Zepp Health Corp

NYSE:ZEPP

Earnings Call Transcript

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for Zepp Health Corporation's Fourth Quarter and Full Year 2024 Earnings Conference Call. At this time all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Grace Zhang, Director of Investor Relations for the company. Please go ahead, Grace.

[Grace Yujia Zhang, executive]

Hello, everyone and welcome to Zepp Health Corporation's Fourth Quarter and Full Year 2024 Earnings Conference Call. The company's financial and operating results were issued in a press release via the Newswire services earlier today and are posted online. You can also view the earnings release and slides referred to on this call by visiting the IR section of the company's website at ir.zepp.com.

Participating in today's call are Mr. Wang Wayne Huang, our Chairman of the Board of Directors and Chief Executive Officer and Ms. Leon Cheng Deng, our Chief Financial Officer. The company's management will begin with prepared remarks, and the call will conclude with a Q&A session. Mr. Mike Yeung, our Chief Operating Officer will join us for the Q&A session.

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe-Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties are included in the company's annual report on Form 20-F for the fiscal year ended December 31, 2023, and other filings as filed with the U.S. Securities and Exchange Commission.

The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Zepp's earnings release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial information. Zepp's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.

I will now turn the call over to our CEO, Mr. Wang Wayne Huang. Please go ahead.

[Wang Huang, executive]

Hello, everyone. Welcome and thank you for joining our fourth quarter 2024 earnings call.

In 2024, we expedited the transition towards a brand empowered, high-margin business model for Amazfit-branded products. We delved deeper into technological innovation and enhanced our global marketing footprint. Despite macroeconomic headwinds and supply bottlenecks, our overall sales in the fourth quarter of 2024 rose by more than 40% quarter-over-quarter, aligning with our guidance. Our gross margin for the year 2024 reached 39% compared with 26.2% full year 2023. At the same time, we finished the year with $112 million cash on hand, provides ample runway for us to invest in responding to market demands.

Let's delve deeper into our remarkable product accomplishments. In 2024, Zepp Health experienced remarkable breakthroughs in wearable technology, AI-powered health innovation, and the expansion of its ecosystem. The successful launch of the T-Rex 3 was a significant turning point, generating a strong surge in market demand and leading to substantial sequential growth in sales. Our T-Rex 3 has been meticulously crafted with a strategic approach to directly change the industry-leading sports and outdoor watches offered by our competitors.

With its military grade durable -- durability, extended battery life, offline mapping functionality, and highly accurate GPS navigation the T-Rex 3 has completely transformed the landscape of adventure-focused smartwatches, establishing new benchmarks for performance. What makes the T-Rex 3 truly exceptional is its status as one of the pioneering smartwatches to fully incorporate AI technology, powered by Zepp OS 4.0 and OpenAI's GPT 4.0, it further solidifies our dominant position in the AI-driven wearable market.

Just 6 months following its introduction, we have seen a consistent rise in user activations accompanied by an overwhelming amount of positive feedback from both users and key opinion leaders. We are confident that the T-Rex 3 will continue to maintain its strong up trajectory, driving higher sales of Amazfit products with attractive profit margins and bringing us closer to achieving our goal of near-term profitability.

At CES 2025, we further diversified our fitness and lifestyle lineup with the launch of Amazfit Active 2, integrating health checking, advanced biosensing, AI-driven coaching, multi-satellite navigation, and seamless smart interactions. Active 2 has received solid reviews from mainstream media in Europe and the United States. With its exquisite design and rich functions, it is hailed as a $100 product that challenges industry leader. The product is extremely popular and the momentum is rising fast. It is expected to experience explosive growth in the second quarter.

Additionally, the upcoming Amazfit Bip 6 series first introduced at the European launch of Active 2 will further expand our reach in the entry-level segment by delivering exceptional price performance value. We have started production in scale and shipment into the main online and offline channels in EMEA and U.S.A. This will propel further our sales growth in the second quarter.

