Zepp Health ADR A ADR Aktie

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Today's conference call is being recorded.

I will now 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 Zepp Health Corporation's Second 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 slides referred to on this call by visiting the IR section of the company's website.

Presenting today are Huang Wang, our Founder and Chief Executive Officer; and Leon Deng, our Chief Financial Officer. Joining us today, we also have Mike Yeung, Chief Operating Officer and General Manager of North America; and Eric Fleming, Vice President of Capital Markets of 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. 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 20-F for the fiscal year ended December 31, 2025, and the other filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to forward-looking statements, except as required under applicable law.

Please also note that Zepp's earnings press release and this conference call include discussions 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 will now turn the call over to our CEO, Mr. Wang Huang. Please go ahead.

Hello, everyone, and thank you for joining Zepp Health's Second Quarter 2026 Earnings Call. In the second quarter, revenue reached USD 63.5 million, representing year-over-year growth of 6.9%. Gross margin was 37.4%, improving by 120 basis points from the same period last year. This was measured rather than explosive growth. However, the quality and direction of the improvement are important. Before all of our new products have fully completed their production ramp and channel expansion, we have already returned to year-over-year revenue growth while improving gross margin. This improvement was achieved despite higher memory and other components' costs.

During the first half of this year and partially -- particularly during the second quarter, we launched or expanded products across our major families with each family serving a distinct strategic role. I would therefore like to use this opportunity to explain how our major product families are developing and more importantly, how they are collectively changing the quality and the longer-term growth potential of our business. The first clear development is that our product mix is moving towards higher-value products. Within the T-Rex family, we have established a mature and stable higher-end product structure. T-Rex 3 Pro and the T-Rex Ultra 2 have U.S. suggested retail prices of approximately USD 399 and USD 549, respectively. These higher-end models have continued to account for approximately 50% of recent global T-Rex family activations.

The important point is that this higher-end mix has been sustained at approximately half of the family, demonstrating durable consumer acceptance of both our higher-end products and the broader T-Rex price ladders. The Active family demonstrates our ability to create and expand a new price tier. Using a strict definition that includes only Active 3 Premium and Active Max, both positioned at a U.S. suggested retail price of USD 169. This tier increased from approximately 22% of global Active family activations in the first quarter to approximately 40% in the second quarter. It reached approximately 49% in July and approximately 57% through August 25.

There were no USD 169 Active products in the comparable period last year. This, therefore, represents genuine adoption of a new higher price tier rather than a reclassification of existing products. The overall scale of Active is equally important. Following the recovery in Bip supply, total global monthly activations of the Active family remained broadly comparable with those of Bip in both July and August to date. This comparison is particularly meaningful because Bip itself has returned to a strong scale and continue to experience strong consumer demand. It demonstrates that Active family, centered largely in the USD 100 to USD 200 price range, can now sustain approximately the same global activation scale as Bip family. Our family anchored in the sub USD 100 segment, even after the supply constraint on Bip was removed. Together with the growing contribution of our $169 Active products, this provides strong evidence that our overall volume mix is moving towards higher-value product bands.

The Balance family provides more than another example of premiumization. It is also important evidence that our strategic focus on Hybrid Training is beginning to translate into product adoption and growth. Balance 3 was designed around the core needs of Hybrid Training users, athletes who combine strength, endurance and recovery within a single training system. Together with Balance Ultra and Helio Strap Pro, this supports our goal of building a differentiation position in Hybrid Training rather than competing only as another general purpose wearable brand. Our sustained engagement with the HYROX and Hybrid Training communities has given us a deeper understanding of these athletes and their training needs. Balance also entered this product cycle with the benefit of several generations of accumulated product credibility and user trust.

Another increasingly important source of the competitiveness is the product design language and the aesthetic capability we have established across our higher-end portfolio this year. The most direct way to understand this progress is to experience the products themselves to see, touch and wear them and to appreciate not only their performance, but also their materials, form and finish. Achieving both objectives at the same time requires significant engineering investment. The broader use of the metal, more refined materials and more sophisticated industry design can affect antenna performance, wireless connectivity, positioning signals and sensor sensitivity if they are not carefully engineered. Our ability to improve materials, craftsmanship and design while maintaining a higher level of GPS connectivity, sensor and sports performance is therefore not simple and aesthetic achievement.

We believe it is an important and increasingly differentiated technology capability. This capability is particularly visible in the new Balance generation. Balance 2 has a U.S. suggested retail price of USD 299.99. Balance 3 starts at USD 369.99. Balance 3 Titanium is priced at USD 499 and Balance Ultra at USD 599.9. Despite this meaningful step-up in price, adoption of the new generation has developed quickly. Balance 3 and Balance Ultra together increased from approximately 3% of global Balance family activations in the second quarter to approximately 26% in July and approximately 30% through August 25. This was not simply a mix shift caused by the replacement of the earlier generation products. In July, total global Balance family activations increased by more than 1/3 compared with the monthly average in the second quarter. While activations of the earlier generation Balance products remain relatively stable.

Balance 3 and Balance Ultra were announced in early June with production and channel deployment ramping through July and August. Initial supply of certain titanium models began only in August. The earlier momentum we have observed validates our product direction and Hybrid Training strategy. However, the new generation has not yet reached the scale or made the financial contribution that we believe it ultimately can. Taken together, these 3 families demonstrate different but complementary capabilities. T-Rex shows that we can sustain in a mature higher-end structure. Active shows that we can establish a new price tier and scale the overall family. Balance shows that our strategic investment in Hybrid Training, product design and engineering can support sustainably higher prices in incremental demand and a differentiated market position.

Bip provides the other side of our product strategy, a strong entry-level foundation combined with improving pricing discipline. Bip is our entry-level product family anchored by Bip 6 in the sub USD 100 segment at a U.S. suggested retail price USD 79.99. Bip 6 was launched 17 months ago. Although its availability was constrained during the second quarter, demand remained very strong after supply recovered. This reinforced our confidence in the product competitiveness and its ability to sustain a meaningful longer life cycle. The longevity of Bip 6 is also supported by our vertically integrated technology stack. Our in-house processor platform was designed with meaningful computational headroom for continued optimization while Zepp OS continues to become more capable and intelligent.

Together, these capabilities allowed us to continue improving Bip 6 through software after launch without relying solely on a new hardware cycle. This strengthens the product's long-term value proposition and supports our confidence in a longer product life cycle. At the same time, Bip Max, which began contributing during the second quarter, has recently represented approximately 1/3 of global Bip family activations. This creates a more complete internal price ladder while Bip 6 continues to provide a strong volume foundation. The recovery in supply, the sustained strength of Bip 6, its continued software evolution and growing contribution from Bip Max gives us confidence to move from rebuilding scale towards stronger pricing discipline and healthier unit economics.

Higher memory and component costs have created pressure on the profitability of entry-level products. However, the pricing decision we are announcing today is supported by enduring consumer demand and continued competitiveness of the Bip family. Therefore, today, we are announcing that we will increase prices across the entire Bip family beginning in January 2027. Our objective is to preserve Bip's compelling consumer value proposition while supporting healthier and more sustainable unit economics over a longer product life cycle. We also see growing strategic relevance in screen-free wearables. Google's recent launch of Fitbit Air further validates the screen-free wearable category that Amazfit entered last year with Helio Strap.

Helio Strap provides screen-free, subscription-free fitness, sleep and recovery tracking within the broader Amazfit and Zepp App ecosystem. Demand exceeded our available supply during the second quarter. We expect supply to recover partially during the third quarter and to be fully restored during the fourth quarter. As availability improves, we expect Helio Strap to make a more meaningful contribution while continuing to strengthen our broader training and recovery ecosystem. Building on Helio Strap, Helio Strap Pro serves a more specialized role. It is designed specifically for HYROX and high-intensity Hybrid Training, with additional capabilities continuing to be developed through software updates. At this stage, its role is to serve as a professional and technological spearhead, allowing us to develop advanced training and recovery capabilities with highly demanding athletes and then expand mature capabilities across the broader Amazfit ecosystem.

We are also building professional credibility in running through Cheetah. Unlike Balance, Cheetah does not yet benefit from the same multigenerational product foundation. Its professional credibility must therefore be earned progressively through product development, athlete adoption and real-world performance. Over the past several months, we have begun to see increasingly visible evidence of this progress. After joining Amazfit as an athlete partner, Josh Kerr broke the world record for the 1 mile. Amazfit athlete Ben Dhiman won this year's UTMB Mont-Blanc. Yomif Kejelcha finished second in the London Marathon in under 2 hours and later wore Cheetah 2 Pro when he set the half marathon world record. Yomif is not a contracted Amazfit athlete, making his choice to use our product during a world record performance, a strong validation of our credibility among elite runners.

