Zepp Health Corporation

Hello, ladies and gentlemen. Thank you for standing by for Zep Health Corporation's fourth quarter and full year 2024 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 Zong, Director of Investor Relations for the company. Please go ahead, Grace.

Hello, everyone. And welcome to Depp House Corporation's fourth quarter and four-year 2024 earnings conference call. The company's financial and operating results were issued in a press release via the newsreel services earlier today and are posted online. You can also view the earnings release and slides referred to on this call by visiting the IR section of the company's website at ir.depp.com. Participating in today's call are Mr. Wang Huang, our Chairman of the Board of Directors and Chief Executive Officer, and Ms. Leon Chen Dun, 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 are included in the company's annual report on Form 20F for the fiscal year ended December 31st, 2023, 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 ZAP's earnings release And this conference call includes discussions of unaudited gap financial information, as well as unaudited non-gap financial information. The press release contains a reconciliation of the unaudited non-gap measures to the unaudited most directly comparable gap measures. I will now turn the call over to our CEO, Mr. Ren Wangfang. Please go ahead.

Hello, everyone. Welcome and thank you for joining our fourth quarter 2024 earnings call. In 2024, we expedited the transition towards a brand-empowered high margin business model for a major brand product. We delved deeper into technological innovation and enhanced our global marketing footprint. Despite macroeconomic headwinds and supply bottlenecks, our overall sales in the fourth quarter of 2024 rose by more than 40% quarter-over-quarter, aligning with our guidance. Our gross margin for the year 2024 reached 39% compared with 26.2% for the year 2023. At the same time, we finished the year with $112 million cash on hand, providing an ample runway for us to invest in responding to market demands. Let's delve deeper into our remarkable product accomplishments. In 2014, ZEP Health experienced remarkable breakthroughs in variable technology, AI-powered health innovation, and the expansion of its ecosystem. The successful launch of the T-REX 3 was a significant turning point. generating a strong surge in market demand and leading to substantial sequential growth in sales. Our TRIC-3 has been meticulously crafted with a strategic approach to directly change the industry-leading sports and outdoor watches offered by our competitors. This is military-grade, durable durability, extended battery life, offline mapping functionality, and highly accurate GPS navigation. The T-Rex 3 has completely transformed the landscape of adventure-focused smartwatches, establishing new benchmarks for performance. The T-Rex 3 truly is exceptional as its status as one of the pioneering smartwatches to fully incorporate AI technology. Powered by ZEPP OS 4.0 and OpenAI GPT 4.0, it further solidifies our dominant position in the AI driven wearable market. Just six months following its introduction, we have seen a consistent rise in user activation accompanied by an overwhelming amount of positive feedback from both users and key opinion leaders. We are confident that the T-REX 3 will continue to maintain its strong trajectory driving higher sales of Amazfit products with attractive profit margins and bringing us closer to achieving our goal of near-term profitability. At CES 2025, we further diversified our fitness and lifestyle lineup with the launch of Amazfit Active 2, integrating health tracking, advanced biosensing, AI-driven coaching, multi-satellite navigation, and seamless smart interactions. ACTIV2 has received solid reviews from mainstream media in Europe and the United States. With its exquisite design and rich functions, It is held as a $100 product that challenges industry leaders. The product is extremely popular, and the momentum is rising fast. It is expected to experience explosive growth in the second quarter. Additionally, the upcoming Amazfit BIP6 series First introduced at the European launch of ACTIV-2, we'll further expand our reach in the entry-level segment by delivering exceptional price performance value. We have started production in scale and shipment into the main online and offline channels in EMEA and USA. This will propel further our sales goals in the second quarter. Beyond smartwatches, we continue to expand the ZAP ecosystem into AI-powered health solutions. At CS2025, we introduced Amazfit Vital. an AI-powered nutrition-checking device that seamlessly integrates with our ecosystem. Unlike traditional food-checking methods, VITAL utilizes AI-powered image recognition to ultimately log meals, track nutrition, and provide real-time dietary insights. By analyzing By analyzing eating behaviors and offering personalized recommendations, Vital extends ZAP Health's AI-driven approach beyond fairness into holistic lifestyle management. Additionally, we have launched a related food log feature in the ZAP app. which provides users with nutritional analysis and dietary recommendations based on their foot intake using their phone cameras. This feature is currently available for free download to users in Europe and North America. We are also exploring the use of DeepSeq to further reduce the cost of processing foot images and videos to prepare for a large-scale service deployment in the future. These functionalities and products add into our sports recovery and health monitoring ecosystem, establish a unique advantage in sports recovery and health management, enhancing the overall brand value. As we advance our global strategy, we continue to elevate brand recognition and expand our influence through strategic marketing and partnerships. This quarter, we welcomed five-time Olympic medalist Gabby Thomas and Italian tennis star Daphne Parlimé as our global athlete partner. Their partnerships enhance our brand visibility on the global stage while also showcasing how Amazfit's smart wearables empower top tier athletes with data-driven insights to optimize training, recovery, and overall performance. Moreover, our strategic partnership with Hyrox, the rapid-growing sport in Europe and North America, has brought unique features to Amazfit smartwatches. We are the only smartwatch brand that supports Hyrox competition and training, providing valuable assistance to athletes in these sports. We continue to deepen our collaboration with Hydrox and are set to launch even more powerful Hydrox-related products. At the same time, we are further differentiating ourselves from competitors, staying ahead by being the first to support various emerging sports. With these partnerships, The major key account partners offline in the United States and Europe have greatly increased confidence in us. They have offered us more offline display space to replace competitors' contests. This will bring us significant new growth opportunities in the coming quarters. Let's recap. our 2025 product strategy. By leveraging Active2 and Bit6 series, we are expanding our market share on a bigger scale, increasing the entry-level user base, and strengthening our brand influence in the value of full money segment, especially the emerging market. At the same time, In the mid- to high-end segment, our T-Rex series has successfully outperformed fresh products from competitors, achieving higher profitability and steady growth. This has also allowed us to convert more entry-level users into professional users and mid- to high-end smartwatch users. Furthermore, by supporting rapidly emerging sports like high loss, enhancing the analysis of food intake in relation to exercise, and offering ecosystem products and services such as vital and healing ring, we provide a big differentiated value to compete with the industry leaders. strengthens our brand positioning and creates a unique market positioning. Now, moving to the OS part of our business, we are continuing to develop ZEPP OS and simultaneously impiling the advanced technologies of OpenAI 4.5 within ZEPP OS. Additionally, we are exploring the use of DeepSeq to significantly reduce costs on a larger scale. The main watch chips that we have successfully designed in the past few years have already served as the main chips in the Tx3, Active2, and Bit6 models. The usage of these chips has reached a milestone of 1 million units. Through the close integration of DevOS with these chips, our watches have achieved better graphic performance and computing speed, as well as lower power consumption. This has enabled our watches to gain a more unique competitive edge compared to competing products, achieve a faster time to market, and a guaranteed supply chain. Looking ahead, we remain confident in Zapp Health's long-term growth trajectory. as we involve the young smartwatches. We are building a comprehensive smart wearable ecosystem that seamlessly integrates advanced AI-driven health solutions, performance checking, and holistic wellness management. This robust product portfolio continues technological advancements, and strategic brand partnerships, we are well positioned to expand our global customer base and drive sustained self-branded sales growth. To underscore our confidence in ZEP Health's long-term outlook, We will continue our share repurchase program in 2025, reflecting our dedication to delivering value for our shareholders. I will now turn the call over to Leon to go over the highlights of our fourth quarter financial results.

