Full Transcript: Zepp Health Q1 2026 Earnings Call

Zepp Health (NYSE:ZEPP) reported first-quarter financial results on Monday. The transcript from the company's first-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://www.zepp.com/events-and-investor-kit#Webcasts-Presentations

Summary

Zepp Health Corporation reported strong financial performance for 2025, with full-year revenue growth of 41.8% and Q4 revenue growth of 43% year over year, driven by the success of Amazfit branded products.

The company is transitioning from a traditional hardware company to a hybrid training platform, focusing on premium products and expanding its ecosystem through AI-driven insights.

For Q1 2026, Zepp Health expects revenue between $50 million and $55 million, representing a 30-43% year-over-year increase, highlighting confidence in structural demand rather than seasonal trends.

Operational highlights include record gross margins of 40.4% in Q4 due to a favorable product mix and successful brand positioning, particularly with the premium T-Rex and Balance series.

Strategic initiatives include partnerships with elite athletes and collaboration with hybrid endurance competitions to enhance brand visibility and credibility.

Management is focused on cost management, with plans to reduce operating expenses relative to revenue in 2026, and maintain a strong balance sheet with a $113 million cash position.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by for Zepp Health's fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Grace Young, Director of Investor Relations for the Company. Please go ahead, Grace.

Grace Young (Director of Investor Relations)

Hello everyone and welcome to Zepp Health's fourth quarter and full year 2025 earnings conference call. The Company's financial and operating results were issued in a press release of 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 IR section of the Company's website. Presenting today are Wang Huang, our Founder and Chief Executive Officer, and Liang Deng, our Chief Financial Officer.

Joining us today we also have Mike Yang, Chief Operating Officer and General Manager of North America, and Eric Fleming, VP of Capital Markets in North America. 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. 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 20F for the fiscal year ended December 31, 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 Health's earnings press release and the conference call includes discussions of unaudited GAAP financial information as well as unaudited non GAAP financial information.

Zepp Health'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 Wen. Please go ahead.

Wen (likely Wayne Huang)

Hello everyone and thank you for joining us today. Before going into the details of the quarter, let me first share how we see Zepp evolving. Over the past few years, we have been transforming Zepp from a traditional wearable hardware company into what we call a hybrid training platform. Our goal is not simply to launch competitive devices, but to build a broader performance system that integrates endurance, change and recovery through hardware, training, intelligence software and data capabilities.

With that Context in mind, 2025 was a strong year for Zepp. For the full year, Amazfit branded product revenue grew 51% year over year. In the fourth quarter, Amazfit branded product sales grew 45% year over year while gross margin reached a record level of 40.3%. Importantly, this growth was achieved without relying on heavy discounting during the holiday season. These results reflect the continued progress of our multi year transformation as we evolve from a volume driven business toward a brand lead and premium focused global company.

They also demonstrate strengthening pricing power across our portfolio as our product makes continuous shifting toward higher value segments. Turning into our product highlights

Our growth in Q4 was broad based across both entry level and premium segments as we continue expanding our portfolio to serve a wider range of users and training scenarios. At CES, we launched Amazfit Active Max. The newest member of the Active family, Active Max fills the gap between our entry level lifestyle watches and our Rocky outdoor series. It targets everyday trainers beginning their fitness journey. It features a vibrant AMOLED display, long Battery Life, over 170 workout modes and built in support for offline maps and training guidance.

Powered by Zap Coach, we also recently introduced Active 3 Premium designed specifically for new and entry level runners. Positioned around 169 US dollar price tier, Active Max and Active 3 premium reinforce the core volume segment of our portfolio while expanding our rich among users beginning structures training in our premium portfolio, the T Rex and Balance series continue to perform strongly. In February we launched T Rex Ultra 2, our newest flagship outdoor watch.

Built with grade 5 titanium and designed for extreme durability, Ultra 2 extends the top end of our portfolio to around the 550 US dollar price level, the highest price point in our history. Products like Ultra 2 reinforce the premium positioning of the AMAZFIT brand while expanding the selling of our product portfolio. On the software side, we continue strengthening our ecosystem through Updates to Zepp OS. Features such as BioCharge Energy Marketing and Zepcode's AI driven training guidance are now reaching more devices and helping increase engagement, retention and long term user value.

Together, our Zepp app, wearables and sensor technologies are creating a stronger ecosystem around our hardware foundation, forming what we believe is a growing defensive mode around our platform by increasing switching costs, improving user retention and expanding lifetime value. On the brand side, we have also made deliberate investments to elevate our credibility in the global performance sports community. This month we announced a partnership with Josh Kerr, a two time Olympic medalist and world champion middle distance runner.

