Zepp Health Corp (ZEPP) 2023 Q2 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Second Quarter 2023 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，大家好。感謝您出席 Zepp Health Corporation 2023 年第二季度收益電話會議。 （操作員指示）今天的電話會議正在錄音。現在我將把電話轉給你們的東道主，公司投資者關係總監張女士。請繼續，格蕾絲。

Hello, everyone, and welcome to Zepp Health Corporation's Second Quarter 2023 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 slides referred to on this call by visiting the IR section of the company's website. 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. 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.

大家好，歡迎參加 Zepp Health Corporation 2023 年第二季度收益電話會議。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在我們的新聞稿中發布，並發佈在網上。您還可以訪問該公司網站的投資者關係部分，查看本次電話會議中提到的收益新聞稿和幻燈片。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王先生；以及我們的首席財務官 Leon Cheng Deng 先生。公司管理層將以準備好的發言開始，電話會議將以問答環節結束。我們的首席運營官楊邁克先生將參加我們的問答環節。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做出的前瞻性陳述。

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 are included in the company's annual report on Form 20-F for the fiscal year ended December 31, 2022, and other filings as filed with U.S. Securities and Exchange Commission.

前瞻性陳述涉及固有風險和不確定性。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該公司截至 2022 年 12 月 31 日的財年 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 as required under applicable law. Please also note that GAAP earnings press release and this conference call includes discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. That press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

除適用法律要求外，公司不承擔更新任何前瞻性陳述的義務。另請注意，公認會計準則收益新聞稿和本次電話會議包括對未經審計的公認會計準則財務信息以及未經審計的非公認會計準則財務信息的討論。該新聞稿包含未經審計的非公認會計準則衡量標準與未經審計的最直接可比的公認會計準則衡量標準的調節表。

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黃王先生。請繼續。

Hello, everyone. Welcome to Zepp Health's Second Quarter 2023 Earnings Conference Call. In the second quarter, we maintained our momentum through the successful execution of our strategic transformation. This shift involves moving away from a business model heavily relied on a single customer for the majority of our revenues. And in that establishing ourselves as a self-reliant global smart wearable and health care solution provider.

大家好。歡迎參加 Zepp Health 2023 年第二季度收益電話會議。第二季度，我們通過成功實施戰略轉型，保持了發展勢頭。這一轉變涉及擺脫我們大部分收入嚴重依賴單一客戶的業務模式。並將我們打造成為一家自力更生的全球智能可穿戴和醫療保健解決方案提供商。

While Mi Band sales were heavily affected by the overall smart-brand market decline, our self-branded products continue to gain traction during the quarter generating 12.7% higher revenues quarter-over-quarter and contributing to (inaudible) 70% of our top line. In this transformative phase, we have come to recognize that enhancing our revenue streams quality is paramount.

雖然小米手環的銷量受到整體智能品牌市場下滑的嚴重影響，但我們的自有品牌產品在本季度繼續受到關注，收入環比增長 12.7%，占我們營收的 70%（聽不清） 。在這個變革階段，我們逐漸認識到提高收入流質量至關重要。

Our strategy has undergone refinement, centering around the utilization of our self-branded product sales to effectively offset the company's fixed costs. This transition marks a deliberate (inaudible) , from the pursuit of sheer growth to the steadfast commitment to attain -- attaining profitability. Notably, this shift in approach has been particularly successful in the Chinese and Indian markets, where we have converted our erstwhile [lock] insurer incurring ventures into sources of profit.

我們的策略進行了細化，圍繞利用我們的自有品牌產品銷售來有效抵消公司的固定成本。這一轉變標誌著一種深思熟慮的（聽不清），從追求純粹的增長到堅定地致力於實現盈利。值得注意的是，這種方法的轉變在中國和印度市場尤其成功，我們已將過去的[鎖定]保險公司轉變為利潤來源。

This strategic focus is aimed to improve our gross margin and ultimately steer us back towards sustained profitability. We have refined our product mix and strategically streamline our sales channels. As a result, our overall gross margin has surged to 22% compared to 17.9% at the same period last year.

這一戰略重點旨在提高我們的毛利率，並最終引導我們走向持續盈利。我們完善了產品組合，並戰略性地簡化了我們的銷售渠道。因此，我們的整體毛利率由去年同期的 17.9% 飆升至 22%。

This achievement is the most highest level we have attained since the second quarter of 2021 even in the face of several total revenues year-over-year and margin pressure seeing from Xiaomi products. Our ROI-driven strategies, spending the supply chain, R&D, product development and marketing has significantly posed our brand image within the premium smart valuable device market.

