Zepp Health Corp (ZEPP) 2022 Q3 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for Zepp Health Corporation's Third Quarter 2022 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded.

女士們，先生們，您好，感謝您支持 Zepp Health Corporation 的 2022 年第三季度收益電話會議。 （操作員說明）正在錄製今天的電話會議。

I will now turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace.

我現在將電話轉給您的主持人，公司投資者關係總監 Grace Zhang 女士。請繼續，格蕾絲。

Hello, everyone, and welcome to Zepp Health Corporation's third quarter 2022 earnings conference call. The company's financial and operating results were issued in a press release via 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 at ir.zepp.com.

大家好，歡迎來到 Zepp Health Corporation 2022 年第三季度財報電話會議。該公司的財務和經營業績今天早些時候通過新聞專線服務發佈在新聞稿中，並在網上發布。您還可以訪問公司網站 ir.zepp.com 的 IR 部分，查看本次電話會議中提到的收益新聞稿和幻燈片。

Participating in today's call are Mr. Huang Wang, 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 Yeung, 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 provision of the U.S. Private Securities Litigation Reform Act of 1995.

參加今天電話會議的有我們的董事會主席兼首席執行官黃旺先生；以及我們的首席財務官 Leon Deng 先生。公司管理層將從準備好的發言開始，電話會議將以問答環節結束。我們的首席運營官 Mike Yeung 先生將加入我們的問答環節。在我們繼續之前，請注意今天的討論將包含根據 1995 年美國私人證券訴訟改革法案的安全港條款作出的前瞻性陳述。

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 is included in the company's annual report on Form 20-F of the fiscal year ended December 31, 2021 and other filings as filed with the U.S. Securities and Exchange Commission.

前瞻性陳述涉及固有的風險和不確定性。因此，公司的實際結果可能與今天表達的觀點存在重大差異。有關此風險和其他風險和不確定性的更多信息包含在公司截至 2021 年 12 月 31 日的財政年度 20-F 表格年度報告以及向美國證券交易委員會提交的其他文件中。

The company does not assume any obligation to update any forward-looking statements, except 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 reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

公司不承擔任何更新任何前瞻性陳述的義務，適用法律除外。另請注意，Zepp 的收益新聞稿和本次電話會議包括對未經審計的 GAAP 財務信息以及未經審計的非 GAAP 財務信息的討論。 Zepp 的新聞稿包含未經審計的非 GAAP 措施與未經審計的最直接可比的 GAAP 措施的調節。

I'll now turn the call over to our CEO, Mr. Huang Wang. Please go ahead.

我現在將電話轉給我們的首席執行官黃旺先生。請繼續。

Hello, everyone. Thank you for joining our call. First, I would like to provide some context by adjusting the macro environment, which continued to worsen during Q3 and impacted our operations amid heightened geopolitical uncertainties and COVID-19 containment measures in China. Against this backdrop, our third quarter revenues came in within our expectation at RMB 1.2 billion, down 24.9% year-over-year primarily due to decreased sales of Mi Band products.

大家好。感謝您加入我們的電話。首先，我想通過調整宏觀環境來提供一些背景信息，宏觀環境在第三季度繼續惡化，並在中國地緣政治不確定性和 COVID-19 遏制措施加劇的情況下影響了我們的運營。在此背景下，我們第三季度的收入符合我們的預期，為人民幣 12 億元，同比下降 24.9%，這主要是由於小米手環產品的銷量下降。

Despite these challenges, we continue to grow during the quarter, with top line up 8.8% quarter-over-quarter, a significant reflection of the resilience of our business. I would like to highlight that despite the macro headwinds we faced during the quarter, our self-branded products have returned to their growth trajectory with a 4.2% year-over-year and 35.6% quarter-over-quarter increase in revenue. This growth was underpinned by increased recognition from global consumers as we made progress in enhancing our product value and expanding our sales channels.

儘管面臨這些挑戰，我們在本季度繼續增長，收入環比增長 8.8%，這顯著反映了我們業務的彈性。我想強調的是，儘管我們在本季度面臨宏觀逆風，但我們的自主品牌產品已恢復增長軌跡，收入同比增長 4.2%，環比增長 35.6%。隨著我們在提升產品價值和擴大銷售渠道方面取得進展，全球消費者對我們的認可度不斷提高，這一增長得到了鞏固。

In the North American market, as we have expanded into more retail channels, our revenue grew by 23% year-over-year and 54% quarter-over-quarter. In Europe, we also had several bright spots. In Poland, for example, where our revenue growth rate was 222% year-over-year. We were also the official partner of the 44th Warsaw Marathon, which has further raised our brand value and recognition.

