Zepp Health Q1 2026 Earnings Call - Premiumization Strategy Drives 33.8% Revenue Growth Amid Memory Cost Headwinds

Conference Call Operator: Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation’s first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. Today’s conference call is being recorded. I will now turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace.

Grace Zhang, Director of Investor Relations, Zepp Health Corporation: Hello, everyone, welcome to Zepp Health Corporation’s first quarter 2026 earnings conference call. The company’s financial and operating results were issued in a press release about 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 Wang Huang, 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 Laming, 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 31st, 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 include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. Zepp’s 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.

Wang Huang, Founder and Chief Executive Officer, Zepp Health Corporation: Hello, everyone, 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, GTR X 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 early validation of the structural changes we have been building.

Stronger premium product mix, improving pricing power, expanding growth 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 organizations, through a new exclusive three-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 smartwatches, smart rings, smart cameras, smart glasses, and smart straps. Alongside connected app experience, HYROX-specific training modes, and connected 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 environments, we can build a more authentic connection with users whose training behaviors span 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 a more complete training system. We believe one of the most important opportunities is the moment when a user moves from casual tracking 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 help 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 the recent New York HYROX event, we introduced Balance 3 and Balance Ultra in a 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 Bio Charge, life load, and 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 environments where serious users decide which brands they rely on.

By showing up in marathon preparation, trail and expedition environments, and hybrid training communities, Amazfit is strengthening the credibility required to support higher-value products, improved product mix, and long-term pricing power. Our premiumization 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 point. Consumers are not choosing Amazfit solely for affordability. In March and April, our premium T-Rex models, priced at $399 and $549, 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 towards 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. This average selling price increasing more than 20% year-over-year. Notably, even amid 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 lineup, including the Cheetah 2 Pro, a performance-focused watch designed for marathon training, and the Cheetah 2 Ultra, engineered for the most demanding mountain and trail environments. Both integrate seamlessly with Zepp Coach with a full suite of running metrics and personalized training plans, recovery insights, and third-party training platform integrations. These devices deliver structured hybrid-style training guidance directly to endurance runners, 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 $550, marking the highest in Amazfit’s history and further reinforcing our premium branded positioning.

At the same time, in our core value segments, the Active Max and Active 3 Premium, positioned around the $169 price point, are expanding our reach among everyday fitness enthusiasts and entry-level runners beginning their structured training journeys. Most recently, we also introduced Bip Max, 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 six smartwatch brands in both the United States and Europe by value share, underscoring the growing global resonance and market strength of the brand. Turning to software, we continue to strengthen our ecosystem through Zepp OS.

Proprietary features such as Zepp Coach, Bio Torch, and our expanding suite of hybrid training and high-loss 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 competitiveness moat around our platform. Across running, outdoor, and hybrid training, we are increasingly connecting Amazfit products with real performance environments and elite athlete validation. In running, Cheetah 2 Pro was supported by major marathon moments in Paris, London, and Boston, including valid proof points from Yeman Crippa, Manuel Petrus, and Rory Linkletter. In outdoor, T-Rex Ultra 2 continue to gain credibility through high altitude alpinists, Jost Kobusch, and real expedition use cases, while Chris Focaut 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 Wierick completed a clean sweep of all four HYROX Majors this season while setting a new HYROX world record. We are also supporting Josh Kerr’s Project 222, his attempt to break the mile world record at the London Diamond League. Together, these moments reflect how Amazfit is showing up at the highest level 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 provide 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-$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 warring. With that, I now turn the call over to Leo to walk through the financial details. Leo, please go ahead.

Leon Deng, Chief Financial Officer, Zepp Health Corporation: Thank you, William. 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 $51.5 million, up 33.8% year-over-year, in line with our guidance range. As William mentioned before, this growth was driven primarily by our new product launches, such as Amazfit 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 lifecycle dynamics, such as model upgrades. In the first quarter, gross margin was 37.7%, an expansion of 0.4% compared with Q1 2025, and moderated from the record high 40.4% achieved in Q4 2025. There are two important points worth highlighting.

The first quarter is traditionally the period whereby we refresh our entry-level product portfolio. It 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 $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 continue to tighten supply, we began preparing for this environment in early 2025 by securing supply through diversified sourcing channels to support manufacturing continuity. 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 IEEPA-related tariffs, which could provide some in offsets. We believe we’re managing this challenge from a position of preparation and discipline, while staying focused on driving sustainable revenue growth and improved profitability. 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 $35.7 million, compared with $31.5 million in Q1 2025 and $37.1 million in Q4 2025. Out of the year-over-year increase of the $4.2 million, there’s a translation difference of approximately $1.8 million on operating expenses in the first quarter of 2026 due to EUR and RMB appreciation to the dollars. $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 $0.6 million was primarily due to front-loaded investments in marketing and branding activities such as CES and HYROX. Excluding $6.2 million of one-off provisions, fourth quarter 2025 operating expenses were approximately $30.9 million.