We recognize that the credit belongs to the athletes while their choice to compete with Amazfit reflects growing trust in our products at the highest level of sports. These positive product indicators should not be interpreted to mean that every family is already contributing all at full scale. T-Rex currently represents a story of sustained higher-end mix rather than rapid unit growth. Active has delivered clear growth in both scale and product mix, while the higher-priced Balance generation has only begun to establish initial momentum. Bip and Helio Strap were constrained by supply during the second quarter and Cheetah and Helio Strap Pro remain at the early stage of professional credibility and market development. As a result, the strategic progress across our portfolio has not yet translated into its full revenue potential.

The product direction is increasingly clear, but the financial contribution is developing at a different pace across the portfolio. At the same time, higher memory and component costs affected profitability across multiple product families with a greater relative impact on entry-level products. These cost pressures partially offset the benefit of our improving product mix. The fact that gross margin still improved by 120 basis points year-over-year despite these headwinds provides further evidence that the underlying mix improvement is real. Looking ahead to the third quarter, based on our current outlook, we expect revenue to be between USD 68 million and USD 73 million. This would represent a year-over-year decline of approximately 4% to 10%.

The comparison base is important. Revenue in the third quarter of last year grew by 78.5% year-over-year to USD 75.8 million. Against that high base, the activation trends we observed in July and August indicated continued improvement in both product mix and consumer demand. The normal production ramp and the channel deployment cycle means that these improvements will not all be reflected in reported revenue immediately and our guidance incorporated that timing. We will remain disciplined in how we manage pricing, product positioning and growth quality.

Our priorities are to expand the contribution of higher-value products, improve the unit economics of our entry-level portfolio, restore supply for products where demand remains strong and build deeper and more durable brand credibility through professional products, athletes and sports communities. We believe these changes are establishing a higher quality, more resilient and more sustainable foundation for Zepp Health's future growth.

With that, I will now turn the call over to our Chief Financial Officer, Leon Deng, to discuss our financial results and outlook in greater detail. Leon, please go ahead.

Thank you, Wayne. Greetings all. Let me walk you through our financial performance for the second quarter. Starting with top line. Our revenue came in at $63.5 million, in line with the guidance we provided. Total revenue grew approximately 7% year-over-year, primarily driven by the new product launches we introduced during the first half of the year, including, among others, Active 3 Premium, Active Max and Bip Max. As Wayne mentioned, our revenue this quarter was impacted by the timing of product launches and product availability, namely the Balance 3 series and the Helio Strap. While underlying consumer demand remained healthy, the timing of product availability affected the quarterly revenue contribution from certain new products, resulting in a temporary impact on near-term revenue growth.

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 Q2, our gross margin was 37.4% compared with 36.2% in the same period last year and broadly in line with the first quarter of 2026. The year-over-year improvement continued to reflect the structural strengthening of the Amazfit brand, driven by a stronger contribution from new products with premium pricing and healthy margins as well as continued ASP expansion supported by growing brand recognition and consumer adoption. At the same time, we continue to navigate certain cost headwinds, including higher memory component prices and foreign exchange fluctuations, particularly the appreciation of RMB. These factors partially offset the benefits from our improved product mix and margin expansion.

Looking to the second half, we are managing the headwind of higher memory costs that are putting downward pressure on our gross margin. As you know, the semiconductor industry is in the middle of a transition from DDR4 to DDR5 and high bandwidth memory driven by AI and data center demand. That is tightening supply for the memory chips we use and increasing costs across consumer electronics industry. Our global operations team has been focused since 2025 on securing sufficient supply to support our manufacturing demands. This means pursuing supplies through multiple channels. We're also leveraging our engineering expertise to optimize memory requirements across different and future designs, all without compromising product performance or customer experience. With regard to the effect of higher memory prices, we have a variety of levers to mitigate the impact.

Our focus is on managing the headwind thoughtfully without losing sight of the large opportunities to drive top line growth alongside increased profitability. On the topic of tariffs, we have filed refund of prior duties paid. The benefit could be another meaningful offset to the higher memory costs. So while memory headwinds are real, we are managing them from a position of preparation and expertise. We remain confident in the long-term margin opportunities of our business as our product portfolio continues to shift towards premium products and our brand positioning strengthens, we expect to continue improving the quality of our gross margin over time.

Turning to operating expenses. We remain committed to the prudent cost management discipline we initiated in 2020 and invest on opportunities where we see fit. Total adjusted operating expenses for the second quarter were USD 34.8 million compared with USD 26.4 million in the second quarter of 2025 and USD 35.7 million in the first quarter of 2026. The year-over-year increase of USD 8.4 million was primarily attributable to 2 factors. Approximately USD 2.7 million was related to foreign currency impacts, while the remaining USD 5.7 million was mainly driven by higher selling and marketing investments. On a sequential basis, operating expenses decreased slightly. Looking ahead, we will cautiously manage the overall expense level, especially when the pace of the new product launches in the second half moderates.

Adjusted R&D expenses were USD 10.8 million compared with USD 10.3 million and USD 11.9 million in the second quarter of 2025 and first quarter of 2026, respectively. Excluding approximately $0.7 million of foreign currency headwinds, R&D expenses were slightly lower year-over-year. We continue to invest selectively in cutting-edge products and emerging technologies, including AI, to further strengthen our competitive position. At the same time, we maintained a disciplined approach to R&D resource allocation, continuously improving efficiency and optimizing returns on our investments. Adjusted selling and marketing expenses were $18.2 million compared with $12 million and $16.4 million in the second quarter of 2025 and first quarter of 2026, respectively. The $6.2 million year-over-year increase was primarily driven by investments supporting new product launches and brand building, including $2.9 million in launch campaigns as well as $1.6 million in e-commerce platform fees, which increased in line with the revenue growth.

The remaining increase reflected strategic brand-building initiatives, including $0.7 million in athlete sponsorships, $0.5 million related to our HYROX partnership and another $0.5 million in physical retail and event activations. These events are designed to further enhance brand awareness, strengthen consumer engagement and support our long-term growth. Adjusted G&A expenses were $5.8 million compared with $4.1 million and $7.4 million in the second quarter of 2025 and first quarter of 2026, respectively. The majority of the year-over-year increase were attributed to foreign currency impacts. In addition, we continue to make targeted investments to protect our intellectual property rights and support certain legal and regulatory matters.

During the quarter, we also achieved a favorable income -- outcome with respect to the lifting of the Section 337 related exclusion order in the U.S. Beyond these strategic investments, we continue to streamline our overhead structure and maintain disciplined cost control while improving operating efficiency.

Turning to profitability. We remain focused on gradually improving operating leverage as we scale the Amazfit brand business while maintaining sufficient investment behind product innovations, software development and brand awareness. With higher revenue and improved year-over-year gross margin, partially offset by higher operating costs and unfavorable foreign exchange translation differences, our adjusted operating loss was $11.1 million compared with $4.9 million in the second quarter of 2025. Net loss was $31 million in the first half of 2026 compared with $27.5 million a year ago, including approximately $4.5 million in foreign exchange headwinds, primarily due to the appreciation of the RMB against the U.S. dollar.

Moving on to working capital. We continue to manage inventory carefully during the quarter. We recorded inventory of $62.4 million for Q2 2026, which was flat compared with Q1 2026 and decreased by $17.5 million compared with the same period last year. Inventory remained under tight control, reflecting our continued focus on improving inventory efficiency and aligning production and procurement more closely with actual market demand.

Turning to cash. We ended the quarter with a solid liquidity position. As of Q2 2026, cash and cash equivalents were $106.3 million, increased by $11 million and $3 million each compared with Q2 2025 and Q1 2026. The cash balance increase was primarily driven by enhanced working capital efficiency, which more than offset the net loss recorded during the period. The cash position provides ample runway for the company to invest and seize potential market opportunities in the future. We continue to actively manage our debt profile and overall financing structure. Long-term and short-term debt levels increased by $6.2 million as of Q2 compared with Q1 2026. The increase was entirely attributable to a rise in long-term debt with a corresponding decrease in short-term debt. We remain committed to prudently managing our debt profile. Our primary objective is to maintain overall debt levels broadly stable.

We're actively extending the maturity profile by replacing short-term borrowings with long-term debt. During the quarter, we successfully converted $13.3 million of short-term debt into long-term obligations, and we expect to continue this trajectory in the coming quarters, supported by sufficient financial headroom and liquidity capacity. Since the beginning of 2023, the company has cumulatively retired $40.2 million of debt, and we'll continue to optimize the capital structure going forward. We'll continue to take a disciplined approach to capital allocation, maintaining a healthy balance sheet and strong liquidity. Our first half performance demonstrates our ability to grow the Amazfit business while sustaining gross margins meaningfully above historical levels.

Looking ahead, we remain focused on strengthening our product portfolio, expanding our global brand presence, developing the Zepp ecosystem and Hybrid Training experiences and maintaining disciplined cost and working capital management. We also remain committed in our share repurchase program. As of Q2 2026, we had repurchased $17.6 million under the $20 million authorization. Overall, we remain focused on sustainable high-quality growth, supported by a healthier product mix, disciplined cost management and continued operational improvements.

With that, I will hand the call back to operator for Q&A. Operator, please go ahead.