即使面對小米產品的多項總收入同比和利潤率壓力，這一成績也是我們自 2021 年第二季度以來取得的最高水平。我們以投資回報率為導向的戰略，在供應鏈、研發、產品開發和營銷方面投入大量資金，在高端智能貴重設備市場上顯著樹立了我們的品牌形象。

These initiatives have not only elevated our brand influence and garnered increased consumer recognition but have also optimized our cost efficiencies. As a result, our products and services have experienced heightened adoption across various global regions. This growth is particularly evidenced in the high-end product segment, where we offer a comparing value proposition delivering premium features and a more accessible price point than our competitors' premium offerings.

這些舉措不僅提升了我們的品牌影響力、贏得了消費者的認可，還優化了我們的成本效率。因此，我們的產品和服務在全球各個地區得到了更高的採用。這種增長在高端產品領域尤其明顯，我們提供比較價值主張，提供比競爭對手的優質產品更優質的功能和更實惠的價格點。

This is especially true in the North American market, where we capped our market position in terms of market value in the top 5 for smart watches according to NPD with an increased gross margin. We continue to enrich our offerings to adjust the preferences of our customers. On June 21, we unveiled Amazfit Cheetah, our first smartwatch series dedicated to runners, featuring a live weight design for runners.

在北美市場尤其如此，根據 NPD 的數據，我們在智能手錶市場價值方面的市場地位達到了前 5 名，並且毛利率有所提高。我們不斷豐富我們的產品，以適應客戶的偏好。 6月21日，我們推出了首款專為跑步者打造的智能手錶系列——Amazfit Cheetah，採用針對跑步者的實時體重設計。

It can optimize the users running experience with industry-leading GPS technologies to deliver enhanced positioning, accuracy and upgraded AI-powered coaching to generate personalized training plans. Leveraging last language model and generative AI technologies, we also rolled out an AI chat feature in Amazfit Cheetah to facilitate to coach to act interactions for users.

它可以利用行業領先的 GPS 技術優化用戶的跑步體驗，提供增強的定位、準確性和升級的人工智能輔導，以生成個性化的訓練計劃。利用最新的語言模型和生成式 AI 技術，我們還在 Amazfit Cheetah 中推出了 AI 聊天功能，方便指導用戶進行交互。

Additionally, we have also been striving to refresh users experience and better meet their fitness and lifestyle needs through firmware updates. On July 10, we released a major update for our popular Amazfit T-Rex 2, which added support for cadence sensors upgraded water malls such as Surfing, Kitesurfing and the newly added Wakesurfing as well as the long-awaited Zepp Coach feature, allowing users to enjoy their favorite summertime activities with our AI-powered training guidance.

此外，我們也一直努力通過固件更新來刷新用戶體驗，更好地滿足他們的健身和生活方式需求。 7月10日，我們針對熱門產品Amazfit T-Rex 2發布了重大更新，增加了對踏頻傳感器的支持，升級了Surfing、Kitesurfing等水上商場以及新增的Wakesurfing以及期待已久的Zepp Coach功能，讓用戶通過我們人工智能驅動的培訓指導，享受他們最喜歡的夏季活動。

We have enhanced our entry-level product line by introducing the new Bip 5, featuring an expensive 1.91 inch Ultra-large display. With the inclusion of the cutting-edge for satellite positioning system, this device empowers users with accurate location tracking and locking a comprehensive range of possibilities.

我們通過推出新的 Bip 5 增強了我們的入門級產品線，該產品配備昂貴的 1.91 英寸超大顯示屏。該設備採用了尖端的衛星定位系統，為用戶提供了精確的位置跟踪和鎖定的全面可能性。

The Bip 5 supports over 120 sports models complemented by intelligent recognition technology. Moreover, it comes with monitoring capabilities on 24 hours bitrate SpO2 levels, and stress levels, ensuring a holistic view of our users well-being.

Bip 5 支持超過 120 種運動模型，並輔以智能識別技術。此外，它還具有 24 小時比特率 SpO2 水平和壓力水平監控功能，確保全面了解用戶的健康狀況。

Additionally, we are planning to build several new products in the second half and are excited about how their advanced features can help more users better manage their health. We will save the details for their upcoming product launches, please stay tuned. Our commitment to enhancing our offerings for users through application of cutting-edge technologies across our products, services and business is built into our DNA. As our AI coach, Zepp Coach is providing more interactive informative and customer customized training experience to our users through product like Amazfit Falcon, Amazfit T-Rex (inaudible) and now made Amazfit T-Rex 2 as well as Amazfit Cheetah. We are also integrating GPT technology into our core development process to enhance our R&D efficiency.

