Zepp Health Corp (ZEPP) 2024 Q2 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's second-quarter 2024 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 的 2024 年第二季財報電話會議。（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 2024 earnings conference call. The company's financial and operating results were issued in a press release by 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 2024 年第二季財報電話會議。該公司的財務和經營業績已在今天早些時候由新聞專線服務發布的新聞稿中發布，並發佈在網上。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. Wayne Wang Huang, our Chairman of the Board of Directors and Chief Executive Officer; and Ms. Leon Deng, our Chief Financial Officer. The company's management will begin with prepared remarks and the call will conclude with a Q&A session. Mr. Mike Yeung, our Chief Operating Officer, will join us for the Q&A session.

參加今天電話會議的有我們的董事會主席兼執行長黃偉恩先生；以及我們的財務長 Leon Deng 女士。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 provision 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. 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, 2023, 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.

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。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 2023 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 that earnings press release and this conference call includes discussions of unaudited GAAP financial information, as well as our unaudited non-GAAP financial information. The press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP barriers. I will now turn the call over to our CEO, Mr. Wang Huang. Please go ahead.

另請注意，收益新聞稿和本次電話會議包括對未經審計的 GAAP 財務資訊以及我們未經審計的非 GAAP 財務資訊的討論。該新聞稿包含未經審計的非公認會計原則措施與未經審計的最直接可比較的公認會計原則障礙的調節。我現在將電話轉給我們的執行長黃王先生。請繼續。

Hello, everyone. Welcome and thank you for joining our call. To begin, I would like to provide an update on our strategic transformation. Our second-quarter results aligned with expectations with an increase in Amazfit-branded products sales and achieving a high gross margin despite a year-over-year decline in sales on net loss for the first half narrowed. With several new products slated for launch in the second half of the year, we firmly believe that the worst time of our transformation is behind us.

大家好。歡迎並感謝您加入我們的通話。首先，我想介紹一下我們策略轉型的最新情況。儘管上半年淨虧損年減幅收窄，但第二季業績符合預期，Amazfit品牌產品銷售成長，毛利率維持在高水準。隨著下半年多款新產品的推出，我們堅信轉型最糟糕的時期已經過去。

The progress we have achieved is centered on three key pillars. First, we are investing in new technologies, including AI, to meet the needs of our customers and maintain a competitive advantage against our peers. Second, we focus on product innovation and profitable growth. We plan to launch our hit products during the upcoming IFA event. In addition, we are enhancing the global visibility of our Amazfit-branded products through sponsorship of major sports events and partnerships with renowned athletes to expand our roster of international representatives.

我們所取得的進展集中在三個關鍵支柱上。首先，我們正在投資包括人工智慧在內的新技術，以滿足客戶的需求並保持相對於同行的競爭優勢。其次，我們注重產品創新和獲利成長。我們計劃在即將舉行的 IFA 活動期間推出我們的熱門產品。此外，我們還透過贊助重大體育賽事以及與知名運動員合作來擴大我們的國際代表名單，從而提高Amazfit品牌產品的全球知名度。

Now, let's delve into the three pillars as we witnessed the transformative impact of AI applications in the industry. According to the latest analyst report, AI is both enhancing existing use cases and grading new ones, significantly boosting user loyalty.

現在，讓我們深入探討三大支柱，並見證人工智慧應用對產業的變革性影響。根據最新的分析師報告，人工智慧既增強了現有用例，又對新用例進行了分級，從而顯著提高了用戶忠誠度。

Zepp Health is leveraging AI to transform sports and health experiences. This quarter, we launched Zepp OS 4.0, integrating OpenAI's GPT-4 into our Amazfit smart watches for safer and more useful responses, enhancing their role as wellness companions.

Zepp Health 正在利用人工智慧來改變運動和健康體驗。本季度，我們推出了 Zepp OS 4.0，將 OpenAI 的 GPT-4 整合到我們的 Amazfit 智慧手錶中，以提供更安全、更有用的回應，增強其作為健康伴侶的作用。

Key features of Zepp OS 4.0 include an upgraded Zepp Flow with intelligent language interactions and new health-focused mini-apps. Zepp OS 4.0 is now available for Amazfit Balance and Amazfit Active with support for other models coming later in 2024.

