Zepp Health (NYSE:ZEPP) reported second-quarter financial results on Tuesday. The transcript from the company's second-quarter earnings call has been provided below.

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Summary

Zepp Health Corporation reported a 33.8% year-over-year increase in Q1 2026 revenue to $51.5 million, driven by new product launches such as the Amazfit Active Max and T-Rex Ultra 2.

The company is focusing on premiumization, evidenced by a 20% increase in average selling prices and the success of higher-priced models like the T-Rex Ultra 2.

Strategic initiatives include a new three-year partnership with HYROX to enhance their hybrid training platform and expand their reach in the endurance sports market.

Gross margin increased to 37.7%, despite higher memory costs and currency fluctuations, highlighting effective cost management and product mix improvements.

For Q2 2026, Zepp Health forecasts revenue between $63 million and $68 million, emphasizing quality growth and maintaining a path toward long-term profitability.

Full Transcript

OPERATOR

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Grace Zhong, Director of Investor Relations for the company. Please go ahead, Grace.

Grace Zhong, Director of Investor Relations

Hello everyone, and welcome to Zepp Health Corporation's first quarter 2026 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 the slides referred to on this call by visiting the IR section of the company's website. Presenting today are Wang Huang, our Founder and Chief Executive Officer, and Leon Deng, our Chief Financial Officer.

Joining us today we also have Mike Yang, Chief Operating Officer and General Manager of North America, and Eric Fleming, Vice President of Capital Markets for North America. 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 involving 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, 2025 and other filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Please also note that Zepp Health's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information.

Zepp Health's press release contains a reconciliation of unaudited non-GAAP measures to the unaudited, most directly comparable GAAP measures. I will now turn the call over to our CEO, Mr. Wang Huang. Please go ahead.

Wang Huang, Chairman and CEO

Hello everyone and thank you for joining us today. We are pleased to begin 2026 with a promising start, delivering another solid quarter. In the first quarter, Amazfit branded revenue grew 33.8% year over year, demonstrating exceptional resilience during what is traditionally a softer season for the consumer electronics industry. This strong performance was primarily driven by the successful launches of the Amazfit Active Max, Active 3 Premium and our flagship T-Rex Ultra 2.

Delivering this level of growth in a seasonally quieter quarter further reinforces our conviction that the market opportunity we are capturing is structural rather than cyclical. More importantly, we do not view this quarter simply as a revenue growth story. We see it as another early validation of the structural changes we have been building: a stronger premium product mix, improving pricing power, expanding gross margin and a clearer brand position in performance-oriented training.

During our last earnings call, I outlined how Zepp Health is evolving into a comprehensive hybrid training platform, seamlessly integrating endurance, strength and recovery through hardware, AI-driven training intelligence, software and data. Our 2026 ambition is clear. We aim to build a global leadership position in hybrid training. To advance this strategy, we further deepened our collaboration with HYROX, one of the world's fastest growing hybrid endurance sports organizations, through a new exclusive three-year global partnership.

This expanded partnership enhances the HYROX athlete experience across training, competition and recovery, leveraging a broader portfolio of exclusive smart wearable categories including smartwatches, smart rings, smart cameras, smart glasses and smart straps. Alongside in-app experiences, HYROX-specific training modes and performance data integrations, this partnership represents more than a sponsorship. It is a strategic step for us to participate in and help shape the emerging hybrid training category.

By engaging directly with HYROX’s global athlete community, gym ecosystem, coaches and race environments, we can build a more authentic connection with users whose training behaviors span strength, endurance, recovery, nutrition and performance readiness. This gives us a differentiated position in the market other than endurance and general smart lifestyle. While we have the opportunity to build authority around hybrid training and a more complete training system, we believe one of the most important opportunities is the moment when a user moves from casual tracking to more serious training.