The sequential increase of $4.8 million was primarily driven by a $1.8 million foreign exchange impact, as mentioned above, a $1.4 million increase in R&D investment to support new products launches in upcoming quarters. A $0.5 million of front-loaded marketing and branding investments. Lastly, $0.2 million in severance costs related to targeted initiatives to enhance organizational efficiency. Going forward, we’ll 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 $11.9 million, compared with $11.5 million in the first quarter of 2025, and $10.2 million in the fourth quarter of 2025. Out of the sequential increase of $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 resource efficiently to optimize our return on investment and productivity. Adjusted selling and marketing expenses were $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. 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 half a million was due to front-loaded investments in marketing and branding activities such as CES and HYROX. At the same time, we continued to push retail profitability and channel mix improvement, including a meticulous refinement of our retail channels and disciplined staffing arrangements across our sales regions. Adjusted G&A expenses were $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 $6.2 million of non-recurring provisions in the fourth quarter, G&A expenses were $5.2 million in Q4 2025.

The sequential increase of $2.1 million was mainly attributable to $1.1 million of negative foreign exchange impact, as well as $0.2 million severance cost as part of the targeted initiatives to enhance organizational efficiency. We continue to streamline our G&A and drive operation 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 the sequential decline driven primarily 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 maturing 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 will continue to optimize the capital structure for the company. We also remain committed to our share repurchase program. As of March 31st, 2026, we had 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. Our outlook for the second quarter of 2026, we expect revenue to be in the range of $63 million-$68 million, representing year-over-year growth of approximately 6%-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’re 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 calls for questions. Operators, please go ahead.

Conference Call Operator: Thank you. If you would like to ask a question, please press star then one on your telephone keypad. If you would like to withdraw your question, please press star then two. Once again, that’s star then one if you have a question. Today’s first question comes from Siddharth Rajeev with Fundamental Research Corp. Please go ahead.

Siddharth Rajeev, Analyst, Fundamental Research Corp: Thank you. Congratulations on the strong Q1 revenue growth. In the last earnings call, Leon, you guided to potentially nine product launches this year, the same as last year, with four announced so far. Should we expect about five more this year? Am I in the correct ballpark?

Leon Deng, Chief Financial Officer, Zepp Health Corporation: Yes, Sid. I think in the end, we probably would have more than nine. Yeah, there are many new product launches are still on the way.

Siddharth Rajeev, Analyst, Fundamental Research Corp: Okay. Where do you see opportunities to reduce costs? It seems like it’s difficult to cut R&D or marketing or branding expenses at this point.

Leon Deng, Chief Financial Officer, Zepp Health Corporation: No, that’s not entirely right. 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. 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 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. I think, you have witnessed that there’s a lot of new product which has been launched already, including the Active Max, Active Premium, T-Rex Ultra 2, and now with the Balance and Cheetah. I think, 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. It should trim towards the norm starting from the second half of the year and going forward. On the other hand, we are also investing a bit or we 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? That’s all tied into the event timing, so to say. I guess, 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. That should also averaged down in the second half of the year. Not to mention G&A expenses, I think you will see a step down already in Q2, and going towards Q3 and Q4.

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.

Siddharth Rajeev, Analyst, Fundamental Research Corp: That’s good to hear. Just one more question, if I may. Is that for other industry players, raising product prices to offset some of these higher memory costs?

Leon Deng, Chief Financial Officer, Zepp Health Corporation: Yes, to some extent, because we noticed that our competitors are also raising price, not to mention Garmin, right? We compare with a lot of our competitors, our pricing at this point of time is still relatively low. I think we have more room to raise the price compare with our competitors. Nevertheless, I think We are focusing on the product itself, right? 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. I think that is the goal that we want to strive for.

Siddharth Rajeev, Analyst, Fundamental Research Corp: Perfect. Thank you so much.

Leon Deng, Chief Financial Officer, Zepp Health Corporation: Thank you, Sid.

Conference Call Operator: Thank you. Our next question today comes from Frank Dugan at Brooks Investments. Please go ahead.

Frank Dugan, Analyst, Brooks Investments: Hi, Leon. 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?

Leon Deng, Chief Financial Officer, Zepp Health Corporation: Yeah. 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. With regard to Q2, we just mentioned it is actually between $63 million to $68 million, which is roughly a growth of 6% to 14%. However, you see this number is actually accounting for the normal shipment timing and product launch phasing during the quarter. 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. I think we have one or two examples of that, which happens in Q2, which kind of impact our revenue forecast for Q2.

However, actually, our long-term strategy and our target for the year remains still on 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, for the 2026 full year, for sure, we’re looking at a profitable growth over 2025. I hope that gives you some color for the future.

Frank Dugan, Analyst, Brooks Investments: Thanks, Leon. One more question around the new three-year global HYROX partnership. How do you plan to leverage that to drive long-term monetization?

Leon Deng, Chief Financial Officer, Zepp Health Corporation: HYROX, as you know, 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 two folds. Number one is, as the participants of HYROX increase, I mean, they increased by a lot over the past years, we believe that it’s going to continue to increase in the future. Looking at the New York HYROX, the participants is as many as the participants of New York Marathon, right? I think number one is we would definitely want to deepen our relationship with HYROX and try to make the feature working better with HYROX, for example, on helping the HYROX athletes to track their timing and then to deliver a better timing every time they race.

Hopefully that would also make us and then establish the authority of our brand in HYROX. Also, as Wei An just mentioned, 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 a 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 serious on a specific sports in their journey when they grow up, right? That’s actually what we want to do through HYROX.

Frank Dugan, Analyst, Brooks Investments: Right. Thanks, Leon.

Conference Call Operator: Thank you. 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.

Grace Zhang, Director of Investor Relations, Zepp Health Corporation: 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.

Conference Call Operator: Thank you. This concludes this conference call. You may now disconnect your line. Thank you, and have a pleasant day.