此外，我們計劃在下半年推出幾款新產品，並對它們的先進功能如何幫助更多用戶更好地管理他們的健康感到興奮。我們將保存他們即將推出的產品的詳細信息，請繼續關注。通過在我們的產品、服務和業務中應用尖端技術來增強我們為用戶提供的產品的承諾已融入我們的 DNA。作為我們的人工智能教練，Zepp Coach 通過Amazfit Falcon、Amazfit T-Rex（聽不清）以及現在的Amazfit T-Rex 2 和Amazfit Cheetah 等產品為我們的用戶提供更具互動性的信息和客戶定制的培訓體驗。我們還將GPT技術融入到我們的核心開發流程中，以提高我們的研發效率。

We believe these will inventory benefit users as they will enjoy premium products and services at a low cost while also contributing to our bottom line games. Lastly, I'm thrilled to share that (inaudible) and (inaudible) icon in (inaudible) and better for Amazfit Cheetah product. In [latin] amazfit at San Francisco Marathon from July 21 to 23, where it demonstrated the exceptional functionalities of our premium learning smartwatch. This

我們相信這些庫存將使用戶受益，因為他們將以低成本享受優質產品和服務，同時也為我們的利潤做出貢獻。最後，我很高興分享 Amazfit Cheetah 產品中的（聽不清）和（聽不清）圖標以及更好的內容。在 7 月 21 日至 23 日的舊金山馬拉鬆比賽中，amazfit 展示了我們的高級學習智能手錶的卓越功能。這

partnership has introduced a Amazfit to more running in services and showcased our ability to craft leading products, helping amplify our reputation as a premium smart watch manufacturer across the international sports community. Looking ahead, we remain optimistic about our company's prospects as the market continues to present huge post-pandemic opportunities.

此次合作將Amazfit引入更多跑步服務，並展示了我們製造領先產品的能力，有助於提升我們作為國際體育界優質智能手錶製造商的聲譽。展望未來，我們對公司的前景保持樂觀，因為市場繼續呈現疫情后的巨大機遇。

According to IDC, global smartwatch shipments are forecast to increase from 157.3 million in 2023 to 206.2 million in 2027. This CAGR of 6.8% despite the challenging macro economy. As we hone our value proposition with AI power products and services to provide the industry's tailwind, we expect our self-branded products to continue to grow.

IDC 預計，全球智能手錶出貨量預計將從 2023 年的 1.573 億部增長到 2027 年的 2.062 億部。儘管宏觀經濟充滿挑戰，但複合年增長率仍高達 6.8%。隨著我們通過人工智能電源產品和服務磨練我們的價值主張，為行業提供順風車，我們預計我們的自有品牌產品將繼續增長。

We will continue to optimize our inventory levels and preventing control cases, while maintaining our competitive edge and building long-term product pipeline through targeted investment in R&D and marketing. The parted by our vertical integrated supply chain and efficient platform-based R&D. We are confident that these efforts will forecast margin expansion and a prompt return to profitability, ultimately, filling our growth and business success. Thank you again for joining us today. I will now turn the call over to Leon to go over the highlights of our second quarter financial results.

我們將繼續優化庫存水平並預防控制案例，同時通過有針對性的研發和營銷投資來保持競爭優勢並建立長期產品管道。這得益於我們的垂直整合供應鍊和高效的基於平台的研發。我們相信，這些努力將預示著利潤率的擴大和盈利能力的迅速恢復，最終實現我們的增長和業務成功。再次感謝您今天加入我們。我現在將把電話轉給萊昂，回顧一下我們第二季度財務業績的亮點。

Thank you, Wang. Greetings, everyone, and thank you for joining our earnings call today. I would like to review some of the key metrics from our financial results the second quarter of 2023. In the second quarter, the consumer electronics categories that we participate in remains challenged by factors such as foreign exchange headwinds and persistently subdued consumer spending power, among others. The conditions have not yet returned to what we could consider normal and we continue to see unprecedented levels of discounting by our competitors. We saw a reduction in channel inventory in the first half of the year, consistent with our expectation for activations to outpace selling, and we expect this to continue through the third quarter particularly in Europe and Asia Pacific, where retailers continue to tighten up.

謝謝你，王。大家好，感謝您今天參加我們的財報電話會議。我想回顧一下我們 2023 年第二季度財務業績的一些關鍵指標。第二季度，我們參與的消費電子品類仍然受到外匯不利因素和消費者支出能力持續低迷等因素的挑戰。其他的。情況尚未恢復到我們認為的正常水平，我們繼續看到競爭對手前所未有的折扣水平。我們看到上半年渠道庫存減少，這與我們對激活速度超過銷售速度的預期一致，我們預計這種情況將持續到第三季度，特別是在歐洲和亞太地區，零售商將繼續收緊庫存。

As for underlying demand, strength in the Americas helped offset the impact of the tough economic climate in Europe and Asia Pacific. Despite this, our brand and product portfolio continued to perform well. Our second quarter revenue amounted to RMB 648.3 million within the expected guidance range for a decline of 41.5% year-over-year, primarily attributed to lower Xiaomi sales.