Josh joins our growing roster of elite athletes including Grant Fisher, Daniel Henry and Ruth Croft. These athletes are not just brand ambassadors, they actively use AMAZFIT devices such as balance2Helio Ring and Helio Strap in their daily training and recovery. When world class athletes rely on our data and training insights to prepare for the highest level of competition, it sends a powerful signal about the accuracy, credibility and performance capabilities of our technology.

Another important component of our strategy is our collaboration with Tyrox, one of the fastest growing hybrid endurance competitions globally. At Tyrox races around the world, including recent events in cities such as Phoenix and Las Vegas, athletes gather in front of their official results screen to capture and share their finished clients. Directly beneath the race results appears presented by Amazfit, making Amazfit the most prominent brand integrated into that moment.

When athletes share those results across social platforms, the brand naturally spread through affiliate generated content rather than paid promotion. This is not traditional sponsorship visibility, it is infrastructure level exposure embedded directly into the athlete experience. More broadly, Tyrox plays a key role in our hybrid training strategy which integrates endurance, strength and recovery into one coherent performance system where variable data, training intelligence and real world performance validation converge.

Looking ahead to 2026, we remain focused on strengthening our premium product lineup, expanding our ecosystem through AI driven training, insights and performance technologies, and deepening our engagement with performance focused communities. For the first quarter of 2026 we expect revenue in the range of 50 million to 55 million US dollars representing an increase of 30% to 43% year. This outlook reflects our confidence that the demand we are seeing is not simply seasonal but structural.

We believe we now have the right combination of products, channels and cost structure to drive sustainable growth and a clear path towards sustained profitability. As our premium mix continues to expand and higher margin categories scale, we expect our margin profile to continue strengthening. With that, I will now turn the call over to Liam to walk through the financial details. Liam, please go ahead.

Liam (likely Liang Deng)

Thank you Wayne. Greetings everyone. Thank you again for joining our fourth quarter and full year 2025 earnings call. In the last quarter of 2025 our revenue rose to 85.2 million up 43% year over year, meeting the upper end of our guidance range. For full year 2025 revenue reached 259 million representing a 41.8% year over year growth compared with US dollar's 183 million in 2024, marking a return to growth trajectory. Our fourth quarter growth was driven by broad-based strength across our diversified portfolio.

As Wen mentioned, our 2025 Q4, Amazfit branded product sales increased by 45.4% year over year and 12.4% sequentially, fueled by strong execution during the critical Black Friday and Christmas sales seasons where our brand visibility reached new heights across major E commerce channels. Additionally, our established premium lines, specifically the T-Rex and Balance series, continue to see sustained demand, further validating our premiumization strategy and boosting our average selling price.

Look ahead. We have just started selling off our Active 3 Premium Activemax and T-Rex Ultra 2 watches and together with our upcoming new product launches, we expect the top line expansion continues into 2026. Turning now to gross margin, it was influenced by various factors including product mix, product launch timing and product life cycles such as model upgrades. In Q4 we achieved a record gross margin of 40.4%, an impressive expansion of 3.6 and 2.2 percentage points compared with same period of 2024 and third quarter of 2025.

It is the highlight of this quarter's financial performance and the strongest indicator of our improving brand recognition and supply chain management. This margin performance was driven by two key factors that I want to elaborate on. First, we realized a highly favorable mix shift with higher contributions from the Premium Adventure series of our AMAZFIT branded products. This shift away from lower margin legacy products towards newer high value SKUs naturally elevate our margin profile.

Second, we were able to maintain price integrity even during higher promotional periods like Black Friday, further boosting margins. The strong gross margin driven by our product mix more than offset the headwinds were facing from FX fluctuations, memory chips, cost increase and tariffs aimed at macroeconomic uncertainties. Gross margin in the full year 2025 was 38.3%. We remain on track with our margin expansion strategy initiated in the second half of 2023 and we expect the trend to continue into 2026 as we further optimize our product mix and supply chain efficiency.

Next expenses we remain committed to prudent cost management, continuing the program we began in 2020 to reduce overall operating costs while investing for growth. Total non GAAP operating expenses for the fourth quarter or 37.1 million expenses as a percentage of sales improved by approximately 6% compared to Q4 2024. However, in absolute amount it is up by around 8 million year over year and quarter over quarter. I will break down the specific driver of this increase to help you understand the quality of our spending.

Approximately around 1 million is directly attributed to certain fixed channel cost investments to drive direct top line growth as we ship more units and generate more revenue. Certain variable selling and logistic expenses naturally rise in tandem. Second, we recorded around 5 million year end provisions, non cash adjustment for potential bad debt and business model optimization as part of our ongoing risk management Strategy and another US$1million investments in patent fees and brand protection to safeguard our intellectual properties and ensure long term business success.