Zepp OS 4.0 的主要功能包括升級的 Zepp Flow，具有智慧語言互動和新的以健康為中心的迷你應用程式。Zepp OS 4.0 現已適用於 Amazfit Balance 和 Amazfit Active，並支援 2024 年稍後推出的其他型號。

Moreover, our R&D team has made significant flow-throughs in AI technology using that Flow platform as a foundation. We plan to release a new form of AI hardware listing in the next six months, making a new chapter in our journey in smart wearable technology. These upcoming releases not only demonstrated our technological strength but also highlight our long-term approach to product innovation and market strategy.

此外，我們的研發團隊以Flow平台為基礎，在人工智慧技術方面也取得了顯著的成果。我們計劃在未來六個月內發布新形態的AI硬體上市，開啟我們智慧穿戴科技之旅的新篇章。這些即將發布的產品不僅展示了我們的技術實力，還凸顯了我們在產品創新和市場策略方面的長期方針。

As we prepare for the upcoming IFA in Berlin, we are excited to introduce several innovative products, including the highly anticipated T-Rex 3 outdoor smartwatch and our new line of open, wearable stereo, OWS earbuds. In recent years, we have observed a growing demand for comfort in platform design, which has led to increased interest in open type headphones. Market research indicates that the open headphone segment is on point for substantial growth, presenting a promising opportunity within the Bluetooth headset market.

在我們為即將到來的柏林 IFA 做準備之際，我們很高興推出幾款創新產品，包括備受期待的 T-Rex 3 戶外智慧手錶和我們新的開放式穿戴式立體聲 OWS 耳塞系列。近年來，我們觀察到對平台設計舒適度的需求不斷增長，這導致人們對開放式耳機的興趣日益濃厚。市場研究表明，開放式耳機市場即將大幅成長，為藍牙耳機市場帶來了巨大的機會。

These new offerings will highlight our latest advancements in hardware development. Additionally, I am pleased to announce that the smart chip jointly designed with Whale Microchip, a subsidiary of Jiangsu Yitong, which we invested in 2021, has successfully entered mass production. This state-of-the-art chip will support Zepp OS 4.0 and will be featured in the smart watches relaunch at IFA.

這些新產品將凸顯我們在硬體開發的最新進展。此外，我很高興地宣布，我們於2021年投資的與江蘇億通旗下鯨魚微芯共同設計的智慧晶片已成功進入量產。這款最先進的晶片將支援 Zepp OS 4.0，並將在 IFA 上重新推出的智慧手錶中亮相。

In our commitment to innovation, we are thrilled to introduce the Amazfit Helio Ring, our first smart ring, which complements our smartwatch lineup. Launched at CES 2024, it has received critical acclaim and will soon be available in more countries.

為了致力於創新，我們很高興推出 Amazfit Helio Ring，這是我們的首款智慧環，它補充了我們的智慧手錶產品線。它在 CES 2024 上推出，廣受好評，並將很快在更多國家上市。

The Helio Ring is ideal for those who prefer not to wear watches while sleeping, pairs seamlessly with Amazfit smart watches like the Cheetah Pro and T-Rex Ultra for continuous 24/7 health monitoring. It offers advanced recovery insights.

Helio Ring 非常適合不想在睡覺時戴手錶的人，可與 Cheetah Pro 和 T-Rex Ultra 等 Amazfit 智慧手錶無縫搭配，連續 24/7 健康監測。它提供了先進的恢復見解。

And the Zepp app integrates data from both devices, empowering athletes to optimize their performance. With additional sizes, the Helio Ring is expanding to a broader market, driving further sales growth by integrating smartwatches, rings, and the upcoming OWS earbuds to launch at IFA.

Zepp 應用程式整合了來自兩個裝置的數據，使運動員能夠優化他們的表現。隨著尺寸的增加，Helio Ring 正在擴展到更廣泛的市場，透過整合智慧手錶、戒指和即將在 IFA 上推出的 OWS 耳機來進一步推動銷售成長。

We have crafted a seamless user experience loop, establishing a compelling, competitive advantage in bundled sales. We anticipate these offerings will further strengthen our market position and drive growth in the second half of the year.

