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Huami Corporation Reports Third Quarter 2020 Unaudited Financial Results


BEIJING, Nov. 23, 2020 /PRNewswire/ — Huami Corporation (NYSE: HMI) today reported revenue of RMB2.2 billion, or US$329.2 million; GAAP diluted net income per share of RMB0.31 (US$0.05), or GAAP diluted net income per ADS of RMB1.24 (US$0.18) for the third quarter ended September 30, 2020.

“Third quarter unit and revenue growth of 16% and 20%, respectively, was predominantly driven by shipments of the Xiaomi Mi Band 5, continued geographic expansion, and the effect of improved economic conditions in many regions,” said Wang Huang, Chairman and CEO of Huami. “We are continuing our strategy as a value leader, leveraging our proprietary technology to drive feature set/price points that are attractive to many budget ranges, and we launched a number of promising new products in the third quarter. At the same time we are continuing to explore the healthcare services business with our partners like Prudential Asia, in order to capture the opportunities in the fast-growing healthcare service industry.”

“We continue to manage the business for long-term success,” added chief financial officer Leon Deng. “However, we experienced some new products launch plan delays and production delays due to the pandemic, and resurgence of the virus in many key markets tempers our near-term outlook. As a result, we will be exercising control on expenses in the coming quarter by focusing on projects with higher return on investment.”

Third Quarter 2020 Financial Summary









For the Three Months Ended


For the Nine Months Ended

GAAP in millions, except percentages and per share
amounts


Sept. 30, 2020

Sept. 30, 2019[1]


Sept. 30, 2020

Sept. 30, 2019[1]

Revenue RMB


2,235.1

1,862.5


4,460.8

3,700.8

Revenue USD


329.2

260.6


657.0

517.8

Gross Margin


20.6%

25.2%


21.5%

26.1%

Net income attributable to Huami
Corporation RMB


81.1

203.3


113.5

368.0

Adjusted net income attributable to Huami
Corporation RMB[2]


120.8

209.8


165.5

416.6








Diluted net income per share RMB


0.31

0.79


0.44

1.43

Diluted net income per ADS USD


0.18

0.44


0.26

0.80

Adjusted diluted net income per share RMB[3]


0.46

0.81


0.64

1.62

Adjusted diluted net income per ADS USD


0.27

0.45


0.38

0.91

Units Shipped


15.9

13.7


32.4

27.6

[1] The USD numbers in 2019 are referenced with the prior 6-K disclosures.

[2] Adjusted net income attributable to Huami Corporation is a non-GAAP measure, which excludes share-based compensation expenses. See “Reconciliation of GAAP and Non-GAAP Results” at the end of this press release.

[3] Adjusted diluted net income is the abbreviation of Adjusted net income attributable to ordinary shareholders of Huami Corporation, which is a non-GAAP measure and excludes share-based compensation expenses attributable to ordinary shareholders of Huami Corporation, and is used as the numerator in computation of adjusted basic and diluted net income per ADS attributable to ordinary shareholders of Huami Corporation.

Management’s Discussion and Analysis

Revenue

Total units shipped in the third quarter 2020 increased 16.1% year-over-year, reaching 15.9 million, compared with 13.7 million in the third quarter of 2019. Third quarter revenues reached RMB2,235.1 million (US$329.2 million), an increase of 20% from the third quarter of 2019. The increase in the quarter was driven primarily by sales through Xiaomi, principally the new Mi Band 5. Sales of self-branded products in the third quarter were primarily driven by new products, including the new Amazfit watches and TWS earbuds. Both sequential and year-over-year quarterly revenue changes can be affected by seasonality of purchase patterns globally, as well as by timing of new product introductions.

Covid-19 Impact

The negative impact of Covid-19 receded in Q3 on retail sales and the worldwide economy generally. China’s GDP rose 5% in the third quarter, some sectors of European retail were stronger, and U.S. retail sales increased 5% in September. We believe this was a contributing factor to Huami’s growth in the third quarter, and we experienced a significant rebound and growth of device activations in most of the markets during the quarter, compared sequentially to the June quarter.

