Zepp Health Corp (ZEPP) 2022 Q4 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Fourth Quarter and Full Year 2022 Earnings Conference Call. (Operator Instructions) 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.

女士們，先生們，您好。感謝您支持 Zepp Health Corporation 的第四季度和 2022 年全年收益電話會議。 （操作員說明）正在錄製今天的電話會議。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 Fourth Quarter and Full Year 2022 Earnings Conference Call. the company's financial and operating results were issued in our press release via the Newswire services earlier today and are posted online. You can also view the earnings press release and the slides referred 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 的 2022 年第四季度和全年收益電話會議。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我們的新聞稿中，並在網上發布。您還可以訪問公司網站 ir.zepp.com 的 IR 部分，查看收益新聞稿和本次電話會議中提到的幻燈片。

Participating in today's call are Mr. Wang Huang, our Chairman of the Board of Directors and Chief Executive Officer; and Mr. Leon Cheng Deng, our Chief Financial Officer.

參加今天電話會議的有我們的董事會主席兼首席執行官王煌先生；以及我們的首席財務官 Leon Cheng Deng 先生。

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.

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。

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

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。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 日止財政年度的 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 required under applicable law. Please also note that Zepp's earnings press release and this conference call includes discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. The press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

公司不承擔更新任何前瞻性陳述的任何義務，適用法律要求的除外。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。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. Wang Huang. Please go ahead.

我現在將電話轉給我們的首席執行官王煌先生。請繼續。

Hello, everyone. Thank you for joining our call. In 2022, we faced substantial macro challenges such as the ongoing COVID-19 pandemic, the Ukraine Russia war, global infection and weakening consumer confidence. These factors affected our operations, while in Q4 consumer discretionary spending decreased due to macro economic uncertainties, particularly in Europe and the U.S. Against this backdrop, our fourth quarter revenue came in at RMB 1.1 billion, down 35.5% year-over-year, primarily due to decreased sales of Mi brand products.

大家好。感謝您加入我們的電話。 2022年，我們面臨著持續的COVID-19大流行、烏克蘭俄羅斯戰爭、全球感染和消費者信心減弱等重大宏觀挑戰。這些因素影響了我們的運營，而在第四季度，由於宏觀經濟的不確定性，特別是在歐洲和美國，消費者可自由支配的支出有所減少。在此背景下，我們第四季度的收入為人民幣 11 億元，同比下降 35.5%，主要是由於小米品牌產品銷量下降。

Our company foresaw the decline of their basic band market, quarters ago and shifted our focus to self-branded watches. I'm pleased to share with you that our self-branded products accounted for 77.4% of our sales during the fourth quarter compared to 57.7% in the same period last year.

我們公司在幾個季度前就預見到了他們的基本錶帶市場的衰退，並將我們的重點轉移到自主品牌手錶上。我很高興與您分享，我們的自有品牌產品在第四季度占我們銷售額的 77.4%，而去年同期為 57.7%。

We now offer various product lines for our self-branded products, including outdoor sports and fitness and basic watch lines. I still remember leading the company through its IPO 5, years ago. Our self-branded products only accounted at roughly 20% for the company's revenue. Over the past 5 years, we have successfully transformed our business from one, which revenue was largely contribute by a single consumer -- a single customer to becoming a top global player in the smart wearables and health care services industries.

我們現在為我們的自主品牌產品提供各種產品線，包括戶外運動和健身以及基本手錶系列。我仍然記得 5 年前帶領公司完成首次公開募股。我們的自有品牌產品僅占公司收入的 20% 左右。在過去的 5 年裡，我們成功地將我們的業務從一個收入主要由單一消費者貢獻的業務轉變為智能可穿戴和醫療保健服務行業的全球頂級參與者。

Despite macro challenges, our self-branded products showed strong performance during Q4, with 28.5% quarter-over-quarter revenue increase and continued gross margin expansion. The success is due to improved sales of our high-margin products and enhanced brand value together with our optimized solid performance in sales channels, demonstrating our improved market position. We believe that the smart valuable market has significant growth potential, we are confident in the growth trajectory of our Amazfit and Zepp products, and we are committed to further expanding our self-branded product line.

儘管面臨宏觀挑戰，我們的自主品牌產品在第四季度表現強勁，收入環比增長 28.5%，毛利率持續擴張。成功歸功於我們高利潤產品的銷售改善和品牌價值的提升，以及我們優化的銷售渠道穩固表現，表明我們的市場地位得到提升。我們相信智能價值市場具有巨大的增長潛力，我們對我們的Amazfit和Zepp產品的增長軌跡充滿信心，我們致力於進一步擴大我們的自有品牌產品線。

As we move forward, we will continue to focus on product innovation and optimizing our cost structure to drive profitability and reinforce our business. (inaudible) We believe the smart variable market has not achieved its full potential yet. For example, as we integrate GPT technology into our Zepp OS, we are able to offer a highly advanced and personalized experience for our users, this allows us to stand out in an increasingly competitive smart wearables industry by providing personalized insights, coaching, goal tracking, nutrition advice and health monitoring features, all with seamlessly integrated within our wearable devices.