我們精心設計了一個無縫的使用者體驗循環，在捆綁銷售中建立了引人注目的競爭優勢。我們預計這些產品將進一步鞏固我們的市場地位並推動下半年的成長。

On the marketing front, around the time of the IFA release, we will announce a major partnership with Hyrox in Europe and North America. Moreover, we have expanded our roster of athlete ambassadors. In the second quarter, we welcomed US Olympic medalist Morgan Pearson, Italian national endurance icon Yemaneberhan Crippa, and Chinese Marathon runner Xiaodong Wu to our team, Amazfit family.

在行銷方面，在 IFA 發布前後，我們將宣布與 Hyrox 在歐洲和北美建立重要合作夥伴關係。此外，我們也擴大了運動員大使名單。第二季度，我們迎來了美國奧運獎牌得主 Morgan Pearson、義大利國家耐力偶像 Yemaneberhan Crippa 和中國馬拉松運動員吳曉東加入我們的團隊 Amazfit 大家庭。

These partnerships enhance our presence in the running and endurance sector and demonstrate their performance advantages of our cutting-edge smart wearables. This also will be a significant step in our brand strategy, further enhancing our influence in global markets.

這些合作關係增強了我們在跑步和耐力領域的影響力，並展示了我們尖端智慧穿戴裝置的性能優勢。這也將是我們品牌策略的重要一步，進一步提升我們在全球市場的影響力。

These efforts are part of our broader strategy to increase the global visibility of our brand and products by aligning with prominent athletes and sports events. We continue to build a strong, recognizable brand identity and create meaningful connections with consumers worldwide.

這些努力是我們更廣泛策略的一部分，旨在透過與傑出運動員和體育賽事合作來提高我們品牌和產品的全球知名度。我們持續打造強大、知名的品牌形象，並與全球消費者建立有意義的連結。

Through those brand and marketing investments, we have solidified our influence in major popular countries such as China, India, and Brazil. Additionally, we achieved a breakthrough in Germany recently, deepened our partnership with Decathlon in France, and steadily improved our global gross margin.

透過這些品牌和行銷投資，我們鞏固了在中國、印度和巴西等主要受歡迎國家的影響力。此外，近期我們在德國取得了突破，深化了與法國迪卡儂的合作，全球毛利率穩定提升。

In conclusion, our transformation journey highlights the effectiveness of our strategic direction with a strong focus on AI and expanding self-branded products. These efforts, combined with increased brand visibility, position us for sustainable growth as we have to go IFA in Berlin with new product releases and rising brand awareness.

總而言之，我們的轉型之旅凸顯了我們策略方向的有效性，重點在於人工智慧和擴展自有品牌產品。這些努力加上品牌知名度的提高，使我們能夠實現永續成長，因為我們必須在柏林的 IFA 上發布新產品並提高品牌知名度。

We anticipate continued growth momentum in the second half of the year. Thank you for your continued support and confidence in Zepp Health. I will now turn the call over to Leon to go over the highlights of our second-quarter financial results.

我們預計下半年將繼續保持成長動能。感謝您對 Zepp Health 一如既往的支持與信任。我現在將把電話轉給萊昂，回顧我們第二季財務表現的亮點。

Thanks, Wayne. Greetings, everyone. Let me walk you through some of the key metrics of our second-quarter financial results. Over the past two years, the entire consumer electronics sector has been facing significant challenges. We have observed that the pressure of discretionary spending, especially in an inflationary environment, is also creating headwinds for our operations.

謝謝，韋恩。大家好。讓我向您介紹我們第二季財務表現的一些關鍵指標。過去兩年，整個消費性電子產業面臨重大挑戰。我們觀察到，可自由支配支出的壓力，特別是在通膨環境下，也為我們的營運帶來了阻力。

Additionally, major brands like Apple and Samsung offered larger-than-usual discounts during the past Prime Day in certain regions, highlighting the competitiveness of the industry landscape. However, we are cautiously optimistic to see that, according to IDC research, overall smart wearable market will return to growth in this year with AI-enabled health insights and AI services as the growth drivers.

此外，蘋果、三星等大品牌在剛過去的Prime Day期間在部分地區推出了比平常更大的折扣，凸顯了行業格局的競爭力。不過，我們謹慎樂觀地認為，根據IDC的研究，今年整體智慧穿戴市場將恢復成長，人工智慧健康洞察和人工智慧服務將成為成長動力。

Our focus has always been on positioning ourselves effectively in the current market. This is why we are prioritizing profitability, aiming to maximize profits from our self-branded product sales, and continuing with the cost transformation initiatives we implemented in previous quarters.

