Huami Corporation Reports Third Quarter 2020 Unaudited Financial Results

Rhea-AI Summary

Huami Corporation (HMI) reported Q3 2020 revenue of RMB2.2 billion (US$329.2 million), a 20% increase year-over-year, driven by strong sales of Xiaomi's Mi Band 5 and other self-branded products. The GAAP diluted net income per share was RMB0.31 (US$0.05), down from RMB0.79 (US$0.11) in Q3 2019. Gross margin decreased to 20.6% from 25.2% due to a shift in product mix. Despite strong market conditions, the company anticipates challenges ahead due to pandemic-related delays and forecasts Q4 2020 revenue between RMB1.95 billion and RMB2.15 billion.

Positive

• Q3 2020 revenue growth of 20% year-over-year.
• Total units shipped increased 16.1% to 15.9 million.
• Strong sales from the Xiaomi Mi Band 5 contributed significantly to revenue.
• Cash and cash equivalents increased to RMB2.6 billion (US$376.4 million) from RMB1.8 billion.

Negative

• GAAP diluted net income per share decreased to RMB0.31 from RMB0.79.
• Gross margin declined to 20.6% from 25.2% due to lower margins on Xiaomi products.
• New product launch delays and production issues related to COVID-19.
• Expected Q4 2020 revenue decline compared to Q4 2019.

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

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

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

Third Quarter 2020 Financial Summary
		For the Three Months Ended			For the Nine Months Ended
GAAP in millions, except percentages and per share amounts		Sept. 30, 2020	Sept. 30, 2019[1]		Sept. 30, 2020	Sept. 30, 2019[1]
Revenue RMB		2,235.1	1,862.5		4,460.8	3,700.8
Revenue USD		329.2	260.6		657.0	517.8
Gross Margin		20.6%	25.2%		21.5%	26.1%
Net income attributable to Huami Corporation RMB		81.1	203.3		113.5	368.0
Adjusted net income attributable to Huami Corporation RMB[2]		120.8	209.8		165.5	416.6
Diluted net income per share RMB		0.31	0.79		0.44	1.43
Diluted net income per ADS USD		0.18	0.44		0.26	0.80
Adjusted diluted net income per share RMB[3]		0.46	0.81		0.64	1.62
Adjusted diluted net income per ADS USD		0.27	0.45		0.38	0.91
Units Shipped		15.9	13.7		32.4	27.6

 

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

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

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

Management's Discussion and Analysis

Revenue

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

Covid-19 Impact

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

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

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

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

Gross Margin

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

Research & Development

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

Sales & Marketing

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

General & Administrative

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

Operating Income and Expenses

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

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

Liquidity and Capital Resources

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

Outlook

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

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

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

Conference Call

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

US (Toll Free):	+1-888-346-8982
International:	+1-412-902-4272
Mainland China (Toll Free):	400-120-1203
Hong Kong (Toll Free):	800-905-945
Hong Kong:	+852-3018-4992

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

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

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

US Toll Free:		+1-877-344-7529
International:		+1-412-317-0088
Replay Passcode:		10149826

About Huami Corporation

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

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

Use of Non-GAAP Measures

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

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

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

Exchange Rate

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

Safe Harbor Statement

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

For investor and media inquiries, please contact:

In China:
Huami Corporation
Grace Yujia Zhang
E-mail: 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 Corporation		203,337		81,074		11,941
Net income per share attributable to ordinary
shareholders of Huami Corporation
Basic income per ordinary share		0.83		0.33		0.05
Diluted income per ordinary share		0.79		0.31		0.05
Net income per ADS (4 ordinary shares equal to 1 ADS)
ADS – basic		3.31		1.30		0.19
ADS – diluted		3.15		1.24		0.18
Weighted average number of shares used in computing net income per share
Ordinary share – basic		245,934,981		248,748,630		248,748,630
Ordinary share – diluted		258,343,485		260,829,357		260,829,357

 

 

