Zepp Health Corp (ZEPP) 2023 Q3 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by for Zepp Health Corporation's third-quarter 2023 earnings conference call. (Operator Instructions) Today's conference call is being recorded.

大家好，女士們、先生們，感謝你們出席 Zepp Health Corporation 的 2023 年第三季財報電話會議。 （操作員指示）今天的電話會議正在錄音。

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

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 third-quarter 2023 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，歡迎參加 Zepp Health Corporation 2023 年第三季財報電話會議。該公司的財務和經營業績今天早些時候透過新聞專線服務發佈在新聞稿中，並發佈在網路上。您也可以造訪該公司網站 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. Wang Huang, 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.

參加今天的電話會議的有董事會主席兼執行長王黃先生和財務長鄧成先生。公司管理階層將以準備好的發言開始，電話會議將以問答環節結束。我們的營運長楊麥克先生將參加我們的問答環節。

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US 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.

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。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有重大差異。

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 the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.

有關此風險和其他風險和不確定性的更多資訊包含在該公司截至 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。除適用法律要求外，本公司不承擔更新任何前瞻性聲明的義務。

Please also note that Zepp's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as our audited non-GAAP financial information. That press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

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 財務資訊以及我們經審計的非 GAAP 財務資訊的討論。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較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執行長黃王先生。請繼續。

Hello, everyone. Welcome to the Zepp Health third-quarter 2023 earnings conference call. In the third quarter, we achieved a business turnaround returning to profitability after enduring six consecutive quarters of losses. Despite the year-over-year decline in revenue, our high-margin self-branded products contribution to our top line now accounted for approximately 80% compared to the average of around 40% for the previous five years. This accomplishment reaffirmed effectiveness of our operational strategy and the early success of our business model transformation.

大家好。歡迎參加 Zepp Health 2023 年第三季財報電話會議。第三季度，我們在經歷了連續六個季度的虧損後，實現了業務扭虧為盈。儘管收入同比下降，但我們的高利潤自有品牌產品對我們營收的貢獻目前約佔 80%，而前五年的平均水平約為 40%。這項成就再次證明了我們營運策略的有效性和業務模式轉型的早期成功。

Before delving into the details of line to provide a recap of our business model transformation, which has taken nearly two years to bring us to our current position. This transformation has involved departing from a business model that have heavily rely on a single customer for the majority of our revenues. We aim to establish ourselves as a self-reliant, global, smart-wearable, and healthcare solutions.

在深入研究產品線細節之前，我們先回顧一下我們的業務模式轉型，我們花了近兩年的時間才達到目前的地位。這項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。我們的目標是將自己打造成一個自力更生、全球化、智慧穿戴和醫療保健解決方案的公司。

Throughout this transformative phase, we have recognized the importance of enhancing the quality of our revenue streams. This transition signifies a deliberate shift from pursuing share growth to a steadfast commitment to achieve profitability. Our strategy focus is centered on improving our growth margin and ultimately guiding us towards sustained profitability and future growth.

在這個變革階段，我們認識到提高收入流品質的重要性。這一轉變標誌著從追求股票成長到堅定致力於實現獲利的轉變。我們的策略重點是提高我們的成長率，並最終引導我們實現持續獲利和未來成長。

Notably, our Q3 performance indicates an early success on this journey. While Xiaomi branded product sales faced persistent industry-wide headwinds, our self-branded products sustained sequential growth momentum with 12.3% quarter-over-quarter revenue growth. This was driven by our expanded AI power product portfolio and average brand influence worldwide, resulting in a rise in product adoption across several markets.