Thank you, William, and greetings, everyone. Thank you again for joining our fourth quarter 2024 earnings call. I would like to start by addressing recent U.S. tariff announcements on inbound goods to be sold in the U.S., which we do not expect to materially impact our U.S. consumer pricing or gross margin due to our proactive supply chain management. This is thanks to the terrific job our team has done to diversify our manufacturing and sourcing over the past years. According to CounterPoint, global sales of smartwatches have fallen for the first time by 7% in 2024 on device shipment, in large part due to a sharp decline in the popularity of the market leader, Apple. Shipments of Apple Watches fell by 19%, with North America as the biggest driver of the decline, where the absence of Apple Watch Ultra 3 and minimum feature update in the Series 10 lineup led consumers to hold back purchases. Despite the overall decline, sales in China grew from 19% of the market to 25%, This was the first time it recorded more smartwatches sales than India or North America, according to CounterPoint. Another large contributor to the global sales drop was India, which fell from 30% of the market to 23%. This was partly because of a bubble in ultra-cheap devices from Indian manufacturers, which was now bust due to a lot of complaints about the quality of the devices. However, CounterPoint expects a recovery in the global market. with single-digit percentage growth in 2025, and it predicts the uptake in sales will be driven by the increasing adoption of AI features and a greater emphasis of providing a wider range of health data, which plays to the core of our strategy. Now, I will shift to our Q4 and full-year 2024 commentary. In Q4, the successful launch of the T-Rex 3 reinforced our leadership in performance-driven smartwatches. During the quarter, we maintained our strategic focus on building a sports-oriented brand identity, positioning ourselves as a premium yet accessible global brand. And we're set to capitalize this in 2025. Our overall sales coming within the guidance range demonstrating a 40% plus quarter over quarter growth. This strong performance was primarily driven by the successful launch of the T-Rex 3. Compared with the fourth quarter of 2023, our revenue declined year over year due to three key factors. Firstly, a continued decline in Xiaomi product sales. Secondly, the supply constraints of T-Rex 3 series. And thirdly, by consumer-related macroeconomic issues resulting in a softer global consumer market. However, as we look ahead to the first quarter of 2025, we expect our Amazfit branded cells to continue in their strong momentum, propelling higher sales growth year over year. Looking at the full year 2024, our revenue declined compared to 2023, primarily due to declining Xiaomi product sales, as well as limited new product launches for Amazfit branded products, with only the T-Rex 3 debuting in the fourth quarter of the year. However, 2025 will be a different story. We are supposed to launch one to two new products every quarter, introducing a different seasonality pattern impacting demand. This shift has been evident from Q4 2024 into Q1 2025. Now 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. Our Q4 2024 gross margin stood at 37%, continuing the margin expansion trend, which we initiated in the second half of 2023. However, this was slightly lower than Q3 2024 due to somewhat promotional pricing, which is customary for the holiday season. The gross margin for our self-branded products remains strong, driven primarily by the higher margin TREC3. Looking ahead, we expect the positive trend to continue in 2025, supported by the launch of ACTIV2 and BIP6 and many other new products in the pipeline. From a margin perspective, 2024 was a year of gross margin expansion, Gross margin percentage in 2024 was 38.5% compared to 26.2% in full year 2023, helped by better product mix and higher brand awareness. In 2025, this trend is expected to continue with the introduction of higher margin products further supporting our profitability. Now, let's turn our attention to costs. We remained steadfast in our commitment to cost management, continuing with the program that we began in Q3 2020 on reducing overall operating costs. In 2024, Q4, total adjusted operating expenses were U.S. dollars 29.3 million compared to U.S. dollars 25.9 million a year ago. The increase was primarily due to spend on promotional campaigns during the holiday seasons to build brand recognition and drive revenue growth. Adjusted operating cost was U.S. dollars 110 million in the full year 2024 compared to U.S. dollars 112 million in 2023 and U.S. dollars 171 million in 2022. We will maintain our cost-conscious approach in the coming quarters. Concurrently, we remain committed to invest in R&D and marketing activities to maintain our long-term