At that point the phone ecosystem becomes less important and the training value becomes more important. HYROX and gym-based hybrid training help create that moment, allowing Amazfit to enter through app experiences, training content, HYROX-specific modes and lower-friction products before users make a full device switch. At the recent New York HYROX event, we introduced Balance 3 and Balance Ultra in a real hybrid training environment. This launch setting was intentional.

These products are designed for users who balance strength, endurance, recovery, work stress and daily life. Powered by Hybrid Charged Energy intelligence in the Zepp app, they bring together BioCharge, live load and training load into one clear view of personal capacity, helping users better understand when to push, when to recover and how to maintain consistency over the long term. These activities are important because premiumization is not only about higher price points, it is about building trust in the environments where serious users decide which brands they rely on.

By showing up in marathon preparation, trail and expedition environments, and hybrid training communities, Amazfit is strengthening the credibility required to support higher-value products, improved product mix and long-term pricing power. Our premiumization strategy is strongly supported by our hybrid training positioning. We are already seeing early evidence that users are willing to move up the price ladder across certain product families. Within the T-Rex lineup, our higher-priced premium models are becoming an increasingly meaningful part of the overall sales mix.

This reinforces an important point: consumers are not choosing Amazfit solely for affordability. In March and April, our premium T-Rex models priced at US$399 and $549 accounted for nearly 50% of total T-Rex family unit sales. As we continue to strengthen our product differentiation and premium brand positioning, users are showing a growing willingness to engage with Amazfit at more premium price tiers. By embedding hybrid training more deeply into both our hardware and software ecosystem, we are enhancing the perceived value of the Amazfit brand and driving a consistent shift toward higher-end product positioning.

This remains one of our key strategic priorities as we move into 2026. In the first quarter, this strategy delivered tangible results, with average selling price increasing more than 20% year over year. Notably, even amidst rising memory component costs and broader storage chip price inflection, we were still able to achieve gross margin expansion, reflecting the effectiveness of our product mix improvement and disciplined cost execution. In April, we extended this philosophy into one of the world's largest performance communities: running.

By adapting our hybrid training methodology to runners, we are enabling them to train more intelligently, improve endurance and support long-term health and durability. This strategy is embodied in our newly launched Cheetah 2 lineup, including the Cheetah 2 Pro, a performance-focused watch designed for marathon training, and the Cheetah 2 Ultra, engineered for the most demanding mountain and trail environments. Both integrate seamlessly with Zepp Coach with a full suite of running metrics and personalized training plans, recovery insights and third-party training platform integrations.

These devices deliver structured, hybrid-style training guidance directly to endurance runners, further strengthening our penetration in the dedicated running segment. Notably, our first quarter growth was broad-based across both entry and premium tiers. At the high end, the T-Rex Ultra 2, crafted from Grade 5 titanium, elevates our price ceiling to US$550, marking the highest in Amazfit history and further reinforcing our premium branded positioning.

At the same time, in our core value segments, the Active Max and Active 3 Premium, positioned around the $169 price point, are expanding our reach among everyday fitness enthusiasts and entry-level runners beginning their training journeys. Most recently, we also introduced Bip Max, the latest addition to our most popular entry-level series. Our strategic progress is also reflected in continued market share gains. In the first quarter, we achieved sequential value share expansion across EMEA, the US and Asia Pacific, supported by strong performance across our full product matrix.

According to third-party data sources, Amazfit now ranks among the top six smartwatch brands in both the United States and Europe by value share, underscoring the growing global resonance and market share of the brand. Turning to software, we continue to strengthen our ecosystem through Zepp OS. Proprietary features such as Zepp Coach, BioCharge and our expanding suite of hybrid training and HYROX modes are being deployed across a growing range of devices, driving deeper user engagement and retention.