值得注意的是，我們第三季的業績顯示這趟旅程取得了初步成功。儘管小米品牌產品銷售面臨持續的全產業阻力，但我們的自主品牌產品維持季比成長勢頭，營收季增12.3%。這是由我們擴大的人工智慧電源產品組合和全球平均品牌影響力推動的，導致多個市場的產品採用率上升。

Notably in Southeast Asia and [Central real gold], our self-branded product revenue increased by 28.4% and 79%, respectively year over year. It is also worth mentioning that we turned net profit positive there for the Chinese and Indian markets during the third quarter as we remain focused on high-quality growth with effective, region-specific, sales expansion and cost reduction strategies.

尤其是在東南亞和【中真金】，我們的自有品牌產品收入較去年同期分別成長28.4%和79%。另外值得一提的是，我們在第三季在中國和印度市場實現了淨利潤正數，因為我們仍然專注於高品質成長，並採取有效的、針對特定區域的銷售擴張和成本降低策略。

Amid the power business model transformation, we prioritize profitability over sheer revenue growth. This strategic is shift the ticket from without in a significant surge in our gross margin, reaching a historic high of 33.9% in Q3. This achievement is filled by R&D breakthroughs such as our industry-leading GPS check technology and our continuous update Zepp OS supporting our premium product lines, elevating our ASP, thereby enhancing our product competitiveness.

在電力業務模式轉型過程中，我們優先考慮獲利能力而不是純粹的收入成長。這項策略使我們的毛利率大幅飆升，第三季達到 33.9% 的歷史新高。這項成就得益於我們領先業界的 GPS 檢查技術和不斷更新的 Zepp OS 等研發突破，支援我們的優質產品線，提升了我們的 ASP，從而增強了我們的產品競爭力。

Fleet expansion in gross margin is also a result of persistent efforts to improve overall operational efficiency. Looking ahead, we remain dedicated to refining our retail channels and product mix to sustain this positive trend in high gross margin, fostering profitable growth for future. While employing a profitability-oriented approach to our business operations this quarter, we also remain focused on leveraging our deep capabilities to enrich and iterate our product and service offerings to attack a broader community of users.

機隊毛利率的擴張也是持續努力提升整體營運效率的結果。展望未來，我們將繼續致力於完善零售通路和產品組合，以維持高毛利率的正面趨勢，促進未來的獲利成長。在本季度採用以盈利為導向的業務運營方法的同時，我們也繼續專注於利用我們的深厚能力來豐富和迭代我們的產品和服務，以攻擊更廣泛的用戶社群。

In September, we launched the Amazfit Balance previously known as the Amazfit GT Series, a powerful smartwatch that enables users to track the ultimate balanced between life, walk, and wellness with seamlessly integrated advanced features for health, fitness, and lifestyle. Specifically, Amazfit Balance features integration with the Zepp Coach, a chat AI-powered fitness coaching service; Zepp Aura for AI-powered rep and wellness services and Zepp pay for convenient NFC contactless payments. Notably, if Amazfit inaugural smartwatch to help us certifiy medical device blood pressure monitoring app in China.

9月，我們推出了Amazfit Balance（原名Amazfit GT系列），這是一款功能強大的智慧手錶，透過無縫整合健康、健身和生活方式的高級功能，讓用戶能夠追蹤生活、步行和健康之間的終極平衡。具體來說，Amazfit Balance 與 Zepp Coach 集成，Zepp Coach 是一項基於聊天人工智慧的健身教練服務； Zepp Aura 用於人工智慧驅動的代表和健康服務，Zepp pay 用於方便的 NFC 非接觸式支付。值得注意的是，Amazfit首款智慧手錶幫助我們在中國認證醫療器材血壓監測應用程式。

Moving forward, we are expanding the blood pressure measurement software from the balanced top line to include a variety of watches such as Amazfit Active Cheetah and T-Rex. This integration augments the overall value of our smartwatches in comparison to other Chinese competitors who only utilize barometric measurement specific models for blood pressures. We believe our approach is of this more convenient and applicable across our entire watch series.