[Operator Instructions]

And today's first question comes from Sid Rajeev with Fundamental Research Corp.

I have 2 questions, if I may. First one, on the supply bottlenecks affecting Bip and Helio Strap, when do you expect these issues to be fully resolved? And how confident are you that supply will be sufficient to meet Q4 demand?

On your question, I think we have explained earlier for Bip, we are almost -- we have almost removed all the restrictions of supply bottlenecks by now. But on Helio Strap, we are gradually working on fully restore the supply bottleneck. So in Q3, you will still see the impact of the supply constraint a little bit, but that has already been reflected in the guidance which we have provided. And in Q4, we're expecting the Helio Strap to be in full supply.

Okay. And second question, selling expense increased significantly in Q2. Where do you see the biggest opportunities to reduce OpEx? And should we expect selling expenses to remain at similar levels in Q3?

No, obviously not. I think if you look at my explanation towards selling expenses, you will see majority of the increase around $2.9 million are linked to the new product launches, which we have launched in Q2. Obviously, Q2, it was a busy quarter that we launched a lot of new products, if you can recall, right? I think to name a few, we probably have around 6 or 7 new product launches in Q2 in this quarter compared with 1 or 2 in the previous year. And you know each product are attached to certain amount on marketing efforts, activation, budgets, et cetera, et cetera. And you simply multiply by 7 or 6, that will be a sizable number.

But as I mentioned, we are almost done with new product launches for the year by now. So maybe there's only 1 or 2 in the second half of this year, but those are minor product launches compared with the ones we had in the first half of the year. So you will see the selling expenses moderate when the activity kind of moderates.

In total, how many products are launched this year, to be exact?

I think if I'm correct, in so far, we probably launched 9 to 10 products and there's still 1 to 2 in the pipeline. So there's going to be -- yes, it's a lot of new products.

So 10 to 12 products this year. Last year, I remember it's 9. So is that a fair assumption?

I think last year, it's less, but I can come back to this number later on.

And our next question comes from Frank Dugan at Brooks Investments.

Leon, congratulations on the second quarter performance. So my first question is around your outlook for the third quarter of 2026. Can you walk us through the main reasons for expected revenue decline in Q3? And also, how do your profitability and cash flow look against current guidance?

Yes. So I think as I have explained and also Wayne explained before, the Q3 outlook actually incorporates a few things. Number one, I would say you're looking at the macroeconomic situations around the world, there's inflation. Everybody is pressed on the discretionary income and the consumers are kind of squeezed because of the higher oil price, et cetera, et cetera, right? So naturally, the macro and on the demand side, people are more -- are less keen to buy new things. But that is the macro situation for consumer electronics. Number one -- that's number one.

Number two, we have explained that a lot of the impact, which goes into the Q3 guidance are linking to supply issues or supply constraints, which I just answered the question from Sid, namely Helio Strap, Balance 3 and Bip series. And then we're working towards resolving them and some of them will be resolved fully in Q3. Some of them will be resolved in Q4. So holiday season for Q4 would be a good quarter with full supply compared with what we have experienced in Q1 and Q2 to some extent.

Number three, I think it's linking to the new product launch windows and also on the process and the speed we can actually get the trade in selling them. For example, Balance 3, that's the situation. Number one, it's a beautiful piece of -- it's a piece of art of watch, which we developed for the Hybrid Training, but we just couldn't manufacture them good enough. It has a lot of difficulties in building them, which we believe that we are resolving them as we speak. So linking to the supply constraints, linking to the new product launch windows and linking to the bigger macroeconomy situation, we have come up with the Q3 number as you see right now. And mind you, last year, Q3, the base was $75.8 million, and that was a year-on-year growth over 2024, if I remember correctly, of more than 75%, right? So obviously, yes, we're doing our best, but it's -- a few of those factors, which I just mentioned has been taken into account in the guidance of Q3, which we put forward.

Yes. And for the longer-term period, do you have any long-term strategy to get the business back to growing year-over-year?

I think if my calculation is correct, I mean, first half of the year, we are still growing by more than 17%, 18% year-over-year. And if you account for even the low end of the guidance for Q3, we are still growing. And then if you heard us correctly, Q4, we are pointing or we're aiming to deliver a growth or at least go back to the growth trajectory. So altogether, if you add it all up, I think on a full year basis, we're still working or you're still looking at a growth trajectory for the top line.

And lastly, my question would be around the market performance, especially Balance 3. And do you have plans to develop a subscription model for the business?

Yes and no. I think we are having in our current Zepp App a subscription functionality, but it's more towards your sleep quality on how to get to relax better, changing your stress levels, et cetera, et cetera. But we are -- we believe that by providing all those professional functionalities for free to the user at this moment of time, it's also one of our key competitive edge against the competitors. So for now, I think except for the services, which I just mentioned, in short term, we don't have any subscription charges ideas on Balance 3 at this moment.

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

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.

Thank you. This concludes the conference call. You may now disconnect your lines. Thank you.

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I will now 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 Zepp Health Corporation's First Quarter 2026 Earnings Conference Call. The company's financial and operating results were issued in our press release at 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 Huang Wang, our Founder and Chief Executive Officer; and Leon Deng, our Chief Financial Officer. Joining us today, we also have Mike Yeung, Chief Operating Officer and General Manager of North America; and [ Eric Flemming ] 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 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 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 statements, except as required under applicable law.

Please also note that Zepp's earnings press release and this conference call includes discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. The press release contains a reconciliation of our 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.

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 earlier validation of the structural changes we have been building, stronger premium product mix, improving pricing power, expanding gross margin and a clear 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 organization through a new exclusive 3-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 smart watches, smart rings, smart cameras, smart glasses and smart straps. Alongside connected app experience, HYROX-specific training modes and selective 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 global athlete community, gym ecosystem, coaches and race environment, we can build a more authentic connection with users whose training behaviors spans 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 more complete -- completed training system.

We believe one of the most important opportunities at the moment when a user moves from casual checking 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 helped 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 a recent New York HYROX event, we introduced Balance 3 and Balance Ultra in the 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-Charge Energy Intelligence in the Zepp app. They bring together BioCharge live load and the 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 environment where serious users decide which brands they rely on by showing up in marathon preparation trail and expedition environment and hybrid training communities. Amazfit is strengthening the credibility required to support higher-value products, improved product mix and long-term pricing power. Our premium racing 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 points. Consumers are not choosing Amazfit solely for affordability.

In March and April, our premium T-Rex models priced at USD 399 and priced $549 a 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 point, this 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 expanded this philosophy into one of the world's largest performance community 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 app including the Cheetah 2 Pro, a performance-focused watch design for marathon training and the Cheetah 2 Ultra engineered for the most demanding mountain and trail environment, both integrate seamlessly with Zepp Coach with a full suite of running metrics and personalized training paths, recovery insights and third-party training platform integrations. These devices deliver structure, hybrid style training guidance directly to endurance runner 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 USD 550, marking the highest in Amazfit history and further reinforcing our premium branded positioning. At the same time, in our core value segments, the Amazfit Active Max and Active 3 Premium positioned around $169 price point, expanding our reach among everyday fitness influencers and entry-level runners beginning their structured training journeys. Most recently, we also introduced FitMax, 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 U.S. and Asia Pacific supported by strong performance across our full product matrix.

According to third-party data sources, Amazfit now ranks among the top 6 smartwatch brands in both the United States and Europe by value share, underscoring the growing global resonance and market change 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 competitive moat around our platform. Across running, outdoor and public training, we are increasingly connecting Amazfit products with real performance environment and elite athlete validation. In running, Cheetah 2 Pro was supported by major marathon moments in Paris, London and Boston, including active proof points from Yeman Crippa, Mao Puhua and Rory Linkletter. In outdoor, T-Rex Ultra 2 continue to gain credibility through high-altitude ascents and real expedition, use cases while [indiscernible] 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 Wietrzyk, completed a clean sweep of all 4 HYROX majors this season. while setting a new HYROX world record. We are also supporting Josh Kerr's Project 2:22, his attempt to break the mile world record at the London Diamond League. Together, these moments reflects how Amazfit is showing up at the highest level of the -- of both hybrid training and endurance performance. Against the macroeconomic backdrop, our premiumization strategy, expanding pricing power, vertically integrated supply chain and diversified manufacturing footprint across China and Vietnam provided 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 towards 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 Leon to walk through the financial details. Leon, please go ahead.

Thank you, Wang. 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 USD 51.5 million, up 33.8% year-over-year, in line with our guidance range. As Wang mentioned before, this growth was driven primarily by our new product launches such as Active MAX, Active 3 Premium and T-Rex Ultra 2, even as the first quarter is traditionally a low season for consumer electronics business.