Beyond smartwatches, we continue to expand the Zepp ecosystem into AI-powered health solutions. At CES 2025, we introduced Amazfit Vital, an AI-powered nutrition checking device that seamlessly integrates with our ecosystem. Unlike traditional food checking method, Vital utilize AI-powered image recognition to ultimately log meals, check nutrition and provide real-time dietary insights. By analyzing eating behaviors and offering personalized recommendations Vital expands Zepp Health's AI-driven approach beyond fitness into holistic lifestyle management.

Additionally, we have launched a related food log feature in the Zepp app, which provides users with nutritional analysis and battery recommendations based on our -- their food intake using their phone cameras. This feature is currently available for free download to users in Europe and North America. We are also exploring the use of DeepSeek to further reduce the cost of processing food image and videos to prepare for a large-scale service deployment in the future. These functionalities and products add into our sports recovery and health monitoring ecosystem, establish a unique advantage in sports recovery and health management, enhancing the overall brand value. As we advance our global strategy, we continue to elevate brand recognition and expand our influence through strategic marketing and partnerships.

This quarter, we welcomed five-time Olympic medalist, Gabby Thomas and Italian tennis star, Jasmine Paolini as our global athlete partners. Their partnerships enhance our brand visibility on the global stage while also showcasing how Amazfit smart wearables empower top-tier athletes with data-driven insights to optimize training, recovery and overall performance. Moreover, our strategic partnership with HYROX, the rapid growing sports in Europe and North America has brought unique features to Amazfit smartwatches. We are the only smartwatch brand that supports HYROX competition and training, providing valuable assistance to athletes in this sport. We continue to deepen our collaboration with HYROX and are set to launch even more powerful HYROX related products.

At the same time, we are further differentiating ourselves from competitors, staying ahead by being the first to support various emerging sports. With these partnerships, the major key account partners offline in the United States and Europe have greatly increased confidence in us. They have offered us more offline display space to replace competitors' counters. This will bring us significant new growth opportunities in the coming quarters.

Let's recap our 2025 product strategy. By leveraging Active 2 and Bip 6 series, we are expanding our market share on a bigger scale, increasing the entry-level user base and strengthening our brand influence in the value for money segment, especially the emerging market. At the same time, in the mid-to-high end segment, our T-Rex series has successfully outperformed flagship products from competitors, achieving higher profitability and steady growth. This has also allowed us to convert more entry-level users into professional users and mid-to high end smartwatch users. Furthermore, by supporting rapidly emerging sports like HYROX, enhancing the analysis of food intake in relation to exercise and offering ecosystem products and services such as Vital and Helio Ring, we provide a differentiated value to compete with the industry leaders. This strengthens our brand positioning and creates a unique market positioning.

Now moving to the OS part of our business. We are continuing to develop Zepp OS and simultaneously compiling the advanced technologies of OpenAI 4.5 within Zepp OS. Additionally, we are exploring the use of DeepSeek to significantly reduce costs on a larger scale. The main watch chips that we are successfully designed in the past few years have already served as the main chips in the T-Rex 3, Active 2 and Bip 6 models. The usage of these chips has reached a milestone of 1 million units through the close integration of Zepp OS with these chips. Our watches has achieved better graphic performance and computing speed as well as lower power consumption. This has enabled our watches to gain a more unique competitive edge compared to competing products, achieve a faster time to market and a guaranteed supply chain.

Looking ahead, we remain confident in Zepp Health's long-term growth trajectory as we evolve beyond smartwatches. We are building a comprehensive smart wearable ecosystem that seamlessly integrates advanced AI-driven health solutions, performance checking and holistic wellness management. With a robust product portfolio, continued technological advancements and strategic brand partnerships, we are well positioned to expand our global customer base and drive sustained self-branded sales growth. To underscore our confidence -- in Zepp Health's long-term outlook, we will continue our share repurchase program in 2025, reflecting our dedication to delivering value for our shareholders.



I will now turn the call over to Leon to go over the highlights of our fourth quarter financial results.