展望未來，我們正在將血壓測量軟體從平衡頂線擴展到包括 Amazfit Active Cheetah 和 T-Rex 等各種手錶。與其他僅使用氣壓測量特定型號進行血壓測量的中國競爭對手相比，這種整合增強了我們智慧手錶的整體價值。我們相信我們的方法更加方便並且適用於我們的整個手錶系列。

In October, we also unveiled the Amazfit Active and Amazfit Active Edge, both tailored for modern day, city consumers featuring an elegant appearance and powerful functionality with our AI-powered Zepp Coach. Amazfit Active is an ideal companion for people trying to live a healthy and active lifestyle.

10 月，我們還推出了 Amazfit Active 和 Amazfit Active Edge，這兩款產品專為現代城市消費者量身定制，具有優雅的外觀和強大的功能以及人工智慧支援的 Zepp Coach。 Amazfit Active 是追求健康、積極生活方式的人的理想伴侶。

Meanwhile, the top -- stylish at Amazfit Active Edge infuses our lifestyle theaters with new vitality, allowing users to express their identity and personality through its unique design. We still have many amazing new products underway for the upcoming months. So stay tuned.

同時，Amazfit Active Edge的時尚上衣為我們的生活風格劇場注入了新的活力，讓使用者透過其獨特的設計表達自己的身份和個性。在接下來的幾個月裡，我們仍然有許多令人驚嘆的新產品正在開發中。所以請繼續關注。

We are currently hosting Amazfit city campaign to champion a balanced and active lifestyle, which we consider the core value of Amazfit watches. Successful sections have taken place in has taken place in, Dusseldorf, Germany and Madrid, Spain with more city campaigns lined up. We invite users to join these sections, share feedback on our product, and collectively build a community that will cater for the users of Amazfit smart watches. We would be delighted to have you participate in these sections as well.

我們目前正在舉辦 Amazfit 城市活動，倡導平衡、積極的生活方式，我們認為這是 Amazfit 手錶的核心價值。已在德國杜塞爾多夫和西班牙馬德里舉辦了成功的部分活動，更多城市活動正在排隊進行。我們邀請用戶加入這些版塊，分享對我們產品的回饋，共同建立一個滿足 Amazfit 智慧手錶用戶需求的社群。我們很高興您也參與這些部分。

At Zepp, innovative minds are the true force needed to advance the increased integration of technology, especially on the Zepp OS. To that end, we recently sponsored Cal Hacks, the world's largest collegiate hackathon for the second consecutive year. This event's wealth of tech talent presents an opportunity for us to discover bright new minds and ideas, thereby empowering us to fulfill our mission.

在 Zepp，創新思維是推動科技整合的真正力量，尤其是在 Zepp OS 上。為此，我們最近連續第二年贊助了全球最大的大學黑客馬拉松 Cal Hacks。這項活動匯集了大量的技術人才，為我們提供了發現明亮的新想法和想法的機會，從而使我們能夠完成我們的使命。

We will continue to involve Zepp OS and increasingly rolling out our new updates to users to grow the user base. Alongside our ongoing product catalog expansion, we consistently enhance our product experience by rolling out software updates. With the adoption and the evolution of that the last, we are offering more regular updates to our users than before.

我們將繼續參與 Zepp OS 並越來越多地向用戶推出新的更新，以擴大用戶群。除了不斷擴展產品目錄外，我們還透過推出軟體更新不斷增強我們的產品體驗。隨著後者的採用和發展，我們為用戶提供比以前更多的定期更新。

For example, we released three major updates for Amazfit T-Rex 2 in the third quarter. First, our official system upgrade to Zepp OS 2.1 brought users a fresh interface and new interactive experiences. Then we also delivered a targeted sports mode upgrade and upgraded algorithm enabling users to check their physical status in real-time. The same is true for our Amazfit Falcon users and much more.