As we increasingly tailor our training intelligence for running and other endurance disciplines, our software ecosystem is becoming a key reason users choose and remain loyal to our brand, further widening the competitiveness moats around our platform. Across running, outdoor and hybrid training, we are increasingly connecting Amazfit products with real performance environments and elite athletes. Validation in running—Cheetah 2 Pro—was supported by major marathon moments in Paris, London and Boston, including proof points from Yemen Krieber, Emmanuel Petras and Rory Linklater.

In outdoor, T-Rex Ultra 2 continued to gain credibility through high-altitude Alpineness, Yaws, Kabush and Rear Expedition use cases, while Gris Burcaud strengthens the aspirational outdoor positioning of the T-Rex series. We also continue to build credibility around elite performance moments. During the HYROX Warsaw Major, Amazfit athlete Joanna Vierich completed a clean sweep of all four HYROX Majors this season while setting a new HYROX world record.

We are also supporting Jos Course Project 222, his attempt to break the Maya world record at the London Diamond League. Together, these moments reflect how Amazfit is showing up at the highest level of both hybrid training and endurance performance. Against a macroeconomic backdrop, our premiumization strategy, expanding pricing power, vertically integrated supply chain and diversified manufacturing footprint across China and Vietnam provide us with multiple levers to mitigate these pressures.

We remain confident that the alignment of our product mix, channel strategy and cost structure will support sustainable growth and a clear path toward long-term profitability. Looking ahead to the second quarter, we expect revenue to be in the range of 63 million to 68 million. This outlook reflects continued year-over-year growth supported by demand across our product portfolio, while also accounting for normal shipment timing and product launch phasing during the quarter.

More importantly, we will continue to focus on the quality of growth—product mix, pricing power, growing gross margin structure and user engagement—rather than only short-term revenue volume. With that, I will now turn the call over to Liu to walk through the financial details. Leo, please go ahead.

Leon Deng, CFO

Thank you, Wayne. Greetings, everyone. Thank you again for joining our first quarter 2026 earnings call. Let me start with revenue. In the first quarter of 2026, our revenue was US$51.5 million, up 33.8% year over year, in line with our guidance range. As Wayne mentioned before, this growth was driven primarily by our new product launches, such as ActivMax, Active 3 Premium, and T-Rex Ultra 2, even as the first quarter is traditionally a low season for consumer electronics.

Turning to gross margin, our performance continued to reflect a combination of factors including product mix, launch timing, and normal product life cycle dynamics such as model upgrades. In the first quarter, gross margin was 37.7%, a net expansion of 0.4% compared with Q1 2025, and moderated from the record high 40.4% achieved in Q4 2025. There are two important points worth highlighting. First, the first quarter is traditionally the period whereby we refresh our entry-level product portfolio, which naturally carries a lower gross margin and therefore weighs on the sequential comparison.

Second, during the quarter we absorbed some higher memory component costs as well as the impact of unfavorable foreign currency exchange fluctuation. Despite these headwinds, we still delivered year-over-year gross margin expansion, where gross profit increased 35.3% to US$19.4 million. This demonstrates the resilience of our operating model and the continued improvement in our brand positioning. Before turning to expenses, let me briefly address the macro backdrop on memory.

We expect higher memory cost to create near-term pressure on gross margins, driven by the industry-wide transition from DDR4 to DDR5 and high bandwidth memory as AI and data center demand continue to tighten supply. We began preparing for this environment in early 2025 by securing supply through diversified sourcing channels to support manufacturing continuity, and we are also using our engineering expertise to optimize memory requirements across current and future products without compromising performance or customer experience.

While this is a real headwind, we have multiple levers to help mitigate the impact, including continued increases in average selling prices and a potential refund of previously paid IEPA-related tariffs, which could provide some offsets. We believe we're managing this challenge from a position of preparation and discipline while staying focused on driving sustainable revenue growth and improved profitability. Now, turning to expenses, we remain committed to the prudent cost management program which began in 2020.