competitive edge. R&D expenses in the fourth quarter of 2024 were U.S. dollars 10.1 million, nearly flat compared to last year. as we consistently evaluated resources efficiency to ensure maximum return on investments and productivity. We're committed to investing in new technologies and AI to secure our long-term technology leadership. Selling and marketing expenses in the fourth quarter of 2024 were US$13.2 million compared to US$11.8 million a year ago. The increase was primarily due to spend on promotional campaigns during the high season to build brand recognition and drive sales growth. At the same time, we consistently push on retail profitability and channel mix improvement. which included meticulous refinement of our retail channels and strategic staffing arrangements across sales regions. We're committed to investing efficiently in marketing and branding to ensure our sustainable growth. G&A expenses were US dollars 6.1 million in the fourth quarter of 2024, compared to U.S. dollars $4 million in fourth quarter of 2023. The increase was largely attributable to provisions for bad debt and foreign exchange rate fluctuations. We remain committed to strict cost control over discretionary spending, ensuring expenses are aligned with striving sustainable growth, In 2025, we aim to keep operating costs at or below 2024 levels, maintaining a lean and efficient structure while strategically investing in high impact areas. Our adjusted operating loss for Q4 2024 stood at US dollars 7.4 million. The loss was mainly driven by lower sales volume, resulting in insufficient coverage of operating expenses. It was the narrowest in the past four quarters, demonstrating sequential improvement and path to profitability in near term. This reflects our ongoing efforts to enhance efficiency and then align expenditures with revenue growth. GATT net loss for the first quarter of 2024 was US dollars 36.9 million, which included operating loss of 9 million, certain investment-related impairments of 13 million, and deferred tax asset valuation allowance of 14 million. Allow me to further elaborate on this. to optimize the operation of the company's core business. The company implemented a one-time impairment at the end of this year for certain projects it had invested in past years. By the end of this year, the company has comprehensively divested from these investments and completed liquidation procedures while possible. Going forward, there will be limited impairment concerns from these investment projects. This impairment measure is designed to streamline the business operations, allowing the company to focus on its main and core business and drive more efficient development. In addition, there's another $40 million technical accounting treatment on deferred tax assets booked in past years. Both are non-recurring and non-cash in nature. Let's now shift our focus to the balance sheet. As Wei En has mentioned, we continue to optimize our working capital, achieving an inventory level of US dollars 57 million in Q4, which was the lowest since 2018. Inventory management remains as a top priority and will continue to keep inventory levels tight to improve cash flow efficiency. By February 2025, we have successfully refinanced the majority of our short-term debts maturing in 2025 into long-term debt instruments with a lower coupon rate. Following this adjustment, long-term debt accounts for around 75% of the company's overall debt structure. And since Q1 2023, 56 million of the total debt has been retired, and the capital structure will be further optimized as operating cash flow strengthens. As of December 31st, 2024, our cash balance stood at U.S. dollars $111 million compared to U.S. dollars $140 million in Q4 2023. The decline is mainly due to lower operating profit offset by a better working capital management. Compared to Q3 2024, the shockfall was mainly due to operating activities. We remain committed to our share buyback program in 2025, reinforcing our confidence in the company's long-term value and our commitment to delivering returns to shareholders. Looking ahead, for Q1 2025, we expect revenue in the range of US dollars 40 to 45 million. This would mark a year-over-year growth of 14% to 29% in the self-branded product sales, highlighting the momentum of our brand expansion strategy. To conclude, despite challenges in 2024, we navigated the year effectively by focusing on disciplined cost management while expanding our self-branded product expansion. As we enter 2025, we're well positioned for sustained growth with a robust product pipeline, margin expansion strategy, and disciplined cost management. We remain confident that these strategic initiatives will drive long-term value for the investors, employees, and customers. Thank you all for your time today. I will now open the call for questions. Operator, please go ahead.