例如，我們在第三季發布了 Amazfit T-Rex 2 的三個重大更新。首先，我們正式系統升級至Zepp OS 2.1，為使用者帶來了全新的介面和全新的互動體驗。然後我們也進行了針對性的運動模式升級和演算法升級，讓使用者可以即時查看自己的身體狀況。對於我們的 Amazfit Falcon 用戶等來說也是如此。

These efforts to enhance our product value drove increased vibrance and engagement across our user community during the quarter. Notably, German national champion, Hendrik Pfeiffer, has teamed up with us for his fall marathon season to showcase the performance and features of Amazfit Cheetah Pro further elevating our brand influence and enlarging our user base.

這些提高我們產品價值的努力在本季度提高了我們用戶社群的活力和參與度。值得一提的是，德國全國冠軍Hendrik Pfeiffer在秋季馬拉松賽季與我們合作，展示了Amazfit Cheetah Pro的性能和功能，進一步提升了我們的品牌影響力，擴大了我們的用戶基礎。

Furthermore, we continued to leverage AI to drive our success, applying AI technology to both our products and services as well as our daily operation evidenced by our latest product launches. We are integrating our AI-powered features such as Zepp Coach and Zepp Aura into more of our products and services to help users train and manage their health effectively.

此外，我們繼續利用人工智慧來推動我們的成功，將人工智慧技術應用到我們的產品和服務以及我們的日常營運中，最新產品的發布就是證明。我們正在將 Zepp Coach 和 Zepp Aura 等人工智慧支援的功能整合到我們的更多產品和服務中，以幫助用戶有效地訓練和管理他們的健康。

Additionally, we continue to adopt GPT technology to facilitate our software development and enhance our R&D efficiency, which has yielded encouraging results. We will continue to enhance our AI capabilities, propel our development to the next level.

此外，我們繼續採用GPT技術來促進我們的軟體開發，提高我們的研發效率，並取得了令人鼓舞的成果。我們將持續提升人工智慧能力，推動我們的發展更上一層樓。

Looking ahead, we remain committed to providing our progressing global user community with our enriched product lines empowered by our evolving AI ecosystem. As the macro environment remains challenging, we are striving to maintain and increase our profitability while also actively exploring opportunities to drive our top-line growth to enhance our product value and attract a broader range of users. As we help more people manage their lives and well-being with our intelligent healthcare solution tools, we remain confident of achieving healthy, sustainable growth.

展望未來，我們仍然致力於為不斷發展的全球用戶社群提供由我們不斷發展的人工智慧生態系統支援的豐富產品線。由於宏觀環境仍然充滿挑戰，我們正在努力維持和提高獲利能力，同時積極探索推動營收成長的機會，以提升產品價值並吸引更廣泛的用戶。當我們利用智慧醫療解決方案工具幫助更多的人管理他們的生活和福祉時，我們仍然有信心實現健康、可持續的成長。

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，回顧一下我們第三季財務表現的亮點。

Thank you, Wang. Greetings, everyone, and thank you for joining our earnings call today. I would like to start by discussing some of the key metrics from our financial results for the third quarter of 2023.

謝謝你，王。大家好，感謝您今天參加我們的財報電話會議。我想先討論 2023 年第三季財務業績的一些關鍵指標。

As noted before, we believe that we have been in a post pandemic downswing in the cycle for our categories that may not yet to be at its end. Our performance has varied on a regional basis. Revenue in the Americas continued to be strong or partially offset by the softer performance in EMEA and APAC, reflecting that particularly difficult macroeconomic environment affecting both regions, which impacted our retailers' selling growth.

如前所述，我們認為，我們的品類已處於大流行後週期的下降期，但可能尚未結束。我們的表現因地區而異。美洲的收入持續強勁，或部分被歐洲、中東和非洲和亞太地區的疲軟業績所抵消，反映出影響這兩個地區的特別困難的宏觀經濟環境，從而影響了我們零售商的銷售成長。

Throughout the year, we saw the reduction in channel inventories levels, which put us in a healthy channel inventory position across our channels and geographies as we enter the holiday season. As I lived through multiple times in my 20 years intact, we fully expect that consumer behavior will normalize in time and our focus on innovation, execution, and exciting product roadmap will result in us returning to revenue growth in time.