Production delays related to the pandemic in the quarter delayed the launch date of a new product and affected new product inventory availability.

Currently, it is reported that a new resurgence of COVID-19 cases is widely around the world, including the U.S., many European countries, Russia, and Japan. Renewed restrictions are being implemented and considered. We expect this resurgence to negatively impact our customers and fourth quarter sales of our key product categories.

Longer-term, smart health technology plays a unique and important role in healthcare, as outlined in a recent white paper published by the company. Industry forecasts and research into consumer adoption and use of wearables and personal health technology still point to strong future demand. However, the company expects the near-term disruptions to daily life on a global scale will impact the fourth quarter, and are setting its expectations accordingly.

Gross Margin

Gross margin in the third quarter 2020 was 20.6%, compared with 25.2% in the year-ago third quarter. Gross margin and gross profit are affected by product mix as different products have different margin contributions, and these can change over the life of a product. In the third quarter 2020, mix between total Xiaomi and self-branded unit shipments was the same as the prior year’s quarter, but gross margin was predominantly driven by lower margins on Xiaomi products compared to the year-ago quarter.

Research & Development

Third quarter 2020 R&D expense was RMB172.9 million, increasing 38.8% year-over year, and comprised 7.7% of revenue, compared to 6.7% of revenue in the year-ago third quarter, reflecting personnel additions and expansion of R&D activities for future products and new product categories, including consumer products and analytics solutions for industry. The company believes that smart R&D investment is key, and that at this percent of sales level is adequately resourced to effectively develop and bring to market new smart devices and analytics for consumers and industry.

Sales & Marketing

Sales and Marketing expense for the third quarter 2020 was RMB115.6 million, increasing 104.2% year-over-year, and comprised 5.2% of revenue, compared to 3.0% of revenue in the year-ago quarter. Higher sales and marketing expense in 2020 was mainly driven by brand promotions for our own branded products globally.  

General & Administrative

General and Administrative expense was RMB91.0 million, increasing 30.8% year-over-year, and comprised 4.1% of revenue, compared to 3.7% in the 2019 third quarter. The increase is primarily due to an increase in share-based compensation.

Operating Income and Expenses

Total Operating Expense for the third quarter 2020 was RMB379.5 million, up 51.3% from the year-ago quarter, reflecting the investments in R&D, Sales and Marketing and G&A described in the preceding sections. Total operating expense represented 17.0% of revenue in the third quarter 2020 compared to 13.5% in the year-ago quarter. The company will be exercising control on expenses in the fourth quarter, focusing on costs as a percent of sales.

Operating Income for the third quarter 2020 was RMB80.6 million, down 63.2% from RMB219.1 million in the year-ago quarter.

Liquidity and Capital Resources

At September 30, 2020, the Company had cash and cash equivalents of RMB2,555.6 million (US$376.4 million), compared with RMB1,803.1 million as of December 31, 2019.

Outlook

For the fourth quarter of 2020, the management of the Company currently expects:

–  Net revenues to be between RMB1.95 billion and RMB2.15 billion, compared with RMB2.11 billion in the fourth quarter of 2019.

The above outlook is based on the current market conditions and reflects the Company management’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Conference Call

The Company’s management will hold a conference call at 7:30 a.m. Eastern Standard Time on Monday, November 23, 2020 (8:30 p.m. Beijing Time on November 23, 2020) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

US (Toll Free):

+1-888-346-8982

International:

+1-412-902-4272

Mainland China (Toll Free):

400-120-1203

Hong Kong (Toll Free):

800-905-945

Hong Kong:

+852-3018-4992

Participants should dial-in at least 10 minutes before the scheduled start time and ask to be connected to the call for “Huami Corporation.”

Additionally, a live and archived webcast of the conference call will be available at http://www.huami.com/investor.

