Huami Corporation Reports Third Quarter 2020 Unaudited Financial Results
BEIJING, Nov. 23, 2020 /PRNewswire/ -- Huami Corporation (NYSE: HMI) today reported revenue of RMB2.2 billion, or US$329.2 million; GAAP diluted net income per share of RMB0.31 (US$0.05), or GAAP diluted net income per ADS of RMB1.24 (US$0.18) for the third quarter ended September 30, 2020.
"Third quarter unit and revenue growth of 16% and 20%, respectively, was predominantly driven by shipments of the Xiaomi Mi Band 5, continued geographic expansion, and the effect of improved economic conditions in many regions," said Wang Huang, Chairman and CEO of Huami. "We are continuing our strategy as a value leader, leveraging our proprietary technology to drive feature set/price points that are attractive to many budget ranges, and we launched a number of promising new products in the third quarter. At the same time we are continuing to explore the healthcare services business with our partners like Prudential Asia, in order to capture the opportunities in the fast-growing healthcare service industry."
"We continue to manage the business for long-term success," added chief financial officer Leon Deng. "However, we experienced some new products launch plan delays and production delays due to the pandemic, and resurgence of the virus in many key markets tempers our near-term outlook. As a result, we will be exercising control on expenses in the coming quarter by focusing on projects with higher return on investment."
Third Quarter 2020 Financial Summary
For the Three Months Ended For the Nine Months Ended
GAAP in millions, except percentages and per share
Sept. 30, 2020
Sept. 30, 2019[1]
Sept. 30, 2020
Sept. 30, 2019[1]
amounts
Revenue RMB 2,235.1 1,862.5 4,460.8 3,700.8
Revenue USD 329.2 260.6 657.0 517.8
Gross Margin 20.6% 25.2% 21.5% 26.1%
Net income attributable to Huami 81.1 203.3 113.5 368.0
Corporation RMB
Adjusted net income attributable to Huami 120.8 209.8 165.5 416.6
Corporation RMB[2]
Diluted net income per share RMB 0.31 0.79 0.44 1.43
Diluted net income per ADS USD 0.18 0.44 0.26 0.80
Adjusted diluted net income per share RMB[3] 0.46 0.81 0.64 1.62
Adjusted diluted net income per ADS USD 0.27 0.45 0.38 0.91
Units Shipped 15.9 13.7 32.4 27.6
[1] The USD numbers in 2019 are
referenced with the prior 6-K
disclosures.
[2] Adjusted net income attributable
to Huami Corporation is a non-GAAP
measure, which excludes share-
based compensation expenses. See
"Reconciliation of GAAP and Non-
GAAP Results" at the end of this
press release.
[3] Adjusted diluted net income is
the abbreviation of Adjusted net
income attributable to ordinary
shareholders of Huami Corporation,
which is a non-GAAP measure and
excludes share-based compensation
expenses attributable to ordinary
shareholders of Huami Corporation,
and is used as the numerator in
computation of adjusted basic and
diluted net income per ADS
attributable to ordinary
shareholders of Huami Corporation.
Management's Discussion and Analysis
Revenue
Total units shipped in the third quarter 2020 increased 16.1% year-over-year, reaching 15.9 million, compared with 13.7 million in the third quarter of 2019. Third quarter revenues reached RMB2,235.1 million (US$329.2 million), an increase of 20% from the third quarter of 2019. The increase in the quarter was driven primarily by sales through Xiaomi, principally the new Mi Band 5. Sales of self-branded products in the third quarter were primarily driven by new products, including the new Amazfit watches and TWS earbuds. Both sequential and year-over-year quarterly revenue changes can be affected by seasonality of purchase patterns globally, as well as by timing of new product introductions.
Covid-19 Impact
The negative impact of Covid-19 receded in Q3 on retail sales and the worldwide economy generally. China's GDP rose 5% in the third quarter, some sectors of European retail were stronger, and U.S. retail sales increased 5% in September. We believe this was a contributing factor to Huami's growth in the third quarter, and we experienced a significant rebound and growth of device activations in most of the markets during the quarter, compared sequentially to the June quarter.
