Huami Corporation Reports First Quarter 2019 Unaudited Financial Results

BEIJING, June 3, 2019 /PRNewswire/ -- Huami Corporation ("Huami" or the "Company") (NYSE: HMI), a biometric and activity data-driven company with significant expertise in smart wearable technology, today announced its unaudited financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Financial and Operating Highlights

    --  Revenues reached RMB799.6 million (US$119.1 million), representing an
        increase of 36.5% from the first quarter of 2018.
    --  Gross margin was 27.2%, compared with 25.0% for the first quarter of
        2018.
    --  Net income attributable to Huami Corporation was RMB75.3 million
        (US$11.2 million), compared with RMB14.8 million for the first quarter
        of 2018.
    --  Basic and diluted net income per American depositary share ("ADS")
        attributable to ordinary shareholders of Huami Corporation was RMB1.25
        (US$0.19) and RMB1.18 (US$0.18), respectively. Each ADS represents four
        (4) Class A ordinary shares.
    --  Adjusted net income attributable to Huami Corporation([1]) was RMB95.0
        million (US$14.2 million).
    --  Adjusted basic and diluted net income per ADS attributable to ordinary
        shareholders of Huami Corporation([2]) was RMB1.57 (US$0.23) and RMB1.49
        (US$0.22), respectively. Each ADS represents four (4) Class A ordinary
        shares.
    --  Total units shipped reached 5.6 million, compared with 4.8 million in
        the first quarter of 2018.


                        [1] Adjusted net income 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.


                        [2] 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 deemed dividend for
                         preferred shares, and is used as
                         the numerator in computation of
                         adjusted basic and diluted net
                         income per ADS attributable to
                         ordinary shareholders of Huami
                         Corporation.

"Strong revenue growth momentum continued in the first quarter, reflecting the effective leveraging of our rising global brand recognition, strategic relationships and consumer trust," said Wang Huang, Chairman and CEO "In the first quarter, with enhancements to and the expansion of, our overseas sales channels and strategies, international version product shipments continued climbing. In particular, our smart watches, in the first quarter, ranked number five globally. We are happy to see that self-branded products and others showed robust growth, with a 62.0% increase in revenue compared with the first quarter of 2018, and contributed 41.3% of total revenues in the first quarter of 2019."

"Our well-established strategic partnerships remain strong and stable. We will launch Mi-Band 4 very soon and continue to work with Xiaomi on future Mi Bands product development, including various band models targeting different global market segments. In the meantime, our team is diligently working closely with Timex Group to develop products as well as plan a global marketing strategy. Furthermore, our Amazfit products are riding the wave of the rapidly rising global smart watch market. In the next few months, we will launch multiple models of Amazfit watches covering different market demands and price ranges." Wang Huang continued, "We have also broadened our IoT life scenario capabilities, with Amazfit products now upgraded with full Amazon Alexa integration. In addition, all NFC version Huami products are now capable of accessing over 200 cities' public transportation networks in China. With all of our achievements in the first quarter, we are excited to continue developing and introducing new products and services, expanding our presence in global markets and further developing our strategic partnership initiatives."

David Cui, Chief Financial Officer, said, "Strong revenue growth continued in the first quarter, increasing 36.5% year-over-year, as the Company benefited from global market expansion and growing consumer recognition of our products. We continued the diversification of our product line, specifically with our self-branded products. Our self-branded products and others grew to 41.3% of total revenues. We shipped 5.6 million units in the quarter, up 17.9% from the first quarter of 2018, driven in large part by stronger international demand. Looking at how the year has started and then looking ahead, we feel confident that we are well-positioned to continue delivering on sustainable growth, through innovative new products and services, creative alliances, global expansion and operational efficiencies."

First Quarter 2019 Financial Results

Revenues increased by 36.5% to RMB799.6 million (US$119.1 million) from RMB585.9 million for the first quarter of 2018, due to an increase in the sales of Xiaomi wearable products and self-branded Amazfit products, both driven by increased brand recognition and the overall rise of the smartwatch market.

Cost of revenues increased by 32.5% to RMB582.1 million (US$86.7 million) from RMB439.2 million for the first quarter of 2018. The increase was in line with the rapid sales growth of both Xiaomi wearable products and self-branded Amazfit products.

