to Runner robbed for what to our asset family.
Our users, athletes, and all stakeholders alike.
More.
Our targeted multi-layered global marketing campaigns across platforms like YouTube, TikTok, and Instagram.
Wayne Wang Huang: From authentic functionality tests by tech influencers to fitness scenario demonstrations by wellness creators and high-profile endorsements by professional athletes, this approach has successfully elevated Zepp Health's global brand perception, resonating deeply with our target audience. The recent Amazon Prime Day serves as a perfect showcase of the effectiveness of our marketing outreach. In US, Amazfit ranked as the second most improved wearable brand year over year. In the EMEA region, our Prime Day sales surged by approximately 60% compared to the 2024 events. In summary, this outstanding quarter represents a powerful validation of our strategic transformation. Our relentless focus on sports tech and premium high-impact products has differentiated our brand in the highly competitive wearable technology market. Innovation, strategic partnerships, and operational excellence are fueling our momentum and shaping the future of connected sports experience.
Have created a powerful marketing Matrix.
From authentic functionality tasks by tech influencers to finished scenario demonstrations by wellness creators and hyper-fire endorsements by professional athletes.
This approach has successfully elevated Zap House's global brand perception.
Resonating deeply with our target audience.
The recent.
Amazon Prime Day serves as a perfect showcase of the effectiveness of our marketing outreach in the USA. Amazement ranked it as the second most improved variable brand year-over-year in the EMEA region. Our Prime Day sales surged by approximately 60% compared to 2024.
Events.
In summary.
This outstanding quarter.
Represents a powerful validation of our strategic Shams transformation.
Our relentless focus on sport, tech, and premium high-impact products.
Has differentiated our brand in the highly competitive variable technology market.
Innovation, strategic partnerships, and operational excellence are fueling our momentum and shaping the future of Zepp Health Corp.
Wayne Wang Huang: To capitalize on the industry's upcoming peak season, we are expanding our premium product portfolio with a flagship device designed to fortify our competitive edge and long-term business soon. Stay tuned. With all the things mentioned above, we are poised to capture additional market share, drive continued growth, creating sustainable value for all stakeholders. Thank you once again for your unwavering support and confidence in Zepp Health. We are incredibly excited about the future and look forward to delivering continued excellence as we progress through the H2 of 2025 and beyond. I will now turn the call over to Leon to go over the highlights of our Q2 financial results.
connected Sports Experience.
To capitalize on the industry's upcoming peak season.
We are expanding our premium product portfolio with a flagship device designed to fortify our competitive edge and long-term business soon. So stay tuned.
With all the things mentioned above, we are poised to capture additional market share.
Drive continued growth, grading sustainable value for all stakeholders.
Thank you once again for your unwavering support and confidence in our health.
We are incredibly excited about the future and look forward to delivering continued excellence as we progress through the second half of 2025 and beyond.
I will now hand the floor over to Leon to go over the highlights of our second quarter financial results.
Leon Cheng Deng: Thank you, William. Greetings, everyone. Thank you again for joining our Q2 2025 earnings call. Let me start by highlighting some key metrics from our financial results for the Q2 2025. I would like to start off by recapping the recent campaigns, such as Helio Strap debut in HYROX Chicago, led to a substantial increase in search activity and engagement. As William mentioned for the Prime Day, we achieved significant year-over-year growth in both the US and EMEA regions. In US, Amazfit ranked as the second most improved wearable brand year over year. In Europe, we significantly outperformed the overall smartwatch category growth of 32%, with particularly strong sales in Germany, Italy, and France. Our growth in the mid to premium smartwatch segment was propelled by strategic pricing, positive customer feedback, and effective offsite brand awareness initiatives.
Thank you and greetings, everyone. Thank you again for joining our second-quarter 2025 earnings call.
Let me start by highlighting some key metrics from our financial results for the second quarter of 2025.
I would like to start off by recapping the recent campaigns.
Such as Halo stripe debt in Heer Rocks, Chicago.
Led to a substantial increase in search activity and engagement.
As William mentioned, for Prime Day, we achieved significant year-over-year growth in both the USA and EMIA regions.
In US.
Administrate rent. As a second, most improved variable brand year-over-year.
In Europe, we significantly outperformed the overall smartwatch category growth of 32%.