[Leon Cheng Deng, executive]

Thank you, Wuang, and greetings, everyone. Thank you again for joining our fourth quarter 2024 earnings call.

I would like to start by addressing recent U.S. tariff announcements on inbound goods to be sold in the U.S., which we do not expect to materially impact our U.S. consumer pricing or gross margin due to our proactive supply chain management. This is thanks to the terrific job our team has done to diversify our manufacturing and sourcing over the past years. According to Counterpoint, global sales of smartwatches have fallen for the first time by 7% in 2024 on device shipment, in a large part due to a sharp decline in the popularity of the market leader, Apple. Shipments of Apple watches fell by 19% with North America as the biggest driver of the decline, where the absence of Apple Watch Ultra 3 and minimal feature update in the Series 10 lineup led consumers to hold back purchases.

Despite the overall decline, sales in China grew from 19% of the market to 25%. This was the first time it recorded more smartwatches sales than India or North America according to Counterpoint. Another large contributor to the global sales drop was India, which fell from 30% of the market to 23%. This was partly because of a bubble in ultra-cheap devices from India manufacturers, which was now bust due to a lot of complaints about the quality of the devices.

However, Counterpoint expects a recovery in the global market with single-digit percentage growth in 2025, and it predicts the uptick in sales will be driven by the increasing adoption of AI features and a greater emphasis of providing a wider range of health data, which plays to the core of our strategy.

Now I will shift to our Q4 and full year 2024 commentary. In Q4, the successful launch of the T-Rex 3 reinforced our leadership in performance-driven smartwatches. During the quarter, we maintained our strategic focus on building a sports-oriented brand identity, positioning ourselves as a premium yet accessible global brand, and we're set to capitalize this in 2025.

Our overall sales coming within the guidance range, demonstrating a 40% plus quarter-over-quarter growth. This strong performance was primarily driven by the successful launch of the T-Rex 3. Compared with the fourth quarter of 2023, our revenue declined year-over-year due to 3 key factors: firstly, a continued decline in Xiaomi product sales; secondly, the supply constraints of T-Rex 3 series; and thirdly, by consumer-related macroeconomic issues resulting in a softer global consumer market. However, as we look ahead to the first quarter of 2025, we expect our Amazfit-branded sales to continue in their strong momentum, propelling higher sales growth year-over-year.

Looking at the full year 2024, our revenue declined compared to 2023, primarily due to declining Xiaomi product sales as well as a limited new product launches for Amazfit-branded products with only the T-Rex 3 debuting in the fourth quarter of the year. However, 2025 will be a different story. We are supposed to launch 1 to 2 new products every quarter, introducing a different seasonality pattern impacting demand. This shift has been evident from Q4 2024 into Q1 2025.

Now moving on to gross margin, which can be influenced by various factors such as product mix, product launch timing and product life cycles, including model upgrades. Our Q4 2024 gross margin stood at 37%, continuing the margin expansion trend, which we initiated in the second half of 2023. However, this was slightly lower than Q3 2024 due to somewhat promotional pricing, which is customary for the holiday season. The gross margin for our self-branded products remained strong, driven primarily by the higher-margin T-Rex 3. Looking ahead, we expect the positive trend to continue in 2025, supported by the launch of Active 2 and Bip 6 and many other new products in the pipeline.

From a margin perspective, 2024 was a year of gross margin expansion. Gross margin percentage in 2024 was 38.5% compared to 26.2% in full year 2023, helped by better product mix and higher brand awareness. In 2025, this trend is expected to continue with the introduction of higher-margin products further supporting our profitability.

Now let's turn our attention to costs. We remained steadfast in our commitment to cost management, continuing with the program that we began in Q3 2020 on reducing overall operating costs. In 2024, Q4, total adjusted operating expenses were USD 29.3 million compared to USD 25.9 million a year ago. The increase was primarily due to spend on promotional campaigns during the holiday seasons to build brand recognition and drive revenue growth.