全年，我們看到渠道庫存水準下降，這使我們在進入假期季節時在整個渠道和地區處於健康的渠道庫存狀況。正如我在 20 年裡經歷過的多次一樣，我們完全期望消費者行為能夠及時正常化，我們對創新、執行和令人興奮的產品路線圖的關注將使我們及時恢復收入成長。

In Q3 2023, we recorded revenue of RMB0.6 billion, in line with our guidance range, down by 50% year over year. This decline was mainly driven by lower Xiaomi branded product sales. During the quarter, our revenue generated from Xiaomi branded products decreased by 77% where our self-branded products experienced a 26% decrease, partially due to the timing of the new product introductions as we will launch Amazfit Active and Amazfit Active Edge products in Q4 this year and also in part due to our strategic approach to prune both channel and product mix.

2023年第三季度，我們錄得收入人民幣6億元，符合我們的指導範圍，年減50%。這一下降主要是由於小米品牌產品銷售下降所致。本季度，小米品牌產品的收入下降了 77%，自有品牌產品的收入下降了 26%，部分原因是新產品推出的時間，因為我們將在第四季度推出 Amazfit Active 和 Amazfit Active Edge 產品今年，部分原因是我們削減通路和產品組合的策略方法。

However, we had lost a 7.6% quarter-on-quarter growth for our self-branded products, which attribute to our enhanced brand value and new product features. Despite the revenue decline, as Wang mentioned, we achieved our return to profitability and realized a third-quarter 2023 net income of RMB3 million compared with a net loss of RMB17 million for the third quarter last year and a net loss of RMB70 million for the second quarter of 2023.

然而，我們的自有品牌產品較上季下降了7.6%，這歸因於我們品牌價值的提升和新產品功能。正如王所提到的，儘管收入下降，我們還是實現了盈利，並實現了2023 年第三季度淨利潤300 萬元人民幣，而去年第三季度淨虧損1700 萬元人民幣，2023 年第三季度淨虧損7,000 萬元人民幣。2023 年第二季。

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. Our gross margin for third quarter stands at a record high of 33.9%, almost doubled compared with the same period last year. This achievement is largely attributed to the strategic transformation driving us to focus more on Amazfit-branded products, especially the higher ASP series and the reduced clearance activities.

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。我們第三季的毛利率創歷史新高，達到33.9%，與去年同期相比幾乎翻了一番。這項成就很大程度上歸功於策略轉型促使我們更加關注Amazfit品牌產品，特別是更高ASP的系列以及清倉活動的減少。

Although the gross margin on Xiaomi branded products experienced a decline, the gross margin of our self-branded products, which now contributes to more than 90% of our total gross profit more than compensated for this weakness, resulting in improvements in the third-quarter gross margin compared with the second quarter. We are confident that with this positive momentum, alongside new product introductions planned for the upcoming months as well as a moderated level of the clearance activity, we should be able to sustain the further expansion of our company's gross margin.

儘管小米品牌產品的毛利率有所下降，但自有品牌產品的毛利率目前佔總毛利的90%以上，足以彌補這一弱點，導致第三季有所改善毛利率與第二季相比。我們相信，憑藉這種積極的勢頭，加上計劃在未來幾個月推出的新產品以及適度的清倉活動，我們應該能夠維持公司毛利率的進一步擴張。

Turning now to costs. As we have discussed, cost has been a key focal point for our company, both in terms of their absolute amount and as a percentage of sales. Hence, we continued to control expenses in a disciplined manner during the quarter. Since Q3 2020, we have been pleased to see a downtrend in total operating expenses while still making strategic investments in new products, technologies and footprint expansions to fuel our long-term growth.