Which particularly strong sales in Germany, Italy, and France.
Leon Cheng Deng: This strong performance sets the stage for continued success, with momentum building ahead of the key events such as the Black Friday for 2025. Now let's turn to the financials. We made an impressive progress in Q2, with robust sales driving a 46% year-over-year revenue increase, reaching $59.4 million, exceeding the upper end of our previous guidance, primarily driven by the strong demand for our Bip 6 and Active 2 series, as well as the continued success of our T-Rex 3 series. These results highlight the effectiveness of our strategic shift to Amazfit branded product ecosystem, with the market recognizing our efforts and positioning the Amazfit brand for a new phase of value reevaluation. Our performance is even more impressive in the context of the quarter's dynamic market environment. Tariff policies and global wearable technology trends continue to evolve, presenting both challenges and opportunities.
Our growth in the mid to premium smartwatch segment was propelled by strategic pricing, positive customer feedback, and effective offsite brand awareness initiatives.
Events, such as Black Friday for 2025.
Now, let's turn to the financials. We made impressive progress in the second quarter, with robust sales driving a 46% year-over-year revenue increase, reaching $59.4 million.
Exceeding the upper end of our previous guidance.
Primarily driven by the strong demand for our Big 6 and Active 2 Series.
As well as the continued success of our T-Rex 3 Series.
These two results highlight the effectiveness of our strategic shift to a misfit branded product ecosystem.
with the market recognizing our efforts and positioning the Misfit brand for a new face of value re-evaluation.
Our performance is even more interesting in the context of the quarters' dynamic marketing environment.
Leon Cheng Deng: Our proactive supply chain management and diversified manufacturing presence enhanced our operational resilience, while our value-centered product approach allowed us to deliver advanced features at more accessible price points, reinforcing our competitive edge. Turning to gross margin, it was influenced by various factors, including product mix, product launch timing, and product life cycles upgrade, such as model upgrades. In Q2 2025, we achieved a gross margin of 36.2%, on par with Q1 2025, but down slightly year over year due to a higher revenue proportion of relatively lower margin entry-level products, namely Amazfit Bip 6 and Active 2 smartwatches, and the clearance of older mid-range Amazfit Balance products to prepare for Balance 2 range launches. For the third quarter, with a full quarter of Helio Strap and Balance 2 sales, as well as several planned new products launches, we expect gross margin to expand. Now, let's turn to costs.
Tariff policies and global wearable technology trends continue to evolve, presenting both challenges and opportunities.
Our proactive supply chain management and diversified manufacturing presence have enhanced our operational resilience.
While our value-centered product approach allowed us to deliver advanced features and more accessible price points, reinforcing our competitive edge.
Turning to gross margin, it was influenced by various factors, including product mix, product launch timing, and product life cycle upgrades, such as model upgrades.
In Q2 2025, we achieved a gross margin of 36.2%.
On par with Q1 2025, but down slightly year-over-year.
Due to higher revenue, the proportion of relatively lower-margin entry-level products, namely Me, Misfit, Pip, 6, and Active 2 smartwatches, and the clearance of older mid-range Balance 1 products, prepares us for the Balance 2 wrench launches.
For the third quarter, with a full quarter of Halo Stripe and Balance 2 cells, as well as several planned new product launches.
We expect gross margin to expand.
Leon Cheng Deng: We remain steadfast in our commitment to cost management, continuing with the program that we began in Q3 2020 on reducing overall operating costs. Our overall adjusted operating cost in Q2, coming at $26 million, compared to $25 million in Q2 2024, and $32 million last quarter. By maintaining a cost-conscious approach, we're actively moving towards a run rate of approximately $25 million per quarter for operating costs. Concurrently, we remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness. Research and development expenses in Q2 2025 were $10.3 million. That increased by 4.2% year-over-year. The increase was a result from our investment in new technologies, including AI, to maintaining our competitive edge against our peers. We also have more new products in the pipeline, so stay tuned.
Now, let's turn to costs.
We remain steadfast in our commitment to cost management.
Continuing with the program that we began in Q3 2020 on reducing overall operating costs.
Our overall adjusted operating cost in the second quarter came in at $26 million, compared to $25 million in the second quarter of 2024 and $32 million last quarter.
