Huami Corporation Reports Second Quarter 2020 Unaudited Financial Results

BEIJING, Aug. 18, 2020 /PRNewswire/ -- Huami Corporation ("Huami" or the "Company") (NYSE: HMI) today reported revenue of RMB1.137 billion, or US$161.0 million; GAAP diluted net income per share of RMB0.05 (US$0.01), or GAAP diluted net income per ADS of RMB0.21 (US$0.03) for the second quarter ended June 30, 2020.

"I am proud of our teams and our brands that generated revenue growth of 9.5% in the second quarter and 21.1% for the first half of 2020, with the challenges of the worldwide pandemic," said Wang Huang, Chairman and CEO of Huami. "New products introduced in the first half of the year, including smartwatches, ear buds and other smart health devices helped our growth, although the pandemic did alter the magnitude of our and the industry's growth. Interest in our new smart health devices and the recent success in the application of our proprietary health data analysis tools for healthcare insurers and providers give us confidence in our strategy, growth and future guidance."



            
              Second Quarter 2020 Financial Summary


                                                                                                                                             For the Three Months Ended                  For the Six Months Ended




            GAAP In millions, except percentages and per share                                                                          
     
              June 30,          
     
     June 30,                              
     
     June 30,     
     
     June 30,
    amounts                                                                                                                                                        2020             2019                                      2020              2019




            Revenue RMB                                                                                                                                        1,137.3          1,038.7                                   2,225.7           1,838.3



            Revenue USD                                                                                                                                          161.0            151.3                                     315.0             267.8



            Gross Margin                                                                                                                                         22.3%           26.7%                                    22.4%            26.9%



            Net income attributable to Huami                                                                                                                      13.3             89.4                                      32.5             164.6
    Corporation RMB



            Adjusted net income attributable to Huami                                                                                                             19.1            111.7                                      44.7             206.7
    Corporation RMB[1]





            Diluted net income per share RMB                                                                                                                      0.05             0.35                                      0.13              0.64



            Diluted net income per ADS USD                                                                                                                        0.03             0.20                                      0.07              0.37



            Adjusted diluted net income per share RMB[2]                                                                                                          0.07             0.43                                      0.17              0.80



            Adjusted diluted net income per ADS USD                                                                                                               0.04             0.25                                      0.10              0.47



            Units Shipped                                                                                                                                          8.9              8.3                                      16.5              13.9





            
              [1] 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.



            
              [2] 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

Overview

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 devices for consumers, and analytics services for industry. Consumer health devices are sold through a number of partner and direct channels in more than 70 countries, at the end of the second quarter, 2020. We market products utilizing our proprietary technology under own brand names, including Amazfit and Zepp. We also develop and manufacture under a preferred partner agreement for Xiaomi Corporation, which are sold under its own brand names, such as the Mi Band. We provide our proprietary technology to Timex for several of its smart watch offerings. To get full utility from our devices, consumers synchronize their devices with our Amazfit app on their phones to track their biometric data and utilize intelligent algorithms to gain insights into their health or fitness.

Proprietary technology

In the second quarter, Huami announced the second generation of its proprietary artificial intelligence smart device chip, the Huangshan 2 which came to market 18 months after the introduction of the first generation in September 2018. At the same time, we announced the next generation of our proprietary biometric sensor and biometric algorithms that monitor a variety of health metrics. Leveraging internally developed advanced technology allows us to produce health and fitness focused products at price/feature points that consumers in many countries find attractive. New products employing the Huangshan 2 chip are planned to become available in the first quarter of 2021. New products added to our offerings in the first half of 2020 include several new smart watches and fitness bands, smart ear buds, and a collapsible treadmill.

Revenue

Total units shipped reached 8.9 million, compared with 8.3 million in the second quarter of 2019, a 7.2% increase. Second quarter revenues reached RMB1,137.3 million (US$161.0 million), representing an increase of 9.5% from the second quarter of 2019. The increase in the quarter was driven by sales both through Xiaomi and Huami's self-branded wearable products. New products, such as ear buds, demonstrated early consumer acceptance.

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. For example, in the second quarter 2020, the company's shipments of Xiaomi wearable products were in a transition period with the launch of the Mi Band 5 in late June. We expect our business cooperation with Xiaomi to continue in the future.