我們的重點始終是在當前市場中有效定位自己。這就是為什麼我們優先考慮獲利能力，旨在從我們的自有品牌產品銷售中實現利潤最大化，並繼續我們在前幾個季度實施的成本轉型計劃。

It's also worth highlighting that we entered the smart ring category recently as it represents a USD2 billion-plus market that is growing at a high, double-digit rate in the upcoming years. Simultaneously, we'll be entering into the open wearable stereo earbuds segment, which will deliver substantial growth in the Bluetooth headphone market.

還值得強調的是，我們最近進入了智慧戒指類別，因為它代表著一個價值超過 20 億美元的市場，並且在未來幾年將以兩位數的高速度成長。同時，我們將進入開放式穿戴式立體聲耳機領域，這將為藍牙耳機市場帶來大幅成長。

Now turning to sales, echoing Wayne's statement, we believe the most challenging phase of our transformation is behind us. The three key pillars driving our progress are applying new technologies, particularly with a focus on AI; product innovations with profitable growth; and enhancing global visibility through major sponsorship and marketing efforts. We are particularly excited about our expanding self-branded product offerings, which position us for long-term growth as a global leader in smart wearables and health care solutions.

現在轉向銷售，與韋恩的說法相呼應，我們相信轉型中最具挑戰性的階段已經過去。推動我們進步的三個關鍵支柱是應用新技術，特別是人工智慧；產品創新與獲利成長；透過重大贊助和行銷活動提高全球知名度。我們對不斷擴大的自有品牌產品感到特別興奮，這使我們能夠長期發展成為智慧穿戴裝置和醫療保健解決方案的全球領導者。

For the second quarter, our overall sales aligned with our guidance with a 6% sequential increase in our self-branded products, more than offset the decline of Xiaomi-branded product sales. This positive development is a testament to the progress we have made in our transformation efforts and we anticipate continued sequential growth in the quarters ahead.

第二季度，我們的整體銷售額與我們的指導一致，自有品牌產品環比成長 6%，遠遠抵消了小米品牌產品銷售額的下降。這一積極的發展證明了我們在轉型努力中所取得的進展，我們預計未來幾季將繼續實現連續成長。

Moving on to gross margin, which can be influenced by various factors such as product mix, product launch timing, and product life cycles, including model upgrades, despite a year-over-year decline in sales, which were in part due to the timing of new launches skewed towards the second half of 2024 and the broader macro challenges, our gross margin for the quarter reached 40.3%. This marks a continuation of the margin expansion we initiated in the third quarter of 2023 and represents the highest gross margin in our company's history, driven primarily by the increased profitability of our self-branded products. Contributing factors include the improved product mix, a higher proportion of new products, and a reduction of clearance activities.

接下來是毛利率，儘管銷售額同比下降（部分原因在於時機），但毛利率可能受到產品組合、產品上市時間和產品生命週期（包括型號升級）等多種因素的影響由於新推出的產品主要集中在2024 年下半年以及更廣泛的宏觀挑戰，我們本季的毛利率達到40.3%。這標誌著我們在 2023 年第三季開始的利潤率擴張的延續，也是我們公司歷史上最高的毛利率，這主要是由我們自有品牌產品盈利能力的提高所推動的。影響因素包括產品結構的改善、新產品比例的增加、清倉活動的減少。

Looking ahead, together with the new product launches in the second half of the year, we are confident that this positive trend in gross margin will persist into the second half of the year, with full-year margins expected to remain at similar levels. This outcome underscores our strategic decision to prioritize profitability over scale, leveraging the revenue from our self-branded products to sustain the company's overall performance.

展望未來，加上下半年新產品的推出，我們有信心毛利率的正面趨勢將持續到下半年，全年毛利率預計將維持在相似水準。這項結果凸顯了我們的策略決策，即優先考慮獲利能力而非規模，利用自有品牌產品的收入來維持公司的整體績效。

Now, let's turn to costs. We remain steadfast in our commitment to cost management, continuing with the program, which we began in Q3 2020 on reducing overall operating costs. In the second quarter, we maintained a rigorous approach on discretionary spending while investing in research and development activities and marketing expenditures to preserve our long-term sustainable growth. As a result, operating costs for the quarter were USD25.3 million, the lowest level in the past year and is in line with our previous guidance.