隨著我們的前進，我們將繼續專注於產品創新和優化我們的成本結構，以提高盈利能力並加強我們的業務。 （聽不清）我們認為智能變量市場尚未充分發揮其潛力。例如，當我們將 GPT 技術集成到我們的 Zepp 操作系統中時，我們能夠為我們的用戶提供高度先進和個性化的體驗，這使我們能夠通過提供個性化的見解、指導、目標跟踪，在競爭日益激烈的智能可穿戴設備行業中脫穎而出、營養建議和健康監測功能，所有這些都無縫集成到我們的可穿戴設備中。

Our dedication to improving the user experience and enhancing overall well-being sets us apart from our competitors and positions us as a leader in the industry by continuing to leverage the power of GPT technology and other cutting-edge offerings. We are strategically expanding our reach and building long-term value. Our company has a long history of investing in cutting-edge technology to enhance our products and services. Several years ago, we invested in liquified architecture chip technology, and now we are able to use our own in-house designed low-power, high-performance RISC-V chip for smartwatches. This investment has allowed us to improve our smartwatches performance and battery life.

我們致力於改善用戶體驗和提高整體福祉，這使我們從競爭對手中脫穎而出，並通過繼續利用 GPT 技術和其他尖端產品的力量，使我們成為行業領導者。我們正在戰略性地擴大我們的業務範圍並建立長期價值。我們公司在投資尖端技術以增強我們的產品和服務方面有著悠久的歷史。幾年前，我們投資了液化架構芯片技術，現在我們可以將自己設計的低功耗、高性能RISC-V芯片用於智能手錶。這項投資使我們能夠提高智能手錶的性能和電池壽命。

We are proud to leverage this technology in conjunction with our AI technology. Similar to GPT to offer tailor-made user experience with the power of our RISC-V chip and AI technology, we can significantly enhance users' health and fitness performance. We also utilize this technology to optimize user service, feedback analysis, marketing data analysis, AI coding and tapping, allowing us to increase operational efficiency and improve service quality.

我們很自豪能夠將這項技術與我們的人工智能技術結合起來。類似於 GPT，利用我們的 RISC-V 芯片和人工智能技術提供量身定制的用戶體驗，我們可以顯著提高用戶的健康和健身表現。我們還利用這項技術優化用戶服務、反饋分析、營銷數據分析、人工智能編碼和竊聽，使我們能夠提高運營效率和提高服務質量。

In addition to enabling users to design their own AI empower watch faces, we have also developed mini apps that are automatically designed by AI, similar to GTP technology. This allows us to offer users a highly personalized experience and sets us apart from our competitors in the smart wearable industry. Soon, we will integrate these technology advancements into our Zepp sports coach junction to elevate the user experience to new highs.

除了讓用戶可以設計自己的AI賦能錶盤，我們還開發了類似GTP技術的AI自動設計的小程序。這使我們能夠為用戶提供高度個性化的體驗，並使我們在智能可穿戴行業的競爭對手中脫穎而出。很快，我們將把這些技術進步整合到我們的 Zepp 運動教練連接器中，將用戶體驗提升到新的高度。

Now let's move to our global operations and products. Our new self-branded products has an impressive market performance. Resulting in increased brand recognition among consumer worldwide in Q4,(inaudible) NPD's Consumer Electronics Industry Performance Award in the fitness tracker category for top e-commerce U.S. market share gain, by validating our product competitiveness in the premium market.

現在讓我們轉向我們的全球運營和產品。我們的新自主品牌產品具有令人印象深刻的市場表現。通過驗證我們的產品在高端市場的競爭力，第四季度全球消費者的品牌認知度提高，（聽不清）NPD 的健身追踪器類別的消費電子行業績效獎證明了我們在高端市場的產品競爭力，從而獲得了美國頂級電子商務市場份額。

We also expanded our presence on the global stage by opening our Warsaw office in February. We successfully launched the Amazfit Falcon globally, which received recognition from the global high-end sports professional community, and our newly launched Amazfit GTS 4 and GTR-4 have been well received by consumers worldwide.