至於潛在需求，美洲的強勁幫助抵消了歐洲和亞太地區嚴峻經濟氣候的影響。儘管如此，我們的品牌和產品組合仍然表現良好。我們第二季度的收入為人民幣 6.483 億元，在預期指導範圍內，同比下降 41.5%，主要歸因於小米銷量下降。

During the quarter, our revenue generated from Xiaomi-branded products declined by 67.2%, largely influenced by market deterioration in smart bands category, while our self-branded products experienced a 7% decrease mainly due to limited new product introductions during the quarter.

本季度，小米品牌產品的收入下降了 67.2%，主要受到智能手環類別市場惡化的影響，而我們的自有品牌產品的收入下降了 7%，主要是由於本季度新產品推出有限。

Moving on to our gross margin, which can be influenced by various factors such as product mix, product launch timing, and product life cycles, including model upgrades. As we continue to make our ROI-oriented approach to optimize our product and sales channel portfolio, the gross margin for our self-branded products remained healthy.

接下來是我們的毛利率，它可能受到產品組合、產品發佈時間和產品生命週期（包括型號升級）等多種因素的影響。隨著我們繼續以投資回報率為導向來優化我們的產品和銷售渠道組合，我們自有品牌產品的毛利率保持健康。

Despite a slight decrease in revenue for our Maytag brand, we are delighted to report a remarkable 51% year-over-year expansion of our Amazfit brand gross margin. This significant growth has played a crucial role in driving our overall Q2 gross margin to an impressive 22%. Notably, this is the highest level we have achieved since Q2 2021 even withstanding a year-over-year decline of 42% in Xiaomi products gross margin during the quarter.

儘管我們的 Maytag 品牌收入略有下降，但我們很高興地報告我們的 Amazfit 品牌毛利率同比增長了 51%。這一顯著增長對於推動我們第二季度整體毛利率達到令人印象深刻的 22% 發揮了至關重要的作用。值得注意的是，儘管本季度小米產品毛利率同比下降 42%，但這是我們自 2021 年第二季度以來取得的最高水平。

This outstanding performance speaks volumes about the strength and resilience of our Amazfit brand despite the market challenges we faced our dedication to delivering high-quality products and optimizing our operations at yield exceptional results. We are confident that with this positive momentum alongside new product introductions planned for the second half of the year as well as a moderated level of clearance activity, we should be able to expand the gross margin of our company even further.

儘管我們面臨市場挑戰，但這一出色的表現充分說明了我們 Amazfit 品牌的實力和韌性，我們致力於提供高質量的產品並優化我們的運營，以取得卓越的成果。我們相信，憑藉這種積極的勢頭，加上計劃於下半年推出的新產品以及適度的清倉活動，我們應該能夠進一步擴大公司的毛利率。

Now let's look at costs. As we have always mentioned in our past earnings calls, controlling cost remains as a top priority for the company, both in terms of their absolute amount and as a percentage of sales.

現在讓我們看看成本。正如我們在過去的財報電話會議中一直提到的那樣，無論是從絕對金額還是佔銷售額的百分比來看，控製成本仍然是公司的首要任務。

Since Q3 2020, we have been pleased to see a downward trend in total operating expenses, while still making strategic investments in new products, technologies and footprint expansions to fuel our long-term growth. In Q2 2023, we delivered on our quarterly run rate target and successfully managed to reduce our adjusted operating costs to RMB 204 million, the lowest level since Q2 2019.

自 2020 年第三季度以來，我們很高興看到總運營支出呈下降趨勢，同時仍在新產品、技術和足跡擴張方面進行戰略投資，以推動我們的長期增長。 2023年第二季度，我們實現了季度運行率目標，並成功將調整後的運營成本降低至2.04億元人民幣，為2019年第二季度以來的最低水平。

Our second quarter R&D expenses were RMB 84.7 million, lowered by 31.4% year-over-year, thanks to enhanced efficiency driven by our platform based R&D strategy. However, as a percentage of sales, R&D costs still remain at a relatively high level, demonstrating our commitment to further building our product strength and our long-term competitive edge.

第二季度研發費用為8,470萬元人民幣，同比下降31.4%，得益於平台化研發策略帶來的效率提升。然而，研發成本佔銷售額的比例仍然保持在較高水平，這表明我們致力於進一步打造我們的產品實力和長期競爭優勢。

As we continue to prune our retail channels to maximize returns on every penny we spend, our selling and marketing expenses declined by 33.9% year-over-year, reaching RMB 70.7 million. However, as a percentage of sales, we're at 10.9% versus 9.7% in the second quarter of last year. We'll continue to invest strategically in our brand, adopting an ROI-based marketing strategy to ensure our ongoing growth and success.

隨著我們不斷精簡零售渠道，實現每一分錢的回報最大化，我們的銷售及營銷費用同比下降33.9%，達到人民幣7,070萬元。然而，我們佔銷售額的百分比為 10.9%，而去年第二季度為 9.7%。我們將繼續對我們的品牌進行戰略投資，採用基於投資回報率的營銷策略，以確保我們的持續增長和成功。

Second quarter G&A expenses were RMB 48.9 million, down by 25.9% year-over-year. benefiting from our effective cost control measures. Looking ahead, we will persist with our prudent stance towards costs and expect cost levels to maintain at current levels are lower in the upcoming quarters, while investing responsibly and with great discipline to fuel our business growth.