By maintaining a cost-conscious approach, we are actively moving towards a run rate of $25 million per quarter for operating costs.
We remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness.
Research and development expenses in the second quarter of 2025 were $10.3 million, which represents an increase of 4.2% year-over-year.
Increase was a result of our investment in new technologies, including AI, to maintain our competitive edge against our peers.
Leon Cheng Deng: At the same time, we focus on refined research and development approaches as we consistently evaluated resource efficiency to ensure maximum return on investment and productivity. Selling and marketing expenses in Q2 2025 were US$12 million. That increased by 15.1% year-over-year, and a decrease of 12.7% quarter over quarter. The year-over-year increase was primarily due to the promotional campaigns to build brand recognition and drive sales growth. The quarter over quarter decrease was primarily due to the absence of large-scaled physical product launch events, such as the CES, held in Q1 2025. We continued to invest in selling expenses and signed a few more renowned athletes to expand our Amazfit athlete team in order to build brand recognition. At the same time, we consistently pushed on retail profitability and channel mix improvement.
And we also have more new products in the pipeline, so stay tuned.
At the same time, we focus on refined research and development approaches. As we consistently evaluate our resource efficiency to ensure maximum return on investment and productivity.
Marketing expenses in the second quarter of 2025 amounted to $12 million, which represents an increase of 15.41% year-over-year and a decrease of 12.7% quarter-over-quarter.
The year-over-year increase was primarily due to the promotional campaigns to build brand recognition and drive sales growth.
The quarter over a quarter decrease was primarily due to the absence of large scale physical product launch events such as the Cs held in the first quarter of 2025.
Expenses and signed a few more renowned athletes to expand our administrative assets team in order to build brand recognition.
Leon Cheng Deng: We're committed to investing efficiently in marketing and branding to ensure our sustainable growth. G&A expenses were $4.1 million in Q2 2025, compared to $4.4 million in the same quarter of 2024. As a result, we narrowed our adjusted operating loss to $4.9 million for the quarter, an improvement of 42% compared to last year. The H1 of the year is typically the seasons with lower sales compared to the H2 of the year, which resulted in an inability to fully cover our operating expenses. As of 30 June, our overall cash balance stood at $95 million, compared to $103 million in Q1 2025. Inventory increased slightly due to preparations for upcoming new product launches.
At the same time, we consistently pushed on retail profitability and channel mix improvement.
We’re committed to investing efficiently in marketing and branding to ensure our sustainable growth.
DNA expenses were $4.1 million in the second quarter of 2025 compared to $4.4 million in the same quarter of 2024.
As a result, we narrowed our adjusted operating loss to $4.9 million for the quarter, an improvement of 42% compared to last year.
The first half of the year is typically the season with lower sales compared to the second half of the year.
Which resulted in the inability to fully cover our operating expenses?
As of June 30th, our overall cash balance stood at $95 million compared to $103 million in Q1 2025.
Leon Cheng Deng: Overall cash position saw a small quarter on quarter decrease, largely influenced by timing and operating performance factors, offset in part by solid working capital management that continues to deliver strong results. In Q3, we expect our overall cash balance to grow from its current levels. In terms of capital structure, our overall long-term and short-term debt levels remained consistent between Q1 and Q2 2025, following the restructuring we completed during Q1. We refinanced a significant portion of our short-term debt into long-term instruments with more favorable interest rates and a 2-year duration, which significantly reduced near-term liquidity pressures and enhanced our overall capital structure. Since Q1 2023, the company has cumulatively retired $68.0 million of debt. We'll continue to optimize the capital structure for the company.
Inventory increased slightly due to preparations for upcoming new product launches.
Overall cash position saw a small quarter-on-quarter decrease, largely influenced by timing and operating performance factors.
offset in part by solid working capital management that continues to deliver strong results.
In Q3, we expect our overall cash balance to grow from its current levels.
In terms of capital structure, our overall long-term and short-term debt levels remained consistent between the first and the second quarter of 2025 following the restructuring we completed during the first quarter.
We refinanced a significant portion of our short-term debt into long-term instruments with more favorable interest rates and a 2-year duration.
which significantly reduced near-term liquidity pressures and enhanced our overall capital structure.
since the first quarter of 2023,
The company has cumulatively retired 60.8 million and 68.0 million.