在北美市場，隨著我們擴展到更多的零售渠道，我們的收入同比增長 23%，環比增長 54%。在歐洲，我們也有幾個亮點。例如，在波蘭，我們的收入同比增長率為 222%。我們還是第44屆華沙馬拉鬆的官方合作夥伴，進一步提升了我們的品牌價值和知名度。

In France and Spain, we enjoyed 36.4% and 26.2% revenue growth, respectively, against macro challenges. In September, we debuted our brand-new Amazfit GTR 4 and GTS 4 at the IFA event. The Amazfit GT 4 Series expected with premium features for both sections and functions. [Over 119 million OLEDs] in the EMEA region reported our launch event at IFA, and our GT 4 Series was named by 3 media sources as the best IFA product. Our new GTR 4 and GTS 4 are equipped with the industry's first dual-band circularly polarized GPS antenna technology, enabling movement tracking and positioning up to 99% as accurate as handheld GPS locators in open-air scenarios.

在法國和西班牙，面對宏觀挑戰，我們的收入分別增長了 36.4% 和 26.2%。 9 月，我們在 IFA 活動中首次亮相了全新的 Amazfit GTR 4 和 GTS 4。 Amazfit GT 4 系列有望在部分和功能方面都具有高級功能。 EMEA 地區 [超過 1.19 億台 OLED] 報導了我們在 IFA 的發布會，我們的 GT 4 系列被 3 家媒體評為最佳 IFA 產品。我們新推出的GTR 4和GTS 4搭載了業界首創的雙頻圓極化GPS天線技術，在戶外場景下運動追踪定位精度可達手持GPS定位器99%。

This generation also features our new BioTracker 4.0 with a high-precision PPG optical sensor. And both models heart rate tracking performance is enhanced to match that of heart rate [valves]. We believe these upgraded product features will prove attractive to users worldwide, enabling more people to reach their fitness goals and better managing their health in their daily life.

這一代還配備了我們新的 BioTracker 4.0 和高精度 PPG 光學傳感器。兩種型號的心率跟踪性能都得到了增強，以匹配心率[閥門]。我們相信這些升級後的產品功能將證明對全球用戶具有吸引力，使更多人能夠實現他們的健身目標並在日常生活中更好地管理他們的健康。

Furthermore, we are excited to team up with adidas Runtastic, a well-established digital platform that serves 182 million athletics to empower users to synchronize workout data to adidas Running via the Zepp App. This function became available on our newly released Amazfit GT 4 Series in October and will gradually become accessible on our other smartwatches going forward. By partnering with global brands that share our passion for helping users achieve their fitness goals, we hope to further expand our user community and achieve continued growth.

此外，我們很高興與 adidas Runtastic 合作，這是一個成熟的數字平台，為 1.82 億運動員提供服務，使用戶能夠通過 Zepp 應用程序將鍛煉數據同步到 adidas Running。該功能於 10 月在我們新發布的 Amazfit GT 4 系列上可用，並將在未來逐步在我們的其他智能手錶上可用。通過與與我們一樣熱衷於幫助用戶實現健身目標的全球品牌合作，我們希望進一步擴大我們的用戶社區並實現持續增長。

In October, we introduced our flagship premium multisport GPS watch, the Amazfit Falcon. It features the new AI-powered Zepp Coach providing users with scientific and tailored fitness guidance through our self-developed smart coaching algorithm. Crafted with a tough aircraft-grade titanium unibody and 20 ATM water resistance a first for Amazfit smartwatches as well as 150 built-in sports modes, accurate dual-band GPS tracking and six satellite positioning systems.

10 月，我們推出了我們的旗艦高級 GPS 多項運動手錶 Amazfit Falcon。它採用全新的人工智能 Zepp Coach，通過我們自主開發的智能教練算法為用戶提供科學和量身定制的健身指導。採用堅固的航空級鈦金屬一體成型機身和 Amazfit 智能手錶首創的 20 ATM 防水性能，以及 150 種內置運動模式、精確的雙頻 GPS 跟踪和六個衛星定位系統。

Amazfit Falcon is devoted sports companion built to breaking limits. Beyond smart wearables, we forged ahead with the expansion of our new health care solutions product lineup with Zepp Clarity, which features discreet invisible in-ear technology up to 18 hours of battery life and 12 unique settings to choose from for optimized effect. Apart from [audiology] health, we believe this is crucial to mental health and overall well-being, as an innovative AI-generated sleep aid soundscape that adapts to users' biological state, our newly developed Zepp Aura solution can help users fall asleep faster and sleep more deeply.

Amazfit Falcon 是專為打破極限而打造的運動伴侶。除了智能可穿戴設備之外，我們還通過 Zepp Clarity 擴展了我們的新醫療保健解決方案產品系列，該產品採用隱蔽的隱形入耳式技術，電池續航時間長達 18 小時，並有 12 種獨特的設置可供選擇，以實現最佳效果。除了 [聽力] 健康，我們認為這對心理健康和整體幸福感至關重要，作為一種創新的 AI 生成的睡眠輔助音景，可以適應用戶的生物狀態，我們新開發的 Zepp Aura 解決方案可以幫助用戶更快入睡睡得更深。

We are confident that these new innovations represent an important milestone in our expansion into the health care sector and will usher in a new growth stage for us. Additionally, we have always been passionate about technology innovation and fostering a more vibrant developer community while striving to reinforce our brand identity on the global stage. Accordingly, we were proud to join past sponsors such as Microsoft and Google Cloud in launching the world's largest collegiate hackathon, Cal Hacks 9.0 held in October.