Adjusted operating cost was USD 110 million in the full year 2024 compared to USD 112 million in 2023 and USD 171 million in 2022. We will maintain our cost-conscious approach in the coming quarters. Concurrently, we remain committed to invest in R&D and marketing activities to maintain our long-term competitive edge. R&D expenses in the fourth quarter of 2024 were USD 10.1 million, nearly flat compared to last year as we consistently evaluated resource efficiency to ensure maximum return on investments and productivity. We're committed to investing in new technologies and AI to secure our long-term technology leadership.

Selling and marketing expenses in the fourth quarter of 2024 were USD 13.2 million compared to USD 11.8 million a year ago. The increase was primarily due to spending on promotional campaigns during the high season to build brand recognition and drive sales growth. At the same time, we consistently pushed retail profitability and channel mix improvement, which included meticulous refinement of our retail channels and strategic staffing arrangements across sales regions. We're committed to investing efficiently in marketing and branding to ensure our sustainable growth.

G&A expenses were USD 6.1 million in the fourth quarter of 2024 compared to USD 4 million in the fourth quarter of 2023. The increase was largely attributable to provisions for bad debt and foreign exchange rate fluctuations. We remain committed to strict cost control over discretionary spending, ensuring expenses are aligned with driving sustainable growth. In 2025, we aim to keep operating costs at or below 2024 levels, maintaining a lean and efficient structure while strategically investing in high-impact areas.

Our adjusted operating loss for Q4 2024 stood at USD 7.4 million. The loss was mainly driven by lower sales volume, resulting in insufficient coverage of operating expenses. It was the narrowest in the past 4 quarters, demonstrating sequential improvement and path to profitability in near term. This reflects our ongoing efforts to enhance efficiency and align expenditures with revenue growth.

GAAP net loss for the first quarter of 2024 was USD 36.9 million, which included operating loss of $9 million, certain investment-related impairments of $13 million and deferred tax asset valuation allowance of $14 million. Allow me to further elaborate on this. To optimize the operation of the company's core business, the company implemented a onetime impairment at the end of this year for certain projects it had invested in past years. By the end of this year, the company has comprehensively divested from these investments and completed liquidation procedures where possible. Going forward, there will be limited impairment concerns from these investment projects. This impairment measure is designed to streamline the business operations, allowing the company to focus on its main and core business and drive more efficient development. In addition, there's another $40 million technical accounting treatment on deferred tax asset booked in past years. Both are nonrecurring and noncash in nature.

Let's now shift our focus to the balance sheet. As Wayne has mentioned, we continue to optimize our working capital, achieving an inventory level of USD 57 million in Q4, which was the lowest since 2018. Inventory management remains as a top priority, and we'll continue to keep inventory levels tight to improve cash flow efficiency. By February 2025, we have successfully refinanced the majority of our short-term debt maturing in 2025 into long-term debt instruments with a lower coupon rate. Following this adjustment, long-term debt accounts for around 75% of the company's overall debt structure. And since Q1 2023, $56 million of the total debt has been retired and the capital structure will be further optimized as operating cash flow strengthened.

As of December 31, 2024, our cash balance stood at USD 111 million compared to USD 140 million in Q4 2023. The decline is mainly due to lower operating profit, offset by a better working capital management. Compared to Q3 2024, the shortfall was mainly due to operating activities. We remain committed to our share buyback program in 2025, reinforcing our confidence in the company's long-term value and our commitment to delivering returns to shareholders.

Looking ahead, for Q1 2025, we expect revenue in the range of USD 40 million to USD 45 million. This would mark a year-over-year growth of 14% to 29% in the self-branded product sales, highlighting the momentum of our brand expansion strategy.

To conclude, despite challenges in 2024, we navigated the year effectively by focusing on disciplined cost management while expanding our self-branded product expansion. As we enter 2025, we're well positioned for sustained growth with a robust product pipeline, margin expansion strategy and disciplined cost management. We remain confident that these strategic initiatives will drive long-term value for the investors, employees and customers.

