20-F/A: Zepp Health Files Amendment to 20-F to Include Financials of Significant Equity Method Investee Jiangsu Yitong

Zepp Health Corporation files an amendment to its 2024 Annual Report on Form 20-F to include the financial statements of Jiangsu Yitong High-tech Co., Ltd., a significant equity method investee.

Summary

• Zepp Health Corporation is filing Amendment No. 1 on Form 20-F/A to its Annual Report for the fiscal year ended December 31, 2024.
• The amendment is required to comply with Regulation S-X, Rule 3-09, which necessitates separate financial statements for significant unconsolidated subsidiaries and equity method investees.
• The company has determined that its equity method investment in Jiangsu Yitong High-tech Co., Ltd. was significant under the investment test of Rule 1-02(w) of Regulation S-X.
• The amendment includes the financial statements and related notes of Jiangsu Yitong as of December 31, 2023 and 2024, and for the fiscal years ended December 31, 2022, 2023 and 2024.
• The filing also includes updated certifications from Zepp Health's CEO and CFO, and the consent of Jiangsu Yitong's independent auditor.
• The amendment does not affect any other parts of the original filing and should be read in conjunction with it and subsequent filings.
• Jiangsu Yitong High-tech Co., Ltd. is primarily engaged in developing, manufacturing, and selling cable television network equipment, providing services for intelligent video monitoring engineering, and developing, designing, and selling chips and sensors.
• In November 2024, Jiangsu Yitong acquired 51% equity interest in Hefei Yunxi Medical Equipment Co., Ltd. for RMB18.36 million.
• Jiangsu Yitong recorded a net loss of RMB38.86 million in 2024, compared to a net loss of RMB0.56 million in 2023.
• Revenues for Jiangsu Yitong decreased from RMB179.45 million in 2023 to RMB99.69 million in 2024.
• As of December 31, 2024, Jiangsu Yitong's total assets were RMB646.21 million and total liabilities were RMB145.97 million.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the significant decline in revenue and increase in net loss for Jiangsu Yitong, a key equity method investee of Zepp Health. The acquisition of Hefei Yunxi is a positive development, but it is not enough to offset the overall negative financial performance.

Positives

• Jiangsu Yitong acquired 51% equity interest in Hefei Yunxi Medical Equipment Co., Ltd. in November 2024, potentially expanding its business scope.
• Jiangsu Yitong is qualified as a High and New Technology Enterprise (HNTE), which allows it to enjoy a preferential income tax rate of 15%.

Negatives

• Jiangsu Yitong experienced a significant decrease in revenue from RMB179.45 million in 2023 to RMB99.69 million in 2024.
• Jiangsu Yitong's net loss increased substantially from RMB0.56 million in 2023 to RMB38.86 million in 2024.
• Jiangsu Yitong's accounts receivable increased significantly from RMB21.32 million in 2023 to RMB121.49 million in 2024.

Risks

• The decrease in Jiangsu Yitong's revenue and increase in net loss could negatively impact Zepp Health's financial results due to its equity method investment.
• The significant increase in Jiangsu Yitong's accounts receivable may indicate potential issues with collecting payments from customers.
• Jiangsu Yitong faces concentration of credit risk with a significant portion of its revenue and amounts due from related parties concentrated with a few customers and suppliers.

Industry Context

The document provides insight into the financial performance of Jiangsu Yitong, a company operating in the cable television network equipment, intelligent video monitoring, and chip/sensor industries, and its acquisition of Hefei Yunxi, a medical equipment company. This reflects a trend of diversification and expansion in the technology and healthcare sectors.

Comparison to Industry Standards

• It is difficult to compare Jiangsu Yitong's performance directly to global benchmarks without more specific information on its product lines and target markets.
• However, the decline in revenue and increase in net loss suggest that the company is underperforming compared to industry averages, especially considering the growth in the broader technology and healthcare sectors.
• Comparable companies in the cable television network equipment industry include Arris International and CommScope, while companies in the chip and sensor industry include STMicroelectronics and Texas Instruments.
• The financial performance of these companies can be used as a benchmark to assess Jiangsu Yitong's relative performance.

Related Party Transactions

• Jiangsu Yitong had sales to related party Anhui Huami of RMB60.01 million in 2024.
• Jiangsu Yitong received research development services from Anhui Huami, a related party.
• Jiangsu Yitong purchased intangible assets from Hefei Huami, a related party.
• Jiangsu Yitong has amounts due from and due to related parties, including Anhui Huami, Hefei Huami, and Anhui Xikai.

Stakeholder Impact

• The negative financial performance of Jiangsu Yitong could negatively impact Zepp Health's shareholders due to its equity method investment.
• The acquisition of Hefei Yunxi could potentially benefit Jiangsu Yitong's employees and customers by expanding its business scope.
• The concentration of credit risk with a few customers and suppliers could pose a risk to Jiangsu Yitong's suppliers and creditors.

Key Dates

Keywords

Zepp Health, Jiangsu Yitong, equity method investment, financial statements, Form 20-F, amendment, Regulation S-X, Hefei Yunxi, acquisition, financial reporting