我們相信，這些新的創新是我們進軍醫療保健領域的一個重要里程碑，將為我們迎來一個新的增長階段。此外，我們一直熱衷於技術創新和培養更有活力的開發者社區，同時努力在全球舞台上強化我們的品牌形象。因此，我們很自豪能與微軟和谷歌云等過去的讚助商一起推出世界上最大的大學黑客馬拉松，即 10 月舉行的 Cal Hacks 9.0。

During the event, we talked to more than 5,000 plus attendees and have successfully attracted more than 1,500 top talent students to visit our booth and learn more about who we are. We also awarded cash prizes and our Amazfit Smartwatches to winners in the Watch Faces and Apps categories in order to recognize their ingenuity and encourage their use of technology to creating solutions that improve our work.

活動期間，我們與 5,000 多名與會者進行了交談，並成功吸引了 1,500 多名優秀學生參觀我們的展位，了解我們是誰。我們還向錶盤和應用程序類別的獲獎者頒發了現金獎勵和我們的 Amazfit 智能手錶，以表彰他們的獨創性並鼓勵他們使用技術來創建改進我們工作的解決方案。

As we anticipate continuing macroeconomic headwinds in Q4 and potentially began increasing organizational efficiency has also been a key focus of our management team this year. And our measures have delivered concrete results in cost efficiency in R&D and G&A expenses as we will take additional measures when needed to hit the fixed cost base in the check.

由於我們預計第四季度宏觀經濟將持續逆風並可能開始提高組織效率，這也是我們管理團隊今年的重點。我們的措施在研發和 G&A 費用的成本效率方面取得了具體成果，因為我們將在需要時採取額外措施來達到支票中的固定成本基礎。

All in all, our fruitful third quarter results including new product launches and encouraging performance from our self-branded products highlight our organization's resilience in the face of multiple external challenges.We will further expand our products and services offering while improve organizational efficiency to maximum the value of our shareholders as well as help more users to live a healthy life.

總而言之，我們豐碩的第三季度業績，包括新產品的發布和我們自有品牌產品令人鼓舞的表現，凸顯了我們組織在面對多重外部挑戰時的韌性。我們將進一步擴大我們的產品和服務範圍，同時提高組織效率，以最大限度地提高組織效率。為股東創造價值，幫助更多用戶健康生活。

Thank you again for joining us today. I will now turn the call over to Leon to go over the highlights of our third quarter financial results.

再次感謝您今天加入我們。我現在將把電話轉給萊昂，讓他回顧一下我們第三季度財務業績的亮點。

Thank you, [Huang]. Hello, everyone. I would like to start by highlighting some of the key metrics of our third quarter financial results. As mentioned by Huang, in the third quarter, we saw persistent challenges associated with high input and freight costs, the evolving geopolitical situation and ongoing COVID-19 containment and control measures in China. These adverse conditions weighed on our revenue generated and our overall gross margin.

謝謝你，[黃]。大家好。我想首先強調我們第三季度財務業績的一些關鍵指標。正如黃所提到的，在第三季度，我們看到了與高投入和運費成本、不斷變化的地緣政治局勢以及中國正在進行的 COVID-19 遏制和控制措施相關的持續挑戰。這些不利條件對我們產生的收入和整體毛利率造成壓力。

Against the macro volatilities and uncertainties, our Q3 revenue come in line with our guidance at RMB 1.2 billion, down 24.9% year-over-year, which consists of 53.5% of self-branded product sales and 46.5% of Xiaomi product sales versus 38% of the self-branded product sales and 61.4% of Xiaomi product sales in the same period last year. The decline in revenue at large is mainly driven by the lower-than-expected Mi Band sales in the third quarter.

面對宏觀波動和不確定性，我們的第三季度收入符合我們的指引，為人民幣 12 億元，同比下降 24.9%，其中自有品牌產品銷售額佔 53.5%，小米產品銷售額佔 46.5%，而 38去年同期自主品牌產品銷售額佔比61.4%，小米產品銷售額佔比61.4%。整體營收下滑主要受第三季度小米手環銷量低於預期的影響。

However, our self-branded products restored their growth with a 4.2% year-over-year increase in revenue despite the headwinds. We have seen bright spots in many parts of our business. For example, in North America markets, our revenue grow 23% year-over-year and 54% quarter-over-quarter. Quarter-over-quarter, we continued to improve on both our top line and the bottom line with 8.8% revenue growth and a narrowed loss during the quarter.