Thank you all for your time today. I will now open the call for questions. Operator, please go ahead.

[Operator]

[Operator Instructions] Today's first question comes from Dev Rajeev with Fundamental Research Corp. Please go ahead.

[Siddharth Rajeev, analyst]

Hi. Regarding the new tariffs on Chinese smartwatch imports to the U.S., Leon, you mentioned there will be minimal impact due to supply chain management. Could you please expand on this point, maybe give some color, please?

[Leon Cheng Deng, executive]

Hi, Sid. Thank you. I think it's -- you know that we have been working on dual sourcing strategy for a long time, at least for 2 to 3 years already, right? And then the U.S. tariff is very much on the goods, which has been manufactured in China and shipped to the United States. So what we're trying to do is trying to mitigate that part of the shipments through our manufacturing base in Southeast Asia so that we cannot -- will avoid the tariff impact, which has been applied to the Chinese goods into United States.

[Siddharth Rajeev, analyst]

Are you able to give or disclose what percent of your overall manufacturing comes from outside China?

[Leon Cheng Deng, executive]

I think for now, you can take all of the products which are coming to United States to satisfy our revenue in United States are coming out of non-China regions. So from that perspective, I think 20% to 25% of the overall portfolio is actually non-China manufacturing base related.

[Siddharth Rajeev, analyst]

Okay. So that means you're probably better off than, say, Apple given that most of their manufacturing is in China. So they will be significantly impacted by these new tariffs.

[Leon Cheng Deng, executive]

Yes, to some extent, I think, yes.

[Siddharth Rajeev, analyst]

You talked about taxes and the loss on -- impairment loss on investments. Could you give more color on that as well? Why did taxes go up so much? And what was the primary driver of the $10 million impairment loss from investments?

[Leon Cheng Deng, executive]

Yes. As I just mentioned, the impairment losses is very much coming out of -- we have made some small investments on our upstream and downstream, let's say, technology companies or similar companies in our domain, which potentially have some synergies. I think that applies to most of the multinational companies. They all have kind of strategic investment department themselves.

So in the past years, we also have made similar investments to some sort of the downstream and upstream companies, which is -- plays into the similar kind of industry or have potential synergies with us. And you know that every year, you need to do an impairment assessment on whether or not these companies, the value of the investment is still the value which you have invested a few years ago.

And I think we all know that in the past years, given the macro headwinds, et cetera, et cetera, some of those start-up companies or mature companies or chip companies, some of that -- those companies, they just -- their performance is not playing in according to what we have invested a few years ago.

So from that perspective, given the prudence principle, which the auditors want us to apply, then you need to do an assessment on those investments you made in the past and impair them whenever possible to actually reflect the fair market value of those investments, right? And that was the reason for the $13 million investment impairment, which we provided.

On the deferred tax asset, I think it's more technical. It's -- you know that there is the so-called deferred tax asset. It happens whereby if you reported in a certain year a loss, which, unfortunately, we did report a loss in the past year, then you can recognize some of that as a tax shield going forward. But then again, per the accounting principle, you have to apply a prudent principle if you think some of those deferred tax asset because also the deferred tax asset has to be used within a certain period of time, right? And if you think a part of that may not be used in the upcoming year or so or is going to expire in the upcoming 1 year or 2, then you have to apply an impairment or a value allowance provision to those deferred tax asset.

But as I said, those adjustments, which we made by Q4 2024 on the investment impairment and also on the tax -- deferred tax asset, they are noncash and one-off in nature. So it's not going to repeat again. And then I think after we provisioned for those amount, also the risk of a further provision on those topics in the year of 2025 would be limited.

[Siddharth Rajeev, analyst]

Thank you so much, Leon. Just final one more question, if I may. This is regarding the market in general. Now Apple sales of smartwatch was down significantly last year. Samsung reported modest growth, but the Chinese players have been growing rapidly. Now are you seeing internally a big shift in demand towards lower-priced players? Is that fairly -- is that an accurate assumption?