In total 6 million. Finally and most importantly, we strategically invested around 1 million in front loaded marketing initiatives including upfront costs for elite athlete sponsorships such as partnerships with Olympic medalist Josh Kerr as well as some investments on marketing and branding activities that filled the adoption of new products launches. As you can see except for the first element majority of the cost increase are not structural cost increases.

We expect lower operating costs relative to revenue in 2026 as these one off cost normalize and will realize further cost efficiencies by line item adjusted research and development expenses where US dollars 10.2 million remained relatively stable quarter over quarter and year over year. We continue to invest in a series of cutting edge products as well as new technologies including AI to maintain our competitive edge against our peers. At the same time we focus on refined research and development approaches as we consistently evaluated resources efficiency to optimize return on investment and productivity.

Adjusted selling and marketing expenses were 15.6 million reflecting the front loaded branding investment I just mentioned. We're seeing a strong return on investment for these marketing dollars as evidenced by our market share gains in in US and Europe. the same time we consistently pushed retail profitability and channel mix improvement. Adjusted G and A expenses were 11.3 million compared with US dollars 6.1 and US dollars 6.5 million in the same period of 2024 and third quarter of 2025.

The increase is mainly driven by the year end provisions I mentioned above, excluding those G&A expenses remained flat through the year. We continue to streamline overhead maintaining disciplined cost control while improved operating efficiency. Total adjusted operating expenses were US dollars 123 million in 2025 compared with US dollars 110 million for the full year 2024. The increase is directly attributable to the reasons I explained above. Adjusted operating expenses for 2025 excluding these would be US dollars 110 million.

We will maintain our cost conscious approach and remain committed to investing in R and D and marketing activities to ensure our long term competitiveness. In Q4, adjusted net loss attributed to debt health was US dollars 6.4 million compared to adjusted net loss of US dollars 22.5 million in the fourth quarter of 2024. The net loss in Q4 was mainly a result of running operating results more than offset by 2 million deferred tax, asset provision and 6 million one off provisions.

Full year adjusted net loss attributed to the company was US dollars 31.5 million compared with the adjusted net loss of US dollars 56.7 million for 2024. The net loss for 2025 were mainly from deferred tax, asset provision, one time specially identified provisions and operating loss from the first half of the year 2025. In terms of our balance sheet and working capital, we continue to manage our inventory rigorously despite strategic risk purchases of key components for the future.

Our inventory balances decreased to US dollars 72.8 million compared with US dollars 87.7 million as of Q3 2025, reflecting our ongoing improvements in inventory management. As of December 31, 2025, our cash and cash equivalent stood at 113 million compared to US dollars 103 million as of Q3 2025 and 111 million as of December 2024. We delivered another quarter of positive operating cash flow, further strengthening our liquidity position. This consistent cash generation capability provides ample Runway for us to invest and seize potential market opportunities.

In terms of capital structure, our overall long term and short term debt levels remained relatively consistent following the restructuring we completed in Q1 2025. However, you may notice a sequential increase in our reported Debt levels in Q4 as a result of refinancing short term debt into long term debt, capitalizing on favorable rates to minimize interest payments. While we are focused on reducing our overall debt level over the longer term, there may be temporary fluctuations in debt levels quarter to quarter due to timing of refinancing and repayment activities.

Since the beginning of 2023, we have cumulatively retired US dollars 58 million of debt and will continue to optimize the capital structure going forward. Given our confidence in the company's strong fundamentals and sustainable growth trajectory, we are reaffirming our commitment to our share repurchase program in 2026. We view the program as effective use of capital that aligns with our focus on delivering sustainable long term value to shareholders.

Before we talk about guidance, I would like to walk you through some of the key macroeconomic and industrial specific factors we are currently facing, including the recent memory chip movement. While we are not immune to memory cost inflation, it is important to note that our products have modest memory requirements compared to other categories like PC and phones. Consumers don't choose our products based on memory configurations, they choose us for their experiences and accuracy.

We deliver. Furthermore, we manage our entire BOM cost holistically. While memory costs have risen somewhat, our vertically integrated supply chain provides us with multiple levers to optimize our overall cost structure. We are continuously focused on driving efficiency throughout the supply chain by leveraging our scale and integration. Additionally, we have intentionally increased inventory levels of certain key components, including risk buys, to ensure we can meet long term demand.

Our strong relationships with suppliers allow us to align with anticipated product demand. And while supply chain challenges are inevitable, we're confident in our ability to navigate them. Lastly, and most importantly, as demonstrated in past quarters, we have seen a steady increase in the average selling price of our products. We firmly believe that compared to our competitors, our pricing still has ample room to grow. In fact, price increases have more than offset the rise in memory costs and helped us in navigating through macroeconomic uncertainties.