然而，我們的自有品牌產品在逆風中恢復了增長，收入同比增長 4.2%。我們在業務的許多方面都看到了亮點。例如，在北美市場，我們的收入同比增長 23%，環比增長 54%。與上一季度相比，我們的收入和利潤均繼續改善，本季度收入增長 8.8%，虧損收窄。

Our adjusted net income for the quarter is minus RMB 8.8 million, which included a one-off severance cost of RMB 10 million. This almost breakeven result demonstrated our organization's resilience and the effectiveness of our continued measures to streamline our cost base.

我們本季度調整後的淨收入為負 880 萬元人民幣，其中包括 1000 萬元人民幣的一次性遣散費。這一幾乎達到盈虧平衡的結果證明了我們組織的彈性以及我們為精簡成本基礎而採取的持續措施的有效性。

On a sequential basis, third quarter 2022 revenue was better than the second quarter 2022 revenue and our operating profit also improved, reconfirming our solid execution capabilities. Notably, our self-branded product revenue in the third quarter grow 35.6% sequentially, boosted by our newly launched products, including the new Amazfit GT 4 Series, the Amazfit Bip 3, the Amazfit Bip 3 Pro, and the Amazfit Trex 2.

從環比來看，2022 年第三季度的收入好於 2022 年第二季度的收入，我們的營業利潤也有所改善，再次證實了我們穩健的執行能力。值得注意的是，我們第三季度的自有品牌產品收入環比增長 35.6%，這得益於我們新推出的產品，包括新的 Amazfit GT 4 系列、Amazfit Bip 3、Amazfit Bip 3 Pro 和 Amazfit Trex 2。

Now let's turn to our third quarter gross margin, which can be affected by the product mix, product launch timing and product life cycles, including model upgrades. Our Q3 gross margin was 19.1%, 1.1 percentage points lower year-over-year affected by higher freight costs compared with the same period last year and clearance of our previous generation products, partially offset by higher gross margin coming from our new product introductions. However, given the 1.2 percentage points increase quarter-over-quarter, we can see a positive gross margin development trend now. It's also worth mentioning that given the new product launches, our gross margin for self-branded products exhibited continuous growth month-over-month in the third quarter.

現在讓我們來看看我們第三季度的毛利率，這可能會受到產品組合、產品發佈時間和產品生命週期（包括型號升級）的影響。我們第三季度的毛利率為 19.1%，同比下降 1.1 個百分點，原因是與去年同期相比較高的運費和我們上一代產品的清關，部分被我們新產品推出帶來的較高毛利率所抵消。但是，鑑於環比增長 1.2 個百分點，我們現在可以看到毛利率正向發展趨勢。還值得一提的是，隨著新產品的推出，我們自有品牌產品的毛利率在第三季度環比持續增長。

Turning now to costs, which has been a key focal point for the company, both in terms of absolute amount as well as the percentage of sales. While we have to balance cost controls carefully with expenditures to fuel growth, we have already seen a decrease in trend in total operating expenses since Q3 2020. As a portion of the operating expenses is fixed and takes time and creativity to reduce them gradually, we expect to achieve further cost reductions in absolute terms for the remainder of the year.

現在轉向成本，無論是絕對金額還是銷售額百分比，這一直是公司關注的重點。雖然我們必須謹慎地平衡成本控制與支出以推動增長，但我們已經看到自 2020 年第三季度以來總運營費用呈下降趨勢。由於部分運營費用是固定的，需要時間和創造力才能逐漸減少，我們預計在今年剩餘時間內進一步降低絕對成本。

Going forward, we'll continue to rightsize our operating expenses from their current level in order to deliver profitability in the coming quarters. Our third quarter 2022 operating expenses were RMB 303.9 million, representing a 1.6% quarter-over-quarter decline. Spending on R&D in Q3 2022 was RMB 127.4 million, an increase of 17.2% year-over-year. The increase was mainly driven by the lower government subsidy received. Excluding the above factors, the R&D expenses remained slightly down versus the third quarter of 2021 due to strict productivity measures applied.

展望未來，我們將繼續從目前的水平調整我們的運營費用，以便在未來幾個季度實現盈利。我們 2022 年第三季度的運營費用為人民幣 3.039 億元，環比下降 1.6%。 2022 年第三季度研發支出為 1.274 億元人民幣，同比增長 17.2%。增長主要是由於收到的政府補貼減少所致。排除上述因素，由於採取了嚴格的生產力措施，研發費用與 2021 年第三季度相比仍略有下降。

Selling and marketing expenses were RMB 123.9 million, 36% (sic) [36.5%] higher year-over-year, mainly due to our increased investments in various international markets and sales channel expansion through digital marketing initiatives and partnerships with leading global sales platforms. These actions are critical to drive our long-term organic growth. Q3 G&A expenses reduced 14.8% compared with the third quarter of 2021 and 26.5% compared with the second quarter of 2022. This decrease illustrates the effectiveness of our expense control strategy.