我們還通過在 2 月開設華沙辦事處擴大了我們在全球舞台上的影響力。我們在全球成功推出了Amazfit Falcon，獲得了全球高端運動專業人士的認可，我們新推出的Amazfit GTS 4和GTR-4也受到了全球消費者的好評。

In Q4, we remain concentrated on optimizing our cost structure as we strive for profitability and further enhance business resilience in 2023. We will continue with these cost-cutting initiatives while balancing cost controls and expenditures to fuel growth. And we anticipate that these actions will meaningfully benefit our business operations in the long run.

在第四季度，我們將繼續專注於優化我們的成本結構，以爭取盈利並進一步增強 2023 年的業務彈性。我們將繼續實施這些削減成本的舉措，同時平衡成本控制和支出以推動增長。我們預計，從長遠來看，這些行動將對我們的業務運營產生重大影響。

We are extremely confident in our ability to seize market opportunities, enhance our product value and continue to deliver additional shareholder value while providing users with more [respond] and comprehensive health care products and services. We believe that by optimizing our cost structure and balancing cost controls with investments in growth, we can continue to enhance our product value and improve margins rather than focus solely on quantity, we prioritize quality growth and aim to win the competition in advanced markets like Europe and North America, even in the face of global macro economic uncertainty, we remain committed to providing cutting-edge technology and products, that stay at the forefront of wellness solutions. Thank you again for joining us today.

我們非常有信心能夠抓住市場機遇，提升我們的產品價值，並在為用戶提供更多[響應]和全面的醫療保健產品和服務的同時，繼續為股東創造額外價值。我們相信，通過優化我們的成本結構，平衡成本控制與增長投資，我們可以繼續提升我們的產品價值和提高利潤率，而不是僅僅關注數量，我們優先考慮質量增長，並旨在贏得歐洲等先進市場的競爭和北美，即使面對全球宏觀經濟的不確定性，我們仍然致力於提供尖端技術和產品，始終處於健康解決方案的前沿。再次感謝您今天加入我們。

I will now turn the call over to Leon to go over the highlights of our fourth quarter financial results.

我現在將把電話轉給萊昂，讓他回顧一下我們第四季度財務業績的亮點。

Thank you Wang. Greetings, everyone. I would like to begin by discussing the key metrics of our fourth quarter financial results. Our fourth quarter revenue coming at the lower end of our guidance range, approximately RMB 1.1 billion, reflecting a 35.5% year-over-year decrease. As we all know, this quarter was marked by macro headwinds as ongoing geopolitical tensions and lower discretionary spending persisted, particularly in Europe and the U.S. As a result, consumers remain cautious with their household budgets, fearing a recession and inflationary pressures.

謝謝王老師。大家好。我想首先討論我們第四季度財務業績的關鍵指標。我們第四季度的收入處於我們指導範圍的下限，約為 11 億元人民幣，同比下降 35.5%。眾所周知，由於持續的地緣政治緊張局勢和較低的可自由支配支出持續存在，特別是在歐洲和美國，本季度受到宏觀不利因素的影響。因此，消費者對家庭預算保持謹慎，擔心經濟衰退和通脹壓力。

Our sales in China were also impacted by lower consumer spending specifically during the month of November and December, the COVID-19 pandemic outbreak and policies dampened consumer confidence and macro uncertainty. Furthermore, our supply chain was affected by the sudden lifting of COVID-19 restrictions in China, causing delays in some of our self-branded product launches.

我們在中國的銷售也受到消費者支出減少的影響，特別是在 11 月和 12 月期間，COVID-19 大流行爆發和政策削弱了消費者信心和宏觀不確定性。此外，我們的供應鏈受到中國突然取消 COVID-19 限制的影響，導致我們的一些自有品牌產品發布延遲。

Consequently, this has net adverse impact on our first quarter sales as well. At the same time, we're encouraged by the bright spots we have seen in many parts of our business. As Wang mentioned, our self-branded products comprised 77.4% of total sales compared to 57.7% for the same period last year.

因此，這也對我們第一季度的銷售額產生了不利影響。與此同時，我們在業務的許多方面都看到了亮點，這讓我們感到鼓舞。正如 Wang 所說，我們的自有品牌產品佔總銷售額的 77.4%，而去年同期為 57.7%。

Moving forward, we're confident that our self-branded products will gain more traction as we continue to improve our product capabilities and increase brand awareness on a global scale. So let's now take a closer look at our gross margin and another bright spot in the quarter's performance. Our gross margins have been influenced by various factors such as product mix, product launch timing and product life cycles, including model upgrades. Despite the challenges we faced during the quarter, we achieved a year high gross margin of 20.7% compared to 19.3% in Q4 2021 and 19.1% in Q3 2022.