現在，讓我們轉向成本。我們仍然堅定地致力於成本管理，並繼續實施我們於 2020 年第三季啟動的降低整體營運成本的計劃。第二季度，我們對可自由支配支出保持嚴格的態度，同時投資於研發活動和行銷支出，以維持我們的長期永續成長。因此，本季營運成本為 2,530 萬美元，為去年最低水平，與我們先前的指引一致。

Our R&D expenses for the second quarter of 2024 were USD10.4 million, reflecting a 13.8% decrease year over year. This represented 25.6% of our revenue compared to 13.1% during the same period in 2023. The reduction in R&D spending was a result of our ongoing efforts to optimize resource allocation, ensuring we achieve maximum return on investment and productivity. At the same time, we're committed to invest in new technologies and suitable AI functions to maintain our competitive edge against our competitors.

2024年第二季我們的研發費用為1,040萬美元，年減13.8%。這占我們收入的 25.6%，而 2023 年同期為 13.1%。研發支出的減少是我們不斷努力優化資源配置的結果，以確保我們能達到最大的投資回報和生產力。同時，我們致力於投資新技術和合適的人工智慧功能，以保持我們相對於競爭對手的競爭優勢。

Selling and marketing expenses for Q2 amounted to USD10.5 million, a modest increase of 3.9% year over year. This accounted for 25.8% of our revenue, up from 10.9% in the previous year. The rise was primarily driven by our strategic investments in outdoor marketing and television commercials across Europe aimed at fostering brand awareness ahead and during the UEFA 2024 and Summer Olympics in Paris.

第二季銷售和行銷費用為1,050萬美元，年比小幅成長3.9%。這占我們收入的 25.8%，高於前一年的 10.9%。這一成長主要是由於我們對歐洲各地戶外行銷和電視廣告的策略性投資所推動的，這些投資旨在在 2024 年歐足總和巴黎夏季奧運會之前以及期間提高品牌知名度。

In parallel, we have been enhancing retail profitability and refining our channel mix by carefully optimizing our retail channels and strategically managing our sales teams. We are committed to making smart investments in marketing and branding initiatives that will fuel our long-term growth.

同時，我們一直透過仔細優化零售通路和策略性管理銷售團隊來提高零售盈利能力並完善我們的通路組合。我們致力於在行銷和品牌推廣活動上進行明智的投資，這將推動我們的長期成長。

G&A expenses were USD4.4 million in Q2, marking a 36.3% decrease year over year. These expenses represented 10.9% of our revenue compared to 7.5% in the same period last year. This reduction reflects our successful personnel optimization initiatives and strict control over discretionary costs.

第二季一般管理費用為 440 萬美元，年減 36.3%。這些費用占我們收入的 10.9%，而去年同期為 7.5%。這項減少反映了我們成功的人員優化措施和對可自由支配成本的嚴格控制。

Looking ahead, we remain committed to prudent cost management aiming to keep costs at or below current levels in the upcoming quarters. Despite reporting the operating loss this quarter, largely attributable to cost coverage issues, when we consider the first half of 2024 as a whole, despite lower sales and thanks to higher gross margin and tightly controlled cost levels, we have narrowed the net income loss by 15% versus the same period last year.

展望未來，我們仍然致力於審慎的成本管理，旨在在未來幾季將成本保持在或低於當前水準。儘管本季度報告了營運虧損，主要歸因於成本覆蓋問題，但當我們考慮2024 年上半年的整體時，儘管銷售額較低，並且由於毛利率較高和嚴格控製成本水平，我們仍將淨利潤虧損縮小了較去年同期成長 15%。

Now, turning on to balance sheet, we continue to manage our working capital effectively. Our inventory levels at the end of Q2 were lower than Q1, marking the lowest level in the company's history. We will maintain this discipline to working capital approach in subsequent quarters.

現在，轉向資產負債表，我們繼續有效地管理我們的營運資金。我們第二季末的庫存水準低於第一季度，創下公司歷史最低水準。我們將在接下來的幾季保持這種營運資本方法的紀律。

Our cash balance stands at USD129 million by the end of Q2, consistent with the first quarter's cash level despite the quarterly losses. This strong cash position encrypts us with the necessary resources to seize potential market opportunities and invest strategically in future growth.

