Zepp Health Q1 And Outlook Lags Consensus As The Pandemic Interrupts Product Launches; Updates On AI Products

Zepp Health Corp ZEPP reported a first-quarter FY23 revenue of $93.95 million, missing the consensus of $122.93 million.
The 14.8% decrease in total revenues was mainly due to a 21.2% Y/Y decline in its self-branded product sales, in line with the decline of the consumer electronics market at large and lower consumer discretionary spending.
Margin: The gross margin declined by 420 bps to 15.9% due to the price reduction of Xiaomi's pricing policy and the deliberate clearance of its older version of self-branded products to optimize inventory levels.
Adjusted loss per ADS of $(0.27) missed the consensus loss of $(0.02).
Zepp held $145.8 million in cash and equivalents.
Drivers: Total units shipped fell 5.4% Y/Y to 3.5 million.
Wayne Wang Huang, Chairman, and CEO, updated on the launch of an advanced platform that integrates Zepp OS and its unique RISC-V-based chip, application of large language model (LLM), and Generative AI technology to its smart wearables and the incorporation of the latest GPT-4 technology to its Zepp OS.
CFO Leon Deng added, "In the first quarter, we experienced a shift in China's Covid-Zero Policy, which interrupted some of our new product launch schedules. As a result, we had to postpone some releases of our new product lines to subsequent quarters, which had a negative impact on our Q1 sales."
Outlook: Zepp expects Q2 revenue of $95.00 million - $124.23 million vs. the consensus of $155.7 million.
Price Action: ZEPP shares traded lower by 5.2% at $1.27 on the last check Tuesday.

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