現在轉向成本。正如我們所討論的，成本一直是我們公司的關鍵焦點，無論是從絕對金額還是佔銷售額的百分比來看。因此，我們在本季繼續嚴格控制費用。自 2020 年第三季以來，我們很高興看到總營運支出呈下降趨勢，同時仍對新產品、技術和足跡擴張進行策略性投資，以推動我們的長期成長。

In Q3, our non-GAAP operating expenses stood at RMB180 million, the lowest level since Q3 2019 and better than the guidance we previously provided.

第三季度，我們的非公認會計準則營運費用為人民幣 1.8 億元，為 2019 年第三季以來的最低水平，好於我們先前提供的指引。

Our R&D expenses in the third quarter of 2023 RMB75 million decreased by 41% year over year. This comprised 12.4% of revenues versus 10.6% for the same period in 2022. The decrease is largely attributed to our refined research and development approaches as we consistently evaluated resources efficiently to ensure maximize the return on investment and productivity. We are committed to investing in new technologies and AI to maintain our competitive edge against our peers.

2023年第三季我們的研發費用為人民幣7,500萬元，較去年同期下降41%。這佔營收的 12.4%，而 2022 年同期為 10.6%。這一下降主要歸因於我們改進的研發方法，因為我們持續有效地評估資源，以確保投資回報和生產力最大化。我們致力於投資新技術和人工智慧，以保持我們相對於同行的競爭優勢。

Our selling and marketing expenses for the third quarter of 2023 RMB70.6 million, a 43% decrease year over year, only price primarily to our retail channel mix in product improvements. At the same time, we continue to invest strategically in our brand and execute our driven marketing strategy.

2023年第三季我們的銷售和行銷費用為人民幣7,060萬元，年減43%，這主要是由於我們的零售通路組合在產品改進方面造成的。同時，我們繼續對我們的品牌進行策略性投資並執行我們的驅動行銷策略。

Our G&A expenses for the third quarter of 2023 were RMB46 million or RMB48 million down by 8.9% year over year compared with RMB52 million in Q3 2022, benefiting from our effective cost control measures.

受惠於我們有效的成本控制措施，我們2023年第三季的管理及行政費用為人民幣4,600萬元或人民幣4,800萬元，較2022年第三季的人民幣5,200萬元年減8.9%。

Looking forward, we are steadfastly committed to our prudent stance in the coming quarters and expect to maintain operating expenses at around these current levels or even lower. Simultaneously, we'll continue to invest in research and R&D activities and marketing initiatives to foster long-term growth and competitiveness while diligently monitoring discretionary [spending].

展望未來，我們在未來幾季堅定地堅持審慎立場，並預計將營運費用維持在當前水準左右甚至更低。同時，我們將繼續投資於研究和研發活動以及行銷活動，以促進長期成長和競爭力，同時認真監控可自由支配的[支出]。

Our operating results pivoted to a profit of RMB11 million compared to the operating loss of RMB73 million in the same period last year and the operating loss of RMB72 million in Q2 2023 as a result of the expansion of our self-branded product gross margin and streamlined operating expenses. As we enter the traditionally high holiday season, we expect to realize operating profit in Q4.

由於自有品牌產品毛利率的擴大和精簡，我們的經營業績從去年同期的經營虧損人民幣7,300萬元以及2023年第二季度的經營虧損人民幣7,200萬元轉向盈利人民幣1,100萬元。營業費用。隨著我們進入傳統的節日旺季，我們預計第四季度將實現營業利潤。

Now turning to the balance sheet. Cash and cash equivalents and restricted cash as of September 30, 2023, totaled approximately RMB1 billion, provide us with sufficient runway to seize potential marketing opportunities and invest in our business growth. We have also focused on managing our working capital efficiently. We kept inventory levels steady at RMB787 million, consistent with Q2 2023 and remains at a multiyear low level.