Total adjusted operating expenses for the first quarter were US$35.7 million, compared with US$31.5 million in Q1 2025 and US$37.1 million in Q4 2025. Out of the year-over-year increase of US$4.2 million, there's a translation difference of approximately US$1.8 million on operating expenses in the first quarter of 2026 due to euro and RMB appreciation to the dollar. Then US$1.4 million is directly attributable to certain e-commerce platform charges, which are a kind of fixed-ratio sales channel charges to drive revenue growth.

The remaining US$0.6 million was primarily due to front-loaded investments in marketing and branding activities such as CES and HYROX. Excluding US$6.2 million of one-off provisions, fourth quarter 2025 operating expenses were approximately US$30.9 million. The sequential increase of US$4.8 million was primarily driven by a US$1.8 million foreign exchange impact as mentioned above, a US$1.4 million increase in R&D investment to support new product launches in upcoming quarters, US$0.5 million of front-loaded marketing and branding investments, and lastly US$0.2 million in severance costs related to targeted initiatives to enhance organizational efficiency. Going forward, we will maintain a cost-conscious approach while continuing to invest in R&D, marketing, and branding activities that support our long-term competitiveness. Let me break down the year-over-year and sequential comparison by line item. Adjusted R&D expenses were US$11.9 million, compared with US$11.5 million in the first quarter of 2025 and US$10.2 million in the fourth quarter of 2025. Out of the sequential increase of US$1.7 million, US$0.3 million was attributed to foreign currency translation differences.

The remaining US$1.4 million increase was due to investment in new products that will be launched in the coming quarters. We continue to invest in a series of cutting-edge products and new technologies, including AI, to maintain our competitive edge while consistently evaluating resource efficiency to optimize our return on investment and productivity. Adjusted selling and marketing expenses were US$16.4 million, compared with US$13.8 million in the first quarter of 2025 and US$15.6 million in the fourth quarter of 2025.

Of the year-over-year increase, approximately US$0.8 million was attributed to foreign exchange translation differences. Another US$1.4 million was directly attributable to fixed channel costs that scale with our revenue growth, and the remaining US$0.4 million was allocated to promotions and branding initiatives that fueled the adoption of our new products. Compared to Q4 2025, selling and marketing expenses increased by US$0.9 million, out of which US$0.4 million was attributable to the appreciation of foreign currencies against the dollar, and the remaining half a million was due to front-loaded investments in marketing and branding activities such as CES and HYROX. At the same time, we continue to push retail profitability and channel mix improvement, including a meticulous refinement of our retail channels and disciplined staffing arrangements across our sales regions. Adjusted G&A expenses were US$7.4 million, compared with US$6.2 million in Q1 2025 and US$11.3 million in Q4 2025. The year-over-year increase reflected approximately US$0.3 million of foreign exchange translation differences and US$0.2 million in brand and intellectual property protection-related fees.

Excluding the US$6.2 million of non-recurring provisions in the fourth quarter, G&A expenses were US$5.2 million in Q4 2025. The sequential increase of US$2.1 million was mainly attributable to US$1.1 million of negative foreign exchange impact, as well as US$0.2 million severance cost. As part of the targeted initiatives to enhance organizational efficiency, we continue to streamline our G&A and drive operational efficiency. With higher revenue and improved year-over-year gross margin, partially offset by higher operating costs and unfavorable foreign exchange translation differences, our operating loss narrowed to US$6.3 million, compared with US$17.2 million in the first quarter of 2025. Adjusted net loss was US$17.9 million, or 34.8% of sales, compared to US$18.1 million, or 41% of sales, in the first quarter of 2025. Turning to the balance sheet and working capital, we continue to manage our inventory rigorously, ending the quarter with inventory of US$62.8 million, down from US$72.8 million as of Q4 2025. We ended the quarter with US$103.2 million in cash and cash equivalents, nearly flat compared with US$103.8 million a year ago and lower than US$112.9 million at the end of 2025, with a sequential decline driven primarily by our net operating losses and partially offset by improved working capital management. Turning to our capital structure, total debt, including both short-term and long-term debt, remained broadly stable both sequentially and year over year. We continue to actively manage our debt maturity profile and financing costs. As debt approaches maturity, we evaluate prevailing market interest rates and available credit capacity to refinance or extend the duration of our borrowings where appropriate. The change in the mix between short-term and long-term debt in the first quarter of 2026 was primarily driven by accounting classification, as certain borrowings originally maturing in late 2026 or 2027 were reclassified from long-term debt to short-term debt due to their remaining maturity profile. Importantly, while the classification between short-term and long-term debt may fluctuate from quarter to quarter, our long-term focus remains on maintaining disciplined control over total debt levels and optimizing our debt duration and interest expenses over time. Since the beginning of 2023, the company has cumulatively retired US$46.7 million of debt, and we will continue to optimize the capital structure for the company.