Thank you. We'll now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And as a reminder, if you wish to ask your questions to the company's management in Chinese, please immediately repeat your question in English. Today's first question comes from Dev Lagi with Fundamental Research Corp. Please go ahead.

Hi. Regarding the new tariffs on Chinese smartwatch imports to the U.S., Leon, you mentioned there will be minimal impact due to supply chain management. Could you please expand on this point, maybe give some color, please?

Thank you. I think it's you know that we have been working on your sourcing strategy for a long time, at least for two to three years already. Right. And then the US tariff is very much on the goods which have been manufactured in China and shipped to the United States. So what we're trying to do is trying to mitigate that part of the shipments through our manufacturing base in Southeast Asia so that we can not avoid the tariff impact which has been applied to the Chinese goods into the United States.

Are you able to give or disclose what percent of your overall manufacturing comes from outside China?

I think for now you can take all of the products which are coming to the United States to satisfy our revenue in the United States are coming out of non-commercial China regions. So from that perspective, I think 20% to 25% of the overall portfolio is actually non-China manufacturing base related.

Okay. So that means you're probably better off than, say, Apple, given that most of their manufacturing is in China. So they'll be significantly impacted by this new tariff.

Yeah, to some extent, I think.

Yeah. You talked about taxes and the impairment loss in investments. Could you give more color on that as well? Why did taxes go up so much, and what was the primary driver of the $10 million impairment loss from investments?