Covid-19 Impact

Covid-19 continued to have a significant negative affect on retail sales in all areas of the world, and in most product categories, through the second quarter. For example, although China recovered and opened many retail establishments midway through the second quarter, a number of Asian retailers reported that shoppers were slow to return, depressing second quarter results. In the Americas and Europe, continued or resurging Covid infection rates kept many stores closed, and also kept many shoppers out of the stores. Many retailers reduced inventories and orders during the second quarter. These all affected our second quarter results.

Production delays due to the pandemic that slowed manufacture of products in the first quarter have been resolved, with minimal lingering impacts in the second quarter.

Looking forward, Huami is working with its channel partners flexibly as they reevaluate or change their market strategies, such as shifting focus to online sales and on-demand retail models. While Huami has several direct online sales channels, the vast majority of our revenue flows through these retail partner channels.

Before the pandemic hit, industry expectations were for strong demand and continued growth for smart health technology for many years. Aside from the disruption and re-setting of consumer purchasing method choices, we see no evidence to indicate that megatrend has been materially changed. Whether by personal choice or by encouragement from those who pay for our care, the world is increasingly focused on improving health. In the nearer term, with all the reports of people gaining weight during lockdowns, we think there may be upticks in demand for smart health technology in different geographies as people refocus on their health.

In addition, the company is engaged in research and development related to detection of Covid-19 infection signals through its internal R&D team, as well as with some of its university research partners.

Gross Margin

Gross margin in the second quarter 2020 was 22.3%, compared with 26.7% in the year-ago second 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 second quarter 2020, total gross margin was positively affected by a higher percentage of Huami-branded products, offset by higher quantities of lower margin products shipped to Xiaomi, and, by discount promotions for some older products in the transition to the new Mi Band 5.

Research & Development

Second quarter 2020 R&D expense was RMB117.2 million, increasing 25% year-over year, and comprised 10.3% of revenue, compared to 9.0% in the year-ago second 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, such as new products expected to be launched in the second half of 2020. Second quarter R&D expense was down 1% sequentially from the first quarter 2020.

The company believes that smart R&D investment is key to its ability to more rapidly develop and bring to market new smart devices and analytics for consumers and industry. The company expects to continue to make these investments in its future despite the challenges posed by the Covid-19 pandemic.

Sales & Marketing

Sales and Marketing expense for the second quarter 2020 was RMB71.3 million, increasing 76.6% year-over-year, and comprised 6.3% of revenue, compared to 3.9% in the year-ago quarter. Sales and Marketing expense is higher in 2020 reflecting the company's focus on expanding international markets outside of China for its own Amazfit-branded products, including increases in advertising and promotional expenses for self-branded products during holiday sales and promotional events and growth in personnel-related expenses. In June, we organized our first AI Innovation convention to present our current research result to the public and opened our first Amazfit offline retail store in Beijing to offer domestic consumers the opportunity to have a first-hand in person experience with our products.

General & Administrative

Second quarter 2020 General and Administrative expense was RMB55.4 million, increasing 8.6% year-over-year, and comprised 4.9% of revenue, the same as the 2019 second quarter. The 10.4% increase in first-half G&A expense in 2020 compared to 2019 reflects primarily the increase in exchange rate fluctuations, professional fees for business management, and depreciation and amortization expenses, offset by the decrease of share-based compensation.

Operating Income and Expenses

Total Operating Expense for the second quarter 2020 was RMB244.0 million, up 31.7% 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 21.5% of revenue in the second quarter 2020 compared to 17.8% in the year-ago quarter, and 20.6% in Q1 2020.

Operating Income for the second quarter 2020 was RMB9.4 million, down 89.8% from RMB92.1 million in the year-ago quarter, driven primarily by the year-over-year increases of 76.6% in Sales & Marketing expense and 25.0% in R&D expense.

Liquidity and Capital Resources

At June 30, 2020, the Company had cash and cash equivalents of RMB2,649.2 million (US$375.0 million), compared with RMB1,803.1 million as of December 31, 2019.

Second Quarter Operational Highlights

"In the first half of 2020, we expanded the breadth of our product offerings," added Huang. "Our first half results reflect our strong brand recognition, effective sales and marketing strategy and superior value proposition. In the first quarter, Amazfit branded products ranked fifth in global shipment volume according to IDC's quarterly report and registered triple digit unit sales growth in the US, Western Europe, and Southeast Asia. And in the second quarter, our overseas shipments held their ground in recovering global markets with international versions of our products accounting for 47.9% of total unit shipments. Another achievement in the second quarter was that we successful launched Mi-band 5, the fifth generation in the popular product line, with strong early sales momentum. We are also very excited with the upcoming release of our new brand, Zepp, by which we target a more premier market and expect to broaden our customer base substantially.