截至第二季末，我們的現金餘額為 1.29 億美元，儘管出現了季度虧損，但與第一季的現金水準一致。這種強大的現金狀況為我們提供了必要的資源，以抓住潛在的市場機會並對未來的成長進行策略性投資。

In Q1 2023, we have initiated the retirement of our short/long-term debt portfolio. Since then, and including Q2 2024, we have successfully retired USD55.2 million of debt. As our operating cash flow continues to strengthen in second half, we will continue to optimize the capital structure for the company.

2023 年第一季度，我們已開始退出短期/長期債務投資組合。自那時起，包括 2024 年第二季度，我們已成功償還了 5,520 萬美元的債務。隨著下半年我們經營性現金流的持續增強，我們將繼續優化公司的資本結構。

In line with our commitment to deliver long-term value to our shareholders, we'll proceed with our share buyback program throughout 2024. This initiative underscores our confidence in the company's future and our dedication to enhancing shareholders' value.

根據我們為股東創造長期價值的承諾，我們將在 2024 年繼續實施股票回購計畫。這項措施凸顯了我們對公司未來的信心以及我們致力於提高股東價值的決心。

Looking ahead, on the third quarter of 2024, we are guiding revenue in the range of USD45 million to USD60 million. It represents 18% to 59% growth on the revenue of self-branded products compared with actual Q2 2024. We're confident in our ability to build on the momentum we have generated to drive further growth and profitability in the quarters to come. Thank you once again for your time and continued support. I will now open the line for any questions. Operator, please go ahead.

展望未來，我們預計 2024 年第三季的營收將在 4,500 萬美元至 6,000 萬美元之間。與2024年第二季實際相比，自有品牌產品的營收成長18%至59%。我們對在未來幾季繼續推動成長和獲利的能力充滿信心。再次感謝您的寶貴時間和持續的支持。如果有任何問題，我現在將開通熱線。接線員，請繼續。

(Operator Instructions) Sid Rajeev, Fundamental Research Corp.

（操作員指令）Sid Rajeev，基礎研究公司

Hi, so first of all, great to see the spike in sequential sales growth of self-branded units. But I guess the real surprise was the continued improvement in gross margins. What's really driving this? Is it higher product prices, cost optimization, or something else? I know you gave some reasons. I was trying to find out what exactly or what's the main reason for this increase. And the second thing is, with new product launches, can you bring it up to the 45% to 50% range?

您好，首先，很高興看到自有品牌產品的連續銷售成長激增。但我想真正令人驚訝的是毛利率的持續改善。到底是什麼推動了這一點？是產品價格上漲、成本優化還是其他原因？我知道你給了一些理由。我試圖找出這種增加的確切原因或主要原因是什麼。第二件事是，隨著新產品的推出，你能把它提高到45%到50%的範圍嗎？

Yeah, Sid. Thank you very much. I think -- let me start with the easy ones. I think we're -- as you heard from Wayne's script, we have a lot of exciting new product launches lined up for the upcoming month, especially in IFA. You heard about the OWS earbuds. You heard about the new T-Rex watches, and you also heard about the ring. And we also have some exciting innovations on the way.

是的，席德。非常感謝。我想——讓我從簡單的開始。我認為，正如您從韋恩的劇本中聽到的那樣，我們將在下個月推出許多令人興奮的新產品，特別是在 IFA 上。您聽過 OWS 耳塞。您聽過新款 T-Rex 手錶，也聽過戒指。我們還將推出一些令人興奮的創新。

And all of these products will carry a very healthy gross margin to the magnitude of over 45% or 50%, depends on the product line we're talking about. So these are the new product launches, which is due for the second half of this year. And that's also, coming back to your first question, one of the reasons, which drives the gross margin of the company continuously improved quarter on quarter for the past four quarters.

所有這些產品都將帶來非常健康的毛利率，達到 45% 或 50% 以上，具體取決於我們所討論的產品線。這些是預計今年下半年推出的新產品。回到你的第一個問題，這也是推動公司毛利率在過去四季逐季持續增加的原因之一。

I think, to a big part, this is coming from optimizing the product mix. But also, it's like I said, I mean, more new products, which has been launched recently, less products which is on clearance. That definitely helps our overall gross margin performance.

