Zepp Health Corporation

Ladies and gentlemen, thank you for standing by for ZEP Health fourth quarter and four-year 2020 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I'll now turn the call over to your host, Ms. Grace Song, Director of Investor Relations for the company. Please go ahead, Grace.

Hello, everyone, and welcome to ZEP Health Corporation's fourth quarter and four-year 2020 earnings conference call. The company's financial and operating results were issued in a press release via Newswire Services earlier today and are posted online. You can also view the earnings press release and the slides to which we will refer on this call by visiting the IR section of the company's website at www.zep.com. Participating in today's call are Mr. Huang Wang, our Chairman of the Board of Directors and Chief Executive Officer, and Mr. Leon Chen 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 Yang, 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 provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's annual report on Form 20F for the fiscal year ended December 31, 2019, 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 statements except as required under applicable law. Please also note that ZEPP's earnings press release and this conference call include decisions of unaudited GAAP financial information, as well as unaudited non-GAAP financial information. ZEPP's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I'll now turn the call over to our CEO, Mr. Huang Wang. Please go ahead.

Hello, everyone. Thank you for joining our call. 2020 was a remarkable year for all of us. Yet, with all the severe disruptions brought by the global pandemic, I am pleased to report we recorded full-year revenue growth on a year-over-year basis of 10.7% and total stream volume growth 8% for the year, reached 45.7 million units, especially our self-branded products, which rose 20%, reached 4.7 million units. These results are despite a fourth quarter tempered by COVID's impact in several of the international markets we served. Specifically, in Q4, our revenue dips by 6.6% and total shipment volume fell 9.5%, both on a year-over-year basis. We should highlight, however, against the challenges our own brands achieved 31.3% shipment growth in the fourth quarter and continuously strengthened market leadership in countries and regions such as Indonesia and Spain, which we still ranked number one in terms of adult smartwatch shipment. As vaccinations worldwide have begun rolling out in mesh, we are confident that our business will rise again soon in both revenue and shipment volume in 2021, especially our own branded watches, which will become the main engine for the business to grow. Our solid full-year results bear evidence to the soundness of our strategy of connecting health with technology. the broad appeal of our smart health products and services, and our ability to execute in a rapidly changing environment. In 2020, we made significant strides in building out our strategy of connecting health with technology. We identified three pillars that will function and be developed as the framework for our business. These are consumer health technology, data analytics, and industrial health. I'd like to take a few minutes to explain these now. Consumer health technology is the backbone of our business. Our products and services in this portfolio showcase many of our triples that have made us a global leader in the smart variable space, namely commitment to innovation, cutting-edge technology, and speed to market. In 2020, we introduced a record 20-plus new products and upgrade versions. We also branched into new product categories, including earbuds, scales, and home fitness equipment, such as chat mules. Many of these new products were presented at the Consumer Electronics Show, CES, in January, and several of our Amazfit and ZEPP-branded products received Best in Show, Distinction, and Accolade from reviewers in leading publications, including variables, tech radar, digital trends, and gadgets and variables. A key element of our strategy in this segment is to continue to rapidly innovate and bring increased functionality and features to our product at all price points. This has been the bedrock of our success in the variable space, and you can expect more the same from us going forward. Supporting this effort is our ongoing commitment to R&D, which is called to our DNA. Our proprietary designed and built AI smart chip, the Wong Sun. It's a shining example of our prowess in technology that distinguishes us from competitors. Now, in its second generation, the Huangshan 2, introduced in 2020, is the most powerful and fattest AI smart chip for variables of this kind. And we have already begun rolling it out in our products. In the meantime, we are also in the process of developing the new WangSan 3, and we believe we are in the leading position on the AI smart chip industry for variables. Data analytics is the second pillar in our framework and is an integral part in expanding our smart health ecosystem. preliminary targeting insurance care providers and employers. This segment works to utilize our data analysis from more than 30 million active users in partnership with industry to empower better wellness decisions. In this regard, in late 2020, US-based lead insurance company Jen Lee cited study results using analytics from our PI Health unit as providing unit value beyond traditional tools in the underwriting process. Just last week, Jen Lee had another announcement of a study documenting PI's effectiveness at improving employee health and longevity. We see this as harbingers of growing recognition for the valuable data analytics can bring to the industry. While the pandemic largely consumed the attention of the insurance industry in 2020, We are hopeful 2021 will afford more opportunities for insurers to integrate variable device data analytics into their business. Industrial healthcare is the first area we are developing as part of our framework. This is a long-term development effort. I believe the industrial health technology space represents a tremendous opportunity for us to apply our engineering expertise in precision sensors, biometrics, AI chips, and engineering capabilities focused on miniaturization and health data analysis. I believe this space is also ripe for disruption. Most recently, you have seen the announcement of the partnership agreement and investment with Prometheus, a provider of miniaturized MRI technology targeted initially at urology applications. Just two weeks ago, they received their FDA 510K clearance, which was a very exciting critical step You also should have noted two different announcements about our partnership with RUMINT, a first mover leader in portable x-ray technology. We are working towards private labeling all of their miniaturized x-ray systems for sale in China. In the industrial healthcare segment, In the near term, we will derive incremental revenue from helping sell products in China. In the long term, we plan to engage in select joint research and harness ways to integrate imaging data or imaging devices into our health technologies ecosystem. To better reflect our strategy positioning connecting health with technology, our expanding product portfolio, and our growth in the global industrial healthcare technology market, on February 25th, we announced our name change to ZEP Health Corporation. This name is easy to remember. Transcends languages and cultures. Last but not least, in October, we extended our strategic cooperation agreement with Xiaomi Corporation for an additional three years. As part of the extended agreement, we will continue to receive the most preferred partner status to develop Xiaomi valuable products and enjoy most preferred strategies partnership status for research and development of AI chips and algorithms for variable devices. We are currently working on Mi Band 6 and expect to launch in the near future. In closing, while no one could have predicted the enormous impact COVID has had on the world in 2020. Our results for this year serve as a solid proof point for the resilience of our business. The soundness of our strategy and the broad base appear of our partners. Even though we can still foresee that the COVID still remains our smart, valuable business in the short term, especially in a few European countries, which are our key markets. I am confident that as we continue to execute on our strategy of connecting health with technology, We are well positioned to capture new and exciting opportunities and deliver long-term shareholder value. I will now turn the call over to Leon to go over highlights of our fourth quarter and four-year results. Thank you, Wong.