"These product launches are part of our continuous execution on our mission, 'Connect Health with Technology.' In July, Huami's wholly owned subsidiary, PAI Health, announced an agreement with Prudential Corporation Asia to incorporate PAI Health's science-backed activity metric into Prudential's Pulse digital health app. This will provide new actionable heart health insights to Prudential members across 11 markets in Asia.

"While the first half of 2020 was a challenging period for all of us, we are proud of our performance in smart wearable product shipments, and the strong execution of our health service strategy. We are confident that our device shipment volume will continue to climb in the second half of the year and we look forward to delivering value to all of our stakeholders," concluded Mr. Huang.

Outlook

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

    --  Net revenues to be between RMB2.1 billion and RMB2.15 billion, which
        would represent an increase of approximately 12.9% to 15.6% from RMB1.86
        billion in the third 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 8:00 a.m. Eastern Standard Time on Tuesday, August 18, 2020 (8:00 p.m. Beijing Time on August 18, 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 hours after the call until August 25, 2020 by dialing:



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



              International:           
              +1-412-317-0088



              Replay Passcode:                            10146949

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 wearable devices, including its own Amazfit brand, and products developed and manufactured for Xiaomi and Timex, comprising 26% of global category shipments([3]). 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.


                                           [3]
                 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 RMB7.0651 to US$1.00, the effective noon buying rate for June 30, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 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: ir@huami.com

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

In the United States:
Huami Corporation
Brad Samson
Tel: +1-714-955-3951
E-mail: brad.samson@huami-usa.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 June 30,



                                                                                                                                                                   2019                     2020



                                                                                                                                 
              
                RMB                 
     
           RMB         US$





              
                Assets



              
                Current assets:



              Cash and cash equivalents                                                                                                                      1,803,117                2,649,185 374,968



              Restricted cash                                                                                                                                      874                    2,304     326



              Term deposit                                                                                                                                                               7,065   1,000



              Accounts receivable                                                                                                                              188,940                  136,039  19,255



              Amounts due from related parties, current                                                                                                      1,421,170                  645,920  91,424



              Inventories                                                                                                                                      893,806                  840,224 118,926



              Short-term investments                                                                                                                            17,187                   17,805   2,520



              Prepaid expenses and other current assets                                                                                                         67,358                   61,315   8,678




              
                Total current assets                                                                                                              4,392,452                4,359,857 617,097






              Property, plant and equipment, net                                                                                                                64,350                   96,372  13,641



              Intangible asset, net                                                                                                                             85,753                  123,498  17,480



              Goodwill[4]                                                                                                                                        5,930                   73,619  10,420



              Long-term investments                                                                                                                            406,099                  314,635  44,534



              Deferred tax assets                                                                                                                              102,649                  124,598  17,636



              Other non-current assets                                                                                                                           8,828                   15,834   2,241



              Non-current operating lease right-of-use assets                                                                                                  108,682                   92,001  13,022




              
                Total assets                                                                                                                      5,174,743                5,200,414 736,071








              
                
                  [4] In June 2020, the Company purchase the 100% equity interest of PAI Health, Inc. ("PAI")
    with a preliminary total consideration of RMB102.5 million. Under the preliminary consideration, the Company
    recognized RMB67.7 million provisional amount as goodwill.


                                                               
              
                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 June 30,



                                                                                                                        2019                     2020



                                                                                      
              
                RMB                 
     
           RMB          US$





     
                Liabilities



     
                Current liabilities:



     Accounts payable                                                                                             1,999,951                1,176,344  166,501



     Advance from customers                                                                                          44,793                   42,752    6,051



     Amount due to related parties, current                                                                          14,769                   16,116    2,281



     Accrued expenses and other current liabilities                                                                 352,249                  254,353   36,001



     Income tax payables                                                                                             67,854                   26,578    3,762



     Notes payable                                                                                                    2,184



     Bank borrowings                                                                                                                        881,436  124,759




     
                Total current liabilities                                                                       2,481,800                2,397,579  339,355




     Deferred tax liabilities                                                                                         5,399                   11,689    1,654



     Other non-current liabilities                                                                                  113,596                  174,509   24,700



     Non-current operating lease liabilities                                                                         76,360                   63,937    9,050




     
                Total liabilities                                                                               2,677,155                2,647,714  374,759


                                                                          
              
                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 June 30,



                                                                                                                                     2019                   2020



                                                                                                   
              