展望未來，我們相信，隨著我們在全球範圍內繼續提高產品能力和品牌知名度，我們的自主品牌產品將獲得更多吸引力。因此，現在讓我們仔細看看我們的毛利率和本季度業績的另一個亮點。我們的毛利率受到多種因素的影響，例如產品組合、產品發佈時間和產品生命週期，包括模型升級。儘管我們在本季度面臨挑戰，但我們實現了 20.7% 的年度高毛利率，而 2021 年第四季度和 2022 年第三季度分別為 19.3% 和 19.1%。

This improvement was mainly driven by the successful launch of our margin accretive new products and the optimization of our product and channel mix. As we continue to implement these proven initiatives, we're confident that we can sustain our positive gross margin trend into 2023. Turning now to costs. As we have discussed, costs have been a key focal point for our company, both in terms of their absolute amount and then as a percentage of sales.

這一改善主要得益於我們成功推出可增加利潤的新產品以及我們產品和渠道組合的優化。隨著我們繼續實施這些行之有效的舉措，我們有信心將積極的毛利率趨勢維持到 2023 年。現在談談成本。正如我們所討論的，成本一直是我們公司的一個關鍵焦點，無論是在絕對金額還是在銷售額中所佔的百分比。

Since Q3 2020, we have been pleased to see a trend towards a decrease in total operating expenses, while still making strategic investments to fuel growth. Our company's adjusted operating expenses, excluding share-based compensation for the fourth quarter of 2022 were RMB 277.6 million, reflecting a year-over-year decrease of 5.9% and a quarter-over-quarter decrease of 6.1%.

自 2020 年第三季度以來，我們很高興看到總運營費用下降的趨勢，同時仍在進行戰略投資以推動增長。 2022 年第四季度，我們公司調整後的運營費用（不包括股權激勵）為人民幣 2.776 億元，同比下降 5.9%，環比下降 6.1%。

However, if we exclude severance payments of RMB 10 million, our Q4 operating expenses would be RMB 267 million. While we acknowledge that reducing fixed costs can be challenging, we are taking further steps to control our expenses and have already made good progress in cutting our expenses run rate.

然而，如果我們剔除 1000 萬元人民幣的遣散費，我們第四季度的運營費用將為 2.67 億元人民幣。雖然我們承認降低固定成本可能具有挑戰性，但我們正在採取進一步措施來控制我們的開支，並且已經在降低我們的開支運行率方面取得了良好進展。

Looking ahead, we expect our total operating expenses to reach approximately RMB 250 million or lower in the coming quarters, which represents a significant decrease of around 20% or more from the average of RMB 300 million per quarter in 2022. We'll continue to rightsize our organization and streamline our cost base in order to achieve profitability in the coming quarters.

展望未來，我們預計未來幾個季度我們的總運營費用將達到約人民幣 2.5 億元或更低，這比 2022 年每季度平均人民幣 3 億元大幅減少約 20% 或更多。我們將繼續調整我們的組織規模並精簡我們的成本基礎，以便在未來幾個季度實現盈利。

Spending on R&D in Q4 2022 was RMB 114.3 million net increase of 21.9% year-over-year, which was partly due to the lower government subsidy received. If we exclude that factor, our R&D expenses remained slightly down versus the fourth quarter of 2021, thanks to our efficient product develop processes.

2022 年第四季度的研發支出為人民幣 1.143 億元，同比淨增長 21.9%，部分原因是收到的政府補貼減少。如果我們排除該因素，由於我們高效的產品開發流程，我們的研發費用與 2021 年第四季度相比仍略有下降。

Selling and the marketing expenses were RMB 125.1 million, 17.8% lower year-over-year, mainly due to pruning of our retail channels in Q4. At the same time, we continue to make investments selectively in various international markets and sales channel expansion through digital marketing initiatives and also partnerships with leading global sales platforms. These investments are critical to drive our long-term organic growth.

銷售和營銷費用為人民幣 1.251 億元，同比下降 17.8%，主要是由於我們在第四季度對零售渠道進行了精簡。與此同時，我們繼續通過數字營銷計劃以及與領先的全球銷售平台的合作夥伴關係，在各個國際市場和銷售渠道擴展方面有選擇地進行投資。這些投資對於推動我們的長期有機增長至關重要。

Our Q4 expenses were RMB 53.4 million which is almost in line with the third quarter of 2022 and a 17.5% decline compared with RMB 64.7 million in the fourth quarter of 2021. We believe that this decrease reflects our execution excellence and reconfirms the effectiveness of our expense control strategy.