Yeah, as I just mentioned, the impairment losses is very much coming out of we have made some small investments on our upstream and downstream, say, technology companies or similar companies in our domain, which potentially have some synergies. I think that applies to most of the multinational companies. They all have a kind of strategic investment department themselves. So in the past years, we also have made similar investments to some sort of the downstream and upstream companies, which is placed into the similar kind of industry or have potential synergies with us. And you know that every year you need to do an impairment assessment on whether or not these companies, the value of the investment is still the value which you have invested a few years ago. And I think we all know that in the past years, given the macro headwinds, et cetera, et cetera, some of those startup companies or mature companies or chip companies, some of those companies, their performance is not playing according to what we have invested a few years ago. So from that perspective, given the prudence principle which the auditors want us to apply, then you need to do an assessment on those investments you made in the past and impair them whenever possible to actually reflect the fair market value of those investments. And that was the reason for the $13 million investment impairment which we provided. On the deferred tax asset, I think it's more technical. You know that there is the so-called deferred tax asset. It happens whereby if you reported in a certain year a loss, which unfortunately we did report a loss in the past year, then you can recognize some of that as a tax shield going forward. But then again, per the accounting principle, you have to apply a prudence principle if you think some of those deferred tax assets, because also the deferred tax asset has to be used within a certain period of time, right? And if you think a part of that may not be used in the upcoming year or so, or it's going to expire in the upcoming one year or two, then you have to apply impairment or value allowance provision to those deferred tax assets. But as I said, those adjustments which were made by Q4 2024 on the investment impairment and also on the deferred tax asset, they are non-cash and one-off in nature. So it's not going to repeat again. And then I think after we provisioned for those amount, also the risk of a further provision on those topics in the year of 2025 would be limited.

Thank you so much, Leon. Just one more question, if I may. This is regarding the market in general. Now, Apple sales of smartwatch was down significantly last year. Samsung reported modest growth. But the Chinese players have been growing rapidly. Now, are you seeing internally a big shift in demand towards lower-priced players? Is that an accurate assumption?

No, I mean, on the contrary, I think what we have seen and what has been, I also put it in my prepared notes, is that although the market overall actually declined, there are a few bright spots. So I think in the outdoor and in the sports part of the smartwatch market, there's a bright star. I think you know which brand I'm talking about. Garmin is actually performing very well. And we all know that Garmin smartwatches are not cheap. So I think from that perspective, what we see is that you also can see it from our Q4 result. After we successfully launched the T-Rex 3 watch, we actually gained share rapidly in Q4 in most of the developed countries where we are operated in. um so we see yes the the there's a decline from the market but that decline um i think to some extent is coming out of there's not so many feature changes in the apple watch and also people are waiting for apple watch ultra 3 which didn't arrive in a year and and that actually drove the the the decline on the market leader apple right On the other hand, I also mentioned that India market kind of collapsed on the super low end and super cheap smartwatch markets front. So what is growing is China, whereby we are a part of that. And also what is growing is the sports watch segment, whereby we took a very good share growth in Q4 on that segment. And also what is going to grow in 2025 is also AI driven, right? And then you heard from Wei and myself, we talked about we're actually one of, if not the first one in adopting AI on the smartwatch. So we think given where the market growth and potential is for 2025, we're actually quite optimistic about our growth trajectory in 2025.

Thank you so much, Leon. Congratulations on a strong view for revenue growth.

Thank you, Sid.

Our next question today comes from Ankit Upadhyay, a private investor. Please go ahead.

Thank you so much for having me on the call. I'm a long-term shareholder in ZEP Health, and I will ask a few questions on the long-term strategy. To start off, I'd like to defer to Mr. Huang, the CEO, on the company's vision. In your 2019 open letter to the employees, you spoke about building a global health ecosystem. How do you think you are tracking against that vision And especially, you know, when we put into the perspective the fact that most of the revenue still comes from the wearables, how do you think you're doing against that vision five years down the line?

Thank you very much. I mean, I thank you for the call. I think I will ask, I will defer this question to Mike Young, our COO, and then maybe Wei-en is going to comment on that if he has any other things to add to it.