                RMB               
     
          RMB          US$





     
                Equity



     Ordinary shares                                                                                                                 155                    155      22



     Additional paid-in capital                                                                                                1,478,902              1,491,115 211,054



     Accumulated retained earnings                                                                                               910,612                943,087 133,485



     Accumulated other comprehensive income                                                                                      111,081                121,920  17,257




     
                Total Huami Corporation shareholders' equity                                                                 2,500,750              2,556,277 361,818




     Non-controlling interests                                                                                                   (3,162)               (3,577)  (506)




     
                Total equity                                                                                                 2,497,588              2,552,700 361,312




     
                Total liabilities and equity                                                                                 5,174,743              5,200,414 736,071


                                                                            
              
                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 June 30,



                                                                                                       2019                                           2020



                                                                             
              
                RMB                     
              
              RMB     
     
        US$





              Revenues                                                                           1,038,715                                      1,137,274         160,971



              Cost of revenues                                                                     761,421                                        883,891         125,107




              
                Gross profit                                                            277,294                                        253,383          35,864




              
                Operating expenses:



              Selling and marketing                                                                 40,405                                         71,342          10,098



              General and administrative                                                            51,030                                         55,423           7,845



              Research and development                                                              93,751                                        117,207          16,590



                            Total operating expenses                                                185,186                                        243,972          34,533




              
                Operating income                                                         92,108                                          9,411           1,331



                            Other income and expenses:



              Interest income                                                                        4,803                                         13,667           1,934



              Other income, net                                                                      4,351                                          1,137             161



                            Income before income tax                                                101,262                                         24,215           3,426



              Income tax expenses                                                                 (12,352)                                       (2,486)          (352)



                            Income before loss from equity method
                             investments                                                             88,910                                         21,729           3,074



              Loss from equity method investments                                                    (265)                                       (7,611)        (1,077)




              
                Net income                                                               88,645                                         14,118           1,997



               Less: Net (loss) income attributable to non-
                controlling interest                                                                  (719)                                           811             115



                            Net income attributable to Huami Corporation                             89,364                                         13,307           1,882



               Less: Undistributed earnings allocated to
                participating nonvested                                                                 190
    restricted shares



                            Net income attributable to ordinary
                             shareholders of Huami                                                   89,174                                         13,307           1,882
    Corporation



                            Net income per share attributable to ordinary


                            shareholders of Huami Corporation



              Basic income per ordinary share                                                         0.37                                           0.05            0.01



              Diluted income per ordinary share                                                       0.35                                           0.05            0.01




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



              ADS - basic                                                                             1.46                                           0.21            0.03



              ADS - diluted                                                                           1.39                                           0.21            0.03




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



              Ordinary share - basic                                                           243,596,530                                    247,828,507     247,828,507



              Ordinary share - diluted                                                         257,455,618                                    259,364,320     259,364,320


                                                                                         
              
                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 June 30,



                                                                                                                                                 2019                                    2020



                                                                                                                       
              
                RMB                     
            
         RMB     
     
        US$



              
                Net income attributable to Huami Corporation                                                                       89,364                                  13,307           1,882



              Share-based compensation expenses                                                                                               22,355                                   5,835             826




              
                Adjusted net income attributable to Huami                                                                         111,719                                  19,142           2,708
    Corporation







                                                                                                                                            For the Three Months Ended June 30,



                                                                                                                                                 2019                                    2020



                                                                                                                       
              
                RMB                     
            
         RMB     
     
        US$





              
                Net income attributable to ordinary shareholders                                                                   89,174                                  13,307           1,882
    of Huami Corporation



              Share-based compensation expenses attributable to                                                                               22,307                                   5,835             826
    ordinary shareholders of Huami Corporation




              
                Adjusted net income attributable to ordinary                                                                      111,481                                  19,142           2,708
    shareholders of Huami Corporation[2]






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



              Adjusted basic income per ordinary share                                                                                          0.46                                    0.08            0.01



              Adjusted diluted income per ordinary share                                                                                        0.43                                    0.07            0.01





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



              ADS - basic                                                                                                                       1.83                                    0.31            0.04



              ADS - diluted                                                                                                                     1.73                                    0.30            0.04





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



              Ordinary share - basic                                                                                                     243,596,530                             247,828,507     247,828,507



              Ordinary share - diluted                                                                                                   257,455,618                             259,364,320     259,364,320





              
                Share-based compensation expenses included
    are follows:



              Cost of revenues                                                                                                                    37                                    (61)            (9)