我們第四季度的支出為人民幣 5340 萬元，與 2022 年第三季度基本持平，與 2021 年第四季度的人民幣 6470 萬元相比下降了 17.5%。我們認為，這一下降反映了我們卓越的執行力，並再次證實了我們的有效性費用控制策略。

Our non-GAAP operating results improved throughout the year in Q4 being the best performing quarter in 2022 from a percentage perspective. This result demonstrated a sequential improvement in our cost control, given Q4's smaller revenue scale. Our adjusted net loss in the quarter was RMB 60.3 million compared with RMB 52 million in the fourth quarter of 2021.

從百分比的角度來看，我們的非 GAAP 經營業績在第四季度全年都有所改善，是 2022 年表現最好的季度。鑑於第四季度的收入規模較小，這一結果表明我們的成本控制有所改善。我們本季度調整後的淨虧損為人民幣 6030 萬元，而 2021 年第四季度為人民幣 5200 萬元。

In the fourth quarter, the company wrote down RMB 30.1 million valuation allowance of deferred tax assets, excluding share-based compensation, the one-off severance packages and the deferred tax asset impact, the adjusted net loss was RMB 20.1 million in the fourth quarter.

第四季度，公司減記遞延所得稅資產估值備抵人民幣3010萬元，剔除股權激勵、一次性遣散費和遞延所得稅資產影響，調整後第四季度淨虧損為人民幣2010萬元.

Now turning to the balance sheet. Our cash flow has remained strong, thanks to our enhanced efficiency in working capital management. In Q4, we generated positive cash flow from operations, some of which were used to retire certain short-term debts.

現在轉向資產負債表。由於我們提高了營運資金管理效率，我們的現金流一直保持強勁。在第四季度，我們從運營中產生了正現金流，其中一些用於償還某些短期債務。

During the fourth quarter, we continue to manage our inventory with precision, successfully reducing our inventory balance to RMB 1 billion compared to RMB 1.25 billion at the end of 2021 and down from its peak of RMB 1.5 billion in 2022.

第四季度，我們繼續精準管理庫存，成功將庫存餘額從 2021 年底的人民幣 12.5 億元和 2022 年的峰值人民幣 15 億元降至人民幣 10 億元。

In November 2021 the Board approved the allocation of up to USD 20 million towards a share repurchase program. In Q4 2022, we continued our repurchase program, a testament to our ongoing confidence on our long-term growth perspectives. We have bought back USD 10.3 million worth of shares by the end of December, and we intended 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 年第四季度，我們繼續執行回購計劃，這證明了我們對長期增長前景的持續信心。截至 12 月底，我們已經回購了價值 1030 萬美元的股票，我們打算實施這一回購計劃。

Moving on to our outlook. In light of ongoing macroeconomic challenges, our guidance for the first quarter of 2023 currently projects net revenue to be between RMB 0.6 billion and RMB 0.75 billion compared with RMB 0.76 billion for the first quarter of 2022. Please note that this outlook reflects continued uncertainty around the potential effects of the COVID-19 pandemic on sales and lower discretionary consumer spending, especially in our international markets and global macro weakness.

繼續我們的展望。鑑於持續的宏觀經濟挑戰，我們目前預計 2023 年第一季度的淨收入將在 6 億元人民幣至 7.5 億元人民幣之間，而 2022 年第一季度為 7.6 億元人民幣。請注意，這一前景反映了圍繞COVID-19 大流行對銷售和可支配消費者支出減少的潛在影響，尤其是在我們的國際市場和全球宏觀經濟疲軟的情況下。

However, we have seen some positive signs and the year may be somewhat back-end loaded as we gradually release our new products. This concludes our prepared remarks. We will now open the call for questions. Operator, please go ahead.

然而，我們看到了一些積極的跡象，隨著我們逐步發布新產品，這一年可能會有些拖後腿。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)

（操作員說明）

The first question comes from Lisa Lee with Alpha Research. Please go ahead.

第一個問題來自 Alpha Research 的 Lisa Lee。請繼續。

I have 2 questions. The first 1 is your fourth quarter margin looks quite strong, what has driven this performance with the improvement due to self-branded products? And secondly, how should we think about the full year 2023 in terms of revenue growth, gross margin, SG&A, et cetera?

我有兩個問題。第一個是你們第四季度的利潤率看起來相當強勁，是什麼推動了這一業績因自主品牌產品的改善？其次，我們應該如何考慮 2023 年全年的收入增長、毛利率、SG&A 等？

Thank you, Lisa. I mean let me quickly come back on your first question. Yes, the gross margin improvement in Q4 is majority driven by the gross margin performance of the self-branded products. As you -- so there are 2 things to it. Number one, we improved on the product mix. as we mentioned that in the past, the Xiaomi products has always been standing for a majority part of our revenue base. But in Q4 2022 it actually reversed. Actually, our self-branded products stands for more than 77% of the overall mix for the quarter.