Gross profit increased by 48.3% to RMB217.5 million (US$32.4 million) from RMB146.7 million for the first quarter of 2018. Gross margin of 27.2% in the first quarter compares with 25.0% in the first quarter 2018.

Total operating expenses increased by 1.5% to RMB139.9 million (US$20.8 million) from RMB137.8 million for the first quarter of 2018.

Research and development expenses decreased by 2.0% to RMB72.4 million (US$10.8 million) from RMB73.8 million for the first quarter of 2018, primarily due to a decrease in share-based compensation (SBC) expenses, which were offset by an increase in personnel-related expenses.

General and administrative expenses decreased by 8.1% to RMB45.3 million (US$6.7 million) from RMB49.3 million for the first quarter of 2018, primarily due to a decrease in SBC expenses, which were offset by an increase in personnel-related expenses.

Selling and marketing expenses increased by 50.5% to RMB22.2 million (US$3.3 million) from RMB14.7 million for the first quarter of 2018, primarily due to an increase in personnel-related expenses and an increase in advertising and promotional expenses, specifically for self-branded products.

Operating income was RMB77.6 million (US$11.6 million), compared with RMB8.8 million for the first quarter of 2018.

Income before income tax was RMB85.6 million (US$12.7 million), compared with RMB16.5 million for the first quarter of 2018.

Income tax expenses were RMB10.7 million (US$1.6 million), compared with RMB2.7 million for the first quarter of 2018.

Net income attributable to Huami Corporation totaled RMB75.3 million (US$11.2 million), compared with RMB14.8 million for the first quarter of 2018.

Net income attributable to ordinary shareholders of Huami Corporation increased to RMB74.1 million (US$11.0 million), compared with net loss attributable to ordinary shareholders of Huami Corporation of RMB199.6 million for the first quarter of 2018.

Basic and diluted net income per ADS attributable to ordinary shareholders of Huami Corporation was RMB1.25 (US$0.19) and RMB1.18 (US$0.18), respectively. Each ADS represents four (4) Class A ordinary shares.

Adjusted net income attributable to Huami Corporation, which excludes share-based compensation expenses, increased by 2.7% to RMB95.0 million (US$14.2 million) from RMB92.5 million for the first quarter of 2018.

Adjusted basic and diluted net income per ADS attributable to ordinary shareholders of Huami Corporation was RMB1.57 (US$0.23) and RMB1.49 (US$0.22), respectively. Each ADS represents four (4) Class A ordinary shares.

As of March 31, 2019, the Company had cash and cash equivalents of RMB1,572.4 million (US$234.3 million), compared with RMB1,441.8 million as of December 31, 2018.

Outlook

For the second quarter of 2019, the management of the Company currently expects:

    --  Net revenues to be between RMB990.0 million and RMB1,010.0 million,
        which would represent an increase of approximately 30.2% to 32.9% from
        RMB760.1 million for the second quarter of 2018.

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 8:00 a.m. Eastern Time on Monday, June 3, 2019 (8:00 p.m. Beijing Time on June 3, 2019) 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 two hours after the call until June 10, 2019 by dialing:



              US Toll Free:             
              +1-877-344-7529



              International:            
              +1-412-317-0088



              Replay Passcode:                             10131883

About Huami Corporation

Huami is a biometric and activity data-driven company with significant expertise in smart wearable technology. Since its inception in 2013, Huami has quickly established its global market leadership and recognition by shipping millions of units of smart wearable devices. In 2018, Huami shipped 27.5 million units of smart wearable devices. Huami has one of the largest biometric and activity databases in the global smart wearables industry. Huami's mobile apps work hand in hand with its smart wearable devices and provide users with a comprehensive view and analysis of their biometric and activity data.

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 deemed dividend for preferred shares, 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 and deemed dividend 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 RMB 6.7112 to US$1.00, the effective noon buying rate for March 29, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on March 29, 2019, 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: ir@huami.com

The Piacente Group, Inc.
Ross Warner
Tel: +86-10-6508-0677
E-mail: huami@tpg-ir.com

In the United States:
Brandi Piacente
Tel: +1-212-481-2050
E-mail:?huami@tpg-ir.com


                                                                  
              
                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 March 31,



                                                                                                                           2018                  2019



                                                                                         
              
                RMB                       RMB          US$







     
                Assets



     
                Current assets:



     Cash and cash equivalents                                                                                       1,441,802             1,572,377 234,291