              Selling and marketing                                                                                                            1,579                                     632              89



              General and administrative                                                                                                      14,973                                   3,833             543



              Research and development                                                                                                         5,766                                   1,431             203




              
                Total                                                                                                              22,355                                   5,835             826


                                                                   
              
                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 Six Months Ended June 30,



                                                                                               2019                                          2020



                                                                     
              
                RMB                     
              
             RMB     
     
        US$





     Revenues                                                                            1,838,311                                     2,225,735         315,032



     Cost of revenues                                                                    1,343,554                                     1,727,792         244,553




     
                Gross profit                                                             494,757                                       497,943          70,479




     
                Operating expenses:



     Selling and marketing                                                                  62,588                                       126,185          17,860



     General and administrative                                                             96,322                                       106,306          15,047



     Research and development                                                              166,131                                       235,543          33,339



                   Total operating expenses                                                 325,041                                       468,034          66,246




     
                Operating income                                                         169,716                                        29,909           4,233



                   Other income and expenses:



     Interest income                                                                        12,293                                        21,338           3,020



     Other income (expenses), net                                                            4,813                                       (8,018)        (1,135)


      Gain from fair value change of long-term
       investment                                                                                                                          1,293             183



                   Income before income tax                                                 186,822                                        44,522           6,301



     Income tax expenses                                                                  (23,034)                                      (4,519)          (640)



                   Income before loss from equity method
                    investments                                                             163,788                                        40,003           5,661



     Loss from equity method investments                                                     (231)                                      (7,943)        (1,124)




     
                Net income                                                               163,557                                        32,060           4,537



      Less: Net loss attributable to non-
       controlling interest                                                                 (1,091)                                        (415)           (59)



                   Net income attributable to Huami Corporation                             164,648                                        32,475           4,596



      Less: Undistributed earnings allocated to
       participating nonvested restricted shares                                              1,425



                   Net income attributable to ordinary
                    shareholders of Huami Corporation                                       163,223                                        32,475           4,596



                   Net income per share attributable to ordinary


                   shareholders of Huami Corporation



     Basic income per ordinary share                                                          0.68                                          0.13            0.02



     Diluted income per ordinary share                                                        0.64                                          0.13            0.02




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



     ADS - basic                                                                              2.71                                          0.52            0.07



     ADS - diluted                                                                            2.56                                          0.50            0.07




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



     Ordinary share - basic                                                            240,817,983                                   247,742,838     247,742,838



     Ordinary share - diluted                                                          255,237,925                                   259,456,193     259,456,193


                                                                                         
              
                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 Six Months Ended June 30,



                                                                                                                                                 2019                                  2020



                                                                                                                       
              
                RMB                     
          
         RMB     
     
        US$



              
                Net income attributable to Huami Corporation                                                                      164,648                                32,475           4,596



              Share-based compensation expenses                                                                                               42,088                                12,213           1,728




              
                Adjusted net income attributable to Huami                                                                         206,736                                44,688           6,324
    Corporation







                                                                                                                                            For the Six Months Ended June 30,



                                                                                                                                                 2019                                  2020



                                                                                                                       
              
                RMB                     
          
         RMB     
     
        US$





              
                Net income attributable to ordinary shareholders                                                                  163,223                                32,475           4,596
    of Huami Corporation



              Share-based compensation expenses attributable                                                                                  41,724                                12,213           1,728


              to ordinary shareholders of Huami Corporation




              
                Adjusted net income attributable to ordinary                                                                      204,947                                44,688           6,324
    shareholders of Huami Corporation[2]






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



              Adjusted basic income per ordinary share                                                                                          0.85                                  0.18            0.03



              Adjusted diluted income per ordinary share                                                                                        0.80                                  0.17            0.02





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



              ADS - basic                                                                                                                       3.40                                  0.72            0.10



              ADS - diluted                                                                                                                     3.21                                  0.69            0.10





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



              Ordinary share - basic                                                                                                     240,817,983                           247,742,838     247,742,838



              Ordinary share - diluted                                                                                                   255,237,925                           259,456,193     259,456,193





              
                Share-based compensation expenses included
    are follows:



              Cost of revenues                                                                                                                    39                                  (54)            (8)



              Selling and marketing                                                                                                            1,910                                 1,264             179



              General and administrative                                                                                                      32,409                                 7,930           1,122



              Research and development                                                                                                         7,730                                 3,073             435




              
                Total                                                                                                              42,088                                12,213           1,728

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SOURCE Huami Corporation