A telephone replay will be available one hour after the call until November 30, 2020 by dialing:

US Toll Free:


+1-877-344-7529

International:


+1-412-317-0088

Replay Passcode:


10149826

About Huami Corporation

Huami’s mission is to connect health with technology. Since its inception in 2013, Huami has developed a platform of proprietary technology including AI chips, biometric sensors, and data algorithms, which drive a broadening line of smart health products for consumers, and analytics services for industry. In 2019, Huami shipped 42.3 million units of smart watches and fitness bands, including its own Amazfit brand, and products developed and manufactured for Xiaomi, comprising 26% of global category shipments[4]. Huami Corporation is based in Hefei, China, with U.S. operations, Huami-USA, based in Cupertino, Calif. For more information, please visit  https://www.huami.com/investor/pages/company-profile.

[4]IDC, Correcting and Replacing Shipments of Wearable Devices, 3/10/20

Use of Non-GAAP Measures

We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. Adjusted net income represents net income excluding share-based compensation expenses, and such adjustment has no impact on income tax. Adjusted net income attributable to ordinary shareholders of Huami Corporation is a non-GAAP measure, which excludes share-based compensation expenses attributable to ordinary shareholders of Huami Corporation, and is used as the numerator in computation of adjusted net income per share attributable to ordinary shareholders of Huami Corporation.

We believe that adjusted net income and adjusted net income attributable to ordinary shareholders help identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in net income and net income attributable to ordinary shareholders. We believe that adjusted net income and adjusted net income attributable to ordinary shareholders provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

Adjusted net income and adjusted net income attributable to ordinary shareholders, should not be considered in isolation or construed as an alternative to net income, basic and diluted net income per share attributable to ordinary shareholders of Huami Corporation or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted net income and adjusted net income attributable to ordinary shareholders, presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Exchange Rate

The Company’s business is primarily conducted in China and the significant majority of revenues generated are denominated in Renminbi (“RMB”). This announcement contains currency conversions of RMB amounts into U.S. dollars (“US$”) solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB6.7896 to US$1.00, the effective noon buying rate for September 30, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on September 30, 2020, or at any other rate.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the cooperation with Xiaomi, the recognition of the Company’s self-branded products; the Company’s growth strategies; trends and competition in global wearable technology market; changes in the Company’s revenues and certain cost or expense accounting policies; governmental policies relating to the Company’s industry and general economic conditions in China and the global. Further information regarding these and other risks is included in the Company’s filings with the United States Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

In China:
Huami Corporation
Grace Yujia Zhang
E-mail: [email protected]  

The Piacente Group, Inc.
Yang Song
Tel: +86-10-6508-0677
E-mail: [email protected]  

In the United States:
Huami Corporation
Brad Samson
Tel: 1+714-955-3951
E-mail: [email protected]  

 

HUAMI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)









As of December 31,


As of September 30,



2019


2020



RMB


RMB


US$








Assets







Current assets:







Cash and cash equivalents


1,803,117


2,555,561


376,393

Restricted cash


874


2,404


354

Term deposit



200,000


29,457

Accounts receivable


188,940


157,983


23,268

Amounts due from related parties, current


1,421,170


1,312,677


193,336

Inventories


893,806


1,100,458


162,080

Short-term investments


17,187


18,118


2,668

Prepaid expenses and other current assets


67,358


101,982


15,020

Total current assets


4,392,452


5,449,183


802,576








Property, plant and equipment, net


64,350


106,771


15,726

Intangible asset, net


85,753


158,334


23,320

Goodwill


5,930


70,980


10,454

Long-term investments


406,099


336,759


49,599

Deferred tax assets


102,649


128,794


18,969

Other non-current assets


8,828


15,405


2,269

Non-current operating lease right-of-use assets


108,682


168,266


24,783

Total assets


5,174,743


6,434,492


947,696

HUAMI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)









As of December 31, 


As of September 30,



2019


2020



RMB


RMB


US$








Liabilities







Current liabilities:







Accounts payable


1,999,951


2,215,864


326,361

Advance from customers


44,793


41,865


6,166

Amount due to related parties, current


14,769


7,565


1,114

Accrued expenses and other current liabilities


352,249


291,108


42,875

Income tax payables


67,854


34,052


5,015

Notes payable


2,184



Bank borrowings



814,207


119,920

Total current liabilities


2,481,800


3,404,661


501,451

Deferred tax liabilities


5,399


21,646


3,188

Long-term borrowing



60,000


8,837

Other non-current liabilities


113,596


172,254


25,370

Non-current operating lease liabilities


76,360


125,020


18,413

Total liabilities


2,677,155


3,783,581


557,259

HUAMI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)









As of December 31,


As of September 30,



2019


2020



RMB


RMB


US$








Equity







Ordinary shares


155


156


23

Additional paid-in capital


1,478,902


1,533,475


225,856

Accumulated retained earnings


910,612


1,024,161


150,843

Accumulated other comprehensive income


111,081


95,274


14,032

Total Huami Corporation shareholders’ equity


2,500,750


2,653,066


390,754

Non-controlling interests


(3,162)


(2,155)


(317)

Total equity


2,497,588


2,650,911


390,437

Total liabilities and equity


5,174,743


6,434,492


947,696

HUAMI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)










For the Three Months Ended September 30,



2019


2020



RMB


RMB


US$








Revenues


1,862,531


2,235,093


329,194

Cost of revenues


1,392,670


1,775,017


261,432

Gross profit


469,861


460,076


67,762

Operating expenses:







Selling and marketing


56,631


115,617


17,029

General and administrative


69,578


90,987


13,401

Research and development


124,538


172,891


25,464

Total operating expenses


250,747


379,495


55,894

Operating income


219,114


80,581


11,868

Other income and expenses:







Interest income


10,911


10,330


1,521

Other expenses, net


(1,971)


(5,754)


(847)

Gain from fair value change of long-term investment



3,304


487

Income before income tax


228,054


88,461


13,029

Income tax expenses


(27,518)


(8,437)


(1,243)

Income before loss from equity method investments


200,536


80,024


11,786

Net income from equity method investments


2,878


2,472


364

Net income


203,414


82,496


12,150

Less: Net income attributable to non-controlling interest


77


1,422


209

Net income attributable to Huami Corporation


203,337


81,074


11,941

Net income attributable to ordinary shareholders of Huami
Corporation


203,337


81,074


11,941

Net income per share attributable to ordinary 







shareholders of Huami Corporation







Basic income per ordinary share


0.83


0.33


0.05

Diluted income per ordinary share


0.79


0.31


0.05








Net income per ADS (4 ordinary shares equal to 1 ADS)







ADS – basic


3.31


1.30


0.19

ADS – diluted


3.15


1.24


0.18








Weighted average number of shares used in computing net
income per share







Ordinary share – basic


245,934,981


248,748,630


248,748,630

Ordinary share – diluted


258,343,485


260,829,357


260,829,357

HUAMI CORPORATION

Reconciliation of GAAP and Non-GAAP Results

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)




For the Three Months Ended September 30,



2019


2020



RMB


RMB


US$

Net income attributable to Huami Corporation


203,337


81,074


11,941

Share-based compensation expenses


6,491


39,723


5,851

Adjusted net income attributable to Huami 
Corporation


209,828


120,797


17,792

















For the Three Months Ended September 30,



2019


2020



RMB


RMB


US$








Net income attributable to ordinary shareholders
of Huami Corporation


203,337


81,074


11,941

Share-based compensation expenses attributable to
ordinary shareholders of Huami Corporation


6,491


39,723


5,851

Adjusted net income attributable to ordinary 
shareholders of Huami Corporation[2]


209,828


120,797


17,792








Adjusted net income per share attributable to 
ordinary shareholders of Huami Corporation







Adjusted basic income per ordinary share


0.85


0.49


0.07

Adjusted diluted income per ordinary share


0.81


0.46


0.07








Adjusted net income per ADS (4 ordinary shares equal
to 1 ADS)