We also remain committed to our share repurchase program. As of March 31, 2026, we had repurchased US$17 million out of the US$20 million authorized program. We view this program as an effective use of capital that aligns with our focus on delivering sustainable long-term value to shareholders. Finally, our outlook for the second quarter of 2026: we expect revenue to be in the range of US$63 million to US$68 million, representing year-over-year growth of approximately 6% to 14%.

This outlook reflects continued year-over-year growth supported by demand across our product portfolio while also accounting for normal shipment timing and product launch phasing during the quarter. More importantly, we will continue to focus on the quality of the growth rather than only short-term revenue volume. With a healthy margin profile, disciplined cost control, and continued operational improvement, we are well positioned to deliver sustainable growth and create long-term value for our shareholders.

Thank you all for your time today. I will now open the call for questions. Operator, please go ahead.

OPERATOR

Thank you. If you would like to ask a question, please press star then one on your telephone keypad. If you would like to withdraw your question, please press star then two. Once again, that's star then one if you have a question. And today's first question comes from Sid Rajeev with Fundamental Research Corp. Please go ahead.

Sid Rajeev, Analyst at Fundamental Research Corp.

Thank you. Congratulations on the strong Q1 revenue growth. In the last earnings call, Leon, you guided to potentially nine product launches this year, same as last year, with four announced so far. Should we expect about five more this year? Am I in the correct ballpark?

Leon Deng, CFO

Yes, I think in the end we probably would have more than nine, but yes, there are many new product launches still on the way.

Sid Rajeev, Analyst at Fundamental Research Corp.

Okay, where do you see opportunities to reduce cost because it seems like it's difficult to cut R&D or marketing or branding expenses at this point.

Leon Deng, CFO

No, that's not entirely right. So you see that the R&D expenses year over year actually increased a bit. It is because of the new product launches which we have to prepare for. And I think towards the end of Q2 you will see that R&D expenses going down because I think by the end of the first half we'll probably go through the majority of the new product launches which we have scheduled for the year. Although there's going to be a bit left for the second half of the year.

But I think you have witnessed that there's a lot of new products which have been launched already, including the Active Max, Active Premium, T-Rex, Ultra 2 and now with the Balance and Cheetah. And I think the first half of the year is actually, from a product launch perspective, a launch-heavy first half, therefore R&D expenses are actually a little bit higher than before. But it should trim towards the norm starting from the second half of the year and going forward.

On the other hand, we are also investing a bit, or we front-loaded some of the marketing expenses into Q1 and Q2. For example, we are hosting the Balance 3 product release in HYROX New York which is a high-profile event and that's all tied into the event timing, so to say. And I guess because of that we spent some of the marketing expenses and branding-related expenses more towards and skewed towards the first half of the year, and that should also average down in the second half of the year.

So now to mention G&A expenses, I think you will see a step-down already in Q2 and going towards Q3 and Q4. So I guess we still stand behind the run rate of around 30 million a quarter or even lower than that which you kind of witnessed for the rest of last year as we go.