We'll continue to optimize the capital structure for the company.
Leon Cheng Deng: We're pleased to reconfirm our commitment to our share repurchase program in 2025, reflecting our confidence in Zepp's fundamentals and long-term trajectory. We believe our valuation continues to represent an attractive opportunity to return value to shareholders in the current market environment. Finally, our outlook for Q3 2025. We expect revenue to be in the range of $72 to 76 million, representing a 70% to 79% year-over-year growth, compared to $42.5 million in Q3 2024. Furthermore, our efforts to reduce operating expenses and improve gross margins are proving effective even as we invest in developing and launching new products. We're very excited to enter the next phase of our post-transformation development with strong momentum. Thank you all for your time today. I will now open the calls for questions. Operator, please go ahead.
We're pleased to reconfirm our commitment to our share repurchase program in 2025.
Reflecting our confidence in the fundamentals and long-term trajectory.
We believe our valuation continues to represent an attractive opportunity to return value to shareholders in the current market environment.
Finally, our outlook for the third quarter of 2025: we expect revenue to be in the range of $72 million to $76 million.
Representing a 70% to 79% year-over-year growth compared to $42.5 million in the third quarter of 2024.
Furthermore, our efforts to reduce operating expenses and improve gross margins are proving effective, even as we invest in developing and launching new products.
We're very excited to enter the next phase of our post-transformation development with strong momentum.
Thank you all for your time today. I will now open the calls for questions.
Operator. Please go ahead.
Operator 2: Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Once again, it's star and then one to ask a question. At this time, we will pause momentarily to assemble our roster. Our first question today will come from Siddharth Rajeev of Fundamental Research Corp. Please go ahead.
Thank you.
We will now begin the question and answer session. To ask a question, you may press star and then 1.
On your touchtone fan.
If you are using a speakerphone, please pick up your handset before pressing the keys.
And to withdraw your question, please press star, then 2.
Once again, this is star and then 1 to ask a question.
And at this time, we will pause momentarily to assemble our roster.
Siddharth Rajeev: Thank you. Congratulations to the entire team at Zepp on a strong quarter and your strong guidance for Q3. Firstly, could you please give more color on the recent spike in share price drivers?
Our first question today will come from Said Raji of Fundamental Research. Please go ahead.
The entire team at Zepp congratulates you on a strong quarter and your strong guidance for Q3.
Firstly.
Color on the recent spike in share price. What are the drivers?
Leon Cheng Deng: Sid, yeah. I think if you ask me, there's a few things which are happening. Number 1, we continue to see that our products are well received by the markets, and our brand is getting noticed everywhere. I just mentioned that we had one of the best Amazon Prime Day we had in the company's history, right? The second thing, I would say, probably it's coming out of the value discovery journey, which is happening right now in the overall market. Because a lot of investors probably see that smart hardware companies like us are taking market share versus the competitors. I think I mentioned this many times before, we are hugely undervalued, if you look at the fair value of our shareholder equity value or if you look at our peers, right? I'm not surprised by the recent share price movement.
s***. Um, uh, yeah. Um, I think I think it's if you ask me. Um, there's um, a few things which are happening. Now, number 1, we continue to see that the our products are well received by the markets and our brand is getting noticed everywhere. And I just mentioned that we had the 1 of the best, um, Amazon, um uh, day we had in the company's history, right? Um, and the second thing, the second thing I I would say, uh, probably it's coming out of the, uh, the value Discovery Journey, which, uh, is happening right now, uh, in the overall Market. Yeah. Because a lot of, um, investors probably see that um, uh, smart, uh, Hardware companies.
Leon Cheng Deng: As a management, we believe if we continue to execute the strategy which we embarked upon, you will see continued growth, the value revaluation, as I mentioned in my script, in the upcoming quarters and years.
Like us are taking, uh, market, share versus a competitor's and then, uh, we are. I think I mentioned this many times before, uh, we are hugely undervalued, if you look at the fair value of our, um, uh, shareholder Equity value, or if you look at our peers, right? Uh, so I'm not surprised by the uh, beaten share price movement. Um, and I, and I as a management, we believe if we continue to execute, uh, the strategy which we embarked upon, um, you will see continued growth and then the value revaluation. As I mentioned in my scripts, um, in the upcoming quarters and years
Siddharth Rajeev: Thank you. How many more product launches in H2 of the year versus how many did you launch in H1?