[Leon Cheng Deng, executive]

No. I mean, on the contrary, I think what we have seen and what has been -- I also put it in my prepared notes is that although the market overall actually declined, there are a few bright spots. So I think in the outdoor and in the sports part of the smartwatch market, there's a bright star. I think you know which brand I'm talking about. Garmin is actually performing very well. And we all know that Garmin smartwatches are not cheap. -- right?

So I think from that perspective, what we see is that you also can see it from our Q4 results. We -- after we successfully launched the T-Rex 3 watch, we actually gained share rapidly in Q4 in most of the developed countries where we are operated in. So we see, yes, the -- there is a decline from the market, but that decline, I think, to some extent, is coming out of -- there's not so many feature changes in the Apple Watch and also people are waiting for Apple Watch Ultra 3, which didn't arrive in a year. And that actually drove the decline on the market leader, Apple, right?

On the other hand, I also mentioned that India market kind of collapsed on the super low end and super cheap smartwatch markets front. So what is growing is China, whereby we are a part of that. And also what is growing is the sports watch segment, whereby we took a very good share growth in Q4 on that segment. And also, what is going to grow in 2025 is also AI-driven, right? And then you heard from Wayne and myself, we talked about we are actually one of, if not the first one in adopting AI on the smart watch. So we think given where the market growth and the potential is for 2025, we're actually quite optimistic about our growth trajectory in 2025.

[Siddharth Rajeev, analyst]

Congratulations on a strong Q4 revenue growth.

[Operator]

And our next question today comes from Ankit Upadhyay, a private investor.

[Unknown Analyst]

I'm a long-term shareholder in Zepp Health, and I will ask a few questions on the long-term strategy. To start off, I'd like to defer to Mr. Huang, the CEO, on the company's vision. In your 2019 open letter to the employees, you spoke about building a global health ecosystem. How do you think you are tracking against that vision? And especially when we put into the perspective the fact that most of the revenue still comes from the wearables, how do you think you're doing against that vision 5 years down the line?

[Leon Cheng Deng, executive]

Thank you very much. I mean thank you for the call. I think I will ask -- I will defer this question to Mike Yeung, our COO. And then maybe Wang is going to comment on that if he has any other things to add to it.

[Yan Yeung, executive]

Yes, I'll try to answer your question. Yes. So besides the smartwatch, as you know, we are also continuously diversifying our product portfolio. We have many other form factors now covering Ring, ear bud, we even have hearing aid. So basically, our -- diversifying our product category can enable us to get into the different segments of the customer base. And at the same time, we are continuously experimenting and rolling out services that might make sense. Also, we have the sleep monitoring service that can -- that is still growing very, very healthy. So that also helped create a subscription business for us. So it is -- this is talking about longer term.

So as we diversify our product portfolio into different sectors and then try to cover different customers, we can try to cross-sell and upsell as well as at the same time, try to deliver the services where the margin would be much higher where it makes sense. In the even longer term, we will also look into more of the 2B area besides 2C. Right now, we're just focusing on consumer. But as we go into -- in the longer term, we can do partnerships with insurance and other enterprises where we can get the whole ecosystem to be more well developed. So that's a very longer-term view. Does that answer your question?

[Unknown Analyst]

Yes, that helps. My second question would be around the relationship with Xiaomi. So while they still remain the shareholders and they have a board seat, the disengagement on the product side also coincided with them gaining their market share rapidly. What's the perspective on that? What's the view at the Zepp management on that?

[Leon Cheng Deng, executive]

No. So I will take this one, Ankit. I think -- so number one, our relationship with Xiaomi is very strong, okay? As what you mentioned, they hold 20% of the company. They have the Board seat, and we have a very close relationship with Xiaomi operating-wise, right? So -- but on the other hand, I think I need to repeat on the transformation journey, which we have been going through in the past 2 or 3 years. Maybe I would just put it in one simple word to it. I think boils down to -- our target is actually to transform ourselves from Foxconn alike OEM, ODM type of a company to a company which has its own brand and then, so to say, a new Garmin type of branded smartwatch type of company, right? So that is actually the strategic shift, which we would like to do.