第二季度管理及行政費用為人民幣4890萬元，同比下降25.9%。受益於我們有效的成本控制措施。展望未來，我們將堅持對成本的審慎立場，預計未來幾個季度的成本水平將保持在較低水平，同時以負責任和嚴格的紀律進行投資，以推動我們的業務增長。

With our enhanced gross margin and carefully managed costs, our non-GAAP net loss has narrowed to $59.2 million in Q2. Despite facing a cost coverage issue in Q2, I'm delighted to share that we're optimistic about returning to profitability in Q3 2023.

隨著毛利率的提高和成本的精心管理，我們第二季度的非 GAAP 淨虧損已收窄至 5920 萬美元。儘管在第二季度面臨成本覆蓋問題，但我很高興地告訴大家，我們對 2023 年第三季度恢復盈利持樂觀態度。

Now turning to the balance sheet. Cash and cash equivalents, restricted cash and term deposits as of June 30, 2023, totaled RMB 10 billion providing ample runway for us to invest and capitalize on potential marketing opportunities. Efficient working capital management remains a priority for us. In Q2, we reduced our inventory to RMB 700.3 million, the lowest level in several quarters. We'll persist in carefully managing inventory levels in order to optimize our operations.

現在轉向資產負債表。截至2023年6月30日，現金及現金等價物、受限制現金和定期存款總計人民幣100億元，為我們投資和利用潛在營銷機會提供了充足的跑道。高效的營運資金管理仍然是我們的首要任務。第二季度，我們將庫存減少至人民幣 7.003 億元，為幾個季度以來的最低水平。我們將堅持謹慎管理庫存水平，以優化我們的運營。

Despite a modest P&L loss in Q2, we sustained positive operating cash flow for the fourth consecutive quarter. We utilized this to reduce our debt levels and will continue to do so in coming quarters. Now turning to our share repurchase program. To recap. In November 2021, the Board authorized the allocation of up to USD 20 million towards a buyback program.

儘管第二季度損益略有虧損，但我們連續第四個季度保持正運營現金流。我們利用這一點來降低債務水平，並將在未來幾個季度繼續這樣做。現在轉向我們的股票回購計劃。回顧一下。 2021 年 11 月，董事會授權撥款最多 2000 萬美元用於回購計劃。

By the end of June 30, 2023, we had repurchased shares worth USD 11.7 million, and we intended to carry out with this buyback program in Q3 reflecting our confidence in the company's future and underscoring our commitment in delivering long-term value to our shareholders. Regarding our outlook for Q3, we expect our net revenue to range from RMB 600 million to RMB 800 million.

截至2023年6月30日，我們已回購價值1170萬美元的股票，我們打算在第三季度實施這一回購計劃，這反映了我們對公司未來的信心，並強調了我們為股東提供長期價值的承諾。對於第三季度的展望，我們預計淨收入將在 6 億元至 8 億元人民幣之間。

We anticipate that the trend of quarter-over-quarter growth in self-branded product sales revenue will continue, positioning us to achieve higher overall gross margin and return to profitability. Please note that this outlook reflects ongoing uncertainties around lower discretionary consumer spending especially in our key markets and global macroeconomic weakness.

我們預計自有品牌產品銷售收入環比增長的趨勢將持續下去，使我們能夠實現更高的整體毛利率並恢復盈利。請注意，這一前景反映了可自由支配消費者支出下降（特別是在我們的關鍵市場）和全球宏觀經濟疲軟方面持續存在的不確定性。

In conclusion, despite the challenges we faced during the second quarter, we're proud of significant strides we made in enhancing our self-branded product sales improving gross margin and implementing efficient cost management efforts. In our continued focus on expanding our product margin and carefully managing our inventory levels and operating costs as well as upcoming new product launches, we remain confident that we are on the right track to continue to deliver value for customers and investors over the long term.

總之，儘管我們在第二季度面臨挑戰，但我們對在提高自有品牌產品銷售、提高毛利率和實施有效的成本管理工作方面取得的重大進展感到自豪。在我們繼續專注於擴大產品利潤、謹慎管理庫存水平和運營成本以及即將推出的新產品的過程中，我們仍然相信，我們正走在正確的道路上，繼續為客戶和投資者提供長期價值。

There's no doubt in my mind that we'll emerge from this challenging period as a stronger company that creates substantial shareholder value. With that, I will now open the call for any questions you may have. Operator, please go ahead. Thank you.