現在轉向資產負債表。截至2023年9月30日，現金及現金等價物以及限制性現金總計約人民幣10億元，為我們提供了充足的跑道來抓住潛在的營銷機會並投資於我們的業務增長。我們也專注於有效管理我們的營運資金。我們將庫存水準穩定在人民幣 7.87 億元，與 2023 年第二季一致，並保持在多年低水準。

We'll continue to manage inventory levels tightly as we weather the macro economy in Q3, coupled with operating profits and efficient working capital management, we achieved positive operating cash flow. This is our fifth consecutive quarter of positive operating cash flow, and we expect to continue with this positive operating cash flow trajectory into coming quarters.

在第三季的宏觀經濟狀況下，我們將繼續嚴格管理庫存水平，加上營業利潤和高效的營運資金管理，我們實現了正的營運現金流。這是我們連續第五個季度實現正營運現金流，我們預計未來幾季將繼續保持這種正營運現金流軌跡。

This Q2 2023, we started to retire part of our short plus long term debt portfolio and retired RMB35 million of debt. In Q3 we continued to reduce our debt levels by another RMB117 million. As our operating cash flow continue to strengthen, we intend to do more in the coming quarter. Furthermore, by the end of September 30, we have repurchased shares worth US$12.3 million.

2023 年第二季度，我們開始償還部分短期和長期債務組合，並償還了 3,500 萬元的債務。第三季度，我們持續減少債務水準1.17億元。隨著我們的營運現金流繼續增強，我們打算在下個季度採取更多行動。此外，截至9月30日，我們已回購價值1,230萬美元的股票。

We remain committed to continuing our buyback program in the fourth quarter, underscoring our confidence in the Company's future and our commitment to delivering long-term value to our shareholders.

我們仍然致力於在第四季度繼續實施回購計劃，強調我們對公司未來的信心以及我們為股東提供長期價值的承諾。

Looking into the future, our revenue guidance for Q4 is projected to be in the range of our the RMB600 million to RMB850 million. What I said is we anticipate that the trend of quarter over quarter growth in self-branded products sales will continue contributing to improving overall performance. Our focus on profitability as well as strengthening ourselves credit products performance remains unwavering.

展望未來，我們第四季的營收指引預計在人民幣 6 億元至 8.5 億元之間。我所說的是，我們預期自有品牌產品銷售較上季成長的趨勢將繼續有助於改善整體業績。我們對獲利能力以及增強信貸產品績效的關注依然堅定不移。

In conclusion, the third quarter presented us with both challenges and opportunities. While external factors played a significant role. Our strategic approach to prioritizing profitability over scale. Our focus ourself branded products and our disciplined cost management approach has all been instrumental to our encouraging performance and business turnaround in the third quarter. We're confident that these stress strategies will continue to deliver value to our investors and shareholders over the long-term.

總而言之，第三季為我們帶來了挑戰和機會。而外部因素則起了很大的作用。我們的策略方針是優先考慮獲利能力而非規模。我們對自有品牌產品的關注和嚴格的成本管理方法都對我們第三季度令人鼓舞的業績和業務週轉起到了重要作用。我們相信，從長遠來看，這些壓力策略將繼續為我們的投資者和股東帶來價值。

Thank you all for your attention, and I will now open the call for any questions you may have. Operator, please go ahead.

感謝大家的關注，我現在將打開電話詢問大家可能有的任何問題。接線員，請繼續。

Thank you. We will now begin the question and answer session for the benefit of all participants on today's call. If you wish to ask your questions to the Company's management in Chinese. Please immediately repeat your question in English (Operator Instructions) At this time we will pause momentarily to assemble our [questions].

謝謝。我們現在將開始問答環節，以便今天電話會議的所有參與者都受益。如果您想用中文向公司管理層提問。請立即用英語重複您的問題（操作員說明） 此時我們將暫時暫停以整理我們的[問題]。

Our first question comes from [Nicholas Jones of Brooks investment]. Please go ahead.

