Zepp Health Corporation

Hello, ladies and gentlemen. Thank you for standing by for ZEP Health Corporation's second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I would now like to turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace.

Hello, everyone, and welcome to ZEP Health Corporation's second quarter 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 ir.zapp.com. Participating in today's call are Mr. Huang Wang, our Chairman of the Board of Directors and Chief Executive Officer, and Mr. Leon Teng, 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 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. and other risks and uncertainties included in the company's annual report on 20F for the fiscal year ended December 31, 2020, 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 required under applicable law. Please also note that ZEPP's earnings press release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial information. ZEPP's press release contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. I'll now turn the call to our CEO, Mr. Huang Wang.

Hello everyone, thank you for joining our call. Second quarter results demonstrated strong continued progress on ZEP Health's mission of connecting health with technology and in our strategic plan to build a company driven by its own brands and powered by our own proprietary technology. let me highlight some key examples from the quarter. In the second quarter, we modestly topped our guidance range. Our own Amazfit and ZEPP branded product revenue continued to grow at 81% versus last year's same period. In June, in the IDC Worldwide Quarterly Variable Device Tracker, Zapp Health's self-branded Amazfit and Zapp watches were recognized as being among the leading shippers of other smart watches in the first quarter of this year. This is a tremendous proof point for the progress of our own brands. It is my strong conviction that the keys to that success are our proprietary smart device technology, a faster pace of innovation, and a broadening line of products at future sets and price points that are attractive to many different customers around the world. We have not gotten to this point by being a me-too company, assembling devices with of the shelf parts. I know that being a relentless technology leader is the key path to success. Two weeks after the end of the quarter in July, we held our annual developers conference next year, 2021. I view this as the most important event of the year as we demonstrate and discuss our new proprietary technology and discuss future courses of development. It also serves as a key engineering recruiting event. This year, we announced the next generation of our proprietary smart device AI chip, the Huangshan 2S, which offers Substantial performance increases, such as reducing operating power consumption by 56%, reducing dormant power consumption by 93%, and improvement in graphic performance by 67%. We believe this provides many significant competitive advantages. We also made the much anticipated announcement of a new operating system for our devices, ZEPP OS, which also serves as the core of an open health management platform. To avoid the limitation of many other mobile or smart operating systems, such as battery and memory usage, we developed a completely different super efficient and lightweight system that emphasizes health, user experience, and privacy protection. At 55 megabytes, The new ZAP OS is one-tenth the size of the company's previous Amazfit OS and is one-twenty-eighth the size of Apple WatchOS 8. The new ZAP OS creates a strong platform for third-party developers and partners to create engaging and useful apps for our devices. while retaining the exceptional battery life for which our products are known. We expect to launch this new operating system in devices later this year. At the developer's conference, we also previewed POMBIS, a sleeveless block pressure measurement system for our amazing product. The new blood pressure capability is significant differentiator for our product and I expect will be a driver of much interest in our product. Clinical testing at the first hospital of Peking University demonstrated excellent accuracy in both systolic and diastolic measurements. The time frame. for accepting applications for clinical trials from external customers of our smartwatch is the fourth quarter this year. This is particularly gratifying for me personally. Three years ago, on the IPO roadshow, an investor asked me when a smartwatch would be able to measure blood pressure. I told him, it would take three years. And I'm very proud that we have now done it. If you know Zap Health, you know that another key part of our strategy is to expand our range of smart products beyond watches. Recent announcements reinforce our progress on this front also. In July 2021, we launched Amazfit PowerBuds Pro, earbuds featuring true wireless stereo with powerful multi-scenario active noise cancellation and advanced health monitoring functions, including cervical vertebra and hearing protection. recently launched our brand new children's smartwatch product line, which allows us to enter a niche market we have not adjusted before. Beyond providing basic children's smartwatch functionalities, our products focus on motivating children to go outdoors and participate in sports activities which will also help prevent myopia for the next generation. This product will be sold in China, combined with the policy guidance of Chinese education regulatory agencies. I believe this product focuses on health and sports characteristics. primary school children from a large number of outside tutoring classes and will be supported by users and government agencies. We do not announce products, but I do want to say that we have many exciting things in store for later this year and Everyone at the company looks forward to surprising and delighting our users. Recent announcements also demonstrated continuing progress in our data analytics business. While these recent announcements are primarily developmental, pilots towards creating future revenue streams recently announced agreements with Rulic Brazil suggests we continue our progress on this front. What this second quarter developments add up is a company moving quickly in building its own brands that drive its financial performance. When we started the company, we leveraged partnerships to develop and build products for others. While we have a way to go towards becoming less reliant on those products for Xiaomi and others, the progress of this quarter should give some good confidence in our path to having our own products driving our financial results. I am incredibly proud of what we have accomplished in just a few short years. I'm equally proud of my team and I have strong confidence in our future as we continue to be leaders in key technology, pace of innovation and creativity in designing products and functionality that customers find compelling. I will now turn the call over to Leon to go over highlights of our second quarter financial results.