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. and welcome to Zapp Health Corporation's first quarter 2026 earnings conference call. The company's financial and operating results were issued in a press release about the newsletter 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 Yan, chief operating officer and general manager of North America, and Eric Fleming, 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 Security Certification Reform Act of 1995. Forward-looking statements involving harm 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 20F 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 ZAP's earnings Press release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial information. That press release contains a reconciliation of unaudited non-gap measures to the unaudited most directly comparable gap measures. I will now turn the call over to our CEO, Mr. Wang Huang. Please go ahead.

Hello, everyone, and 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 software 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 T-Rex Ultra 2. Delivering this level of goals in a Seasonary Quieter Quarter further enforces 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 area 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 outline how Zapp 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 HIROX, one of the world's fastest growing hybrid endurance sports organizations, through a new exclusive three-year global partnership. This expanded partnership enhances the high-worth athlete experience across training, competition, and recovery, leveraging a broader portfolio of exclusive smart wearable categories, including smart watches, smart rings, smart cameras, smart glasses, and smart straps. alongside kinetic app experience, HIRO specific training modes, and synaptic performance data integrations. This partnership represents more than a sponsorship. It is a strategic step for us to participate in and helped shape the emerging hybrid training category. By engaging directly with IROC's global athlete community, gym ecosystem, coaches, and race environments, we can build a more authentic connection with users whose training behaviors Ben Strings, Endurance Recovery, Nutrition, and Performance Readiness. These give 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 completed 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. HI-ROS and gym-based hybrid training help create that moment, allowing Amazfit to enter through app experiences, training content, HI-ROS-specific modes, and lower-friction product before users make a full device switch. At the recent New York HIROX 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 earlier 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 USD and $549 USD 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 shipped toward 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 with average selling price point with average selling price increasing more than 20% year-over-year. Notably, even amid rising memory component causes and broader storage chip price inflection, we were still able to achieve gross margin expansion. reflecting the effectiveness of our product mix improvement and discipline cost execution. In April, we extended 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 integrated seamlessly with their coach with a full suite of running metrics and personalized training plans. Recovery insights and the third-party training platform integrations. These devices deliver structure hybrid style training guidance directly to endurance runners, further strengthening our penetration in the dedicated running segment. Notably, our first quarter growth was for the base across both entry and premium tiers. At the high end, the T-Rex Ultra II, crafted from grade V titanium, elevates our price ceiling to US dollar of $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 Amazfit, the Active Max and Active 3 Premium positions 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 US, 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 business and market chains of the brand. Turning to software, we continue to strengthen our ecosystem through ZAP OS. Proprietary features such as ZAP Coach, BioCharge, 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 modes 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 acid proof points from Yemen Kriber, Amano Petros, and Rory Linkletter. In outdoor, T-Rex Altitude continues to gain collectability through high altitude alpinist, Josh Kavush, and Maria Expedition use cases, while Chris Bocotte strengthens the aspirational outdoor positioning of the T-Rex series. We also continue to build credibility around elite performance moments. During the high loss workshop major, a major athlete, Joanna Wierick, completed a clean sweep of all four HIROX majors this season while setting a new HIROX world record. We are also supporting Josh Kor'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 microeconomic backdrop, our premiumization strategy, expanding pricing power, vertically integrated supply chain, and diversifying manufacturing footprint across China and Vietnam provide us with multiple levels 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 toward long-term profitability. Looking ahead to the second quarter, we expect revenue to be in the range of 63 million 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 facing 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 worrying. With that, I now turn the call over to Leo to walk through the financial details. Leo, please go ahead.