Sounds good. Yes, I will try to answer the question. Yes, can you hear me? Yeah, I will try to answer the question. Yeah, I'll try to answer a question. Yeah. So, uh, uh, besides, uh, the, uh, smartwatch, uh, as you know, you were also continuously diversifying our product portfolio. Uh, we have many other form factors now, uh, you know, covering rain, uh, you know, uh, air, but, um, you know, uh, we even have hearing aid. So basically, uh, you know, our, um, you know, uh, diversifying our, our, our product category, uh, can enable us to, uh, get into, uh, the different segments of the customer base. And at the same time, we're continuously experimenting and rolling out services that might make sense. You know, so we have the sleep monitoring service that can, you know, that is still growing very, very healthy. So that also helped create a subscription business for us. So it is, you know, this is a longer term, you know, so as we diversify our product portfolio into different sectors and then try to cover different customers, we can try to cross-sell and up-sell, as well as at the same time try to deliver the services where the margin would be much higher. where it might make sense. In the even longer term, you know, we will also look into more of the 2B area besides 2C. Right now, we're just primarily focusing on consumer, but as we go into, in the longer term, we can do partnerships, you know, with, you know, insurance and other enterprises where we can get the whole ecosystem to be more well developed. So that's a very longer-term view. Does that answer your question?

Yeah, that helps. Thank you so much. My second question would be around the relationship with Xiaomi. So while they still remain the shareholders and, you know, they have a board seat, the disengagement on the product side also coincided with them gaining their market share rapidly. What's the perspective on that? What's the view, you know, at the ZEPP management on that?

No, so I will take this one, Ankit. I think, so number one, our relationship with Xiaomi is very strong, okay? As what you mentioned, they hold 20% of the company, they have the board seat, and we have a very close relationship with Xiaomi operating-wise, right? But on the other hand, I think I need to repeat on the transformation journey, which we have been going through in the past two or three years. Maybe I would just put it in one simple word to it. I think it boils down to our target is actually to transform ourselves from a Foxconn-alike OEM, ODM type of a company to a company which has its own brand and then, so to say, a new Garmin type of branded smartwatch type of company. So that is actually the strategic shift which we would like to do. And then, you know, from a profitability perspective, we first want to shift the company to the situation whereby our self-branded product sales is actually sufficient enough to cover all our operating expenses, and we're going to be profitable on that. And then from that moment onwards, as a second step, we can look at whether or not to expand that revenue base with Xiaomi or, as Mike just mentioned, any big 2B customers. uh to expand again because the issue is um you have seen in the past in our financial uh reports uh xiaomi is actually very big from a revenue perspective but then year over year the margin on that business is actually uh decreasing rapidly and then uh also xiaomi has as a listed company they have uh made a very open announcement uh towards the market saying that on the hardware front they're not going to make any profit on it they are going to just do a cost plus five percent on it right and then if we continue on this path uh forward um i think you will see a declining trend on the Xiaomi revenue and the profit which we're going to turn out of it. So that's why we're trying to actually get to first use our self-branded product sales to sustain our profitability and to expand again to this journey. So that is actually a well-thought strategy which we kind of embarked two to three years ago. And then I think we're coming to the end of the tunnel. So we see the light at the end of the tunnel right now. So you see that, yes, overall revenue year over year, 24 compared with 23. there's a decline but it's very much driven by the xiaomi revenue decline but then it does not impact too much on the bottom line and on the same time you saw the gross margin expansion of the company from 26 to close to 40 right and then Yes, at Q4 2024 or throughout the year of 2024, we do have a cost coverage issue whereby our revenue need to hit to the threshold in order to get profitable. But that was very much related to a different product launch cadence, which was in 2024, if you know or if you track us as what you said, looking at 2024, there's only one new product which we have launched. That is the T-Rex 3. And after we launched that, we received immediate traction and popularity on that product. And then that drive the quarter-on-quarter run rate of the revenue to grow by more than 40% Q4 versus Q3, right? And Wayne also has alluded to it, and so do I, in 2025, we're going to have a major product refreshment and new product introductions every single quarter. which is going to be a different cadence than what we have experienced in 2024. So from that perspective, I think 2025 would be a totally different year whereby we'll see strong self growth compared to 2024. I think I have give you a very long answer to the question and coming back to Xiaomi, I think after we have finish the step to use our self-branded products to sustain our profitability, then the next step is to look at whether or not we can expand the revenue and strike a win-win on those two BDOs. And then since our relationship with Xiaomi has been very good and is very good. And then, you know, the Xiaomi ecosystem works in a way that every year there's going to be a new sourcing plan and then you can bid for it and then you can get that product. contract to produce for different Xiaomi ecosystem kind of products, right? So I think we would just embark on the plan, which we set out to do, and then hopefully that answers your question.