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%, and an expansion of 0.4% compared with Q1 2025, and moderated from the record high 40.4% achieved in Q4 2025. There are 2 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, weighed 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 USD 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 costs 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 continued 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 i.e. PA-related tariffs, which could provide some offsets. We believe we are 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 prudent cost management program, which we began in 2020. Total adjusted operating expenses for the first quarter were USD 35.7 million compared with USD 31.5 million in Q1 '25, and USD 37.1 million in Q4 '25. Out of the year-over-year increase of the USD 4.2 million, there is a translation difference of approximately USD 1.8 million on operating expenses in the first quarter of 2026, due to euro and RMB appreciation to the dollars. Then USD 1.4 million is directly attributable to certain e-commerce platform charges, which was a kind of fixed ratio sales channel charges to drive revenue growth. Remaining USD 0.6 million was primarily due to front-loaded investments in marketing and branding activities such as CES and HYROX.

Excluding USD 6.2 million of one-off provisions, fourth quarter 2025 operating expenses were approximately USD 30.9 million. The sequential increase of USD 4.8 million was primarily driven by USD 1.8 million foreign exchange impact, as mentioned above and USD 1.4 million increase in R&D investment to support new product launches in upcoming quarters and USD 0.5 million of front-loaded marketing and branding investments and lastly, $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 USD 11.9 million compared with USD 11.5 million in the first quarter of 2025 and USD 10.2 million in the fourth quarter of 2025. Out of the sequential increase of USD 1.7 million, $0.3 million was attributed to foreign currency translation differences. The remaining $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 resources efficiently to optimize our return on investment and productivity.

Adjusted selling and marketing expenses were USD 16.4 million compared with $13.8 million in the first quarter of 2025 and $15.6 million in the fourth quarter of 2025. Of the year-over-year increase, approximately 0.8 million was attributed to foreign exchange translation differences, another $1.4 million was directly attributable to fixed channel costs that scale with our revenue growth, and the remaining $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 $0.9 million, out of which $0.4 million was attributable to the appreciation of foreign currencies against the dollar and the remaining $0.5 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 meticulous refinement of our retail channels and disciplined staffing arrangements across our sales regions. Adjusted G&A expenses were USD 7.4 million compared with $6.2 million in Q1 2025 and $11.3 million in Q4 2025. The year-over-year increase reflected approximately $0.3 million of foreign exchange translation differences and $0.2 million in brand and intellectual property protection related fees. Excluding the USD 6.2 million of nonrecurring provisions in the fourth quarter, G&A expenses were $5.2 million in Q4 2025. The sequential increase of USD 2.1 million was mainly attributable to $1.1 million of negative foreign exchange impact as well as $0.2 million severance costs 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 $6.3 million compared with $17.2 million in the first quarter of 2025. Adjusted net loss was $17.9 million or 34.8% of sales compared to $18.1 million or 41% of the 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 $62.8 million down from $72.8 million as of Q4 2025. We ended the quarter with $103.2 million in cash and cash equivalents, nearly flat compared with $103.8 million a year ago and lower than $112.9 million at the end of 2025. With a sequential decline driven primarily by our net working -- 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 borrowing originally matured 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 $46.7 million of debt, and we'll continue to optimize the capital structure for the company. We also remain committed to our share repurchase program. As of May -- as of March 31, 2026, we have repurchased $17 million out of the $20 million authorized program. We view this program as an effective use of capital that aligns with our focus in 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 USD 63 million to USD 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 Instructions] Today's first question comes from Sid Rajeev with Fundamental Research Corp.

Congratulations on the strong Q1 revenue growth. In the last earnings call, Leon, you guided to potentially 9 product launches this year, the same as last year with 4 announced so far, should we expect about 5 more this year? Am I in the correct ballpark?

Yes. I think in the end, we probably would have more than 9, but yes, there are many new product launches are still underway.

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?

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 it. And I think towards the end of Q2, you will see that R&D expenses more going down because I think by the end of the first half, we'll probably go through a 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 has been launched already, including the Active MAX, Active Premium, T-Rex Ultra 2 and now with the Balance and Cheetah, I think this first half of the year is actually from a product launch perspective, a launch heavy first half. Therefore, R&D expenses is actually a little bit higher than before. But it should trend towards the norm starting from the second half of the year and going forward.

On the other hand, we are also investing a bit with 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, right? And that's all tied into the event timing, so to say. And I guess, we -- 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 -- and not 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 the last year as we go.

That's good to hear. Just 1 more question, if I may. Is there other industry players raising product prices to offset some of these higher memory costs?

Yes, to some extent because we noticed that our competitors are also raising price and not to mention Garmin, right? But we -- 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 the -- we are focusing on the product itself, right? 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.

Our next question today comes from [ Frank Dugan ] at Brooks Investments.

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?

Yes. 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, you -- we just mentioned, it is actually between $63 million 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 1 or 2 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 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, if -- and for the 2026 full year, for sure, we are looking at a profitable growth over 2025. I hope that gives you some color for the future.

Yes. And yes, 1 more question around the new 3-year global HYROX partnership. How do you plan to leverage that to drive long-term monetization?

The HYROX, as you know, is actually part of our -- it's actually -- it's one of the bigger trend on hybrid training, right? We kind of explained just now that we would like to establish our authority in hybrid training through working very closely with HYROX, right? It actually comes into 2 folds. Number 1 is, as the participants of HYROX increase, I mean, they increased by a lot over the past years. And we believe that is going to continue to increase in the future. And looking at the New York HYROX is actually -- the participants is as many as the participants of New York Marathon, right? So I think number 1 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 athlete to track their timing and then to deliver a better timing every time they race. And that's -- and hopefully, that would also make us and establish the authority of our brand in HYROX.

And also, as Wang just mentioned, we -- by doing that, we would like to become users' choice when they look beyond their current watch because for a normal user, consumer, there is a moment of time that they start considering 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 a serious on specific sports in their journey of when they grow up, right? That's actually what we want to do through HYROX.

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

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.

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

Ladies and gentlemen, thank you for standing by for Zepp Health Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. I will now 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 Zepp Health Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. The company's financial and operating results were issued in our press release at the Newswire services earlier today and are posted online. You can also view the earnings press release and 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 will also have Mike Yeung Chief Operating Officer and General Manager of North America; and [ Eric Flemming ], VP of Capital Markets in 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 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 20-F for the fiscal year ended December 31, 2024, other filings as filed with the U.S. Securities and Exchange cognition. 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 the conference call includes discussions of unaudited GAAP financial information as well as our audited non-GAAP financial information. Zepp's press release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable GAAP measures.

I will now turn the call over to our CEO, Wang. Please go ahead.

Hello, everyone, and thank you for joining us today. Before going into the details of the quarter, let me first share how we see Zepp evolving. Over the past few years, we have been transforming Zepp from a traditional variable hardware company into what we call a hybrid training platform. Our goal is not simply to launch competitive devices, but to build a broader performance system that integrates endurance, change and recovery through hardware training intelligence, software and data capabilities.

With that context in mind, 2025 was a strong year for Zepp For the full year, Amazfit branded product revenue grew 51% year-over-year. In the fourth quarter, Amazfit branded product sales grew 45% year-over-year, while gross margin reached a record level of 40.3%. Importantly, this growth was achieved without relying on heavy discounting during the holiday season. These results reflect the continued progress of our multiyear transformation as we evolve from a volume-driven business, toward a brand lead and premium focused global company. We also demonstrate strengthening pricing power across our portfolio as our product makes continuous shifting towards higher-value segments.

Turning into our product highlights. Our growth in Q4 was broad based across both entry level and premium segments, as we continue expanding our portfolio to serve a wider range of users and training scenarios. At CES we launched a Amazfit Active MAX, the newest member of the Active family. Active Max fills the gap between our entry-level lifestyle watches and our Rocky Outdoor series. It targets everyday trainers, beginning their fitness journey.

It features a vibrant AMOLED display, long-rate over 170+ workout modes and building support for offline maps and training guidance powered by Zepp Coach. We also recently introduced Active 3 premium, designed specifically for new and entry-level runners, positioned around USD 169 price tier, Active Max and Active 3 Premium reinforce the core volume segment of our portfolio, while expanding our reach among users beginning structured training.

In our Premium portfolio, the T-Rex and Balance series continue to perform strongly. In February, we launched T-Rex Ultra 2, our newest flagship outdoor watch, built with Grade 5 titanium and designed for achieve durability, Ultra 2 extends the top end of our portfolio to around the USD 550 price level. The highest price point in our history. Products like Ultra 2 reinforce the premium positioning of the Amazfit brand while expanding the selling of our product portfolio.

On the software side, we continue strengthening our ecosystem through updates to Zepp OS. Features such as BioCharge, energy marketing, and Zepp Coach AI-driven training guidance and now reaching more devices and helping increase engagement, retention and long-term user value. Together, our Zepp app, variables and sensor technologies are creating a stronger ecosystem around our hardware foundation. From what we believe is a growing defensive mode around our platform by increasing switching costs, improving user retention and expanding lifetime value.

On the brand side, we have also made deliberate investments to elevate our credibility in the global performance sports community. This month, we announced a partnership with Josh Kerr, a 2-time Olympic Medalist and World Champion middle-distance runner. Josh joins our growing roster of elite athletes, including Grant Fisher, Tyler Andrews and Ruth Croft. These athletes are not just brand ambassadors, they actively use Amazfit devices such as Balance 2, Helio Ring and Helio Strap in their daily training and recovery.