我們的第一個問題來自[布魯克斯投資公司的尼古拉斯瓊斯]。請繼續。

Hello, and thank you for taking my question. I actually have two questions. Firstly, on this margin level sustainable? And secondly, in terms of profitability, can you sustain profitability in the fourth quarter?

您好，感謝您提出我的問題。我其實有兩個問題。首先，這個利潤水準可持續嗎？其次，在獲利能力方面，第四季能否維持獲利？

Yeah. Thank you, Nicholas. I mean, let me take this two questions, and I think as we mentioned before that the gross margin portfolio of our company is actually improved quite a bit throughout the year. You saw that our gross margin actually jumped in Q2 versus Q1 and also versus last year to a high of 32%. And thereafter in Q3, our gross margin further improved to 34% roughly.

是的。謝謝你，尼古拉斯。我的意思是，讓我回答這兩個問題，我認為正如我們之前提到的，我們公司的毛利率組合實際上全年都有了很大的提高。您看到，我們第二季的毛利率實際上比第一季和去年都躍升到了 32% 的高點。此後第三季度，我們的毛利率進一步提高到約34%。

And this is actually due to a mix of product mix improvement and retail channel mix improvement in our gross margin management. And as we head into Q4, which is traditionally the high seasons for our product categories. And then also, as I mentioned, we launched quite some new products starting from second half of this year. And these new products also carry a much higher gross margin than what the old products used to carry before.

這實際上是由於我們毛利率管理中產品組合的改善和零售通路組合的改善。當我們進入第四季度時，這通常是我們產品類別的旺季。然後，正如我所提到的，我們從今年下半年開始推出了許多新產品。而這些新產品的毛利率也比以前的老產品高很多。

So therefore, I think given the high season in Q4, given the product mix improvement we are doing and given the relative moderate clearance activities, which we are going to do. But obviously, we're going to do some in Black Friday and Christmas season to catch ourselves. And we still see fact that Q4 gross margin will continue at the Q3 level and maybe a little bit even further expand further in Q4.

因此，我認為考慮到第四季度的旺季，考慮到我們正在做的產品組合改進以及考慮到我們將要做的相對適度的清倉活動。但顯然，我們將在黑色星期五和聖誕節期間做一些事情來控制自己。我們仍然看到第四季的毛利率將繼續保持第三季的水平，並且可能在第四季進一步擴大。

So I think that should give you a feeling for the gross margin portfolio for Q4, how that looks like with regard to the profitability in Q4, we normally don't guide on that, but I think as you hear I mentioned that given the high season of Q4 and the improved gross margin performance of the company.

因此，我認為這應該讓您對第四季度的毛利率組合有一個感覺，就第四季度的盈利能力而言，我們通常不會對此進行指導，但我認為正如您所聽到的那樣，我提到鑑於高第四季業績及公司毛利率表現改善。

And we also intended to streamline our cost at its current level or even lower. We believe that these all gives us a good chance in delivering a Q4 operating income, which would allow us to continue the performance improvement trend throughout the year.

我們還打算將成本精簡到當前水準甚至更低。我們相信，這些都為我們提供了實現第四季度營業收入的良好機會，這將使我們能夠繼續全年的業績改善趨勢。

Thank you.

謝謝。

(Operator Instructions) As there are no further questions. Now I'd like to turn the call back over to the Company's IR Director, John, for closing remarks.

（操作員說明）因為沒有其他問題了。現在我想將電話轉回給公司的投資人關係總監約翰，讓其致閉幕詞。

Thank you once again for joining us today. If you have further questions, please feel free to come past GAP's Investor Relations department through the contact information provided on our IR 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。如果您還有其他疑問，請隨時透過我們 IR 網站上提供的聯絡資訊聯絡 GAP 投資者關係部門。本次電話會議到此結束。現在您可以斷開線路。謝謝。