     Restricted cash                                                                                                    10,010                 6,074     905



     Term deposit                                                                                                       96,969



     Accounts receivable                                                                                                58,925                51,163   7,624



     Amounts due from related parties, current                                                                         656,399               322,353  48,032



     Inventories                                                                                                       484,622               372,569  55,515



     Short-term investments                                                                                             50,482                51,077   7,611



     Prepaid expenses and other current assets                                                                          58,247                43,776   6,522




     
                Total current assets                                                                               2,857,456             2,419,389 360,500






     Property, plant and equipment, net                                                                                 40,042                46,285   6,897



     Intangible asset, net                                                                                              63,722                62,171   9,264



     Goodwill                                                                                                            5,930                 5,930     884



     Long-term investments                                                                                             208,949               233,007  34,719



     Deferred tax assets                                                                                                75,032                94,292  14,050



     Other non-current assets                                                                                            7,350                 5,155     768



     Noncurrent operating lease right-of-use assets[3]                                                                                       19,336   2,881




     
                Total assets                                                                                       3,258,481             2,885,565 429,963


                                                                                                              
              
                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 March 31,



                                                                                                                                                                        2018                 2019



                                                                                                                                     
              
                RMB                       RMB          US$





              
                Liabilities



              
                Current liabilities:



              Accounts payable                                                                                                                                    1,064,106              583,774  86,985



              Advance from customers                                                                                                                                  5,943                3,151     470



              Amount due to related parties, current                                                                                                                 10,695               10,763   1,604



              Accrued expenses and other current liabilities                                                                                                        213,975              214,390  31,946



              Income tax payables                                                                                                                                    54,037               82,721  12,326



              Notes payable                                                                                                                                          18,936                6,074     905



              Bank borrowings                                                                                                                                        20,000               20,000   2,980



              Current operating lease liabilities[3]                                                                                                                                     11,575   1,725




              
                Total current liabilities                                                                                                              1,387,692              932,448 138,941




              Deferred tax liabilities                                                                                                                                4,962                4,938     736



              Other non-current liabilities                                                                                                                          56,249               56,249   8,381



              Noncurrent operating lease liabilities[3]                                                                                                                                   5,761     858




              
                Total liabilities                                                                                                                      1,448,903              999,396 148,916






              
                [3] The Company has adopted Accounting Standards Update No. 2016-02, Leases, beginning January 1, 2019
    on a modified retrospective basis. As a result, the Company recognized approximately RMB19 million of
    right-of-use assets, approximately RMB12 million current lease liabilities and RMB6 million noncurrent
    lease liabilities on the consolidated balance sheet as of March 31, 2019. The Company elected not to
    recognize lease assets and liabilities for leases with a term of 12 months or less. The adoption did not have
    a material impact on the Company's consolidated statements of operations for the quarter ended March 31,
    2019 or the opening balances of retained earnings as of January 1, 2019.


                                                                          
              
                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 March 31,



                                                                                                                                   2018                      2019



                                                                                                 
              
                RMB                 
     
           RMB          US$





     
                Equity



     Ordinary shares                                                                                                               151                       151      22



     Additional paid-in capital                                                                                              1,373,577                 1,393,310 207,610



     Accumulated retained earnings                                                                                             340,046                   415,330  61,886



     Accumulated other comprehensive income                                                                                     97,141                    79,087  11,784




     
                Total Huami Corporation shareholders' equity                                                               1,810,915                 1,887,878 281,302




     Non-controlling interests                                                                                                 (1,337)                  (1,709)  (255)




     
                Total equity                                                                                               1,809,578                 1,886,169 281,047




     
                Total liabilities, mezzanine equity and equity                                                             3,258,481                 2,885,565 429,963


                                                                                            
              
                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 March 31,



                                                                                                                                                                             2018                                    2019



                                                                                                                                                            
      
            RMB                                  RMB        US$





              Revenues                                                                                                                                                   585,920                         799,596     119,144



              Cost of revenues                                                                                                                                           439,246                         582,133      86,741




              
                Gross profit                                                                                                                                  146,674                         217,463      32,403




              
                Operating expenses:



              Selling and marketing                                                                                                                                       14,740                          22,183       3,305



              General and administrative                                                                                                                                  49,270                          45,292       6,749



              Research and development                                                                                                                                    73,838                          72,380      10,785