Production delays related to the pandemic in the quarter delayed the launch date of a new product and affected new product inventory availability.
Currently, it is reported that a new resurgence of COVID-19 cases is widely around the world, including the U.S., many European countries, Russia, and Japan. Renewed restrictions are being implemented and considered. We expect this resurgence to negatively impact our customers and fourth quarter sales of our key product categories.
Longer-term, smart health technology plays a unique and important role in healthcare, as outlined in a recent white paper published by the company. Industry forecasts and research into consumer adoption and use of wearables and personal health technology still point to strong future demand. However, the company expects the near-term disruptions to daily life on a global scale will impact the fourth quarter, and are setting its expectations accordingly.
Gross Margin
Gross margin in the third quarter 2020 was 20.6%, compared with 25.2% in the year-ago third quarter. Gross margin and gross profit are affected by product mix as different products have different margin contributions, and these can change over the life of a product. In the third quarter 2020, mix between total Xiaomi and self-branded unit shipments was the same as the prior year's quarter, but gross margin was predominantly driven by lower margins on Xiaomi products compared to the year-ago quarter.
Research & Development
Third quarter 2020 R&D expense was RMB172.9 million, increasing 38.8% year-over year, and comprised 7.7% of revenue, compared to 6.7% of revenue in the year-ago third quarter, reflecting personnel additions and expansion of R&D activities for future products and new product categories, including consumer products and analytics solutions for industry. The company believes that smart R&D investment is key, and that at this percent of sales level is adequately resourced to effectively develop and bring to market new smart devices and analytics for consumers and industry.
Sales & Marketing
Sales and Marketing expense for the third quarter 2020 was RMB115.6 million, increasing 104.2% year-over-year, and comprised 5.2% of revenue, compared to 3.0% of revenue in the year-ago quarter. Higher sales and marketing expense in 2020 was mainly driven by brand promotions for our own branded products globally.
General & Administrative
General and Administrative expense was RMB91.0 million, increasing 30.8% year-over-year, and comprised 4.1% of revenue, compared to 3.7% in the 2019 third quarter. The increase is primarily due to an increase in share-based compensation.
Operating Income and Expenses
Total Operating Expense for the third quarter 2020 was RMB379.5 million, up 51.3% from the year-ago quarter, reflecting the investments in R&D, Sales and Marketing and G&A described in the preceding sections. Total operating expense represented 17.0% of revenue in the third quarter 2020 compared to 13.5% in the year-ago quarter. The company will be exercising control on expenses in the fourth quarter, focusing on costs as a percent of sales.
Operating Income for the third quarter 2020 was RMB80.6 million, down 63.2% from RMB219.1 million in the year-ago quarter.
Liquidity and Capital Resources
At September 30, 2020, the Company had cash and cash equivalents of RMB2,555.6 million (US$376.4 million), compared with RMB1,803.1 million as of December 31, 2019.
Outlook
For the fourth quarter of 2020, the management of the Company currently expects:
- Net revenues to be between RMB1.95 billion and RMB2.15 billion, compared with RMB2.11 billion in the fourth quarter of 2019.
The above outlook is based on the current market conditions and reflects the Company management's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.
Conference Call
The Company's management will hold a conference call at 7:30 a.m. Eastern Standard Time on Monday, November 23, 2020 (8:30 p.m. Beijing Time on November 23, 2020) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:
US (Toll Free): +1-888-346-8982
International: +1-412-902-4272
Mainland China (Toll Free): 400-120-1203
Hong Kong (Toll Free): 800-905-945
Hong Kong: +852-3018-4992
Participants should dial-in at least 10 minutes before the scheduled start time and ask to be connected to the call for "Huami Corporation."
Additionally, a live and archived webcast of the conference call will be available at http://www.huami.com/investor.