Thank you, Wei Yan. 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 US dollars 51.5 million, up 33.8% year over year, in line with our guidance range. As Wayne mentioned before, this growth was driven primarily by our new product launches, such as 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%, and 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. First, the first quarter is traditionally the period whereby we refresh our entry-level product portfolio, which naturally carries a lower gross margin and therefore wait 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 US dollar 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 the manufacturing continuity. And we're 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 IEPA-related tariffs, which could provide some 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. Now turning to expenses, we remain committed to prudent cost management program, which will begin in 2020. Total adjusted operating expenses for the first quarter were US dollars, 35.7 million compared with US dollars 31.5 million in Q125 and US dollars 37.1 million in Q425. Out of the year-over-year increase of the US dollar 4.2 million, there's a translation difference of approximately US dollar 1.8 million operating expenses in the first quarter of 2026 due to Euro and RMB appreciation to the dollars. Then US dollar 1.4 million is directly attributable to certain e-commerce platform charges, which was a kind of fixed ratios sales channel charges to drive revenue growth. Remaining US dollar 0.6 million was primarily due to front-loaded investments in marketing and branding activities such as CES and HIROX. Excluding US dollars 6.2 million of one-off provisions, fourth quarter 2025 operating expenses were approximately US dollars 30.9 million. The sequential increase of US dollar 4.8 million was primarily driven by a US dollar 1.8 million foreign exchange impact as mentioned above, and a US dollar 1.4 million increase in R&D investment to support new products launches in upcoming quarters. And a US dollar 0.5 million of front-loaded marketing and branding investments. And 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 US dollar 11.9 million compared with US dollar 11.5 million in the first quarter of 2025 and the US dollar 10.2 million in the fourth quarter of 2025. Out of the sequential increase of US dollar 1.7 million, 0.3 million was attributed to foreign currency translation differences. The remaining 1.4 million Thank you very much. were US dollars 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 and another 1.4 million was directly and Xiaojun Zhang. Thank you. Thank you. 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 HIROX. At the same time, we continue 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 US dollars 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 US dollar 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 US dollar 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 GNA 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 and Xiaojun Zhang in the first quarter of 2025. Adjusted net loss was 17.9 million or 34.8% of sales compared to 18.1 million or 41.1% 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 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 while 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 discipline 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. Finally, our outlook. For the second quarter of 2026, we expect revenue to be in the range of US$63 million to US$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 Thank you very much. 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 1 on your telephone keypad. If you would like to withdraw your question, please press star then 2. Once again, that's star then 1 if you have a question. and today's first question comes from Sid 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, same as last year, with four announced so far. Should we expect about five more this year? Am I in the correct ballpark?

Yes, I think in the end we probably would have more than nine, but there are many new product launches that are still on the way.

Okay. Where do you see opportunities to reduce costs? Because it seems like it's difficult to cut R&D or marketing or branding expenses at this point.

No, that's not entirely right. So 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. And I think 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, but 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. And 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. But 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 High Rocks, New York, which is a high-profile event, right? And that's all tied into the event timing, so to say. And 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. And that should also average down in the second half of the year. So not to mention G&A expenses, I think you will see a step down already in Q2 and going towards Q3 and Q4. So 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 and not to mention Garmin, right? But we, compared with a lot of our competitors, our pricing at this point of time is still relatively low. So I think we have more room to raise the price compared with our competitors. But nevertheless, I think we are focusing on the product itself, right? So 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 Thank you. And 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 will 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. But with regard to Q2, we just mentioned it is actually between 63 to 68 million, which is roughly a growth of 6% to 14%. But however, you see this number is actually accounting for the normal shipment timing and product launch facing during the quarter. 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. And 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 board 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, if and for the 2026 full year, for sure we're looking at, and a profitable growth over 2025. I hope that gives you some color for the future.

Yeah, thanks, Leon. And yeah, one more question around the new three-year global higher-ups partnership. How do you plan to leverage that to drive long-term monetization?

The HIROX, as you know, is actually part of or it actually is one of the bigger trend on hybrid training. We kind of explained just now that we would like to establish our authority in hybrid training through working very closely with HIROX, right? It actually comes into two folds. Number one is as the participants of HIROX increase, I mean, they increased by a lot over the past years, and we believe that it's going to continue to increase in the future. And looking at the New York HIROX is actually the participants is as many as and the participants of New York Marathon. So I think number one is we would definitely want to deepen our relationship with HIROX and try to make the feature working better with HIROX. For example, helping the HIROX athletes to track their timing and then to deliver a better timing every time they race. And hopefully that would also make us and then establish the authority of our brand in HIROX. And also as Wei En just mentioned, we by doing that we would like to become users choice when they look beyond their current watch because for a normal user consumer there's a moment of time that they start considering a series spots be it running be it hybrid training be it whatever it is we want to actually by establishing the authority in HIROX to become users' choice once they become serious on a specific sports in their journey when they grow up. That's actually what we want to do through HIROX.

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 Zapp 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.