Thank you. How many more product launches are planned for the second half of the year? How many did you launch in the first half?
Leon Cheng Deng: I think on the H1, in Q1, we launched our entry-level new products. We refreshed the line, and it's actually well received by the customers. To name a few, it's Bip 6 and Active 2. In Q2, we actually managed to refresh our mid-tier line, the Balance 2, and also we coupled that with a new device, which is called Helio Strap. It's actually well received by the customers, and it has been ranked as the best heart rate sensors out of all the wearables, which the KOL has ever tested. In the upcoming quarters, I'm sorry, I cannot tell you exactly what it is, but if you listen to Wayne's script and if you listen to my script, we have very exciting products in the pipeline for Q3 and Q4.
I think, um, on the first half, we enqueued 2 in q1. We launched our entry-level, uh, new products; we refreshed the line, uh, and it's actually well received by the customers. To name a few, it's Bit 6 and uh, Active 2.
And then in Q2, we actually managed to refresh our mid-tier line, the balance, uh, uh, 2. And also, we couple that with a new device, which is, uh, caught Helio stripe. It's actually well, received by the customers, uh, and it has been ranked as the best, uh, uh, heart rate, sensors, uh, out of all the variables, um, which uh, the KO has ever tested.
Leon Cheng Deng: I think it will be for sure on par with the new product launches we had in the H2 of previous year, if not more. We do have a lot of new products in the pipeline in the upcoming quarters.
Uh, so and then in the upcoming quarters, uh, I think I have, I'm sorry. I cannot tell you exactly what it is. But um, if you listen to Waze script and if you listen to my script, we have, uh, very exciting products in the pipeline for Q3 and Q4
Siddharth Rajeev: Got it.
Um, I think it will be for sure on par with the new product launches we had in the second half of the previous year, if not more. We do have a lot of new products in the pipeline in the upcoming quarters.
Leon Cheng Deng: Stay tuned.
Siddharth Rajeev: Got it, thanks. In terms of gross margin, I know you said you expect gross margins to improve in the coming quarters. Do you think you can hit closer to 40% for the full year?
Thank you.
Got it. Thanks. In terms of gross margins, I know you said you expect gross margins to improve in the coming quarters. Do you think you can hit closer to 40% for the full year?
Leon Cheng Deng: Yeah. We don't guide on gross margins, but our business has a seasonal factor here. If you look at Q1 and Q2, we refreshed our entry-level line, and then rightfully so, entry-level lines carries less than-Our premium or mid-tier product lines gross margin. That actually has a small mix impact in Q1 and Q2 gross margin you see. As we are heading into Q3, we have a full quarter of Balance 2 and Helio Strap, and also the new products, which is on the horizon for us to push into the market. Those would definitely lift the product mix for H2 of the year for the company. I for sure would expect that our gross margin is going to expand in H2 of the year.
Leon Cheng Deng: That is how you should look at the gross margin for our company for the upcoming quarters and for the full year.
For us to push into the market. Those would definitely lift the product mix for the second half of the year for the company. So, uh, I I I, I I for sure would expect that our gross margin is going to expand in the second half of the year. Um, and and and that's that's
Siddharth Rajeev: Okay. Just one final question, if I may. Given the lot of back and forth on tariffs, are you able to tell us more about what % of your imports to US comes from Vietnam? What are the current tariffs you are experiencing for your Chinese and Vietnam production?
That is how you should look at the gross margin for our company for the upcoming quarters and for the full year.
Leon Cheng Deng: Now, okay. I think it's public information, right?
Okay, just one final question, if I may. Given the lot of back and forth on sales, are you able to tell us more about what percent of your imports, or uh, to us comes from Vietnam? And what are the current titles you are experiencing for Chinese and Vietnam production?
Siddharth Rajeev: Yeah.
Leon Cheng Deng: If I'm shipping the products from China to US, the tariff at this moment is just south of 25% at this moment for our product category. If we're shipping the same thing out of Vietnam towards US, the tariff impact on that is close to 0. On certain products, between Vietnam and US, there's a tariff waiver on it. The idea here is that if we can ship as much as the products out of Vietnam to US, we can mitigate the tariff impact in full. Rightfully so, if you look at our impact for Q1 and Q2 on the tariff, I have to say, it's better than what we have expected. Yes, there's some impact on the tariffs, especially on the part from China to US.
