ZEPP

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.

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.

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 Foucault 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 Johanna 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 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 warring. With that, I now turn the call over to Leo to walk through the financial details. Leo, please go ahead.

Thank you, Huang. 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 Huang 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 to 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'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.

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.

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?

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.

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.

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.

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?

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.

Perfect. Thank you so much.

Thank you, Sid.

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

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?

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 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.

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?

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 Wang Huang 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.

Right. Thanks, Leon.

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.

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 line. Thank you, and have a pleasant day.

Gentlemen, thank you for standing by for Zepp Health Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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 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 Wang Huang, our Founder and Chief Executive Officer, and Leon Deng, our Chief Financial Officer. Joining us today, we'll also have Mike Yeung, Chief Operating Officer and General Manager of North America, and Eric Fleming, VP of Capital Markets in North America. 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 could differ materially from the views expressed today. Further information regarding this and other risks is included in the company's annual report on Form 20-F for the fiscal year December 31st, 2024, and other filings 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 by law. Please also note that Zepp's earnings press release and the conference call include forward-looking information as well as our non-GAAP financial information. Zepp Health's press release contains a reconciliation of the audited non-GAAP measures to the audited most directly comparable GAAP measures. I'll turn the call to our CEO, Wang Huang. Please go ahead.

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 wearable 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, strength, 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 multi-year transformation as we evolve from a volume-driven business to a premium-focused global company. They also demonstrate strengthening pricing power across our product mix as it continues shifting toward higher value segments. Turning to our product highlights. Our growth in Q4 was broad-based across entry-level and premium segments as we continue expanding our portfolio to a wider range of users and training scenarios. At CES, we launched Amazfit Active Max, the newest member of the Active family. Active Max fills the gap between our entry-level lifestyle watches and our rugged outdoor series. It targets everyday trainers beginning their fitness journey. It features a vibrant AMOLED display, long battery life over 170 workout modes, and built-in support for offline maps and training guidance powered by Zepp Coach. We also recently introduced Active 3 Premium, designed specifically for runners.

Positioned around a $169 price tier, Active Max and Active 3 Premium reinforce the core volume segment of our portfolio, while expanding our reach into structured training. In our premium performance, 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 for extreme durability, Ultra 2 extends the top end of our portfolio to around the $550 price level. This price point is new in our history. Products like this reinforce the premium positioning of the Amazfit brand while expanding the ceiling of our product portfolio. On the software, we continue strengthening our ecosystem through updates to Zepp OS. Features such as BioCharge energy monitoring and Zepp Coach AI-driven training guidance are now reaching more devices and helping retention and long-term user value.

Together, variables and sensor technologies are creating a stronger ecosystem around our hardware foundation, forming what we believe is a growing defensive moat 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, 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 rely on our data and training insights to prepare for the highest level of competition, it sends a powerful signal about the accuracy, credibility, and performance capabilities of our technology.

Our strategy is our collaboration with HYROX, the fastest-growing hybrid endurance competition globally. Following recent events in cities such as Phoenix and Las Vegas, athletes gather in front of the official results screen to capture and share their finish times. The results are presented by Amazfit, making Amazfit the most prominent brand integrated into that moment. When athletes share those results across social platforms, the brands naturally spread through athlete-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, strength, and recovery into one coherent performance system where wearable data, training intelligence, and real-world performance validation converge.

Looking ahead to 2026, we remain focused on strengthening our premium product lineup, expanding ecosystem through AI-driven training insights and performance technologies. Deepening our engagement with performance-focused communities. For the first quarter of 2026, we expect in the range of $50 million-$55 million. Representing an increase of 30%-40% year-over-year. This outlook reflects our confidence that the demand we are seeing is not simply seasonal. We believe we now have the right combination of products, channels, and cost structure to drive growth and a clear path towards sustained profitability. As our premium mix continues to expand and higher margin categories scale, we expect our margin profile 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 Huang. 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, upper end of our guidance range. For full year 2025, revenue million, representing a 41.8% year-over-year growth. This $183 million in 2024, marking this trajectory. Our fourth quarter growth was driven by broad-based strength across our diversified portfolio. As Wang Huang mentioned, our 2025 Amazfit branded product sales increased by 45.4% year-over-year, percent sequentially, fueled by strong execution during the critical Black Friday and Christmas sale seasons, where our brand visibility reached new heights across major e-commerce channels. Additionally, our established premium lines, specifically the T-Rex and Balance, continue to demand, further validating our premiumization strategy price.

Looking ahead, we have just launched the Active 3 Premium, Active Max, and T-Rex Ultra 2 watches, and together with our, we expect the top line expansion continues into 2026. Turning now to gross margin. It was influenced by various factors, including product mix, and product life cycles, such as model upgrades. In Q4, we achieved 40.4%, an impressive expansion of 3.6 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 two key factors that I want to elaborate on. First, a 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. 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 and amid macroeconomic uncertainties. Gross margin in the full year 2025 was 38.3%, will remain on track with our margin 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 million.

Expenses as a percentage of sales improved by approximately compared to Q4 2024. However, in absolute amounts, it is around $8 million year-over-year and quarter-over-quarter. I will break down the driver of this increase to help you understand the quality of our spend is directly attributed to certain fixed channel costs to drive direct top-line growth. As we ship more units and generate more revenue, selling and expenses naturally rise in tandem. Second, $5 million year-end provisions, non-cash adjustment for potential bad debt and business model optimization as part of our ongoing risk management strategy. $1 million investments in patent fees and brand protection for 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.