銷售和營銷費用為人民幣 1.239 億元，同比增長 36%（原文如此）[36.5%]，這主要是由於我們通過數字營銷計劃和與全球領先銷售平台的合作夥伴關係增加了對各個國際市場的投資和銷售渠道擴張.這些行動對於推動我們的長期有機增長至關重要。第三季度 G&A 費用與 2021 年第三季度相比下降了 14.8%，與 2022 年第二季度相比下降了 26.5%。這一下降說明了我們的費用控制策略的有效性。

As we look ahead, cost structure optimization will continue to be our primary focus. It's especially aimed at the complex and the high volatile macro environment. With higher productivity, ROI-based operations and more disciplined cost reduction measures, we expect to reduce our operating expenses further. As our revenue improved and expense declined sequentially, adjusted operating loss for the third quarter of 2022 improved further to RMB 65 million compared with the adjusted loss of RMB 98 million in the second quarter and the adjusted loss of RMB 142 million in the first quarter of 2022.

展望未來，成本結構優化將繼續是我們的主要重點。特別針對複雜多變的宏觀環境。憑藉更高的生產力、基於投資回報率的運營和更嚴格的成本削減措施，我們預計將進一步降低運營費用。隨著我們收入的改善和費用的連續下降，2022 年第三季度調整後的經營虧損進一步改善至人民幣 6500 萬元，而第二季度的調整後虧損為人民幣 9800 萬元，第一季度的調整後虧損為人民幣 1.42 億元。 2022.

We also paid close attention to the foreign exchange fluctuations and recorded a positive FX contribution year-to-date, thanks to our proactive management of the FX risks. Our adjusted net loss in third quarter was RMB 8.8 million, which includes a RMB 10 million severance payment, narrowed compared with a loss of [RMB 90.4 million] in the second quarter and a loss of RMB 75.7 million in the first quarter of 2022.

由於我們積極管理外匯風險，我們還密切關注外匯波動，年初至今錄得正外匯貢獻。我們第三季度調整後的淨虧損為人民幣 880 萬元，其中包括人民幣 1000 萬元的遣散費，與第二季度的虧損 [人民幣 9040 萬元] 和 2022 年第一季度的虧損人民幣 7570 萬元相比有所收窄。

Now turning to the balance sheet. Our cash flow also remained strong with cash flow from operations in Q3 standing positive at RMB 115.3 million. As of September 30, 2022, cash and cash equivalents were RMB 1.01 billion compared with RMB 997 million as of June 30, 2022. During the quarter, we continued to manage our working capital and inventory more efficiently and realized lower inventory levels quarter-over-quarter. We're targeting to reduce our inventories by year-end to be on par or lower than the levels we expected in 2021.

現在轉向資產負債表。我們的現金流也保持強勁，第三季度的運營現金流為正值 1.153 億元人民幣。截至 2022 年 9 月 30 日，現金及現金等價物為人民幣 10.1 億元，截至 2022 年 6 月 30 日為人民幣 9.97 億元。本季度，我們繼續更有效地管理營運資金和庫存，並實現了較低的庫存水平。 -四分之一。我們的目標是在年底前將庫存減少到與我們 2021 年預期的水平相當或更低的水平。

In November 2021, the Board approved the allocation of up to USD20 million toward a share repurchase program. In Q3 2022, we continued the repurchase program reflecting our confidence in our growth strategy and financial performance. We have bought back USD9.2 million worth of shares until September 30, 2022, and intend to carry out with this buyback program.

2021 年 11 月，董事會批准撥款至多 2000 萬美元用於股票回購計劃。 2022 年第三季度，我們繼續實施回購計劃，以反映我們對增長戰略和財務業績的信心。截至 2022 年 9 月 30 日，我們已回購價值 920 萬美元的股票，並打算執行此回購計劃。

Moving on to our outlook. In light of the ongoing challenges, our guidance for the fourth quarter of 2022 currently projects net revenue to be between RMB 1.1 billion and RMB 1.35 billion compared with RMB 1.66 billion for the fourth quarter of 2021. Please note that this outlook reflects the continued uncertainty of the potential effects of the China COVID-19 pandemic policy ourselves and the lower discretionary consumer spending, especially in our overseas markets aimed global macroeconomic weakness. Please also note that this guidance is based on existing market conditions and reflects the management's current and preliminary estimates of the market and operating conditions as well as the customer demand, which are all subject to change.

繼續我們的展望。鑑於持續存在的挑戰，我們目前預計 2022 年第四季度的淨收入將在 11 億元人民幣至 13.5 億元人民幣之間，而 2021 年第四季度為 16.6 億元人民幣。請注意，這一前景反映了持續的不確定性中國 COVID-19 大流行政策的潛在影響以及可自由支配的消費者支出減少，尤其是在我們的海外市場，旨在應對全球宏觀經濟疲軟。另請注意，本指南基於現有市場狀況，反映了管理層對市場和經營狀況以及客戶需求的當前和初步估計，這些都可能發生變化。

This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

我們準備好的發言到此結束。我們現在將開始提問。接線員，請繼續。

(Operator Instructions) The first question today comes from Clive Cheung with Credit Suisse.