No. Okay, so I I think it's public information, right? Uh, so if I'm shipping the products from China to us the tariffs at this moment, it's just, uh, uh, south of 25% at this moment. Yeah. For our product, uh, for our product category. Yeah. If we are shipping the same thing out of Vietnam towards us, um, the, uh, the terrorists impact on that is close to zero because on certain uh, products, uh, between Vietnam and us, uh,
Leon Cheng Deng: We could offset majority of that through productivity gains in the other parts of the BOM.
Siddharth Rajeev: Thank you so much, Leon Deng.
There's a, a, a tariff waver on that. So, uh, the idea here is that if we can ship as much as a product out of Vietnam to us, then we can mitigate the, the Tariff impact info, um, and and, and, and, and rightfully. So, um, if you look at our impact for the first and second quarter on the Tariff, uh, it's almost or I have to say it's better than what we have expected. Yes, there's some impact on the tariffs, um, uh, especially on the part from China to the US but then we could offset majority of that through productivity gains, um, in the other parts of the uh, of the bomb.
Thank you so much, Leah.
Leon Cheng Deng: Okay. Thank you, Sid.
Okay, thank you, sir.
Operator 2: Our next question today will come from Dylan Chu of Point72 Hong Kong. Please go ahead with your question.
Our next question today will come from Dillon, 2 of 0.72 Hong Kong. Please go ahead with your question.
Dylan Chu: Hey. Good morning, management. Thanks for the opportunity to ask question. Congratulations on the strength set of results. Maybe 2 questions, just following up on gross margin. Number 1 would be, what kind of sales contribution would you expect from the new Helio Strap launch? What kind of gross margin do you expect the product to carry, and how would it sort of evolve as the scale continues to ramp up? Number 2, slightly medium-term, into 3 years, as your sales product mix continue to improve, how should we think about your gross margin benchmarking against Garmin's Fenix lines? Because right now, at around 40%, we're sort of close to their opening margin. If we further upgrade our product mix, I'm just wondering if you can give us a little bit color on your medium-term gross margin and thoughts. Thank you.
Hey, good morning management. Thanks uh, for the opportunity to have questioned set of results. Uh, maybe uh uh 2 questions, um, just following up on gross margin. Uh, number 1 would be uh,
What kind of sales contribution would you expect from the new, uh, Halo strap lounge? And what kind of gross margin? Uh, do you expect, uh, the product to carry and how would it, uh, sort of evolved as a skill continues to ramp up? Um, and number 2, study, immediate term, you know, in 2 to 3 years, uh, as yourself, uh, product makes continue to improve. Uh, how should we think about our growth margin? Um, benchmarking against s guidance? Uh, Finish Lines. Uh, because right now at, you know, uh, around 40%, we're sort of close to their open margin. Um, if we, um, further upgrade our product but, uh, product makes, I'm just wondering if you can give us a little bit of color on your medium term. Uh, gosh man, thoughts, thank you.
Leon Cheng Deng: Hi. Yeah. Let me comment on your first question first, on the Helio Strap, right? The Helio Strap, we only launched it in June, and after we launched it in June, it actually received a very good popularity from the customers who bought it. I think this product, if you ask us, it has a unique value to our company because we are being noticed, and it's the first time that serious performance users are actually buying our devices for the reason that we have the best heart rate sensors in the market, and we also have the best insights which can be provided by our Zepp OS and our Zepp app towards the users who are using it.
Hi. Um, yeah. So, let me, um, um, let me comment on your first question first, uh, on the head of Stripe, right? Um, the Helios Stripe, we only launched it in June, and after we launched it in June, it actually received, uh, a very good, uh, popularity from the customers who bought it. I think, uh, this product, if you ask us, it has, uh, a unique, um, um, um, value to our company because we are being noticed and it's the first time that, uh,
Leon Cheng Deng: We also mentioned that if you benchmark this product against its competitors, it's much cheaper, it's much better from a performance perspective, and it's gaining popularity, and it's actually, I think if you ask me, we're having more supply constraint versus the demand. Helio Strap in itself, it carries a very healthy gross margin, because on one hand, it's a relatively cheap product. It has been priced at $99, right? On the other hand, it has quite healthy gross margin, which is on par with the overall company's gross margin we're currently having. Right? The more we can sell on the Helio Strap, in the future, it might become a separate line by itself. It's still very early to say. That's how you should look at the Helio Strap.