我認為，這在很大程度上來自於優化產品組合。而且，就像我說的，我的意思是，最近推出的新產品更多，清倉的產品更少。這肯定有助於我們的整體毛利率表現。

On the other hand, we're also doing retail channel mix. For example, we cut the bleeders on those channels, which doesn't make money. And by doing so, through optimizing the retail channel mix, as well as our product mixes, together with the new product launches, which is lined up in the second half of the year, we're confident that we can continue on the gross margin improvement trend for the upcoming quarters.

另一方面，我們也在進行零售通路組合。例如，我們在這些頻道上剪掉了出血點，這並不賺錢。透過這樣做，透過優化零售通路組合以及我們的產品組合，再加上下半年推出的新產品，我們有信心能夠繼續保持毛利率未來幾季的改善趨勢。

Okay, so my next question is, you have a lot of new products planned. So, to make it easier for us to track, are you able to give us a number, as in, how many new products or upgraded products planned this year versus last year?

好的，我的下一個問題是，你們計劃了很多新產品。那麼，為了方便我們跟踪，您能否給我們一個數字，例如今年與去年相比，計劃推出多少新產品或升級產品？

I think we have at least three, if not four, products, which are scheduled to be launched in the second half of the year. And last year, same period, I think we have two products, if I remember clearly.

我認為我們至少有三種（如果不是四種）產品計劃在今年下半年推出。去年同期，如果我記得清楚的話，我想我們有兩種產品。

Okay. And then, in the first half of this year, you had two versus --

好的。然後，今年上半年，你有兩場比賽--

Now, the first half of this year, we only had one. Yeah. You can count -- 1.5, because we launched the Big 5 Unity, which is a different variable of the Big 5.

現在，今年上半年，我們只有一個。是的。你可以算——1.5，因為我們推出了Big 5 Unity，這是Big 5的一個不同變數。

Yeah, yeah. Okay. And then, I know you don't provide segmental revenue by region, but did you notice any material change in sales in any region, particularly last quarter?

是啊是啊。好的。然後，我知道您沒有按地區提供細分收入，但您是否注意到任何地區的銷售額有任何重大變化，特別是上個季度？

No, I think we have told you before that, United States still remains as a region whereby we see a lot of potential growth from. And also, we have seen some breakthroughs in Europe, like what Wayne mentioned in Germany, in France. We have worked with the key accounts such as Ecanow in those countries. And in Asia-Pacific, specifically in China, we have seen a very good growth from China, and we have put in a lot of marketing efforts to promote that as well.

不，我想我們之前已經告訴過你，美國仍然是一個我們看到很多潛在成長的地區。而且，我們在歐洲看到了一些突破，就像韋恩在德國和法國提到的那樣。我們與這些國家的 Ecanow 等大客戶合作。在亞太地區，特別是在中國，我們看到中國的成長非常好，我們也投入了大量的行銷努力來促進這一點。

Thank you, Leon. And just one question, finally, could you provide an update on the status with NYSE given the non-compliance notice you received a few months back?

謝謝你，萊昂。最後還有一個問題，鑑於您幾個月前收到的不合規通知，您能否提供紐約證券交易所的最新狀態？

Oh, yeah. So we have, ultimately, the -- until October 31 to rectify this issue. And we -- as we have communicated before, we are committed to resolve this through either organically the share price to push above $1 or, if needed, a reverse split. So, we're confident that before that date, we'll be regain the compliance.

哦，是的。因此，我們最終需要在 10 月 31 日之前修正這個問題。正如我們之前所傳達的，我們致力於透過有機地將股價推至 1 美元以上，或在需要時進行反向分割來解決這個問題。因此，我們有信心在那一天之前，我們將重新獲得合規性。

Appreciate it. Thank you, Leon.

欣賞它。謝謝你，萊昂。

Thank you, Sid.

謝謝你，席德。

Nicolette Jones, Brooks Investments.

尼可萊特瓊斯，布魯克斯投資公司。

Hi, management. Thank you for taking my questions. I just have two questions. I'd also like to just dig in a little bit more about the new product map and some of your thinking behind your public decisions. And then, in addition, I'd like to find out more information on the net income trend.

嗨，管理層。感謝您回答我的問題。我只有兩個問題。我還想進一步深入了解新產品地圖以及您對公共決策背後的一些想法。另外，我想了解更多有關淨利潤趨勢的資訊。

Okay. Now, maybe I'll take the easy ones, Nicolette. Obviously, the net income trend, you have noted that it has been on uptrend. Quarter on quarter is improving. If you look at the first half of this year, the net income, obviously, is much better than the same period of last year. I think it was an improvement of 15% to that magnitude. And we are actually looking or targeting at improvement also for second half of this year. So, hopefully, throughout the year, we can come back to profitability. That's always the target, which we have been striving for.