（操作員說明）今天的第一個問題來自瑞士信貸的 Clive Cheung。

This is Clive from Credit Suisse. I have 3 questions. I'll ask them all at once. So number one, I saw the sales and marketing expenses disproportionately grew this quarter. I noticed in the prepared remarks, Leon already mentioned it was -- it has gone into channel expansion and specific markets -- in specific markets. Could you share a little bit more color on where geographically this has gone into, and what kind of digital channels are we targeting at the moment? That's number one.

我是瑞士信貸的克萊夫。我有 3 個問題。我馬上問問他們。所以第一，我看到本季度的銷售和營銷費用不成比例地增長。我在準備好的發言中註意到，Leon 已經提到它 - 它已經進入渠道擴張和特定市場 - 在特定市場。您能否分享更多關於它在地理上進入的位置以及我們目前針對哪種數字渠道的顏色？這是第一。

Number two, with regards to our staff force right now and with a reduced capacity, how does that impact our R&D assets and product delivery intensity? And lastly, number three, I think there was a mention on supply chain constraints. And my question is what components in particular, are we facing the most delays and impacting our fourth quarter shipments or for next year as well?

第二，關於我們目前的員工隊伍和產能下降，這對我們的研發資產和產品交付強度有何影響？最後，第三，我認為有人提到了供應鏈限制。我的問題是，特別是哪些組件，我們是否面臨最多的延誤並影響我們第四季度或明年的出貨量？

Thank you, Clive. I mean let me answer the easiest question first on the supply chain constraints, right? So I think in Q3, all the supply constraints we have seen at the beginning of the year -- for the first half of the year has been elevated. So basically, the supply constraints issue no longer applies to us starting from the second half of Q3, and then we don't see any of that would impact us in Q4 anymore.

謝謝你，克萊夫。我的意思是讓我先回答關於供應鏈限制的最簡單的問題，對嗎？因此，我認為在第三季度，我們在年初看到的所有供應限制——今年上半年都在加劇。所以基本上，供應限制問題從第三季度下半年開始不再適用於我們，然後我們認為這些問題不會再影響我們在第四季度。

And similarly, also the freight cost, we also see a trend that the freight cost is going down, especially on the sea freight. So that additional freight cost situation versus last year, which we have experienced for the first 3 quarters of this year should also kind of resolved to a certain extent in Q4. So I think that hopefully answers your third question.

同樣，還有運費，我們也看到運費下降的趨勢，尤其是海運。因此，與去年相比，我們在今年前三個季度經歷的額外運費情況也應該在第四季度得到一定程度的解決。所以我認為這有望回答您的第三個問題。

And then let me turn to the first question, which is on the marketing and sales expenses. Yes, we have invested quite a bit in the international marketing and sales expansion, i.e., investing on the digital platforms, for example, on Amazon and on some local online platforms, the big ones regionally, right, for example, Coolblue in the Netherlands, [mediamarkt.com] in a lot of the European countries, right? And we will continue to invest on those online platforms as we see the shopping pattern from most of the international clients we have are more turning to the big online channels, right?

然後讓我轉向第一個問題，即營銷和銷售費用。是的，我們在國際營銷和銷售擴張方面投入了大量資金，即投資於數字平台，例如亞馬遜和一些本地在線平台，區域性大平台，例如荷蘭的 Coolblue , [mediamarkt.com] 在很多歐洲國家，對吧？我們將繼續投資這些在線平台，因為我們看到大多數國際客戶的購物模式更多地轉向大型在線渠道，對嗎？

And also given our DNA, we believe that investing on digital campaigns and digital marketing and investing in our online platforms will probably going to yield a bigger return for ourselves. And additionally, we also increased our investments on offline channels. For example, in United States, we have seen quite a growth year-over-year, a large part of that is driven by our offline channel investment.

並且鑑於我們的 DNA，我們相信投資於數字活動和數字營銷以及投資於我們的在線平台可能會為我們自己帶來更大的回報。此外，我們還增加了對線下渠道的投資。例如，在美國，我們看到同比增長相當大，其中很大一部分是由我們的線下渠道投資推動的。

For example, we're actually getting listed in big offline channels like Best Buy, Target, et cetera, et cetera, in United States, and we are also deepening our presence in offline channel growth in Europe as well. And nevertheless, we also have expanded in the Asian countries expansion, for example, in India and in the rest of the [ASEAN] countries.

例如，我們實際上在美國的 Best Buy、Target 等大型線下渠道上市，我們也在深化我們在歐洲線下渠道增長中的影響力。儘管如此，我們還在亞洲國家/地區進行了擴張，例如印度和其他 [ASEAN] 國家/地區。

And to give you approximation, I think we kind of invested around 10% of the sales and marketing expenses relative to our self-branded sales value in this quarter. And I think we will continue with that run rate in the upcoming quarters as well. So that's -- and then turning to your second question on the reduced capacity with regard to the R&D resources. I think we have also mentioned in our prepared remarks, we are actually looking at how to optimize our R&D efforts.