When world-class athletes rely on our data and training insights to prepare for the highest level of competition, this sends a powerful signal about the accuracy, credibility and performance capabilities of our technology.

Another important component of our strategy is our collaboration with HYROX, one of the fastest-growing hybrid endurance competition globally. At HROX, racers around the world, including recent events in cities such as Phoenix and Las Vegas, athletes gather in front of their official results screen to capture and share their finished time, directly beneath the race results appears presented by Amazfit, making Amazfit the most prominent brand integrated into that moment. When athletes share those results across social platforms, the brands naturally spreads through athelete-generated content rather than paid promotion.

This is not traditional sponsorship visibility. It is structure level exposure, embedded directly into the athlete experience. More broadly, HYROX plays a key role in our hybrid training strategy, which integrates endurance, exchange and recovery into one coherent performance system, where variable data, training intelligence and real-world performance validation converge.

Looking ahead to 2026. We remain focused on strengthening our premium product lineup, expanding our ecosystem through AI-driven training, insights and performance technologies and deepening our engagement with performance-focused communities. For the first quarter of 2026, we expect revenue in the range of USD 50 million to USD 55 million, representing an increase of 30% to 43% year-over-year. This outlook reflects our confidence that the demand we are seeing is not simply seasonal, but structural. We believe we now have the right combination of products, channels and cost structure to drive sustainable growth and a clear path towards sustained profitability. As our Premium mix continues to expand in higher-margin categories scale, we expect our margin profile to continue strengthening.

With that, I will now turn the call over to Leon, to walk through the financial details. Leon, please go ahead.

Thank you, Wang. Greetings, everyone. Thank you again for joining our fourth quarter and full year 2025 earnings call. In the last quarter of 2025, our revenue rose to $85.2 million, up 43% year-over-year, meeting the upper end of our guidance range. For full year 2025, revenue reached $259 million, representing a 41.8% year-over-year growth, compared with USD 183 million in 2024, marking a return to growth trajectory.

Our fourth quarter growth was driven by broad-based strength across our diversified portfolio. As Wang mentioned, our 2025 Q4 Amazfit branded product sales increased by 45.4% year-over-year and 12.4% sequentially, fueled by strong execution during the critical Black Friday and Christmas sales seasons, where our brand visibility reached new heights across major e-commerce channels.

Additionally, our established Premium lines, specifically the T-Rex and Balance series continue to see sustained demand. further validating our premiumization strategy and boosting our average selling price.

Look ahead, we have just started selling off our Active 3 Premium/Active MAX and T-Rex Ultra 2 watches. And together with our upcoming new product launches, we expect the top line expansion continues into 2026.

Turning now to gross margin. It was influenced by various factors, including product mix, product launch timing and product life cycles such as model upgrades. In Q4, we achieved a record gross margin of 40.4%, an impressive expansion of 3.6 and 2.2 percentage points compared with same period of 2024 and third quarter of 2025. It is a highlight of this quarter's financial performance and the strongest indicator of our improving brand recognition and supply chain management.

This margin performance was driven by 2 key factors that I want to elaborate on. First, we realized a highly favorable mix shift with higher contributions from the Premium Adventure series of our Amazfit-branded products. This shift away from lower-margin legacy products towards newer high-value SKUs naturally elevate our margin profile.

Second, we were able to maintain price integrity even during higher promotional periods like Black Friday, further boosting margins. The strong gross margin driven by our product mix more than offset the headwinds we're facing from FX fluctuations, memory chips cost increase and tariffs-aimed macroeconomic uncertainties.

Gross margin in the full year 2025 was 38.3%. We remain on track with our margin expansion strategy initiated in the second half of 2023, and we expect the trend to continue into 2026 as we further optimize our product mix and supply chain efficiency.

Next, expenses. We remain committed to prudent cost management, continuing the program we began in 2020 to reduce overall operating costs while investing for growth. Total non-GAAP operating expenses for the fourth quarter were $37.1 million. Expenses as a percentage of sales improved by approximately 6% compared to Q4 2024. However, in absolute amount, it is up by around $8 million year-over-year and quarter-over-quarter.

I will break down the specific driver of this increase to help you understand the quality of our spend. Approximately around $1 million is directly attributed to certain fixed channel cost investments to drive direct top line growth. As we ship more units and generate more revenue, certain variable selling and logistics expenses naturally rise in tandem. Second, we recorded around $5 million year-end provisions noncash adjustment for potential bad debt and business model optimization as part of our ongoing risk management strategy and another USD 1 million investments in patent fees and brand protection to safeguard our intellectual properties and ensure long-term business success, in total $6 million.

Finally, and most importantly, we strategically invested around $1 million in front-loaded marketing initiatives, including upfront costs for elite athlete sponsorships such as partnerships with Olympic Medalist Josh Kerr, as well as some investments on marketing and branding activities that filled the adoption of new product launches. As you can see, except for the first element, the majority of the cost increase are not structural cost increases. We expect lower operating costs relative to revenue in 2026, as these one-off costs normalize and will realize further cost efficiencies.

By line item, adjusted research and development expenses were USD 10.2 million, remained relatively stable quarter-over-quarter and year-over-year. We continue to invest in a series of cutting-edge products as well as new technologies including AI, to maintain our competitive edge against our peers. At the same time, we focus on refined research and development approaches as we consistently evaluated resources efficiency to optimize return on investment and productivity.

Adjusted selling and marketing expenses were $15.6 million, reflecting the front-loaded branding investment I just mentioned. We're seeing a strong return on investment for these marketing dollars as evidenced by our market share gains in U.S. and Europe. At the same time, we consistently pushed retail profitability and channel mix improvement. Adjusted G&A expenses were $11.3 million compared with USD 6.1 million and USD 6.5 million in the same period of 2024 and third quarter of 2025. The increase is mainly driven by the year-end provisions I mentioned above. Excluding those, G&A expenses remained flat through the year.

We continue to streamline overhead maintaining disciplined cost control while improved operating efficiency. Total adjusted operating expenses were USD 123 million in 2025 compared with USD 110 million for the full year 2024. The increase is directly attributable to the reasons I explained above. Adjusted operating expenses for 2025, excluding these would be USD 110 million. We will maintain our cost-conscious approach and remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness.

In Q4, adjusted net loss attributed to Zepp Health was USD 6.4 million, compared to adjusted net loss of USD 22.5 million in the fourth quarter of 2024. The net loss in Q4 was mainly a result of running operating results more than offset by $2 million deferred tax asset provision and a $6 million one-off provisions. Full year adjusted net loss attributed to the company was USD 31.5 million compared with the adjusted net loss of USD 56.7 million for 2024. The net loss for 2025 were mainly from deferred tax asset provision, onetime especially identified provisions and operating loss from the first half of the year 2025.

In terms of our balance sheet and working capital, we continue to manage our inventory rigorously. Despite strategic risk purchases of key components for the future, our inventory balances decreased to USD 72.8 million compared with USD 87.7 million as of Q3 2025, reflecting our ongoing improvements in inventory management. As of December 31, 2025, our cash and cash equivalents stood at $113 million, compared to USD 103 million as of Q3 2025 and $111 million as of December 2024. We delivered another quarter of positive operating cash flow, further strengthening our liquidity position. This consistent cash generation capability provides ample runway for us to invest and seize potential market opportunities.

In terms of capital structure, our overall long-term and short-term debt levels remained relatively consistent following the restructuring we completed in Q1 2025. However, you may notice a sequential increase in our reported debt levels in Q4 as a result of refinancing short-term debt into long-term debt, capitalizing on favorable rates to minimize interest payments. While we are focused on reducing our overall debt level over the longer term, there may be temporary fluctuations in debt levels quarter-to-quarter due to timing of refinancing and repayment activities.

Since the beginning of 2023, we have cumulatively retired USD 58 million of debt, and we'll continue to optimize the capital structure going forward. Given our confidence in the company's strong fundamentals and sustainable growth trajectory, we are reaffirming our commitment to our share repurchase program in 2026. We view the program as an effective use of capital that aligns with our focus on delivering sustainable long-term value to shareholders.

Before we talk about guidance, I would like to walk you through some of the key macroeconomic and industrial specific factors we are currently facing, including the recent memory chip movement. While we are not immune to memory cost inflation, it is important to note that our products have modest memory requirements compared to other categories like PC and phones. Consumers don't choose our products based on memory configurations, they choose us for the experiences and accuracy we deliver.

Furthermore, we manage our entire BOM cost holistically, while memory costs have risen somewhat, our vertically integrated supply chain provides us with multiple levers to optimize our overall cost structure. We are continuously focused on driving efficiency throughout the supply chain by leveraging our scale and integration. Additionally, we have intentionally increased inventory levels of certain key components, including RISC-V, to ensure we can meet long-term demand. Our strong relationships with suppliers allow us to align with anticipated product demand and while supply chain challenges are inevitable, we're confident in our ability to navigate them.

