Zepp Health Corporation (NYSE:ZEPP) Q3 2025 Earnings Call Transcript

Zepp Health Corporation (NYSE:ZEPP) Q3 2025 Earnings Call Transcript November 5, 2025

Operator: 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.

Grace Yujia Zhang: 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.

Wang Huang: 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.

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

Q&A Session

Siddharth Rajeev: 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?

Leon Cheng Deng: 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.

Siddharth Rajeev: 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?

Leon Cheng Deng: 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.

Siddharth Rajeev: 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?

Leon Cheng Deng: 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.

Operator: Your next question comes from Dylan Chu with Point72 HK.

Dylan Chu: 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.

Leon Cheng Deng: 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.

Dylan Chu: 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.

Leon Cheng Deng: 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.

Operator: Your next question comes from Yuan Zhu with Guosen Securities.

Yuan Zhu: 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?

Leon Cheng Deng: 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.

Yuan Zhu: 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?

Leon Cheng Deng: 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.

Operator: 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.

Grace Yujia Zhang: 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.