And then from a profitability perspective, we first want to shift the company to the situation whereby our self-branded product sales is actually sufficient enough to cover all our operating expenses, and we're going to be profitable on that. And then from that moment onwards, as a second step, we can look at whether or not to expand that revenue base with Xiaomi or as Mike just mentioned, any big 2B customers to expand again. Because the issue is you have seen in the past in our financial report, Xiaomi is actually very big from a revenue perspective. But then year-over-year, the margin on that business is actually decreasing rapidly.

And then also Xiaomi has as a listed company, they have made a very open announcement towards the market saying that on the hardware front, they're not going to make any profit on it. They are going to just do a cost plus 5% on it, right? And then if we continue on this path forward, I think, yes, you will see a declining trend on the Xiaomi revenue and the profit, which we're going to churn out of it, right? So that's why we're trying to actually get to first use our self-branded product sales to sustain our profitability and to expand again to this journey. So that is actually a well-thought strategy, which we kind of embarked 2 to 3 years ago.

And then I think we're coming to the end of the tunnel. So we see the light at the end of the tunnel right now. So you see that, yes, overall revenue year-over-year '24 compared with '23, there's a decline, but it's very much driven by the Xiaomi revenue decline, but then it does not impact too much on the bottom line. And on the same time, you saw the gross margin expansion of the company from 26% to close to 40%, right? And then yes, at Q4 2024 or throughout the year of 2024, we do have a cost coverage issue whereby our revenue need to hit certain threshold in order to get profitable. But that was very much related to a different product launch cadence, which was in 2024, if you know or if you track us as what you said, looking at 2024, there's only one new product which we have launched. That is the T-Rex 3 and after we launched that, we received immediate traction and popularity on that product. And then that drives the quarter-on-quarter run rate of the revenue to grow by more than 40% Q4 versus Q3, right?

So -- and Wayne also has alluded to it and so do I, in 2025, we're going to have a major product refreshment and new product introductions every single quarter which is going to be a different cadence than what we have experienced in 2024. So from that perspective, I think 2025 would be a totally different year, whereby we will see strong sales growth compared to 2024.

I think I have give you a very long answer to the question. And coming back to Xiaomi, I think after we have finished the step to use our self-branded products to sustain our profitability, then the next step is to look at whether or not we can expand the revenue and strike a win-win on those 2 big deals.

And then since our relationship with Xiaomi has been very good and is very good. And then the Xiaomi ecosystem works in a way that every year, there's going to be a new sourcing plan and then you can bid for it and then you can get that contract to produce for different Xiaomi ecosystem kind of products, right? So I think we would just embark on the plan, which we set out to do. And hopefully, that answers your question.

[Unknown Analyst]

Yes, no. Thanks Leon. That was a really clear answer. My last question is about the stock itself, pretty tactical question, but I think it's important. The stock continues to be very illiquid. What's being done about it, if anything has been -- if it's being taken into action?

[Leon Cheng Deng, executive]

No. So Ankit, I mean, I think it's a good question, and thank you for asking this question. There are a few things. Number one is, if you look at our total asset and net equity value of the company, it's actually north of $250 million. So I think we are looking at the current market cap and the share price, we're hugely undervalued. That's number one.

Number two, I have mentioned in the press release that we recently refinanced our short-term debt to long-term debt. So we actually pushed the tower to 2027 and beyond. So there's no immediate maturity coming due in 2025 and 2026. And then with the cash we currently have on hand, I think we have ample runway to cater for anything and to invest on any opportunities once it emerged, right?