Lastly and most importantly, as demonstrated in past quarters, we have seen a steady increase in the average selling price of our products. We firmly believe that compared to our competitors, our pricing still has ample room to grow. In fact, price increases have more than offset the rise in memory costs and helped us in navigating through macroeconomic uncertainties.

Finally, our outlook for the first quarter of 2026. We are entering the year with strong momentum. Despite the first quarter traditionally being a slower season for the consumer electronics industry, we expect revenue to be in the range of $50 million to $55 million, representing year-over-year growth of approximately 30% to 43%. This guidance reflects our current visibility into our order book and strong sell-through trends in our key markets. With strong financial fundamentals, a clear path to continued margin expansion and solid operational discipline, we are well positioned to deliver profitable growth and create long-term shareholder value.

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

[Operator Instructions]

Your first question comes from Sid Rajeev with Fundamental Research.

Congratulations on the strong revenue growth and the new product launches. Also nice to see you're anticipating robust revenue growth in Q1. How many new products are you planning to launch this year compared to last year? Just a rough idea is fine.

Hi Sid, I think it's around similar products may be slightly more. So if I'm not mistaken, last year, we have launched around products or so, and this year probably is at the same quantum of that or maybe slightly more.

Okay. And how are you preparing for the recent spike in the U.S. dollar?

We are not that much exposed to the currency fluctuations on the dollars, right? I think a lot of our production is diversified in Asia, in different places. And if you look at our markets, we are very strong in Western Europe markets as well as the U.S. markets. So yes, to some extent, the dollar strengthened up is actually giving us some tailwind instead of the headwind.

Okay. Just one more question, if I may. Regarding operating expenses, you did a good job in stabilizing or even cutting costs in some areas. Which specific areas do you think there is room for further reductions?

I think if you look at the selling and marketing expenses, we -- as we just mentioned, in some places, we actually front-loaded some of the expenses into the high seasons because we want to prepare for the upcoming new product launches for example. And that should normalize over the quarters because it's very much driven by the product launch windows and the cadence we have applied.

Another one is the G&A cost because you have seen that G&A costs keep on going down for us. And then I think there's also room to improve over there. And the last one is R&D. But I think on one hand, we need to invest R&D to sustain the new product launches I just mentioned. You asked about the numbers, right? On the other hand, we see a lot of places whereby we could adopt AI to actually improve our efficiency on R&D.

Your next question comes from Peter [indiscernible] with Brooks Investments.

I have 2 questions. If you could provide more color on the sales performance of the Adventure series? And second, if you can share more about what's the plan for the Amazfit, Strap and Ring for this year?

Sorry, I didn't get the first question, clearly, if you can repeat the first one.

Right. Yes, if you can provide more color on the sales performance of the Adventure series. And the second question would be what's the plan for the Amazfit strap and ring.

Okay. So thank you. On the first one, on the Adventure series, you see that we have launched many new products in 2025 throughout the year. So we have launched the T-Rex 3 Pro, and we have also launched the T-Rex Ultra 2 in February, right? And then we have some of the new products also in the T-Rex family lined up in 2026. And obviously, the Adventure series actually also helped us to elevate our overall product mix and also helped us to improve our ASP for the company. So Adventure series is playing more and more important role in the overall mix we have. So I think it will continue to be like that in 2026.

And with regard to your second question on Helio Strap and the rings. Helio Strap has made great performance and [indiscernible] In 2025, and it has been the most popular, if not the most popular products among that price range in our portfolio. But I think on the other hand, we didn't manufacture enough of the Helio Strap to cater for the Q3 and Q4 high seasons. And we are actually resolving the supply chain on that.

And in 2026, you should see more of the manufacturing of those devices and you should see the market demand to be satisfied on the Helio Strap. On the other hand, we are also working on the next generation of those as we speak. So stay tuned for the second half of this year.

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

Thank you once again for joining us. We hope you have a great day. You may now disconnect. Thank you.

Thank you.

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

I will now hand 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 Zepp Health Corporation's Third Quarter 2025 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 slides referred to on this call by visiting the IR section of the company's website at ir.zepp.com.

Participating in today's call are Mr. Wang Wayne Huang , our Chairman of the Board of Directors and Chief Executive Officer; and Mr. Leon 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 Yeung, 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 20-F for the fiscal year ended December 31st, 2024, 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 discussions 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 will now turn the call over to our CEO, Mr. Wayne Wang Huang. Please go ahead.

Thank you all for joining us today. I'm delighted to report that Zepp Health delivered another exceptional quarter with revenue grew 78.5% year-over-year, underscoring the ongoing effectiveness of our strategic brand and product evolution. We also turned our cash balance from outflow to inflow, a critical operational milestone. These results once again validate the strength of our strategy, the competitiveness of our products and the growing global recognition of the Amazfit brand.

Our exceptional Q3 performance was fueled by our well-executed multi-tier product strategy, which drove consistent gross margin growth quarter-over-quarter. In September, we launched our flagship Amazfit T-Rex 3 pro, which was well received by users and endurance outdoor community with enhanced durability, advanced navigation and outdoor safety features setting new premium outdoor benchmarks.

Our earlier launch Balance 2 and Helio Strap continued performing well, offering advanced analytics and better usability for daily training. Entry-level lines maintained steady sales across key global channels, underscoring Amazfit's strong positioning across consumer segments.

Our gross margin continued to expand sequentially, growing from 36.2% to 38%, thanks to effective mix management and strong ongoing execution of our margin improvement initiatives that began in late 2023.

Operating expenses remain prudent as we balance continued investment in R&D with selective marketing spending to support brand visibility. These improvements demonstrate our commitment to operational discipline, while maintaining innovation momentum on which Leon will provide more details later.

The Amazfit T-Rex 3 Pro launch was the highlight of the quarter, designed for endurance athletes and outdoor adventures. The new model introduces key upgrades that elevate the user experience such as enhanced durability, advanced navigation and improved outdoor safety feature, providing exceptional precision and reliability in challenging terrain.

The metal made its global debut during UTMB race week in Chamonix, where Amazfit ambassadors and elite trail runners use the watch for real-time checking and recovery optimization. Notably, Ruth Croft earned first place in the UTMB 2025 Women's division, marking a historic win and powerful validation of our product performance.

Beyond hardware, the T-Rex 3 lineup continue to evolve through firmware upgrades that add new HYROX training modes, merging training and competition into one integrated experience.

Our Balance 2 and Helio Strap, representing the perfect synergy of advanced analytics and everyday usability continued to perform strongly following their Q2 debut. During the quarter, Balance 2 updates introduced new training modes, including HYROX PFT and ultramarathon, improved data visualization, plug-in cycling speedometer connectivity and refined UI features such as one tap display and optimized digital quant feedback.

Our entry-level Bip 6 and Active 2 series continued to contribute stable volume across key global channels, maintaining strong sell-through performance and solidifying Amazfit's position across diverse user tiers.

Beyond hardware, we advanced our technology ecosystem on multiple fronts. A major milestone this quarter was Zepp Health's acquisition of core assets from Wild.AI. a pioneering women's wellness platform. Wild.AI uses common informed analytics to optimize performance, recovery and nutrition across all stages of our women's life.

Integrating these capabilities into our ecosystem will enable Amazfit to deliver more personalized physiology aware coaching experiences to female athletes, while maintaining compatibility with third-party wearables.

We also continue to integrate Zepp OS and Zepp Pro, building on the advances of Zepp OS 5.0, we enhanced AI-driven training insights and expanded our integration with platforms like Strava and TrainingPeaks, offering users more connected and data-rich performance feedback. These improvements also powered the latest firmware updates across Balance 2 and T-Rex 3.

In addition, the long-awaited BioCharge feature upgrade has arrived on balance 2, integrating synchronized biometric data streams to calculate your energy levels through the day. BioCharge is a personalized body energy management feature that continuously analysis your energy levels by integrating data from your nighttime sleep, daytime naps, exertion and stress indicators.

Separately, we are proud to share that Amazfit received RED Network Security [ MB certificate from SCS ]. This recognition reflects our commitment to user privacy, product safety and international compliance, further strengthening global consumer trust in our products.

Our athlete and community initiatives continue to strengthen Amazfit brand equity worldwide. Athletes are now contributing to our product development process, ensuring that our sports watches are designed by athletes for athletes.

In Japan, we proudly welcome Ota Aoi as Amazfit's first Japanese brand ambassador. Furthermore, we continue to expand our presence in major global and regional sports communities.

During the quarter, we strengthened our presence in global and regional sports communities through continued partnerships with HYROX. We expanded our HYROX athlete roster, welcoming returning athlete Hunter Mclntyre alongside new competitors.

This expansion underscores our commitment to supporting both established champions and emerging talent in functional fitness racing, while integrating athlete insights into product development. Additionally, we participate in the HYROX Beijing event, engaging local fitness communities and reinforcing our brand's global empowerment of athletes.

