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Our Mission
We are transforming the way individuals connect with the Internet and with each other through smart wearable technology and data-driven innovations. Our mission is to make the world more connected.
Our Global Market Leadership
We are a biometric and activity data-driven company with significant expertise in smart wearable technology. We shipped 11.6 million units of smart wearable devices in the first nine months of 2017, more than any other company in the world, according to the Frost & Sullivan Report. As of September 30, 2017, we had shipped a total of 45.3 million devices since our inception in 2013, quickly establishing our global market position and recognition.
We believe we have one of the largest biometric and activity databases in the global smart wearables industry. Our mobile apps, Mi Fit and Amazfit, work hand in hand with our smart wearable devices and provide users with a comprehensive view and analysis of their biometric and activity data. As of September 30, 2017, our mobile apps had 49.6 million registered users, from whom we collect over 10 dimensions of measurement that include heart rate, ECG, weight, body fat compositions, GPS running track, steps, sleeping duration, etc. With a wide range of biometric and activity data from a large number of users, we are well-positioned to develop new application scenarios for smart wearable technology and drive innovation.
We have been the sole partner of Xiaomi Corporation, or Xiaomi, a mobile Internet company and global consumer electronics brand, to design and manufacture Xiaomi-branded smart bands, watches (excluding children watches and quartz watches), scales and associated accessories, or Xiaomi Wearable Products. Our strategic cooperation agreement with Xiaomi grants us the most-preferred-partner status globally to develop future Xiaomi Wearable Products and provides us with significant business demand, allowing us to quickly commercially launch our products and ramp up our business. This large and visible demand, combined with our technological expertise, in turn enhances our control over our supply chain and drives our efficiency. Meanwhile, our strong research and development capabilities and innovative products enrich Xiaomi’s suite of offerings and enhance user loyalty, resulting in a mutually beneficial relationship between Xiaomi and us. As of September 30, 2017, we had sold 40.0 million Mi Band series of smart band products since its launch in July 2014. In addition to Xiaomi Wearable Products, we also leverage Xiaomi’s established distribution network to promote smart bands and watches under our own brand, Amazfit. Our cooperation with Xiaomi has been a major driver for our growth. Xiaomi is the sole customer and distribution channel for all of our Xiaomi Wearable Products, and sales of Xiaomi Wearable Products contributed 97.1%, 92.1% and 82.4% of our total revenues for 2015 and 2016 and the nine months ended September 30, 2017, respectively. See “Risk Factors—Risks Related to Our Business and Industry—Xiaomi is our most important customer and distribution channel. Any deterioration of our relationship with Xiaomi or reduction of sales of Xiaomi Wearable Products could have a material adverse effect on our operating results.” for more discussion on our dependence on Xiaomi.
We have achieved significant growth since our inception. Our revenues increased by 73.6% from RMB896.5 million in the year ended December 31, 2015 to RMB1,556.5 million (US$233.9 million) in the year
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ended December 31, 2016, and increased by 37.4% from RMB943.5 million for the nine months ended September 30, 2016 to RMB1,296.2 million (US$194.8 million) for the same period of 2017. We recorded a net loss of RMB37.9 million in the year ended December 31, 2015, which improved to a net income of RMB23.9 million (US$3.6 million) in December 31, 2016. For the nine months ended September 30, 2017, we had a net income of RMB95.1 million (US$14.3 million), compared to a net loss of RMB19.0 million for the nine months ended September 30, 2016. Our adjusted net income, which excludes share-based compensation expenses, increased from RMB18.1 million in the year ended December 31, 2015 to RMB81.7 million (US$12.3 million) in the year ended December 31, 2016, and increased from RMB24.3 million for the nine months ended September 30, 2016 to RMB143.7 million (US$21.6 million) for the same period of 2017. See “—Summary Consolidated Financial and Operating Data—Non-GAAP Measures” for a reconciliation of adjusted net income to net income.
Recent Developments
The following sets forth our selected unaudited financial data for the two months ended November 30, 2017 and certain operating data for the fourth quarter of 2017. We have provided the preliminary results described below for the purpose of providing the investors with the most current information that our company is able to provide under the time constraints. The below summary of financial data is not a comprehensive statement of our financial results for the two months ended November 30, 2017 or 2016. Because our company’s 2017 fiscal year has only recently ended, we are still in the process of completing our annual year-end financial statements. Therefore, it is possible that normal annual adjustments will be made.
| • | Revenues . Our revenues for the two months ended November 30, 2017 were RMB476.7 million (US$71.6 million), consisting of RMB345.0 million (US$51.9 million) of Xiaomi Wearable Products segment revenues and RMB131.7 million (US$19.8 million) of self-branded products and others segment revenues, as compared to revenues of RMB399.2 million, consisting of RMB363.0 million of Xiaomi Wearable Products segment revenues and RMB36.2 million of self-branded products and others segment revenues, for the two months ended November 30, 2016. The increase was primarily attributable to an increase in average revenue per unit and an increase in shipment volume of our self-branded products. |
| • | Cost of revenues . Our cost of revenues for the two months ended November 30, 2017 was RMB355.4 million (US$53.4 million), as compared to cost of revenues of RMB336.8 million for the two months ended November 30, 2016. |
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| • | Gross profit . Our gross profit for the two months ended November 30, 2017 was RMB121.3 million (US$18.2 million), as compared to gross profit of RMB62.4 million for the two months ended November 30, 2016. |
| • | Research and development expenses . Our research and development expenses for the two months ended November 30, 2017 were RMB19.6 million (US$2.9 million), as compared to research and development expenses of RMB16.1 million for the two months ended November 30, 2016. The increase was primarily attributable to an increase in personnel-related costs associated with an increase of average compensation level. |
| • | General and administrative expenses . Our general and administrative expenses for the two months ended November 30, 2017 was RMB30.3 million (US$4.6 million), as compared to general and administrative expenses of RMB22.4 million for the two months ended November 30, 2016. The increase was primarily attributable to an increase in advisory and professional service fees related to this offering. |
| • | Selling and marketing expenses . Our selling and marketing expenses for the two months ended November 30, 2017 was RMB7.7 million (US$1.2 million), as compared to selling and marketing expenses of RMB8.7 million for the two months ended November 30, 2016. The decrease was primarily attributable to a decrease in spending on advertising as we increasingly utilize e-commerce platforms for marketing and promotion of our products. |
| • | Net income . Our net income for the two months ended November 30, 2017 was RMB52.2 million (US$7.9 million), as compared to net income of RMB14.0 million for the two months ended November 30, 2016. |
| • | Adjusted net income . Our adjusted net income, which excludes share-based compensation expenses, was RMB61.9 million (US$9.3 million) for the two months ended November 30, 2017, as compared to adjusted net income of RMB23.6 million for the two months ended November 30, 2016. |
| • | Shipment volume . We shipped 6.5 million units of smart wearable devices in the fourth quarter of 2017. |
The above selected unaudited financial data for the two months ended November 30, 2017 and certain operating data for the fourth quarter of 2017 are generally consistent with the trends for the nine months ended September 30, 2017 as disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our selected unaudited financial data for the two months ended November 30, 2017 and certain operating data for the fourth quarter of 2017 may not be indicative of our financial results for future interim periods or for the full year ended December 31, 2017. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus for information regarding trends and other factors that may affect our results of operations.
