Zepp Health Corporation reported revenues for the first quarter of 2025 reached $38.5 million, a decrease of 3.6 percent from the first quarter of 2024. The decrease was primarily due to the $5.0 million decrease in the sales of Xiaomi wearable products.

Sales of Amazfit branded products grew 10.2 percent year-over-year, reportedly marking a return to growth since the first quarter of 2022, preceded by a strong quarter-over-quarter growth of 43.4 percent from the third quarter to the fourth quarter of 2024. The increase was mainly driven by the successful launch of Amazfit Active 2, Bip 6, while the company still faced supply constraints, especially on the Amazfit Active 2 premium version, which it reported should be resolved in the second quarter of 2025.

Compared with fourth quarter of 2024, the company’s reported revenue decline was driven by the seasonality while the first quarter is the lowest quarter of the year and supply constrains, especially on the long lead-time components for Amazfit Bip 6 and Active 2 premium version, which resulted the Bip 6’s launch were postponed to the end of March 2025.

Profitability & Expenses
Gross margin in the first quarter of 2025 was 37.3 percent, which was higher than the first and fourth quarters of 2024. The company reported it was impacted by the additional 20 percent tariffs imposed on China-made products in the first quarter of 2025, excluding that the gross margin is 38.4 percent. The higher gross margin of Amazfit-branded products was mainly driven by the higher gross margin of newly-launched products.

Research & Development (R&D) expenses in the first quarter of 2025 were $12.4 million, a decrease of 7.8 percent year-over-year. The decrease resulted from the company’s R&D approach, which consistently evaluated resource efficiency to ensure maximum return on investment and productivity.

We are committed to investing in new technologies and AI to maintain our competitive edge against our peers,” the company said.

Selling and Marketing expenses in the first quarter of 2025 were $13.8 million, an increase of 28.5 percent year-over-year. The increase was primarily due to $1.7 million in digital campaigns and product launch events for new products, and $1.4 million in sales channel investments. At the same time, the company noted that it “consistently pushed on retail profitability and channel mix improvement. We are committed to investing efficiently in marketing and branding to ensure sustainable growth.”

General and Administrative expenses were $6.5 million in the first quarter of 2025, compared with $6.4 million in the same period of 2024, an increase of 1.5 percent year-over-year. The increase was said to be largely attributable to foreign exchange rate fluctuations of $1.0, offset by a $0.8 million decrease in share-based compensation expenses.

Total operating expenses for the first quarter of 2025 were $32.7 million, an increase of 6.9 percent year-over-year. Adjusted operating expenses, which exclude share-based compensation and amortization of intangible assets resulting from acquisitions and business cooperation agreements, were $31.5 million, compared with $27.8 million in the same period of 2025. The increase was primarily due to foreign exchange rate fluctuations of $1.0 million, $1.7 million in digital campaigns and product launch events for new products and $1.4 million in sales channel investments. The company reported it “will maintain our cost-conscious approach, aiming for operating expenses of $25 to $27 million in the upcoming quarters. Concurrently, we remain committed to investing in R&D and marketing activities to ensure our long-term competitiveness.”

The operating loss for the first quarter of 2025 was $18.4 million, which resulted in an inability to fully cover operating expenses, compared to the operating loss of $15.9 million for the first quarter of 2024. Adjusted operating loss for the first quarter of 2025 was $17.2 million, compared to an adjusted operating loss of $13.1 million for the same period of 2024. The variance was mainly due to foreign exchange rate fluctuations of $1.0 million, $1.7 million in digital campaigns and product launch events for new products and $1.4 million in sales channel investments.

Adjusted operating income/(loss) represents operating income/(loss) excluding: share-based compensation expenses and amortization of intangible assets resulting from acquisitions and business cooperation agreements.

Net loss attributable to Zepp Health Corporation for the first quarter of 2025 was $19.7 million, compared to a net loss of $14.8 million in the first quarter of 2024. Adjusted net loss attributable to Zepp Health Corporation was $18.1 million, compared to an adjusted net loss of $13.6 million in the first quarter of 2024. The first quarter is typically the season with the lowest sales, which results in an inability to cover operating expenses fully.

Liquidity and Capital Resources
As of March 31, 2025, the company had cash and cash equivalents and restricted cash of $103.8 million, compared with $110.7 million of cash balance as of December 31, 2024, the result was driven by the net loss for the first quarter of 2025, offset by $12.8 million tighter working capital management. This cash position provides ample runway for the company to invest and seize potential market opportunities.

The company reported that it “managed its working capital and inventory efficiently and recorded inventory of $64.1 million as of March 31, 2025. It went up a bit due to preparation for product launch, but the company managed to improve big time on accounts receivable collection and accounts payable management. The company will continue to manage working capital tightly.”

By February 2025, the company said it “successfully refinanced the majority of short-term debts maturing in 2025 to a multi-year long-term debt maturing in 2027 and beyond with a lower interest rate. Starting the first quarter of 2023, it initiated the retirement of its short/long-term debt portfolio. As of the first quarter of 2025, it has retired $67.8 million of debt since early 2023, with $11.5 million repaid in the first quarter of 2025. As its operating cash flow continues to strengthen, it will continue to optimize the capital structure for the company.”

Shares Outstanding
As of March 31, 2025, the company had 229.9 million ordinary shares outstanding, representing the equivalent of 14.4 million ADSs, assuming the conversion of all ordinary shares into ADSs.

Share Repurchase Program Update
In its third quarter 2021 earnings release, the company announced that its Board had authorized a share repurchase program of up to $20 million through November 2022. On November 21, 2022, the Board authorized a 12-month extension of the company’s share repurchase program. On November 20, 2023, the Board further authorized the company to extend its share repurchase program for another 12 months. On November 18, 2024, the Board further authorized the company to extend its share repurchase program for another 24 months. Pursuant to the extended share repurchase program, the company could repurchase its shares in the form of ADSs and/or ordinary shares through November 2026 with an aggregate value equal to the remaining balance under the share repurchase program. As of March 31, 2025, the company had used US$15.4 million to repurchase approximately 2.0 million ADSs. The company expects to fund the repurchases under the extended share repurchase program from its existing cash balance.

Outlook
For the second quarter of 2025, the company’s management expects net revenues to be between $50 million and $55 million, representing an increase of approximately 23 percent to 35 percent from $40.6 million in the second quarter of 2024. The outlook is based on current market conditions and reflects its current and preliminary estimates of market, operating conditions and customer demand, all subject to change.

Image courtesy Zepp Health