A telephone replay will be available one hour after the call until November 30, 2020 by dialing:
US Toll Free:
+1-877-344-7529
International:
+1-412-317-0088
Replay Passcode: 10149826
About Huami Corporation
Huami's mission is to connect health with technology. Since its inception in 2013, Huami has developed a platform of proprietary technology including AI chips, biometric sensors, and data algorithms, which drive a broadening line of smart health products for consumers, and analytics services for industry. In 2019, Huami shipped 42.3 million units of smart watches and fitness bands, including its own Amazfit brand, and products developed and manufactured for Xiaomi, comprising 26% of global category shipments([)(4]). Huami Corporation is based in Hefei, China, with U.S. operations, Huami-USA, based in Cupertino, Calif. For more information, please visit https://www.huami.com/investor/pages/company-profile.
([4])IDC, Correcting and Replacing Shipments of Wearable Devices, 3/10/20
Use of Non-GAAP Measures
We use adjusted net income, a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. Adjusted net income represents net income excluding share-based compensation expenses, and such adjustment has no impact on income tax. Adjusted net income attributable to ordinary shareholders of Huami Corporation is a non-GAAP measure, which excludes share-based compensation expenses attributable to ordinary shareholders of Huami Corporation, and is used as the numerator in computation of adjusted net income per share attributable to ordinary shareholders of Huami Corporation.
We believe that adjusted net income and adjusted net income attributable to ordinary shareholders help identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in net income and net income attributable to ordinary shareholders. We believe that adjusted net income and adjusted net income attributable to ordinary shareholders provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects and allows for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.
Adjusted net income and adjusted net income attributable to ordinary shareholders, should not be considered in isolation or construed as an alternative to net income, basic and diluted net income per share attributable to ordinary shareholders of Huami Corporation or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures to the most directly comparable GAAP measures. Adjusted net income and adjusted net income attributable to ordinary shareholders, presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
Exchange Rate
The Company's business is primarily conducted in China and the significant majority of revenues generated are denominated in Renminbi ("RMB"). This announcement contains currency conversions of RMB amounts into U.S. dollars ("US$") solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB6.7896 to US$1.00, the effective noon buying rate for September 30, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on September 30, 2020, or at any other rate.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the cooperation with Xiaomi, the recognition of the Company's self-branded products; the Company's growth strategies; trends and competition in global wearable technology market; changes in the Company's revenues and certain cost or expense accounting policies; governmental policies relating to the Company's industry and general economic conditions in China and the global. Further information regarding these and other risks is included in the Company's filings with the United States Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
In China:
Huami Corporation
Grace Yujia Zhang
E-mail: ir@huami.com
The Piacente Group, Inc.
Yang Song
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$")
except for number of shares and per share data, or otherwise noted)
As of December 31, As of September 30,
2019 2020
RMB
RMB US$
Assets
Current assets:
Cash and cash equivalents 1,803,117 2,555,561 376,393
Restricted cash 874 2,404 354
Term deposit 200,000 29,457
Accounts receivable 188,940 157,983 23,268