Finally, our outlook for the first quarter of 2026. We are entering the year with strong momentum. Despite the first quarter traditionally being a slower season for the consumer electronics industry. We expect revenue to be in the range of 50 million to 55 million, representing year over year growth of approximately 30 to 43%. This guidance reflects our current visibility into our order book and strong sell through trends in our key markets. With strong financial fundamentals, a clear path to continue margin expansion, and solid operational discipline, we are well positioned to deliver profitable growth and create long term shareholder value.

Thank you all for your time today. I will now open the call for questions. Operator, please go ahead.

OPERATOR

Thank you. We will now begin the question and answer session. To ask a question, you may press start then 1. On your touchtone phone, if you are using a speakerphone, please pick up your handset before pressing the keys. 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 questions to the company's management in Chinese, please immediately repeat your question in English.

At this time, we will pause momentarily to assemble our roster. Your first question comes from Ben Rajeev with Fundamental Research Corp. Please go.

Ben Rajeev (Equity Analyst)

Hi. Congratulations on the strong revenue growth and the new product launches. Also, nice to see you're anticipating robust revenue growth in Q1. How many new products are you planning to launch this year compared to last year? Just a rough idea is fine.

Wen (likely Wayne Huang)

I said I think it's around similar products, maybe slightly more so. If I'm not mistaken, last year we have launched around nine products or so and this year probably is at the same quantity or number of that or maybe slightly more. Okay.

Ben Rajeev (Equity Analyst)

And how are you preparing for the recent spike in the US Dollar?

Wen (likely Wayne Huang)

We are not that much exposed to the currency fluctuations on the dollars. I think a lot of our production is diversified in Asia in different places, and if you look at our markets, we are very strong in Western Europe markets as well as the US markets. So yeah, to some extent the dollar strengthening is actually giving us some tailwind instead of the headwind.

Ben Rajeev (Equity Analyst)

Okay, thank you. Just one more question if I may, regarding operating expenses. You did a good job in stabilizing or even cutting costs in some areas. Which specific areas? Do you think there's room for further reductions?

Wen (likely Wayne Huang)

I think if you look at the selling and marketing expenses, we as we just mentioned, in some places we actually front loaded some of the expenses into the high seasons because we want to prepare for the upcoming new product launches, for example. And that should normalize over the quarters because it's very much driven by the product launch windows and the cadence we have applied. Another one is the G&A cost because you have seen that G&A costs continue to decrease for us and then I think there's also room to improve over there.

And the last one is R and D. But I think on one hand we need to invest on R and D to sustain the new product launches. I just mentioned you asked about the numbers. Right. On the other hand, we see a lot of places whereby we could adopt AI to actually improve our efficiency on R and D. Thank you so much, Dion.

OPERATOR

Okay. Thank you, Sid. Thank you once again. If you wish to ask a question, please press Star one on your telephone. Your next question comes from Peter Brampton with Brookes Investments. Please go ahead.

Peter Brampton

Hello. Congratulations on the 2025 performance. I have two questions. If you could provide more color on the sales performance of the Adventure series and second, if you can share more about what's the plan for the Amazfit strap and ring for this year? Sorry, I didn't get the first question clearly. If you can repeat the first one

Wen (likely Wayne Huang)

right. Yes. If you can provide more color on the sales performance of the Adventure series. And the second question would be what's the plan for the Amazfit strap and ring? Okay, so thank you. On the first one on the Adventure series, you see that we have launched many new products in 2025 throughout the year. So we have launched the T Rex 3 Pro and we have also launched the t Rex Ultra 2 in February. Right. And then we have some of the new products also in the T Rex family lined up in 2026.

And obviously the Adventure series actually also helped us to elevate our overall product mix and also helped us to improve our ASP for the company. So Adventure Series is playing more and more important role in the overall mix we have. So it will continue to be like that in 2026. And with regard to your second question on Helio Stripe and the rings, Heliostripe has made a great performance and a debut in 2025 and it has been the most popular, if not the most popular products among that price range in our portfolio.

But I think on the other hand, we didn't manufacture enough of the Helio Stripe to cater for the Q3 and Q4 high seasons and we are actually resolving the supply chain on that. And in 2026 you should see more of the manufacturing of those devices and they should see the market demand to be satisfied. On the Helio stripe, on the other hand, we're also working on the next generation of those as we speak. So stay tuned for the second half of this year.

Okay. Thanks, Liam.

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 Jung for closing remarks.

Grace Jung

Thank you once again for joining us. We hope you have a great day. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.