              
                Total operating expenses                                                                                                                      137,848                         139,855      20,839




              
                Operating income                                                                                                                                8,826                          77,608      11,564




              
                Other income and expenses:



              Interest income                                                                                                                                              1,394                           7,490       1,116



              Other income                                                                                                                                                 6,237                             462          69




              
                Income before income tax                                                                                                                       16,457                          85,560      12,749



              Income tax expenses                                                                                                                                        (2,744)                       (10,682)    (1,592)




              
                Income before income from equity method investments                                                                                            13,713                          74,878      11,157



              Income from equity method investments                                                                                                                            7                              34           5




              
                Net income                                                                                                                                     13,720                          74,912      11,162




              Less: Net loss attributable to non-controlling interest                                                                                                    (1,048)                          (372)       (55)




              
                Net income attributable to Huami Corporation                                                                                                   14,768                          75,284      11,217




              Less: Accretion of Series A Preferred Shares                                                                                                                   177



              Less: Accretion of Series B-1 Preferred Shares                                                                                                                 368



              Less: Accretion of Series B-2 Preferred Shares                                                                                                               4,049



              Less: Deemed Dividend for Preferred Shares                                                                                                                 209,752



              Less: Undistributed earnings allocated to participating nonvested                                                                                                                           1,153         172
    restricted shares




              
                Net income attributable to ordinary shareholders of Huami                                                                                   (199,578)                         74,131      11,045
    Corporation




              
                Net income per share attributable to ordinary
    shareholders of Huami Corporation



              Basic (loss) income per ordinary share                                                                                                                      (1.31)                           0.31        0.05



              Diluted (loss) income per ordinary share                                                                                                                    (1.31)                           0.29        0.04





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



              ADS - basic                                                                                                                                                 (5.22)                           1.25        0.19



              ADS - diluted                                                                                                                                               (5.22)                           1.18        0.18





              
                Weighted average number of shares used in computing net                                                                                   152,893,007                     238,007,944 238,007,944
    income per share


              Ordinary share - basic





              Ordinary share - diluted                                                                                                                               152,893,007                     252,131,378 252,131,378


                                                                                                            
              
                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 March 31,



                                                                                                                                                            2018                                     2019



                                                                                                                                  
              
                RMB                     
             
         RMB     
     
        US$



              
                Net income attributable to Huami                                                                                              14,768                                   75,284          11,217
    Corporation



              Share-based compensation expenses                                                                                                          77,756                                   19,733           2,940




              
                Adjusted net income attributable to Huami                                                                                     92,524                                   95,017          14,157
    Corporation







                                                                                                                                                       For the Three Months Ended March 31,



                                                                                                                                                            2018                                     2019



                                                                                                                                  
              
                RMB                     
             
         RMB     
     
        US$





              
                Net income attributable to ordinary                                                                                        (199,578)                                  74,131          11,045
    shareholders of Huami Corporation



              Share-based compensation expenses attributable                                                                                             62,341                                   19,431           2,895


                 to ordinary shareholders of Huami Corporation



              Deemed Dividend for Preferred shares                                                                                                      209,752




              
                Adjusted net income attributable to ordinary                                                                                  72,515                                   93,562          13,940
    shareholders of Huami Corporation[4]






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



              Adjusted basic income per ordinary share                                                                                                     0.47                                     0.39            0.06



              Adjusted diluted income per ordinary share                                                                                                   0.39                                     0.37            0.06





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



              ADS - basic                                                                                                                                  1.90                                     1.57            0.23



              ADS - diluted                                                                                                                                1.57                                     1.49            0.22





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



              Ordinary share - basic                                                                                                                152,893,007                              238,007,944     238,007,944



              Ordinary share - diluted                                                                                                              162,243,568                              252,131,378     252,131,378





              
                Share-based compensation expenses included
    are follows:



              Cost of revenues                                                                                                                              332                                        2



              Selling and marketing                                                                                                                       4,062                                      331              49



              General and administrative                                                                                                                 37,010                                   17,436           2,598



              Research and development                                                                                                                   36,352                                    1,964             293




              
                Total                                                                                                                         77,756                                   19,733           2,940






              
                [4] 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 deemed
    dividend for preferred shares, and is used as the numerator in computation of adjusted net income per share attributable
    to ordinary shareholders of Huami Corporation.

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SOURCE Huami Corporation