Amounts due from related parties, current 1,421,170 1,312,677 193,336
Inventories 893,806 1,100,458 162,080
Short-term investments 17,187 18,118 2,668
Prepaid expenses and other current assets 67,358 101,982 15,020
Total current assets 4,392,452 5,449,183 802,576
Property, plant and equipment, net 64,350 106,771 15,726
Intangible asset, net 85,753 158,334 23,320
Goodwill 5,930 70,980 10,454
Long-term investments 406,099 336,759 49,599
Deferred tax assets 102,649 128,794 18,969
Other non-current assets 8,828 15,405 2,269
Non-current operating lease right-of-use assets 108,682 168,266 24,783
Total assets 5,174,743 6,434,492 947,696
HUAMI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
As of December 31, As of September 30,
2019 2020
RMB
RMB US$
Liabilities
Current liabilities:
Accounts payable 1,999,951 2,215,864 326,361
Advance from customers 44,793 41,865 6,166
Amount due to related parties, current 14,769 7,565 1,114
Accrued expenses and other current liabilities 352,249 291,108 42,875
Income tax payables 67,854 34,052 5,015
Notes payable 2,184
Bank borrowings 814,207 119,920
Total current liabilities 2,481,800 3,404,661 501,451
Deferred tax liabilities 5,399 21,646 3,188
Long-term borrowing 60,000 8,837
Other non-current liabilities 113,596 172,254 25,370
Non-current operating lease liabilities 76,360 125,020 18,413
Total liabilities 2,677,155 3,783,581 557,259
HUAMI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
As of December 31, As of September 30,
2019 2020
RMB
RMB US$
Equity
Ordinary shares 155 156 23
Additional paid-in capital 1,478,902 1,533,475 225,856
Accumulated retained earnings 910,612 1,024,161 150,843
Accumulated other comprehensive income 111,081 95,274 14,032
Total Huami Corporation shareholders' equity 2,500,750 2,653,066 390,754
Non-controlling interests (3,162) (2,155) (317)
Total equity 2,497,588 2,650,911 390,437
Total liabilities and equity 5,174,743 6,434,492 947,696
HUAMI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
For the Three Months Ended September 30,
2019 2020
RMB
RMB
US$
Revenues 1,862,531 2,235,093 329,194
Cost of revenues 1,392,670 1,775,017 261,432
Gross profit 469,861 460,076 67,762
Operating expenses:
Selling and marketing 56,631 115,617 17,029
General and administrative 69,578 90,987 13,401
Research and development 124,538 172,891 25,464
Total operating expenses 250,747 379,495 55,894
Operating income 219,114 80,581 11,868
Other income and expenses:
Interest income 10,911 10,330 1,521
Other expenses, net (1,971) (5,754) (847)
Gain from fair value change of long-term investment 3,304 487
Income before income tax 228,054 88,461 13,029
Income tax expenses (27,518) (8,437) (1,243)
Income before loss from equity method investments 200,536 80,024 11,786
Net income from equity method investments 2,878 2,472 364
Net income 203,414 82,496 12,150
Less: Net income attributable to non-controlling interest 77 1,422 209
Net income attributable to Huami Corporation 203,337 81,074 11,941
Net income attributable to ordinary shareholders of Huami 203,337 81,074 11,941
Corporation
Net income per share attributable to ordinary
shareholders of Huami Corporation
Basic income per ordinary share 0.83 0.33 0.05
Diluted income per ordinary share 0.79 0.31 0.05
Net income per ADS (4 ordinary shares equal to 1 ADS)
ADS - basic 3.31 1.30 0.19
ADS - diluted 3.15 1.24 0.18
Weighted average number of shares used in computing net
income per share
Ordinary share - basic
245,934,981 248,748,630 248,748,630
Ordinary share - diluted 258,343,485 260,829,357 260,829,357
HUAMI CORPORATION
Reconciliation of GAAP and Non-GAAP Results
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
For the Three Months Ended September 30,
2019 2020
RMB
RMB
US$
Net income attributable to Huami Corporation 203,337 81,074 11,941
Share-based compensation expenses 6,491 39,723 5,851
Adjusted net income attributable to Huami 209,828 120,797 17,792
Corporation
For the Three Months Ended September 30,
2019 2020
RMB
RMB
US$
Net income attributable to ordinary shareholders 203,337 81,074 11,941
of Huami Corporation
Share-based compensation expenses attributable to 6,491 39,723 5,851