Yeah, no, thanks, Leon. That was a really clear answer. My last question is about the stock itself, you know, pretty tactical question, but I think it's important. The stock continues to be very illiquid. What's being done about it, if anything has been, you know, if it's being taken into action?

So, Ankit, I mean, I think it's a good question, and thank you for asking this question. There are a few things. Number one is If you look at our total asset and net equity value of the company, it's actually north of $250 million. So I think we are looking at the current market cap and the share price. We're hugely undervalued. That's number one. Number two, I have mentioned in the press release that we recently refinanced our short-term debts to long-term debts. So, we actually pushed the tower to 2027 and beyond. So, there's no immediate maturity coming due in 2025 and 2026. And then with the cash we currently have on hand, I think we have ample runway to cater for anything and to invest on any opportunities once it emerged, right? Number three, I think you heard us talking. We have and we are going to continue with the stock buyback program, which we kicked out two years ago. And then we're actually prepared to upsize the stock buyback program whenever needed. because we're very confident on our strategy and our growth trajectory. And I think last but not the least, what you see here is that it's very much a self-help story, right? I believe that if we could prove to the market that the transformation journey of transforming from a Foxconn-like company to a kind of a new garment company, and then you can actually become profitable, And to be honest, if you look at the ranking globally, the value share, we're actually ranked number six or seven, depends on the quarter you're looking at. So we're actually ranked very high, just a few place from Apple, Garmin and Samsung, right? But then if we can further expand our brand awareness and brand recognition and also if we can actually growth our relatively share in the key countries we set out to do those are EMEA countries and China and United States then I think the share price would start to recover and you will see a more liquid situation coming out of our company. But as I said, I mean, one swallow does not make a summer, right? But you have seen that from Q4 versus Q3, our sales growth is more than 40%. And our guidance for Q1 is also a year-on-year more than high teens growth rate. And if we can continue on that, I think given two or three quarters, you should be able to see a recovery on the share price.

Thank you so much for that answer. So thank you, Leon and Mike, for those clear answers. And I wish all the best with all the initiatives while I check the time on my TRX3 watch. Thank you.

Thank you. Thank you.

And our next question comes from Nicola Jones with Brooks Investments. Please go ahead.

Yes. Well, thank you for taking my question. And I just actually have one of them. Could you please provide or recap and provide some more information about the new product roadmap for 2025 and any impact on growth these new products may have?

Yeah, I can do a quick recap of the – sorry, there's an echo on the line – You can hear me okay, right, operator?

That is correct. We were getting some background noise, and I muted Nicolette's line. Please proceed.

Okay, good. So let me get back to the question. I think briefly, if you look at our strategy, we do have basically different smartwatch lines playing on different price segments. So in January this year in CES, we have launched Active and BIP. Those are our entry-level value for money, the price segment products. And as Wei En just mentioned that these two products line since launch, the moment we launched them, It received a lot of popularity and then the activation keep on climbing. So those two products would be our gatekeeper for the entry level price segments. And then it's going to continue to grow throughout the year. And if you look at what I just mentioned, we have also the mid to high end price tier products. One of them is actually T-Rex, which we launched in Q3 in September 2024. And it's actually in full swing right now. The activation keep on climbing, both a lot of media and YouTubers. Call us the T-Rex three, the gaming Phoenix killer, that type of reputation we received. So if we continue on this trend in this year, and then obviously T-Rex and the sports. and outdoor part of the business would continue to grow, and then it's going to also help our growth story for 2025. Now, last but not least, you know that we also have a mid-level type of price point product, and that product theory is called balance theory. And on the balance theory, the target is more towards the urban consumers who want to do light sports, but then we can actually give them the edge on all the functionalities you could expect on the smartwatch, but then we are more accurate on the GPS, on the sports functionalities, et cetera, et cetera, for the urban users. So with these three product lines, and then I have alluded to it i think we are going to in 2024 we only have one product introduction but in 2025 you will see that we will have new products coming out almost every quarter and then that will obviously change the demand pattern of our sales pattern as well So I think given that, it would drive the 2025 revenue and growth of the company to a new high versus 2024. And then you have already seen it in our guidance for 2025 Q1 and also in the Q4 2024 numbers. I hope that answers your question.

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

Grace Ong Thank you once again for joining us today. If you have further questions, please feel free to contact ZEPP's Health Investor Relations Department through the contact information provided on our website. Thank you.

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