Editors. Um, it's much cheaper. It's much better from a performance perspective and, uh, um, it's, it's gaining popularity and it's actually, um, uh, I I think if you ask me, we're having more, uh, Supply, uh, uh, constrain, uh, versus the demand. So, uh, and and Halo stripe in itself. It carries a very health, uh, gross margin, uh, because, um, on 1 hand, it's a relatively, uh, uh, cheap product. It has been priced at $99, right? Um, but, um, on the other hand, uh, it has quite healthy, uh, uh, gross margin, which is on par with the overall company's growth margin, where, where company, having right? So, uh, the more we can, uh, uh, we can sell on The Helio stripe in the future. It might become
It's a step line by itself, but it's still very early to say, right?
Leon Cheng Deng: If I come back to your second question, obviously, if you go back to the products we have, on a very broad part, we have the Outdoor series, which is represented by T-Rex. We have the Balance series, which is our mid-tier product, which is competing against the mainstream Apple and Samsung watch. We have the Essential series, which is in the price range of around $100, which is representing the Bip 6, and the Active 2 watches we're having. We're actually covering the full price range of different price ranges for the smartwatches. Different ranges from the entry level all the way till the most high-end watches, obviously, it carries different gross margin, from low to high. Right? On a mix perspective, we think the proportion of the high-end and the mid-end products will continue to expand in a midterm.
That's how you should look at the failures, right? Um, and then, if I come back to your second question, uh, obviously, um, if you go back to the products, we have, uh, on a very broad part, we have the, uh, outdoor series which is represented by T-Rex. Uh, we have the balance series, which is our meet tier product.
Which is, uh, uh, which is competing against the mainstream Apple and Samsung watch. And then we have the essential series, which is in price range of, uh, uh, around $100, uh, which is representing the big 6, uh, and active 2 watches. Uh, we're having. So we're actually covering the full, uh, price range, uh, of of, of different price ranges or for the smart watches and, um, different ranges. Um, from the entry-level all the way to the, uh, the the most high-end uh, uh, watches. Obviously, you carries different gross margin from low to high, right? Um, and, um, we on a mix, uh, perspective. Uh, we think, um, the uh, the proportion of the high-end and the mid and, uh,
Leon Cheng Deng: Over 2 years to 3 years time frame, or maybe shorter than that. We still want to have a good base and a funnel from the entry level products, because we also see that there's a growing demand and popularity on the products which we price at $100. Yeah, this is maybe a quite long answer to your question. I think in the upcoming 2 years or mid to long term, you should expect our gross margin to further expand above the 40%, which we set as a goal for now.
Products will continue to expand um, in a mid-term. So over 2 years, to 3 years, time frame, or maybe uh, shorter than that. Uh, and um, we still want to have a good base, uh, and a funnel from the entry-level products. Because we also see that there's a uh, uh, there's a, there's a growing amount and popularity, on the products, which we priced at
So, um, yeah, this is maybe, uh, quite a long answer to your question. I think in the, uh, upcoming two years or mid to long term, you should um, expect our gross margin to further expand above the 40% which we set as a goal for now.
Dylan Chu: Yeah. Thank you. That's very clear. Could I please maybe have a follow-up for one quick question? You mentioned the Helio Strap is running into a little supply constraint. I'm just wondering, when do you expect it to sort of improve? What kind of capacity or volume expectation can we possibly have for next year?
Leon Cheng Deng: No, I think we're working day and night to improve on the supply issues as we speak. Yeah, I think in Q3, we should be able to resolve it. That's why, I mean, you should be able to see a full Q3, with the Helio Strap performance from a run rate perspective.
Yeah, thank you. And that's very clear. Could I please make you a follow-up 1? Quick question you mentioned the Halo strap is running into a little Supply. Uh, constraint just want to, when do you expect it to, uh, sort of improve, um, and, and what kind of capacity, or or volume expectation? Can we possibly have for next year?