為了給你一個近似值，我認為我們在本季度投資了相對於我們自有品牌銷售價值的大約 10% 的銷售和營銷費用。我認為我們也將在接下來的幾個季度繼續保持這種運行率。這就是——然後轉向你關於研發資源能力下降的第二個問題。我想我們在準備好的發言中也提到了，我們實際上正在研究如何優化我們的研發工作。

For example, in the past, since we don't have Zepp O -- before we had the Zepp OS, each and every product we need to kind of engineered a separate software platform for it in order to sell the -- our smartwatches. And now with Zepp OS, we can apply a more platforming approach with less people in order to deliver a high-quality product, right?

例如，在過去，由於我們沒有 Zepp O——在我們擁有 Zepp OS 之前，我們需要為每一種產品設計一個單獨的軟件平台，以便銷售——我們的智能手錶。現在有了 Zepp OS，我們可以用更少的人應用更多的平台化方法來交付高質量的產品，對吧？

And we're also trying to streamline our operations to try to generate more efficiencies on applying a so-called legal approach in working out our R&D projects and our new smartwatches. So I think that's why at a reduced R&D spending level, we are able -- we believe we're going to churn out same quality of R&D efforts or even more with a reduced sales force -- workforce. I think that's in a nutshell what we're trying to do. I hope those give you a flavor on what it is.

我們也在努力簡化我們的運營，以提高效率，通過應用所謂的法律方法來製定我們的研發項目和我們的新智能手錶。所以我認為這就是為什麼在降低研發支出水平的情況下，我們能夠——我們相信我們將在減少銷售人員的情況下生產出同樣質量的研發工作，甚至更多——勞動力。我認為這就是我們正在努力做的事情。我希望這些能讓你了解它是什麼。

Yes. Very clear.

是的。非常清楚。

(Operator Instructions) The next question comes from [Lisa Lee] with Alpha Research.

（操作員說明）下一個問題來自 Alpha Research 的 [Lisa Lee]。

I just have one question. You mentioned further cost reductions going forward. Can you please elaborate on your measures? And how should we think about -- how should we quantify further cost reductions in the fourth quarter and next year?

我只有一個問題。您提到了未來進一步的成本削減。你能詳細說明你的措施嗎？我們應該如何考慮——我們應該如何量化第四季度和明年的進一步成本削減？

Thank you, Lisa. I think we have identified a few areas to streamline our costs. Number one is what I just mentioned in the area of R&D, we're trying to apply a so-called platforming approach and a legal block to make sure that we can kind of realize the similar goal with a reduced workforce, right?

謝謝你，麗莎。我認為我們已經確定了幾個可以精簡成本的領域。第一是我剛才在研發領域提到的，我們正在嘗試應用所謂的平台化方法和法律障礙，以確保我們可以通過減少勞動力來實現類似的目標，對嗎？

Number two is on the sales and marketing expenses part, we are trying to look at the return on investments on our marketing investments. For example, if we're going to sports, a sports activity, a marathon, for example, we want to look at the return on investment very closely to make sure that we're just -- we're not investing on certain things just for the sake of investing on it, right? And also we're actually looking at the channel performance to -- in different offline channels to trying to see what type of products we should sell in which channel and then try to get the best return out of that.

第二是銷售和營銷費用部分，我們正在努力查看營銷投資的投資回報率。例如，如果我們要參加體育運動、一項體育活動、一場馬拉鬆比賽，我們希望非常仔細地查看投資回報，以確保我們只是——我們沒有在某些事情上進行投資只是為了投資它，對吧？而且我們實際上正在研究渠道績效 - 在不同的線下渠道中試圖了解我們應該在哪個渠道銷售什麼類型的產品，然後嘗試從中獲得最佳回報。

And the third one is on the G&A expenses part. We are proactively looking at where we can save and what we can leverage more from either third-party services or looking at whether or not we could streamline the service and actually prioritize certain requests or opportunities rather than the other, right? So I think to answer your question, we are currently standing at operating expenses overall of RMB 300 million per quarter. And then we -- and in Q3, this includes a RMB 10 million severance cost. So basically, if you strip that one out, we're probably at RMB 290 million kind of operating expenses level for Q3.

第三個是 G&A 費用部分。我們正在積極尋找可以節省的地方以及我們可以從第三方服務中更多地利用什麼，或者看看我們是否可以簡化服務並實際優先考慮某些請求或機會而不是其他，對嗎？所以我想回答你的問題，我們目前每季度的總運營費用為 3 億元人民幣。然後我們 - 在第三季度，這包括 1000 萬元人民幣的遣散費。所以基本上，如果你去掉那個，我們第三季度的運營費用可能達到 2.9 億元人民幣。

And in Q4, we're more looking at streamline the cost base towards the RMB 250 million level. And hopefully, that will be a first step. And then going into next year, we're going to proactively check the cost base and see if we need to reduce the cost base even further if the macro environment is not improving.