ADS – basic


3.41


1.94


0.29

ADS – diluted


3.25


1.85


0.27








Weighted average number of shares used in 
computing net income per share







Ordinary share – basic


245,934,981


248,748,630


248,748,630

Ordinary share – diluted


258,343,485


260,829,357


260,829,357








Share-based compensation expenses included 
are follows:







Cost of revenues


8



Selling and marketing


647


556


82

General and administrative


4,130


21,033


3,098

Research and development


1,706


18,134


2,671

Total


6,491


39,723


5,851

HUAMI CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)




For the Nine Months Ended September 30,



2019


2020



RMB


RMB


US$








Revenues


3,700,842


4,460,828


657,009

Cost of revenues


2,736,224


3,502,809


515,908

Gross profit


964,618


958,019


141,101

Operating expenses:







Selling and marketing


119,219


241,802


35,614

General and administrative


165,900


197,293


29,058

Research and development


290,669


408,434


60,156

Total operating expenses


575,788


847,529


124,828

Operating income


388,830


110,490


16,273

Other income and expenses:







Interest income


23,204


31,668


4,664

Other income (expenses), net


2,842


(13,772)


(2,028)

Gain from fair value change of long-term investment



4,597


677

Income before income tax


414,876


132,983


19,586

Income tax expenses


(50,552)


(12,956)


(1,908)

Income before loss from equity method investments


364,324


120,027


17,678

Net income (loss) from equity method investments


2,647


(5,471)


(806)

Net income


366,971


114,556


16,872

Less: Net income (loss) attributable to non-controlling interest


(1,014)


1,007


148

Net income attributable to Huami Corporation


367,985


113,549


16,724

Less: Undistributed earnings allocated to participating nonvested restricted shares


2,102



Net income attributable to ordinary shareholders of Huami Corporation


365,883


113,549


16,724

Net income per share attributable to ordinary 
shareholders of Huami Corporation







Basic income per ordinary share


1.51


0.46


0.07

Diluted income per ordinary share


1.43


0.44


0.06








Net income per ADS (4 ordinary shares equal to 1 ADS)







ADS – basic


6.03


1.83


0.27

ADS – diluted


5.73


1.75


0.26








Weighted average number of shares used in computing net income per share

Ordinary share – basic


242,542,392


248,080,549


248,080,549

Ordinary share – diluted


255,322,189


259,723,569


259,723,569

HUAMI CORPORATION

Reconciliation of GAAP and Non-GAAP Results

(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”)

except for number of shares and per share data, or otherwise noted)




For the Nine Months Ended September 30,



2019


2020



RMB


RMB


US$

Net income attributable to Huami Corporation


367,985


113,549


16,724

Share-based compensation expenses


48,579


51,936


7,649

Adjusted net income attributable to Huami 
Corporation


416,564


165,485


24,373

















For the Nine Months Ended September 30,



2019


2020



RMB


RMB


US$








Net income attributable to ordinary shareholders
of Huami Corporation


365,883


113,549


16,724

Share-based compensation expenses attributable

to ordinary shareholders of Huami Corporation


48,301


51,936


7,649

Adjusted net income attributable to ordinary 
shareholders of Huami Corporation[2]


414,184


165,485


24,373








Adjusted net income per share attributable to 
ordinary shareholders of Huami Corporation







Adjusted basic income per ordinary share


1.71


0.67


0.10

Adjusted diluted income per ordinary share


1.62


0.64


0.09








Adjusted net income per ADS (4 ordinary shares equal
to 1 ADS)







ADS – basic


6.83


2.67


0.39

ADS – diluted


6.49


2.55


0.38








Weighted average number of shares used in 
computing net income per share







Ordinary share – basic


242,542,392


248,080,549


248,080,549

Ordinary share – diluted


255,322,189


259,723,569


259,723,569








Share-based compensation expenses included 
are follows:







Cost of revenues


47


(54)


(8)

Selling and marketing


2,557


1,820


268

General and administrative


36,539


28,963


4,266

Research and development


9,436


21,207


3,123

Total


48,579


51,936


7,649

SOURCE Huami Corporation

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