Over the past several years, Zepp Health has completed a structural transformation of both its product and profit model. Our brand has also been significantly strengthened and reshaped with a clear positioning as a sports and performance technology brand. Today, our portfolio covers every tier from entry to premium with healthy profit margins and distinct positioning.

Our high-end offerings, the T-Rex 3 Pro has delivered strong performance, proving robust market acceptance for our premium line. Meanwhile, our Balance, Active and Bip lines continue to deliver steady growth across global channels.

Alongside this, our expanding Helio ecosystem featuring Helio Ring, Helio Strap and future Helio innovations has built a strong and scalable framework that supports our long-term competitiveness and sustainable growth. This solid foundation provides us strong confidence heading into the fourth quarter and 2026, as we continue to execute on our strategy and deliver lasting value to both users and shareholders.

Entering the final quarter of 2025, we are confident in our continued growth, supported by a strong product pipeline, margin improvement initiative and disciplined execution despite a challenging macroeconomic environment, our strategic focus on sports tech and holistic health ecosystem is delivering earlier results.

We anticipate Q4 revenue to be between USD 82 million and USD 86 million delivering 38% to 45% year-over-year growth. This growth reinforces our optimism in sustaining top line momentum and achieving greater operating leverage.

What continues to fuel our success is our dual commitment, creating long-term value for shareholders and empowering users through innovative technology. Thank you for your trust and support.

I will now turn the call over to Leon to go over the highlights of our third quarter financial results.

Thank you, Wayne. Greetings, everyone. Thank you again for joining our third quarter 2025 earnings call. The macroeconomic landscape has had some impact on our Q3 performance. On the tariff front, the situation has remained stable, and we have made the necessary short-term adjustments to our business model. Moving forward, we are focused on long-term structural supply chain optimizations.

Additionally, we have increased inventory in key product lines to meet strong customer demand and mitigate potential tariff-related risks, which explains the slight increase in our inventory levels this quarter.

Regarding memory chips, we have seen prices more than doubled this year due to supply constraints and increased demand, especially in the AI sector. While memory chips represent a relatively small part of our overall bill of materials, we have secured supply at a favorable pricing to mitigate the impact. We'll continue to monitor market conditions and adjust our plans accordingly.

Now, let's turn to financials. In the third quarter of 2025, our revenue increased 78.5% year-over-year to $75.8 million, meeting the upper end of our previous guidance as Amazfit branded ecosystem continued to gain traction. Echo to Wayne, this performance represents strong market receptions for the T-Rex 3 Pro launched in September as well as continued strength from Balance 2 and Helio Strap, both introduced in the second quarter.

In addition, the sustained popularity of our entry models, including Bip 6 and Active 2, provided steady sales volume. These positives were partially offset by Helio Strap supply constraints and typhoon-related shipment delays late in the quarter. Looking ahead, we have just started selling of our T-Rex 3 Pro 44-millimeter version on October 25th. And together with our upcoming new product launches, we expect the top line expansion continues into the holiday season.

Turning to gross margin. It was influenced by various factors, including product mix, product launch timing and product life cycles such as model upgrades. In the third quarter, we reported a gross margin of 38.2% or 39.4%, excluding the impact of tariffs. This represents a 2.4% decrease compared to 40.6% in Q3 2024.

The year-over-year decline was primarily driven by 3 factors related to our entry-level products. First, these products were priced lower than the previous generation to drive revenue growth, which resulted in a lower margin. Second, Prime Day discounts were applied to expand our customer base, further impacting margins. Third, as a part of our annual product cycle refreshment cycle, the current entry-level models are nearing the end of their life cycle and were offered at the promotion prices.

Despite these factors, the T-Rex product line showed strong margin performance with the launch of the T-Rex 3 Pro in September, helping to offset the impact of Prime Day discounts on the T-Rex 3.

Sequentially, gross margin improved by 2% compared to Q2 2025, driven by a higher contribution from the new products and a more favorable product mix. This was partially offset by promotions on entry-level products as well as the impact of front-loaded shipments ahead of the U.S. tariffs on China manufactured goods. We remain on track with our margin expansion strategy initiated in the second half of 2023 and expect further progress as new product launches gain scale.

Now let's turn to costs. We remain committed to prudent cost management, continuing the program we began in Q3 2020 to reduce overall operating costs. Adjusted operating expenses for the third quarter totaled $28.6 million and 37.7% of sales compared to $28.6 million and 67.3% of sales in the third quarter of 2024 and $26.4 million and 44.4% of sales in the previous quarter.

It remained stable compared with last year. The $2.2 million quarter-over-quarter increase was primarily driven by foreign exchange rate fluctuations. However, by maintaining a cost-conscious approach, we're moving towards a run rate of approximately $25 million per quarter for operating costs.

Concurrently, we remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness. Adjusted R&D expenses in the third quarter of 2025 were USD 10.2 million, increased by 1.5% year-over-year and remained stable quarter-over-quarter. At the same time, we focused on refined R&D approaches, as we consistently evaluated resource efficiency to ensure maximum return on investment and productivity.

Adjusted selling and marketing expenses were $11.9 million in the third quarter of 2025, increased by 0.5% year-over-year and decreased by 1% quarter-over-quarter. This year-over-year increase was primarily due to front-loaded brand and channel investments ahead of the holiday season.

We also expanded the Amazfit athlete roster by signing several new athletes during the quarter, including, among others, elite trail Runners, Ruth Croft, as well as marathoner Ota Aoi, Amazfit's first Japanese brand ambassador to further elevate our brand recognition.

At the same time, we consistently pushed on retail profitability and channel mix improvement. We are committed in investing efficiently in marketing and branding to ensure our sustainable growth.

Meanwhile, adjusted G&A expenses were $6.5 million in the third quarter of 2025, flat year-over-year and with a modest sequential increase from the second quarter of 2025, primarily reflecting normal foreign exchange fluctuations.

Excluding these effects, G&A expenses will remain stable or slightly lower over the past 3 quarters, as we continue to streamline overhead, maintaining disciplined cost control, while improving operating efficiency.

As a result, we achieved operating breakeven in the third quarter of 2025, a significant improvement versus Q3 2024 when adjusted operating loss was $11.3 million. This marks a key milestone in our path to sustained profitability, and we expect to be operational profitable in the fourth quarter of 2025.

As of September 30, our cash balance stood at $103 million compared with $95 million in Q2 2025. Inventory levels increased slightly during the quarter as the company strategically built up stock in key product lines to prepare for upcoming product launches and Q4 consumer electronics peak season. Cash balance increased were primarily driven by improved working capital and enhanced operational efficiency. We expect the cash balance to continue to grow in Q4 2025.

In terms of capital structure, the overall long-term and short-term debt levels remained consistent following the restructuring we completed during the first quarter. We refinanced a significant portion of our short-term debt into long-term instruments with a more favorable interest rate and a 2-year duration, which significantly reduced near-term liquidity pressure and enhanced our overall capital structure. Since beginning of 2023, the company has cumulatively retired $64.5 million of debt. Going forward, we will continue to optimize the capital structure for the company.

We maintained our commitment to our share buyback program, underscoring our confidence in Zepp Health's long-term fundamentals and growth trajectory and our focus on delivering value for shareholders.

Finally, our outlook for the fourth quarter of 2025, we expect revenue to be in the range of $82 million to $86 million, representing a 38% to 45% year-over-year growth compared to $59.5 million in the fourth quarter of 2024. We are thrilled to move into the next stage of our growth, building on our positive momentum heading into Q4 and 2026. Thank you all for your time for today.

I will now open the call for questions. Operator, please go ahead.

[Operator Instructions] Your first question comes from Sid Rajeev with Fundamental Research Corp.

Congratulations on another strong quarter. I have a few minor questions. The press release mentioned supply constraints on the Helio Strap. Do you mind giving more color on this?

Yes, Sid, I mean, I have mentioned the issue has a few folds. Number one is there is a memory chip issue, which impacts the whole industry and the lead time for those is actually getting quite long if we want to secure enough quantity of that.

Obviously, Helio Strap is a very popular product well received by the consumers and customers all over the world. So we have a shortage in essence in every region, which we operate. So it's more constrained by the supply volume rather than the demand.

And then the other thing is we also have encountered a few things like the typhoon in the Southern East China area towards the quarter end, which also like put the already constrained situation a little bit more tight. So I think that's the situation we have around the Helio Strap. But we are actually working towards resolving those. So you will see that situation improving in Q4 and into Q1.

And you don't give segmental revenues by region. But just to get an idea regarding the impact of tariffs, would you say North America still accounts for approximately 15% of total shipments?

I think so. So I think it's around 15% to 20%. But we have -- actually, we have communicated our dual sourcing strategy, whereby we supply majority of the products in the U.S.A. from Vietnam, right? So the tariff impact on that is relatively small, if not to 0.

And with respect to product launches, was the T-Rex Pro the only product launched last quarter? Can you give us some numbers, how many launched last quarter, how many expected in Q4?