謝謝你，麗莎。我的意思是讓我快速回到你的第一個問題。是的，第四季度毛利率的提高主要是由自主品牌產品的毛利率表現推動的。和你一樣 - 所以有兩件事。第一，我們改進了產品組合。正如我們提到的，過去，小米產品一直佔據我們收入基礎的大部分。但在 2022 年第四季度，它實際上發生了逆轉。實際上，我們的自有品牌產品佔本季度整體產品組合的 77% 以上。

So I think product mix definitely plays a role, and you all know that our self-branded product carries a higher margin than the Xiaomi-branded products. Number 2 is also on the channel mix. So what we did in Q4 and also in the second half of 2022 is to gradually pruning our channel, our retail partners, right? We try to look at the probabilities selectively on the retail partners and try to prune those ones which are not making money.

所以我認為產品組合肯定發揮了作用，你們都知道我們的自主品牌產品比小米品牌產品的利潤率更高。 2 號也在頻道組合中。那麼我們在第四季度和 2022 年下半年所做的就是逐步修剪我們的渠道，我們的零售合作夥伴，對嗎？我們嘗試有選擇地查看零售合作夥伴的概率，並嘗試修剪那些不賺錢的合作夥伴。

So in essence, the product and channel mix has been 1 of the reasons, driven the overall gross margin up for the company for Q4, and we see this actually this trend to continue in 2023. And then on 2023 full year, normally without a guide for the full year performance, we only guide for the upfront 1 quarter performance, but I think I could give you a few -- some colors on how we look at the full year.

因此，從本質上講，產品和渠道組合是推動公司第四季度整體毛利率上升的原因之一，我們實際上看到這種趨勢將在 2023 年繼續。然後在 2023 年全年，通常沒有全年業績指南，我們只指導第一季度的前期業績，但我想我可以給你一些——一些關於我們如何看待全年的顏色。

So I think at this moment, we're cautiously optimistic about the full year, because according to IDC data and some other third-party market research institutions report, the overall wealth of market for 2023, is still pointing to a small growth. I think it's a single-digit growth for the full year for 2023. And then what I can say is that our market share among the global players has remained relatively stable and also improving in the course of 2022.

所以我認為目前，我們對全年持謹慎樂觀態度，因為根據 IDC 數據和其他一些第三方市場研究機構的報告，2023 年市場整體財富仍指向小幅增長。我認為這是 2023 年全年的個位數增長。然後我可以說的是，我們在全球參與者中的市場份額保持相對穩定，並且在 2022 年期間也在提高。

So we're cautiously optimistic about the full year of 2023. But however, I think the year is probably going to be a little bit back-end loaded because also from a seasonality perspective, the high season, sale season for our industry always centered around Q3 and Q4. So in this case, I think over a full year, we're still seeing probably our revenue is going to be cautiously optimistic, but more skewed towards second half of this year.

因此，我們對 2023 年全年持謹慎樂觀態度。但是，我認為這一年可能會有一些後端負載，因為從季節性角度來看，我們行業的旺季、銷售季節始終集中在大約Q3和Q4。因此，在這種情況下，我認為在一整年的時間裡，我們仍然會看到我們的收入可能會謹慎樂觀，但更傾向於今年下半年。

On the gross margin, I have mentioned that our gross margin performance, we have seen that there's an increasing trend quarter-by-quarter in 2022, and we expect that to, I think, 2022, Q4, we had the third quarter was 20.7%. And I think we see this trend gradually improving also into 2023. So -- because we also think the product mix and the channel mix is going to continue to improve for our company.

關於毛利率，我已經提到我們的毛利率表現，我們已經看到 2022 年每個季度都有增長趨勢，我們預計到 2022 年第四季度，我們的第三季度為 20.7 %。而且我認為我們看到這種趨勢也會在 2023 年逐漸改善。所以 - 因為我們也認為我們公司的產品組合和渠道組合將繼續改善。

On the cost, operating cost overall, I think I also just mentioned that we have managed to tune the cost down to a level in Q4, whereby if you exclude the severance cost, it stands at RMB 270 million per quarter well by the full year run rate was $300 million per quarter for 2022. And we expect that this number is going to be further tuned down to a level of $250 million per quarter, or even lower per quarter for 2023.

關於成本，總體運營成本，我想我剛才也提到了我們已經設法將成本降低到第四季度的水平，如果不包括遣散費，到全年每季度將達到 2.7 億元人民幣2022 年的運行率為每季度 3 億美元。我們預計這個數字將進一步下調至每季度 2.5 億美元的水平，或者到 2023 年甚至更低。

So overall, I think given all the things which I just mentioned, we think we are on a good track to return to profitability in 2023, hopefully, in the second half of the year, if not earlier.