Number three, I think you heard us talking, we have and we are going to continue with the stock buyback program, which we kicked out 2 years ago, right? And then we're actually prepared to upsize the stock buyback program whenever needed, right? Because we have -- we are very confident on our strategy and our growth trajectory. And I think last but not the least, what you see here is that it's a very much a self-help story, right? I believe that if we could prove to the market that the transformation journey of transforming from a Foxconn-like company to a kind of a new Garmin company, and then you can actually become profitable.

And to be honest, if you look at the ranking globally, the value share, we are actually ranked #6 or #7 depends on the quarter you're looking at. So we're actually ranked very high, just a few place from Apple, Garmin and Samsung, right? But then if we can further expand our brand awareness and brand recognition and also if we can actually grow our relative share in the key countries we set out to do, those are EMEA countries and China and United States, then I think the share price would start to recover and you will see a more liquid situation coming out of our company.

But as I said, I mean, one swallow does not make a summer, right? So we need -- but you have seen that from Q4 versus Q3, our sales growth is more than 40%. And our guidance for Q1 is also a year-on-year more than high teens growth rate. And if we can continue on that, I think given 2 or 3 quarters, you should be able to see a recovery on the share price.

[Unknown Analyst]

Thank you so much for that answer. So thank you Leon and Mike for those answers and I wish all the best with all the initiatives while I check the time on my T-Rex 3 watch. Thank you.

[Operator]

And our next question comes from Nicola Jones with Brooks Investments. Please go ahead.

[Nicolas Britten-Jones, analyst]

Yes. Thank you for taking my question and I just actually have one of them. Could you please provide or recap and provide some more information about the new product road map for 2025 and any impact on growth these new products may have?

[Leon Cheng Deng, executive]

Yes, I can do a quick recap of the -- Sorry, there's an echo on the line. You can hear me okay, right? Operator?

[Operator]

That is correct and we were getting some background noise and I muted Nicolette's line. Please proceed.

[Leon Cheng Deng, executive]

Okay. Okay. Good. So let me get back to the question. I think briefly, if you look at our strategy, we do have basically different smartwatch lines playing on different price segment. So in January this year in CES, we have launched Active and Bip. Those are our entry-level value for money the price segment products. And as Wayne just mentioned that these 2 products line since launch, the moment we launched them, it received a lot of popularity and then the activation keep on climbing. So those 2 products would be our gatekeeper for the entry-level price segments, and then it's going to continue to grow throughout the year.

And if you look at what I just mentioned, we have also the mid- to high-end price tier products. One of them is actually T-Rex which we launched in Q3 in September 2024, and it's actually in full swing right now. The activation keep on climbing, both a lot of media and YouTubers call us the T-Rex 3, the Garmin Fenix killer, that type of reputation we received. So if we continue on this trend in this year and then obviously, T-Rex and the sports and the outdoor part of the business would continue to grow, and then it's going to also help our growth story for 2025.

Last but not least, you know that we also have a mid-level type of price point product and that product series is called Balance series. And on the Balance series, the target is more towards the urban consumers who want to do live sports, but then we can actually give them the edge on all the functionalities you could expect on the smartwatch, but then we are more accurate on the GPS, on the sports functionalities, et cetera, et cetera, for the urban users.

So with these 3 product lines, -- and then I have alluded to it, I think we are going to -- in 2024, we only have 1 product introduction. But in 2025, you will see that we will have new products coming out almost every quarter, and then that will obviously change the demand pattern of our sales pattern as well. So I think given that, it would drive the 2025 revenue and growth of the company to a new high versus 2024. I think you have already seen it in the -- our guidance for 2025 Q1 and also in the Q4 2024 numbers. I hope that answers your question.

[Operator]

As there are no further questions at this time, I'd like to turn the call back over to the company's IR Director, Grace Zhang, for closing remarks.

[Grace Yujia Zhang, executive]

Thank you once again for joining us today. If you have further questions, please feel free to contact Zepp Health's Investor Relations department through the contact information provided [Indiscernible].

[Operator]

Thank you. This concludes this conference call. You may now disconnect your lines, and have a wonderful day. Thank you.