在我看來，毫無疑問，我們將擺脫這個充滿挑戰的時期，成為一家更強大的公司，創造巨大的股東價值。現在，我將開始電話會議，回答您可能提出的任何問題。接線員，請繼續。謝謝。

(Operator Instructions)

（操作員說明）

The first question comes from Nicole Jones with Book Investments.

第一個問題來自圖書投資公司的妮可瓊斯。

I have 3 questions. Firstly, could you give some more details on the expected profitability in Q3 and Q4? And then secondly, what do you see as the margin trend in Q3 and Q4? And then finally, could you provide some more details on the new projects through the second half of the year?

我有 3 個問題。首先，您能否詳細介紹一下第三季度和第四季度的預期盈利能力？其次，您認為第三季度和第四季度的利潤率趨勢如何？最後，您能否提供有關下半年新項目的更多細節？

I think I would start with the easy questions on the new product launches, and I will go into the gross margin and profitability questions in a bit. So if you look at the new product launches, we have -- I mean we mentioned that in his script as well, we launched quite a few new products in July, August time take, for example, the big pie watch, which is actually our value segment mainstream product line.

我想我將從有關新產品發布的簡單問題開始，稍後我將討論毛利率和盈利能力問題。所以如果你看一下新產品的發布，我們——我的意思是我們在他的劇本中也提到，我們在七月、八月推出了很多新產品，例如大餅表，它實際上是我們的價值細分主流產品線。

And then we are actually going to launch our latest flagship products, our famous GT series and bear with me, I think we're going to have new names for that in the coming days, which we're going to launch in Berlin as well. And then also, we will launch a few new products, which are the new versions of our famous mill and the GT sports range in the second half of the year.

然後我們實際上將推出我們最新的旗艦產品，我們著名的 GT 系列，請耐心等待，我想我們將在未來幾天內為其推出新名稱，我們也將在柏林推出。然後我們還會在下半年推出一些新產品，就是我們著名的磨坊和GT運動系列的新版本。

So we do have many new product launches, as we mentioned in our script in the second half of the year, especially in September, October frame, which is on the way, right? Related to that, I think that would -- naturally brings me to the margin trend for Q3 and Q4. I think as you can see, and we also mentioned in our Q2 numbers that we see a clear jump in our self-branded products, the Amazfit brand margin increasing in Q2, and we see this continuing into Q3 and Q4.

所以我們確實有很多新產品發布，正如我們在下半年的劇本中提到的那樣，特別是在九月、十月框架中，這些產品即將推出，對嗎？與此相關的是，我認為這自然會讓我想到第三季度和第四季度的利潤率趨勢。我認為正如您所看到的，我們在第二季度的數據中也提到，我們的自有品牌產品出現了明顯的躍升，Amazfit 品牌利潤率在第二季度有所增加，並且我們看到這種情況會持續到第三季度和第四季度。

So I think in the previous call, I have alluded to a rule of thumb number that our gross margin for our self-branded products is in the range of 30% in -- for our self-branded products. And I think given the new product launches, which we have under way, we see this number would further improve in Q3 and Q4. And then coming to the profitability questions you have, I believe that's your first question. We are reporting a narrower loss so be it that we have -- we still have a loss in Q2 this year.

因此，我認為在之前的電話會議中，我提到了一個經驗法則，即我們自有品牌產品的毛利率在 30% 左右。我認為考慮到我們正在進行的新產品發布，我們認為這個數字將在第三季度和第四季度進一步改善。然後談到您所面臨的盈利能力問題，我相信這是您的第一個問題。我們報告的虧損收窄，因此今年第二季度我們仍然虧損。

But you can see that we are clearly making progress on, number one, on the gross margin, we actually returned to the highest level in past 3 years on the gross margin percentage, which is 22%. It's not a small number per se. But as I just mentioned, we expect this number to further improve in the upcoming quarters to more go into the 30th of May.

但你可以看到，我們在第一方面明顯取得了進展，在毛利率方面，我們的毛利率實際上回到了過去三年來的最高水平，即22%。這本身就不是一個小數字。但正如我剛才提到的，我們預計這一數字將在未來幾個季度進一步改善，並持續到 5 月 30 日。

And on the other hand, we also managed to cut our operating costs from a run rate of $300 million per quarter to $200 million a quarter. And we're also going to be very prudent on how we manage the cost. Number one, we should not sacrifice the future growth of the company. Number two, we are actually benefiting from the AI from the push on using the ChatGPT alike AI models in our day-to-day work and also the platforming approach in our R&D development process to actually -- to do more or less the same or even more as what we did before with a lower spending level, which we have demonstrated in the past quarters.