ordinary shareholders of Huami Corporation
Adjusted net income attributable to ordinary 209,828 120,797 17,792
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 0.49 0.07
Adjusted diluted income per ordinary share 0.81 0.46 0.07
Adjusted net income per ADS (4 ordinary shares equal
to 1 ADS)
ADS - basic 3.41 1.94 0.29
ADS - diluted 3.25 1.85 0.27
Weighted average number of shares used in
computing net income per share
Ordinary share - basic 245,934,981 248,748,630 248,748,630
Ordinary share - diluted 258,343,485 260,829,357 260,829,357
Share-based compensation expenses included
are follows:
Cost of revenues 8
Selling and marketing 647 556 82
General and administrative 4,130 21,033 3,098
Research and development 1,706 18,134 2,671
Total 6,491 39,723 5,851
HUAMI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
For the Nine Months Ended September 30,
2019 2020
RMB
RMB
US$
Revenues 3,700,842 4,460,828 657,009
Cost of revenues 2,736,224 3,502,809 515,908
Gross profit 964,618 958,019 141,101
Operating expenses:
Selling and marketing 119,219 241,802 35,614
General and administrative 165,900 197,293 29,058
Research and development 290,669 408,434 60,156
Total operating expenses 575,788 847,529 124,828
Operating income 388,830 110,490 16,273
Other income and expenses:
Interest income 23,204 31,668 4,664
Other income (expenses), net 2,842 (13,772) (2,028)
Gain from fair value change of long-term investment 4,597 677
Income before income tax 414,876 132,983 19,586
Income tax expenses (50,552) (12,956) (1,908)
Income before loss from equity method investments 364,324 120,027 17,678
Net income (loss) from equity method investments 2,647 (5,471) (806)
Net income 366,971 114,556 16,872
Less: Net income (loss) attributable to non-controlling interest (1,014) 1,007 148
Net income attributable to Huami Corporation 367,985 113,549 16,724
Less: Undistributed earnings allocated to participating nonvested restricted shares 2,102
Net income attributable to ordinary shareholders of Huami Corporation 365,883 113,549 16,724
Net income per share attributable to ordinary
shareholders of Huami Corporation
Basic income per ordinary share 1.51 0.46 0.07
Diluted income per ordinary share 1.43 0.44 0.06
Net income per ADS (4 ordinary shares equal to 1 ADS)
ADS - basic 6.03 1.83 0.27
ADS - diluted 5.73 1.75 0.26
Weighted average number of shares used in computing net income per share 242,542,392 248,080,549 248,080,549
Ordinary share - basic
Ordinary share - diluted 255,322,189 259,723,569 259,723,569
HUAMI CORPORATION
Reconciliation of GAAP and Non-GAAP Results
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
For the Nine Months Ended September 30,
2019 2020
RMB
RMB
US$
Net income attributable to Huami Corporation 367,985 113,549 16,724
Share-based compensation expenses 48,579 51,936 7,649
Adjusted net income attributable to Huami 416,564 165,485 24,373
Corporation
For the Nine Months Ended September 30,
2019 2020
RMB
RMB
US$
Net income attributable to ordinary shareholders 365,883 113,549 16,724
of Huami Corporation
Share-based compensation expenses attributable 48,301 51,936 7,649
to ordinary shareholders of Huami Corporation
Adjusted net income attributable to ordinary 414,184 165,485 24,373
shareholders of Huami Corporation[2]
Adjusted net income per share attributable to
ordinary shareholders of Huami Corporation
Adjusted basic income per ordinary share 1.71 0.67 0.10
Adjusted diluted income per ordinary share 1.62 0.64 0.09
Adjusted net income per ADS (4 ordinary shares equal
to 1 ADS)
ADS - basic 6.83 2.67 0.39
ADS - diluted 6.49 2.55 0.38
Weighted average number of shares used in
computing net income per share
Ordinary share - basic 242,542,392 248,080,549 248,080,549
Ordinary share - diluted 255,322,189 259,723,569 259,723,569
Share-based compensation expenses included
are follows:
Cost of revenues 47 (54) (8)
Selling and marketing 2,557 1,820 268
General and administrative 36,539 28,963 4,266
Research and development 9,436 21,207 3,123
Total 48,579 51,936 7,649
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SOURCE Huami Corporation