好的。現在，也許我會選擇簡單的，尼可萊特。顯然，淨利潤趨勢，你已經注意到它一直處於上升趨勢。季度環比正在改善。如果你看今年上半年，淨利潤顯然比去年同期好得多。我認為這個幅度提高了 15%。實際上，我們也在尋求或瞄準今年下半年的改進。因此，希望我們全年都能恢復獲利。這始終是我們的目標，也是我們一直在努力的目標。

And coming back to your first question on the new products and the thinking behind it, I think you have heard us saying that in the upcoming IFA, which is in September, we're going to launch a new watch. Our most popular outdoor smartwatch. T-Rex, it's up for an update. I mean, it's actually -- a lot of new functionalities will be added to that watch. And we are also going to launch a new OWS earbuds.

回到你關於新產品及其背後的思考的第一個問題，我想你已經聽到我們說，在即將舉行的 9 月份的 IFA 上，我們將推出一款新手錶。我們最受歡迎的戶外智慧手錶。霸王龍，即將更新。我的意思是，實際上，該手錶將添加許多新功能。我們還將推出一款新的 OWS 耳塞。

OWS is a very popular concept. It's basically talking about open-end headset, which you can wear without feeling it, right? It's very different from the AirPods, which is made by Apple. So, we think, and according to the market research, the OWS earbuds is going to be a fast-growing segment in the Bluetooth headset market in the upcoming years. So we are quite excited to have that product add to our lineup.

OWS是一個非常受歡迎的概念。它基本上是在談論開放式耳機，您可以佩戴而沒有感覺，對吧？它與 Apple 製造的 AirPods 有很大不同。因此，我們認為，根據市場研究，OWS 耳塞將成為未來幾年藍牙耳機市場中快速成長的細分市場。因此，我們非常高興將該產品添加到我們的產品陣容中。

And you also heard that we have the Helio Ring, and we're going to put Helio Ring into more geographies and also into more sizes, especially the smaller sizes, which are more tailored for the mass market and mass consumers, right? So, I think we are going to be one of the only players, if not the only players who have the smartphone coupled with the ring, coupled with the OWS headphones, and maybe some other form factors because we have always been saying that we're trying to offer a full suite of wearable devices, smart wearable devices, so that our users can have a one-stop shop on better controlling and understand their health conditions, right?

您還聽說我們有Helio Ring，我們將把Helio Ring投放到更多的地區、更多的尺寸，特別是更小的尺寸，更適合大眾市場和大眾消費者，對嗎？因此，我認為我們將成為唯一擁有智慧型手機、指環、OWS 耳機以及其他外形因素的玩家之一，因為我們一直在說我們「我們試圖提供一整套可穿戴設備，智慧穿戴設備，以便我們的用戶可以一站式更好地控制和了解他們的健康狀況，對嗎？

So, I think, this is always the concept, what we try to bring this company to. So we want to be smart wearable player, not only restricted to smart watch per se, and where -- we want to offer a complete suite of health care services to the users. So that's the whole theme behind the new products, which we are going to launch. I'm not sure if I answered your question correctly or --

所以，我認為，這始終是我們試圖為這家公司帶來的理念。所以我們希望成為智慧型穿戴玩家，不僅限於智慧手錶本身，而且我們希望為用戶提供一整套的醫療保健服務。這就是我們將要推出的新產品背後的全部主題。我不確定我是否正確回答了你的問題或者--

Yeah, no, that's really informative, actually. Gives much more color.

是的，不，實際上，這非常有用。賦予更多色彩。

Okay. Thank you.

好的。謝謝。

If there are no further questions, I'd like to turn the call back over to the company's IR Director, Grace Zhang, for any closing remarks.

如果沒有其他問題，我想將電話轉回公司的投資人關係總監 Grace 張，讓其結束語。

Thank you once again for joining us today. If you have further questions, please feel free to contact Zepp Health investor relations department through the contact information provided on our IR website. 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 Zepp Health 投資者關係部門。謝謝。

The conference has now concluded. Thank you for attending today's presentation.

會議現已結束。感謝您參加今天的演講。