另一方面，我們還設法將運營成本從每季度 3 億美元削減到每季度 2 億美元。我們也會非常謹慎地管理成本。第一，我們不應該犧牲公司未來的發展。第二，我們實際上從人工智能中受益，因為在我們的日常工作中推動使用類似 ChatGPT 的人工智能模型，以及我們研發開發過程中的平台方法，以實際實現或多或少相同或甚至與我們之前在較低支出水平上所做的一樣，我們在過去幾個季度中已經證明了這一點。

So with a higher gross margin overall on the company and a lower run rate on the cost, I think we're heading towards this breakeven point, which we also alluded in our prepared script that we are very confident that in Q3, our transformation journey from what our CEO, Wang just mentioned, that we will very much reliant on a big -- single big customer sales to a company whereby we should be able to justify our profitability based on a majority of our self-branded product sales, that type of company, right?

因此，由於公司整體毛利率較高，成本運行率較低，我認為我們正在走向盈虧平衡點，我們在準備好的腳本中也提到了這一點，我們非常有信心在第三季度實現轉型之旅正如我們的首席執行官王剛剛提到的，我們將非常依賴於一家大客戶的銷售，我們應該能夠根據我們大部分自有品牌產品的銷售來證明我們的盈利能力，這種類型公司的，對吧？

And we see that is happening -- going to happen in Q3. And then given the seasonality of Q4, and I don't want to jump the gun here too much. But I think we are relatively confident that we should be able to return to profitability starting from Q3, which is next quarter.

我們看到這種情況正在發生——將在第三季度發生。然後考慮到第四季度的季節性，我不想在這裡操之過急。但我認為我們相對有信心，我們應該能夠從第三季度（即下個季度）開始恢復盈利。

(Operator Instructions) The next question comes from Lisa Lee with Elsa Research.

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

I also have 3 questions. The first one is on overseas market. Can you share more color about the situation in overseas? And what are you seeing in July, August? What do you think about the trend for the remainder of the year? And the second one is on potential new partnerships for Zepp Health. Any specific directions you're considering? And last one is your relationship with Xiaomi and what's your forecast of Xiaomi's products going forward? Okay.

我還有3個問題。第一個是海外市場。您能分享一下海外的情況嗎？七月、八月你會看到什麼？您如何看待今年剩餘時間的趨勢？第二個是關於 Zepp Health 潛在的新合作夥伴關係。您正在考慮任何具體方向嗎？最後一個是您與小米的關係，您對小米未來的產品有何預測？好的。

Thank you, Lisa. So very good questions. So let me also start with your third question on the Xiaomi relationship. I think Xiaomi stands at where are the so-called -- we started from the so-called Xiaomi ecosystem company, but I think over the time, this term has changed for a lot of companies, but we still have very good relationship with Xiaomi to number one, Xiaomi remains as one of the biggest shareholders of our company.

謝謝你，麗莎。非常好的問題。那麼我也先回答你關於小米關係的第三個問題。我認為小米站在所謂的哪裡——我們是從所謂的小米生態系統公司開始的，但我認為隨著時間的推移，這個詞對於很多公司來說已經改變了，但我們仍然與小米保持著非常好的關係排名第一的小米仍然是我們公司的最大股東之一。

Number two, we still have the wearables cooperation with Xiaomi on various product categories, and that is not changing for us. However, you also noticed that we have embarked on a transformation journey from changing the company from reliant on one single big customer type of situation, let's put it in a different way from an OEM or ODM supplier type of situation to a more company, which is dependent on its own self-branded products, whereby we hope that we can come to a situation whereby our self-branded product sales is good enough to cover for our fixed cost to start with, right?

第二，我們仍然與小米在多個產品類別上進行可穿戴設備合作，這對我們來說沒有改變。但是，您也注意到，我們已經開始了一個轉型之旅，從將公司從依賴單一大客戶類型的情況，換一種說法，從OEM或ODM供應商類型的情況轉變為更多的公司，這依賴於自己的自有品牌產品，所以我們希望自有品牌產品的銷量能夠覆蓋我們的固定成本，對嗎？

And then I think the past 6 quarters, we have reported 6 quarters of losses. And then that was also part of the reason we are actually going through a secure transformation journey to go from a reliance on Xiaomi single big customer to Amazfit self-reliance company as what our CEO just mentioned.

然後我認為在過去的 6 個季度中，我們報告了 6 個季度的虧損。這也是我們實際上正在經歷一個安全轉型之旅的部分原因，從依賴小米單一大客戶到 Amazfit 自力更生的公司，正如我們首席執行官剛才提到的那樣。

So to assure you that where our relationship with Xiaomi is actually very strong, and it will continue to be strong, but we will do more and more risk return on investment type of analysis on the product categories we are cooperating with Xiaomi, right? So we'll set a very clear threshold on the gross margin, on the profitability of -- which are bringing by the Xiaomi projects, and we'll work with them on those projects, which also have a mutual benefit to our company because in the end, I have due responsible -- responsibility towards our shareholders, right?