所以總的來說，我認為考慮到我剛才提到的所有事情，我們認為我們在 2023 年恢復盈利的良好軌道上，希望是在今年下半年，如果不是更早的話。

That's very clear. And if I may, can I add 1 more question. Can you also discuss your performance in different regions? For example, now we're seeing, I guess, a recovery trend in China, but not so much in Europe and North America. Can you talk about your performance in different regions and give us more colors there.

這很清楚。如果可以的話，我可以再添加 1 個問題嗎？能不能也談談你們在不同地區的表現？例如，我猜，現在我們看到中國出現了復甦趨勢，但歐洲和北美卻沒有那麼明顯。你能談談你在不同地區的表現，給我們更多的顏色嗎？

Now I think, yes, in China, you see gradually recovering trend, although relatively slow in Q1 2023, and I think this is going to improve as we go in the year, but China actually sets to a small part of our overall self-branded product portfolio. Our biggest market is actually in the European markets, whereby we are kind of impacted a little bit by the discretionary income cut because of the inflation pressures in Europe and also, to some extent, by the Ukraine and Russia war.

現在我認為，是的，在中國，你會看到逐漸復甦的趨勢，儘管在 2023 年第一季度相對緩慢，而且我認為隨著我們今年的進展，這種情況會有所改善，但中國實際上只占我們整體自我的一小部分品牌產品組合。我們最大的市場實際上是在歐洲市場，由於歐洲的通脹壓力以及在某種程度上還受到烏克蘭和俄羅斯戰爭的影響，我們受到了可支配收入削減的一點影響。

We're actually mitigating that. And then in February this year, we even opened a regional office in Warsaw on top of the other satellite offices, which we already had in Europe. And we see certain bright spots in Europe, especially in Eastern Europe areas, actually, our market share has went up quite dramatically during the year in Poland, especially, and we see that in Southern Europe market, we're also actually maintaining our share and improving our share.

我們實際上正在減輕這種情況。然後在今年 2 月，我們甚至在歐洲已有的其他衛星辦事處之上開設了華沙地區辦事處。我們在歐洲看到了一些亮點，尤其是在東歐地區，實際上，我們在波蘭的市場份額在這一年中大幅上升，尤其是在南歐市場，我們實際上也在保持我們的份額並提高我們的份額。

So Europe has and will remain as a cornerstone for our regional performance for our company. And then there's a bright spot in United States, as mentioned by Wang just in his script before, we won 1 of the third parties Consumer Electronics Industry Performance Award for the -- for a fitness tracker category for the top e-commerce U.S. market share gain in 2022. So actually, we gained the market share from nowhere to a double-digit number in the course of 2022.

因此，歐洲已經並將繼續作為我們公司區域業績的基石。然後在美國有一個亮點，正如 Wang 之前在他的劇本中提到的，我們贏得了第三方消費電子行業績效獎中的一項——用於美國市場份額最高的電子商務的健身追踪器類別在 2022 年獲得收益。因此，實際上，在 2022 年期間，我們的市場份額從無到有增加到兩位數。

So we think U.S.A. will continue to act as a growth engine for ourselves in 2023 and beyond. So I think those are -- and obviously, the ASEAN market is a good emerging market whereby we think we still have quite some opportunities, especially in Korean and Japanese markets to actually grow ourselves even further than what we currently have.

因此，我們認為美國將在 2023 年及以後繼續充當我們自己的增長引擎。所以我認為這些 - 很明顯，東盟市場是一個很好的新興市場，我們認為我們仍然有很多機會，特別是在韓國和日本市場，我們可以比目前的市場進一步發展。

So I think there are -- yes, we're leading in inflationary and consumer discretionary cuts type of environment. But however, we still see bright spots in different parts of the world, whereby we believe there is still a huge potential for us to tap in 2023 and beyond.

所以我認為有——是的，我們在通貨膨脹和非必需消費品削減類型的環境中處於領先地位。但是，我們仍然看到世界不同地區的亮點，因此我們相信我們在 2023 年及以後仍有巨大的潛力可以挖掘。

The next question comes from Ian Lee with [Daishin] Securities.

下一個問題來自 [Daishin] Securities 的 Ian Lee。

And congratulations for the fourth quarter, very good result. I have 2 questions. First is about your gross margin. We have noticed many -- price has fallen significantly since last year? And how can we measure the impact on the company's gross margin?