Olympic medalist Josh Kerr, as well as some investment branding activities that fueled the adoption of new product launches. As you can see, except for the first element, 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 we realize further cost efficiencies. By line item, adjusted research and development expenses were $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 resource efficiency, maximize return on investment and productivity.

Adjusted selling and marketing were $15.6 million, reflecting the front-loaded branding investment I just mentioned. We're seeing return 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 $11.1 million compared with $6.1 million and $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. 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 $123 million in 2025, $110 million for the full year 2024.

The increase is due to the reasons I explained above. Adjusted operating expenses, excluding these, would be $110 million. We take a cautious approach and remain committed to investing in marketing activities to ensure our long-term competitiveness. Net loss attributed to Zepp Health was $6.4 million compared to adjusted net loss of $22.5 million in the quarter of 2024. The net loss in Q4 was mainly a result of a $2 million deferred tax asset provision and a $6 million provision. Full-year adjusted net loss attributed to the company was $31.5 million, compared with the adjusted net loss of $56.7 million for 2024.

The net loss for 2025 from deferred tax asset provision, one-time specially identified provisions and operating loss from the first half of the year 2025. In terms of our inventory and working capital, we continue to manage our inventory rigorously. Despite strategic risk purchases of key components for the future, our inventory increased to $72.8 million compared with [$87.7] million as of Q3 2025, reflecting our ongoing management. As of December 31st, 2025, cash equivalents stood at $113 million compared to [$102.6 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 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 note 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. While we are focused on reducing our overall debt level over the longer term, temporary fluctuations in debt levels quarter-to-quarter due to timing of refinancing and repayments. Beginning of 2023, we have cumulatively retired $8 million of debt and will continue to optimize the capital structure going forward. Given our confidence in the company's strong fundamentals and sustainable growth, we are reaffirming our commitment to our share repurchase program in 2020. As effective use of capital that aligns with our focus on delivering value to shareholders.

Before we talk about guidance, I would like to walk you through macroeconomic and industry-specific factors we are currently facing, including the chip risk. While we are not immune to memory cost inflation, it's 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. Our entire BOM cost is managed holistically while memory costs rise somewhat. Our vertically integrated supply chain provides us with multiple ways to optimize our overall cost structure. We're continuously focused on driving efficiencies throughout the supply chain by leveraging our scale and integration. Additionally, we are building inventory levels of certain key components, including risk buys, to ensure we can meet long-term demand. Our strong relationships with suppliers allow us to align with anticipated product demand.

While supply chain challenges are inevitable, our ability to navigate them. Lastly, and most importantly, as demonstrated, 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 macro. 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-$55 million, representing year-over-year growth of approximately 30%-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're 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.

Thank you. Welcome to the session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your questions to the company, please repeat your question in English. At this time, we will pause momentarily. Your first question comes from [Sid Rajeev with] Fundamental Research. Please go ahead.

Hi. 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.

I said I think it's around similar products, maybe slightly more. If I'm not mistaken, last year we have launched around nine products or so, and this year probably is at the same quantity of that, slightly more.

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

We are not that much affected by the fluctuations in the dollar, right? I think a lot of our production is diversified in Asia in different places. If you look at our markets, we are very strong in Western Europe markets as well as the U.S. markets. To some extent, the dollar is actually giving us some tailwind instead of the headwind.

Okay, thank you. Just one more question, if I may. Regarding operating expenses, you did a good job in slicing or even cutting costs in some areas. Which specific areas do you think there's the reductions?

I think if you look at the selling and marketing expenses, in some places we actually front-loaded some of the expenses into the high seasons for the upcoming new product launches, for example. That should normalize over the quarters because it's very much driven by the product launch wins we have applied. Another one is the G&A cost, because you have seen that G&A cost keep on going down for us. Then I think there's also room to improve. The last one is R&D. On one hand, we need to invest on R&D, the new product launches I just mentioned. You asked about the numbers, right? On the other hand, a lot of places whereby we could adopt AI to actually increase efficiency on R&D.

Thank you so much, Leon.

Okay. Thank you, Sid.

Once again, if you're on your telephone. The next question comes from Peter Branson with Brooks Investments.

Hello. Congratulations on the 2025 performance. I have two questions. If you could provide more color on the sales performance. 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.

Yes. If you can provide more color on the sales performance. The second question would be, what's the plan for the Amazfit strap and ring?

Okay. Thank you. On the first one, on the Adventure series, you see that we have many new products in 2025 throughout the year. We have launched T-Rex 3 Pro, and we have also launched the T-Rex Ultra 2 February, right? We have some of the new products also in the T-Rex family lined up in 2026. The series actually also helped us to elevate our overall ASP for the company. Adventure series is playing more and more important role in the overall mix we have. It will continue to be like that in 2026. With regard to your second question on Helio Strap and the rings.

Helio Strap has made a great performance and a debut in 2025. The most popular, if not the most popular, products in our portfolio. I think on the other hand, we didn't manufacture enough of the Helio Strap to cater for the Q3 and Q4 high seasons. Actually resolving the supply chain on that in 2026, you should see more of the manufacturing of those devices, and you should see the to be satisfied on the Helio Strap. On the other hand, we're also working on the next generation of those as we stay tuned for the second half of this year.

Thank you. There's no other questions. Now I'd like to turn the call back over to the company's IR Director, Grace Zhang, for closing remarks.