因此，可以向您保證，我們與小米的關係實際上非常牢固，並且將繼續保持牢固，但我們會對與小米合作的產品類別進行越來越多的風險投資回報類型分析，對吧？因此，我們將為小米項目帶來的毛利率和盈利能力設定一個非常明確的門檻，我們將在這些項目上與他們合作，這對我們公司也有互惠互利，因為最後，我有應有的責任——對我們股東的責任，對嗎？

So I think that is on the Xiaomi partnership. And then with regard to your second question on whether or not we have any plans on the new partnerships other than Xiaomi, I think that is there's always plans from the company in the making, but I would not comment too much on this. I mean, if we were going to have or if there's such a B2B relationship materializing, you will definitely hear from us in our IR website. And then I come back to your first question, which is on the overseas market performance.

所以我認為這就是與小米的合作關係。關於你的第二個問題，除了小米之外，我們是否有任何新的合作夥伴計劃，我認為公司一直在製定計劃，但我不會對此發表太多評論。我的意思是，如果我們打算建立或建立這樣的 B2B 關係，您一定會在我們的 IR 網站上收到我們的消息。然後我回到你的第一個問題，關於海外市場的表現。

I think put aside the Xiaomi revenues of the company, which is in the meantime, has been becoming a small portion of the company's overall sales, on our self-branded products, it has always been having a different characteristics than -- or a dependence on the Chinese sales we're making in China, right?

我認為，拋開公司的小米收入不談，小米的收入目前已經成為公司整體銷售額的一小部分，在我們的自有品牌產品上，它一直具有不同的特徵——或者說是依賴。關於我們在中國的銷售，對嗎？

To -- I think I've mentioned this many times in the previous calls, that majority of our self-branded products sales is actually coming from the so-called overseas markets or international markets the company has. The biggest part is coming out of Europe. And then the second biggest part is coming out of Asia Pacific countries and the third one is coming out of United States and then with a small portion of that mix coming out of China.

我想我在之前的電話中已經多次提到過，我們大部分自有品牌產品的銷售實際上來自於公司所謂的海外市場或國際市場。最大的一部分來自歐洲。第二大部分來自亞太國家，第三大部分來自美國，然後一小部分來自中國。

What we noticed in Q2 is that we're actually growing in all these regions, except for China and India whereby we also mentioned in our prepared remarks that we tapered from looking at the scale in these markets towards profitability. So we first want to manage for profitability so that the overall company is positioned for a health profitability.

我們在第二季度注意到的是，除了中國和印度之外，我們實際上在所有這些地區都在增長，我們在準備好的評論中也提到，我們逐漸從關注這些市場的規模轉向盈利能力。因此，我們首先要進行盈利能力管理，以便整個公司能夠實現健康的盈利能力。

And then we're going to -- as the next step, we're going to look at whether or not we can actually make profitable growth to that -- in that sequence. So -- and if you look at our overseas markets, we see that U.S. market actually presents itself as a very lucrative and a growth potential market for us because we are well positioned in that market to compete with big brands like Garmin, Samsung and Fitbit. And we have this unique positioning that we have the made in China manufacturing production capabilities in China, which we can address more the demand of the value segment.

然後我們將 - 作為下一步，我們將看看我們是否能夠真正實現盈利增長 - 按照這個順序。因此，如果你看看我們的海外市場，我們會發現美國市場實際上對我們來說是一個非常有利可圖且具有增長潛力的市場，因為我們在該市場處於有利地位，可以與Garmin、三星和Fitbit 等大品牌競爭。我們有一個獨特的定位，那就是我們在中國擁有中國製造的生產能力，我們可以更多地滿足價值細分市場的需求。

And in the meantime, we're actually competing with Garmin on the high-end premium segment in the United States. And then we think a year and a bit, I think our market share in -- according to NPD, which is third-party market share research company. Our market share according to them has come up from 0 to 10% or 11%, if I remember correctly. So I think that's in a nutshell, our performance in the international markets. And I hope that gives you a feeling for what it is.

與此同時，我們實際上正在美國的高端高端市場與 Garmin 競爭。然後我們思考了一年多的時間，我認為我們的市場份額——根據第三方市場份額研究公司 NPD 的數據。根據他們的說法，我們的市場份額已經從 0 上升到 10% 或 11%（如果我沒記錯的話）。所以我認為簡而言之，這就是我們在國際市場上的表現。我希望這能讓您感受到它是什麼。

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

由於現在沒有其他問題了，我想將電話轉回給 Grace 張，讓其作結束語。

Thank you once again for joining us today. If you have further questions, please feel free to contact GAP's Investor Relations department through the contact information provided on our IR website. This concludes this conference call. Thank you.

再次感謝您今天加入我們。如果您還有其他疑問，請隨時通過我們的 IR 網站上提供的聯繫信息聯繫 GAP 的投資者關係部門。本次電話會議到此結束。謝謝。

Again, this concludes the conference call. You may now disconnect your line. Thank you.

電話會議再次結束。您現在可以斷開線路。謝謝。