在第四季度，我們更多地考慮將成本基礎精簡到 2.5 億元人民幣的水平。希望這將是第一步。然後進入明年，我們將主動檢查成本基礎，看看如果宏觀環境沒有改善，我們是否需要進一步降低成本基礎。

So that's very helpful. I actually have another question. Can you also give us some guidance on your gross margin going forward?

所以這非常有幫助。其實我還有一個問題。您能否也給我們一些關於您未來毛利率的指導？

Yes. So you have seen our gross margin is actually picking up, although it hasn't come back to the 2021 level yet, I think there's 2 folds of rationale here. Number one is, we try to -- we understand that inventory level is a big problem for us because we exit the year with high ambitions. But in Q1, we got hit by the Russian and Ukraine war, by the lower consumer spending issues in most of our international markets. So therefore, actually, we have put a lot of resources and effort in cleaning up all the old generation products, if you want to put it in that way.

是的。所以你已經看到我們的毛利率實際上正在回升，雖然它還沒有回到 2021 年的水平，但我認為這裡有 2 倍的理由。第一是，我們試圖——我們明白庫存水平對我們來說是一個大問題，因為我們以雄心勃勃的姿態結束了這一年。但在第一季度，我們受到俄羅斯和烏克蘭戰爭的打擊，以及我們大多數國際市場消費者支出下降的問題。因此，實際上，如果你想這樣說的話，我們已經投入了大量資源和精力來清理所有老一代產品。

So what you see here in the mix of our Q2 and Q3 gross margin, it actually carries a big chunk of the lower gross margin coming out of clearing our previous generation products, right? But I think we're looking at the end of this exercise, so that our self-branded products gross margin should improve or increase from their current level going forward as we head into the high season in Q4. And that's number one.

那麼你在我們第二季度和第三季度的毛利率組合中看到的，它實際上佔了清算我們上一代產品的較低毛利率的很大一部分，對吧？但我認為我們正在考慮這項工作的結束，因此隨著我們進入第四季度的旺季，我們的自有品牌產品毛利率應該會從目前的水平提高或增加。這是第一。

Number two, you also noticed that our mix has skewed from in the past. It was Xiaomi products play in the majority weight of our sales revenue mix and our self-branded, I think Xiaomi used to account for 70%, and I think in 2021, it was 60% of our overall revenue. But then this year, as we head into Q1, Q2, Q3, I think year-to-date, we're at more self-branded product stands for around [55-ish percent] of the overall mix, and Xiaomi is actually becoming the minority part of our product mix, right?

第二，您還注意到我們的組合與過去相比有所偏差。小米產品在我們的銷售收入組合和我們的自有品牌中佔據了大部分份額，我認為小米曾經佔 70%，我認為在 2021 年，它占我們總收入的 60%。但今年，當我們進入第一季度、第二季度、第三季度時，我認為今年迄今為止，我們更多的自有品牌產品代表了整體產品組合的 [55-ish%]，而小米實際上是成為我們產品組合的少數部分，對嗎？

So I think we intended to actually continue this trend going forward. And then the self-branded products going into Q4 and next year, as you noticed that in Q3, our self-branded products start the growth trajectory again, and I think we expect that trend to continue for the upcoming quarters as well. And in the meantime, we will try to see if we can get more revenue from the Xiaomi side.

所以我認為我們實際上打算繼續這種趨勢。然後是進入第四季度和明年的自有品牌產品，正如您在第三季度注意到的那樣，我們的自有品牌產品再次開始增長軌跡，我認為我們預計這種趨勢也將在接下來的幾個季度繼續下去。同時，我們會嘗試看看能不能從小米這邊獲得更多的收入。

And then by playing that mix and then playing it more towards self-branded products accounts for the majority of the revenue mix of the company together in improving the margins of the self-branded products, I think where you're going to look at the gross -- overall gross margin for the company is going to gradually improve from its current level as we reported in Q3. So I hope that will give you some color on what it is going to be in the upcoming quarters.

然後通過玩這種組合，然後更多地玩自有品牌產品，占公司收入組合的大部分，以提高自有品牌產品的利潤率，我認為你會在哪裡看毛利率——正如我們在第三季度報告的那樣，公司的整體毛利率將從目前的水平逐步提高。所以我希望這能讓你對接下來幾個季度的情況有所了解。

Yes. That's great color.

是的。那是很棒的顏色。

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

由於沒有其他問題，現在我想將電話轉回給公司以作結束語。

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 website. This concludes this conference call. You may now disconnect your lines. Thank you.

再次感謝您今天加入我們。如果您還有其他問題，請隨時通過我們網站上提供的聯繫信息聯繫 Zepp 的投資者關係部門。本次電話會議到此結束。您現在可以斷開線路。謝謝你。