祝賀第四季度，非常好的結果。我有兩個問題。首先是關於你的毛利率。我們注意到很多——自去年以來價格大幅下跌？我們如何衡量對公司毛利率的影響？

Yes, Ian, thank you. The -- I think in so far, at least in Q1, we haven't seen too much of a price decrease in other words, the benefit of IC price going down, which should in turn translate into a better margin per sale for ourselves because -- number one, I think it takes a few quarters for the price to be reflected in our BOM material cost because most of the purchase we make it's a long lead time purchase, especially on IC, which we're locking the price already a few quarters before the current quarter.

是的，伊恩，謝謝你。我認為到目前為止，至少在第一季度，我們還沒有看到太多的價格下降，換句話說，IC 價格下降的好處，這反過來應該會轉化為我們自己更好的每次銷售利潤率因為 - 第一，我認為價格需要幾個季度才能反映在我們的 BOM 材料成本中，因為我們進行的大部分採購都是提前期採購，尤其是在 IC 上，我們已經鎖定了價格當前季度之前的幾個季度。

So I think in so far, we didn't see too much of that benefit in our gross margin. But as you mentioned, we noticed that there's a cost price going down for the IC in the industry. And I think in the coming quarters, we probably would see that benefit flowing into our gross margin, and that will, in turn, also increase our gross margin performance even further than what we have mentioned just now.

所以我認為到目前為止，我們的毛利率並沒有看到太多的好處。但是正如你提到的，我們注意到行業中 IC 的成本價格正在下降。而且我認為在未來幾個季度，我們可能會看到這種收益流入我們的毛利率，而這反過來也會比我們剛才提到的進一步提高我們的毛利率表現。

Okay. And the second is about Chat GPT and very popular topic in business. And we think this is a good very good opportunities for that. Could you give us a more detailed outlook on the -- on your product future plan about the Chat GPT application .

好的。第二個是關於聊天 GPT 和商業中非常流行的話題。我們認為這是一個很好的機會。你能否給我們更詳細的展望 - 關於你的產品未來計劃關於聊天 GPT 應用程序。

Yes. No, Chat GPT is actually a very interesting thing, but it's not only a buzzword for us. It really has been used in many parts of our operations, right? So I think there are 2 folds to it. Number 1 is we have applied Chat GPT in our basic processes. Think about consumer care. Think about listening to consumers' insights, think about linking the APIs towards our research and the development processes, and help us to find out errors and code better, for example, right?

是的。不，Chat GPT其實是一個很有趣的東西，但它對我們來說不僅僅是一個流行語。它確實已經在我們的許多操作中使用過，對嗎？所以我認為它有 2 個折疊。第一，我們在基本流程中應用了 Chat GPT。想想消費者關懷。想想听取消費者的意見，想想把 API 和我們的研究和開發過程聯繫起來，幫助我們更好地找出錯誤和代碼，例如，對吧？

So I think we have integrated Chat GPT in our basic day-to-day working processes in our company because we are -- we have always been a technology-driven companies, and we use most advanced technology whenever we saw there's a potential to it. Right?

所以我認為我們已經將 Chat GPT 整合到我們公司的基本日常工作流程中，因為我們一直是一家技術驅動型公司，只要我們看到它有潛力，我們就會使用最先進的技術.正確的？

Number two, I think, which is different than the other parties. So for example, if you look at Apple, they also have a Chat GPT application, but the only thing what it does is basically running Chat GPT on the watch instead of on the phone, and then it's just a different platform. But what we have done is we have integrated Chat GPT into our Zepp OS and in turn, that actually helps us to tailor and look at the user's data and help user to make a tailor-made program and, for example, on the workspaces, getting to know their insights, sleep insights, AI coaching, goal tracking, et cetera, et cetera, better than what we can do without Chat GPT? I think we're 1 of the first wearable companies to apply GPT to this extent in the industry and will continue to do so.

第二，我認為，這與其他各方不同。例如，如果你看看 Apple，他們也有一個 Chat GPT 應用程序，但它所做的唯一一件事基本上是在手錶而不是手機上運行 Chat GPT，然後它只是一個不同的平台。但我們所做的是將 Chat GPT 集成到我們的 Zepp 操作系統中，這實際上幫助我們定制和查看用戶數據，並幫助用戶製作量身定制的程序，例如，在工作區，了解他們的洞察力、睡眠洞察力、AI 指導、目標跟踪等等，比沒有 Chat GPT 我們能做的更好？我認為我們是業內首批將 GPT 應用到這種程度的可穿戴公司之一，並將繼續這樣做。

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

由於現在沒有進一步的問題，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 line. 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。

Again, the conference has ended. You may disconnect your line. Thank you.

會議再次結束。您可以斷開線路。謝謝。