Sid Rajeev, Analyst at Fundamental Research Corp.

That's good to hear. Just one more question if I may, is that for other industry players raising product prices to offset some of these higher memory costs?

Leon Deng, CFO

Yes, to some extent, because we noticed that our competitors are also raising price, and not to mention Garmin. Right. But compared with a lot of our competitors, our pricing at this point of time is still relatively low. So I think we have more room to raise the price compared with our competitors. But nevertheless, I think we are focusing on the product itself. So raising the price is definitely not the final goal. In the end we want to actually present to the user the best product with the best user experience and best features at the best price which they can get out of the market.

So I think that is the goal that we want to strive for.

Sid Rajeev, Analyst at Fundamental Research Corp.

Thank you so much.

Leon Deng, CFO

Thank you, Sid.

OPERATOR

Thank you. And our next question today comes from Frank Dugan at Brooks Investments. Please go ahead.

Frank Dugan, Analyst at Brooks Investments

Leon. Congratulations on the first quarter performance. My first question would be around the Q2 revenue guidance and if you can talk more about that and how do you view the profitability outlook for the full year?

Leon Deng, CFO

Yeah, Frank, thank you. We don't give the guidance on the full year but hopefully I can give you some color to it later on. But with regard to Q2 we just mentioned it is actually between 63 to 68 million which is roughly a growth of 6% to 14%. But however you see this number is actually accounting for the normal shipment timing and product launch phasing during the quarter. So if we, let's say if we have certain products which we initially wanted to produce and sell in Q2 and for some reasons we couldn't manufacture those in time and meet the time window for the sales, it might slip into Q3.

And I think we have one or two examples of that which happens in Q2 which kind of impact our revenue forecast for Q2. But however we actually, our long-term strategy and our target for the year remains still on the profitable growth path because we see, given Q1 and Q2, we see a continued year-over-year growth. And also this year-over-year growth is supported by the demand across our product portfolio on a broad base. We believe that heading into the second half of the year we should be able to continue number one, the growth path and number two, and for the 2026 full year for sure we're looking at a profitable growth over 2025.

I hope that gives you some color for the future.

Frank Dugan, Analyst at Brooks Investments

Yeah, thanks Leon. And yeah, one more question around the new three year global HYROX partnership. How do you plan to leverage that to drive long term monetization?

Leon Deng, CFO

The HYROX, as you know, is actually part of, or it actually it's one of the bigger trend on hybrid training. We kind of explained just now that we would like to establish our authority in hybrid training through working very closely with HYROX. It actually comes into two folds. Number one is as the participants of HYROX increase, I mean they increased by a lot over the past years and we believe that it's going to continue to increase in the future.

And looking at the New York HYROX is actually the participants, it's as many as the participants of New York milestone. Right. So I think number one is we would definitely want to deepen our relationship with HYROX and try to make the feature working better with HYROX, for example, helping the HYROX athletes to track their timing and then to deliver a better timing every time they race. And hopefully that would also make us and then establish the authority of our brand in HYROX.

And also as Weihan just mentioned by doing that we would like to become users' choice when they look beyond their current watch because for a normal user consumer there's a moment of time that they start considering a serious sports, be it running, be it hybrid training, be it whatever it is. We want to actually, by establishing the authority in HYROX, to become users' choice once they become serious on a specific sport in their journey of when they grow up.

Right. That's actually what we want to do through HYROX.

Frank Dugan, Analyst at Brooks Investments

Right. Thanks Leon.

OPERATOR

Thank you. As there are no further questions, I'd like to turn the call back over to the company's IR Director, Grace Zhong for closing remarks.

Grace Zhong, Director of Investor Relations

Thank you once again for joining us today. If you have further questions, please feel free to contact Zepp Health's Investor Relations department. Thank you.

OPERATOR

Thank you. This concludes this conference call. You may now disconnect your line. Thank you and have a pleasant day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.