HUAMI CORPORATION
Reconciliation of GAAP and Non-GAAP Results
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
		For the Three Months Ended September 30,
		2019		2020
		RMB		RMB		US$
Net income attributable to Huami Corporation		203,337		81,074		11,941
Share-based compensation expenses		6,491		39,723		5,851
Adjusted net income attributable to Huami  Corporation		209,828		120,797		17,792
		For the Three Months Ended September 30,
		2019		2020
		RMB		RMB		US$
Net income attributable to ordinary shareholders of Huami Corporation		203,337		81,074		11,941
Share-based compensation expenses attributable to ordinary shareholders of Huami Corporation		6,491		39,723		5,851
Adjusted net income attributable to ordinary  shareholders of Huami Corporation[2]		209,828		120,797		17,792
Adjusted net income per share attributable to  ordinary shareholders of Huami Corporation
Adjusted basic income per ordinary share		0.85		0.49		0.07
Adjusted diluted income per ordinary share		0.81		0.46		0.07
Adjusted net income per ADS (4 ordinary shares equal to 1 ADS)
ADS – basic		3.41		1.94		0.29
ADS – diluted		3.25		1.85		0.27
Weighted average number of shares used in  computing net income per share
Ordinary share – basic		245,934,981		248,748,630		248,748,630
Ordinary share – diluted		258,343,485		260,829,357		260,829,357
Share-based compensation expenses included  are follows:
Cost of revenues		8		-		-
Selling and marketing		647		556		82
General and administrative		4,130		21,033		3,098
Research and development		1,706		18,134		2,671
Total		6,491		39,723		5,851

 

 

HUAMI CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
		For the Nine Months Ended September 30,
		2019			2020
		RMB			RMB			US$
Revenues		3,700,842		4,460,828			657,009
Cost of revenues		2,736,224		3,502,809			515,908
Gross profit		964,618		958,019			141,101
Operating expenses:
Selling and marketing		119,219		241,802			35,614
General and administrative		165,900		197,293			29,058
Research and development		290,669		408,434			60,156
Total operating expenses		575,788		847,529			124,828
Operating income		388,830		110,490			16,273
Other income and expenses:
Interest income		23,204		31,668			4,664
Other income (expenses), net		2,842		(13,772)			(2,028)
Gain from fair value change of long-term investment		-		4,597			677
Income before income tax		414,876		132,983			19,586
Income tax expenses		(50,552)			(12,956)			(1,908)
Income before loss from equity method investments		364,324		120,027			17,678
Net income (loss) from equity method investments		2,647			(5,471)			(806)
Net income		366,971		114,556			16,872
Less: Net income (loss) attributable to non-controlling interest		(1,014)		1,007				148
Net income attributable to Huami Corporation		367,985		113,549			16,724
Less: Undistributed earnings allocated to participating nonvested restricted shares		2,102		-			-
Net income attributable to ordinary shareholders of Huami Corporation		365,883		113,549			16,724
Net income per share attributable to ordinary  shareholders of Huami Corporation
Basic income per ordinary share		1.51		0.46			0.07
Diluted income per ordinary share		1.43		0.44			0.06
Net income per ADS (4 ordinary shares equal to 1 ADS)
ADS – basic		6.03		1.83			0.27
ADS – diluted		5.73		1.75			0.26
Weighted average number of shares used in computing net income per share Ordinary share – basic		242,542,392		248,080,549			248,080,549
Ordinary share – diluted		255,322,189		259,723,569			259,723,569

 

 

HUAMI CORPORATION
Reconciliation of GAAP and Non-GAAP Results
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$")
except for number of shares and per share data, or otherwise noted)
		For the Nine Months Ended September 30,
		2019		2020
		RMB		RMB		US$
Net income attributable to Huami Corporation		367,985		113,549		16,724
Share-based compensation expenses		48,579		51,936		7,649
Adjusted net income attributable to Huami  Corporation		416,564		165,485		24,373
		For the Nine Months Ended September 30,
		2019		2020
		RMB		RMB		US$
Net income attributable to ordinary shareholders of Huami Corporation		365,883		113,549		16,724
Share-based compensation expenses attributable to ordinary shareholders of Huami Corporation		48,301		51,936		7,649
Adjusted net income attributable to ordinary  shareholders of Huami Corporation[2]		414,184		165,485		24,373
Adjusted net income per share attributable to  ordinary shareholders of Huami Corporation
Adjusted basic income per ordinary share		1.71		0.67		0.10
Adjusted diluted income per ordinary share		1.62		0.64		0.09
Adjusted net income per ADS (4 ordinary shares equal to 1 ADS)
ADS – basic		6.83		2.67		0.39
ADS – diluted		6.49		2.55		0.38
Weighted average number of shares used in  computing net income per share
Ordinary share – basic		242,542,392		248,080,549		248,080,549
Ordinary share – diluted		255,322,189		259,723,569		259,723,569
Share-based compensation expenses included  are follows:
Cost of revenues		47		(54)		(8)
Selling and marketing		2,557		1,820		268
General and administrative		36,539		28,963		4,266
Research and development		9,436		21,207		3,123
Total		48,579		51,936		7,649

 

View original content:http://www.prnewswire.com/news-releases/huami-corporation-reports-third-quarter-2020-unaudited-financial-results-301178734.html

SOURCE Huami Corporation