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.