No, I think, I think where where, where, where where, where we're working day and night, to improve on the supply, uh, uh, issues as we speak. So I think in Q3, we will be able to resolve it. Um, so that's why I mean your you should be able to see uh, uh, a full Q3, uh, with The Helio stripe. Uh, uh performance, uh, in a from a run rate perspective.
Dylan Chu: Got it. Thank you. That's all my question. Thank you.
Got it. Thank you. That's all my questions. Thank you.
Leon Cheng Deng: Thank you.
Thank you.
Operator 2: Our next question today will come from Frank Brogan of Brooks Investments. Please go ahead.
Our next question today will come from Frank Dugan of Brooks Investments. Please go ahead.
Frank Brogan: All right. Thank you. Congratulations for such a good quarter. I only have one question. You mentioned a very strong guidance for Q3. What's going to be the main driver for that?
All right, thank you. Congratulations on such a good quarter. I only have one question: you mentioned a very strong guidance for Q3. So what's going to be the main driver for this?
Leon Cheng Deng: I think I just mentioned, there's a few things. Number 1, the Essential series, the Bip and Active 2, the entry-level products, continue to get traction. We have a very strong Amazon Prime Day performance out of those 2 products. These 2 products will continue to perform for Q3. Also from a seasonality perspective, Q3 to Q4 are typically the high seasons for smartwatch and electronics purchase. Right? That's number 1. Number 2, we recently launched Balance 2 and the Helio Strap. Those are 2 products which we launched in June, and it's actually a big and major refresh of our mid-range products. It actually received very good reviews from the KOLs and also the consumers. These 2 products is going to continue to perform in the course of Q3, and it will be a full quarter performance.
Leon Cheng Deng: What you see in Q2 is only 1 month. Right? That's number 2. Number 3 is that our T-Rex 3, which is our flagship line, continue to perform. It was well-received the moment it was launched last year, Q3. Every quarter, it just steadily growing in its popularity. These 3 lines, as I just mentioned, will continue to perform in Q3. Not to mention, we have something, which William also hinted to, interesting product, which we're very proud of, to be launched in Q3 as well. A factor of the 4 would drive the growth for Q3.
Off those 2 products. So, these 2, 2 products will continue to perform uh for Q3. Um and also from a seasonality perspective, Q3 Q4 typically the high seasons for uh, smart watch and uh, uh, electronics purchase, right? Uh, so that's number 1. Number 2, we recently, uh, launched balance tool and, uh, Helio stripe. Those are 2 products, which we launched in June, and it's actually a big and major refresh of our, uh, mid-range products. Um, and they actually received a very good, uh, reviews from the kols and also the consumers. Um, so these 2 products, it's going to continue to perform in the course of Q3, and it will be a full quarter performance. So, what you see in Q2 is only 1 month.
uh, so that's number to
Number 3, is that, uh, our T-Rex 3, we uh uh, which is our uh, Flagship line continued to perform. It actually performed. Uh it was well, received the moment, it was it got launched last year to 3 and then every quarter it just steadily growing in its popularity.
So so so these 3 lines as I just mentioned will continue to perform in uh Q3 and not to mention, we have something which we also hinted to um uh uh uh uh uh uh uh interesting product, which were very proud of uh, to be launched in Q3 as well. So a factor of the 4 would drive the growth, uh, for Q3
Frank Brogan: Okay, thank you.
Okay, thank you.
Leon Cheng Deng: Thank you.
Thank you.
Operator 2: Ladies and gentlemen, at this time, we will conclude our question-and-answer session. I'd like to turn the conference back over to Grace Zhang for any closing remarks.
Ladies and gentlemen, at this time, we will conclude our question-and-answer session.
I'd like to turn the conference back over to pick Gray for any closing remarks.
Grace Zhang: Thank you once again for joining us today. If you have further questions, please feel free to contact Zepp's Investor Relations Department through the contact information provided on our IR website. Thank you.
Thank you once again for joining us today. If you have further questions, please feel free to contact Zaps Investor Relations Department through the contact information provided on our IR website. Thank you.
Operator 2: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
The conference has now concluded. Thank you for attending today's presentation.
And you may now disconnect your lines.