Yes. I think I can give you the number for Q3. For Q4, unfortunately, I couldn't tell more about it. But I think what you can see is that, yes, indeed, in Q3, from a new product perspective, there's only T-Rex 3 Pro, both -- and only the 48 millimeter version, which we launched during the EFAT and the UTMB in September. So that's in Q3, the only new product which we launched.

But then on the other hand, Helio Strap and the Balance 2 were launched in June. So those 2 products also actually have been sold for the whole quarter of Q3. And if you look at Q4, -- the first one is the T-Rex 3 Pro 44-millimeter version, which we start selling on October 25th, right? And then with regard to the new ones, I think you just have to be patient, and you will get to know those in due course.

Your next question comes from Dylan Chu with Point72 HK.

Congrats on the [ three ] quarter. Two questions from my side. Number one, just around new product momentum and holiday sales as related to that Q4 guide. Could you please give us a bit more color on the T-Rex 3 Pro launch as well as the 44-millimeter initial feedback so far, how would you compare that versus [indiscernible] for [ T-Rex 3 ]? And what's your current view on the holiday season demand signals? What's your overall plan for the holiday season?

And sort of related to that, given the strong new product pipeline as well as the supply chain improvement you mentioned, and we can see on the balance sheet you're proactively building inventory. Is there any reason to be extra conservative in terms of 4Q guide? Because this year, the Q-on-Q guide imply a slightly lower growth compared to historical guidance. So this is my first question.

Thank you, Dylan. It's a long question. Let me try to answer it one by one, right? So first, on the holiday season sales, I think in so far, the signal we have received is quite positive, right? And that also translates into the guidance, which we guide.

And then if you look at how we guide, I mean, obviously, we're a little bit prudent in guiding the numbers. And then on Q2, we guided 72% to 76% and then we delivered 75.8% right? So I think Q4, obviously, given the demand situation, we see there's definitely a good demand for our new products, both on the Helio Strap and also for the T-Rex 3 right?

And then to answer the second part of your question, T-Rex 3 Pro actually received quite good feedback both on the 48-millimeter versions and the 44-millimeter versions. Unfortunately, I don't have enough data points to tell a trend because in so far, 44-millimeter version is only being sold for a week, and the majority of that is in China. And I think we have seen that the activation has been performing on a day-to-day basis increasing.

But then on T-Rex 3 Pro 48-millimeter version, I think I can say a few more things on that. So starting from the launch date until today, the trend we have seen is that it's actually performing very well and actually, to some extent, even better than the similar performance of [ T 3 ] when we launched that product 1 year earlier.

And to some extent, if you -- which is a fantastic achievement because bear in mind that T-Rex 3 compared with T-Rex 3 Pro is only half the price of T-Rex 3 Pro, right? So I would say that is actually a good trend for us to start with.

And obviously, we're going to continue that momentum into Q4 and into the holiday season. I think that should give you a color for the holiday season and how you look at the different product categories performing in the upcoming months.

Second question is on your channel strategy into 2026 and beyond. There seems to be a significant amount of white space, both online and offline in terms of channel opportunities. We can see recently the brand.com traffic has increased quite a bit and the offline presence continue to expand a little bit. So could you please give us a bit more color in terms of how you want to grow your channel reach into Q4 and next year? Just any thoughts around the low-hanging fruits and your focus channels would be helpful.

Yes. It's a good question. So what we noticed is that in the past quarters, our online presence and also the channel on online is actually growing very fast, to some extent, even outpace the growth we see on the offline channels, right? Because traditionally, we were very strong on offline channels. And now you see that Amazon and our own dot-com website is actually growing very fast.

And maybe it also has something to do with the strategy, which we had to go premium, whereby most of the products, if you see, which are performing very well, are T-Rex 3, T-Rex 3 Pro, Balance 2, those are above $300 products, right?

So I think looking into the next year and the next quarter, obviously, the online part will continue to play a significant role in our growth trajectory because Amazon and also our dot-com website still have a lot of potential to perform next year versus this year.

We see a lot of demand and push from Amazon and a lot of aggressive plans has been built up as we speak, right? So I think number one trend is definitely online and online will continue to grow. We haven't seen the ceiling yet. So that trend for sure will definitely continue.

On the other hand is the offline channel. What you noticed or maybe that kind of explained why we were a little bit more prudent or conservative on the numbers we guide is that we have some supply constraints, for example, on Helio Strap.

And we also have issues when we launch the first batch of the new products, we try to prioritize online than offline. Obviously, we want these products to be seen by online users first before it goes to mainstream and it goes into the channels like Best Buy and Target, right?

And if we -- which means there's still a lot of potential [ to get ] on the offline channels, well, we have enough supply of our products, for example, on T-3 Pro and on Helio Strap, the moment we resolve the supply issue, we will definitely push for a bigger reach in the offline channels for next year. So I think in essence, both we see big opportunities, both on online and offline.

And obviously, if we drive a bigger growth on offline -- on online, that will give a better gross margin portfolio versus the offline channel, right? So I think that's how you should look at the channel mix going forward. And I hope that gives you a feeling for such a picture on how we are going to evolve in the upcoming quarters.

Your next question comes from Yuan Zhu with Guosen Securities.

Congratulations on your results. I have 2 questions. The first relates to your outlook for Q4 regarding your top line guidance, what are your underlying assumptions for price growth and volume growth? And what's your approach to discounting during this period?

And also, could management share if any marketing initiatives are planned for Q4? How should we think about the trajectory of sales and marketing expenses next quarter?

So let me try to answer your question one by one, right? Number one is on the outlook for Q4. It's the guidance, which we put forward. But I -- as I just mentioned, we try to -- we always try to be prudent on our guidance, and you can look at through the Q2 guidance and the realization of that.

And on the assumptions, obviously, we have assumed that, number one, Q4 would be a good holiday season and which, by definition, Q4 is the highest quarter of the year, whereby people buy presents for the holiday seasons, right? And we tried to pull the average ASP up, which you see that we try to do that quarter-over-quarter, right?

And together with the launch of the Balance 2, which is at the price of $300 or so and then on T-Rex 3 Pro, which is close to $400, right? We're actually -- with the launch of these products, obviously, we're trying to increase the price, improve the gross margin.

And then that would drive the gross margin growth further in Q4, which you already witnessed in the margin performance between Q3 and Q2, right, which we grow 2%. And obviously, we are expecting the margin to further expand in Q4.

But then it will be offset a little bit by the discounting and promotional events because, yes, unfortunately, everybody is doing that. So we probably have to do some of that, but we will try to do it selectively and then try to target on certain consumers and certain product group rather than on everything, right? And we'll try to look at the return on investment if we're going to do any discount at all.

Now from a marketing investment perspective, I think what you see is that we are quite flat on the marketing expenses in the past quarters. So I think it always hovers around [ $10 million, $11 million ] per quarter. And that is also what we try to do in Q4 because as I explained many times, we believe that we can -- number one, we're going to visit on every single thing, which we're going to invest. If it doesn't carry a good ROI, we're not going to do that, right?

Number two, if there's an opportunity and you see that whenever there's opportunity, we front-load marketing expenses to trade for a higher growth. That's what we did in Q3. And then if there's such an opportunity in Q4, for sure, we'll do such a thing like that because we still believe that growth and gaining market share is the most important thing, which we need to do at the current point of time.

So I think if my memory is right, I think that should cover all the questions you just raised, if I -- but remind me if I missed anything.

Yes. It's very clear. And my second question is on the product road map. Just a follow-up, will there be any other new product launches this year? And if we look further ahead, could management share your plans for product iteration next year? Are there any plans to expand the lineup further perhaps with running smartwatch or smart [ trains ]and where the pace of new product launches become more intensive next year?

Yes. No. So I think I have answered the product -- new product question just now, I think it was coming from Sid or it's from -- coming from Dylan, I cannot remember. But if you look at Q3, we have launched T-3 Pro. And in Q4, we started selling the 44-millimeter version just a few days ago, right? So that's, for sure, one of the new products in Q4. And then there's going to be a few new products, which we have in the pipeline for this quarter as well, but then I cannot say too much about it. So I will just stop at there for Q4.

And then on next year, I think what I have explained to you maybe a few times this year as well is that we have maintained this cadence of every quarter, we have 2 or 3 new products launches for the quarter. And then normally, it starts with Q1, whereby we refresh the entry-level lines; and Q2, we start with the more Apple and Samsung challenger line. And then in Q3, we look at more the T-Rex and the sports line, et cetera, et cetera. So I think next year, we'll have a similar pace and quantity of products compared to this year. So I think that's something you -- to just give you a feeling of that.

But with regard to what product, which products, I think I would ask you to be patient and wait until the moment we launch those products, but I can guarantee you it's going to be exciting products.

As there are no further questions, now I'd like to turn the call back over to the company's IR Director, Grace Zhang, for closing comments.

Thank you, once again, for joining us today. If you have further questions, please feel free to contact Zepp Investor Relations department through the contact information provided on our website. Thank you.