Q2 2023 Tuya Inc Earnings Call
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Okay.
Good morning.
Thank you Hello, everyone welcome to our second quarter 2023 earnings call joining us today are founder and CEO of <unk>.
Mr Terry Wang and our CFO <unk> <unk>.
The second quarter 2023 financial results and webcast of this conference call.
At IR <unk> Com a replay of this call will also be available on our website in a few hours.
Before we continue I refer you to our Safe Harbor statement in our earnings press release, which applies to the floor as we will make forward looking statements.
With that I will now turn the call to our founder and CEO message everyone. Jerry will deliver his remarks in Chinese which will be followed by corresponding English translation.
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Overall, everyone. Thank you for joining <unk> Q2, 2023 earnings conference call.
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The second quarter of 2023 and marked a significant milestone for us for first time in our company's history. We have achieved culturally breakeven and recorded modest profit on non-GAAP basis of approximately $1 5 million bullish translating to a non-GAAP net margin of around two 7%.
Moreover, we achieved a positive operational cash flow for the quarter, bringing in about $7 5 million bullish the moving to reporting non-GAAP profitability and the expansion of positive operating cash flow. Both marked a turning point in our overall day to day operations.
This signifies our growing capacity to generate value.
The initial responsibility for any enterprise and base business operations on DAU.
These accomplishments attached to the dedication of our team and the strategic operational adjustments, we have implemented over the last two years is amendment of our organization has played a crucial role in this milestone.
Going forward, we remain firmly committed to focusing on further refining our operations, both structurally and functionally.
King avenues to enhance efficiency and reduce costs. Our aim is to ensure consistent financial performance and our progress towards achieving breakeven even at the non-GAAP operating level.
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In the second quarter of 2023, our total revenue reached approximately $57 million.
Representing a sequential growth of around 20%. This marks the third consecutive quarter of sequential growth comparing year over year. There was an eight 9% decline in our total revenue.
Factoring this what the currency fluctuations, particularly the weakening of the RMB against the U S dollar, which accounted for around five six percentage points of the year over year decline.
Excluding the impact of the current currency fluctuations our total revenue was close to flat year over year.
It's worth noting that the.
Resurgence in consumer demand has not yet reached their full potential and the cautious operating strategies adopted by downstream business during destocking cycle persists, thereby impacting this quarter's results.
Our overall gross margin of 246, 7% with biggest figure the gross margin for <unk> climbed back to 44, 2%. Meanwhile, thanks to the successful implementation of Iot device solution strategy. The gross margin of our smart device distribution segment.
For our growth to 23% or.
Our software and value added services maintained a steady gross margin of 74, 5%.
Of particular note our cloud storage services have been consistently generating solid cash flows and stable revenues.
Marketing this transition into a period of scalable growth.
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Regarding our cob creates operational management, our non-GAAP operating expenses for this quarter showed a sequential decrease attachment to our stringent cost the bargaining across all departments. When we speak of efficiency are around new capacity per head count and a gross profit supported by headcount reached historical highs in Q2.
Following several quarters of continued improvement.
And then who are reopening now let's dive into some business updates from the second quarter, primarily due to an equivalency call is <unk> property and low credit.
In terms of our business strategies, our focus remains on three key areas executing our customer focused strategy, improving our Iot developer platform and continued product enhancements.
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The valued after throughout <unk> platform continues to be favorable by top tier customers in early June without signing ceremony in collaboration and without our customer higher groups, New energy brand now, creating new outage technology together, we aim to jointly develop a smart devices for home LNG manager.
<unk>, including PV storage charging devices, and the heat pumps and to establish a smart home LNG management platform, we initiated a services for a prominent list the company with a market cap close to 100 billion RMB and the leading player in the electric coal and home appliance industry.
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Combined with the smart committed communications fix solution.
We have secured a partnership with the leading Swedish retailer.
Distribution channel extensively covered in the Nordic region, and whose business focuses on DIY and home products.
All smart home brands under their umbrella.
The two hour platform.
Additionally, we have newly acquired a renowned global brand specializing in engineering joined products and irrigation equipment, which is also a subsidiary of European listing leading company and engineering Jointing technology. They are predominantly cover market in North America, Europe and Australia.
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<unk> smart private cloud products also continue to help us acquire top customers were written fully.
Agreement with a subsidiary of a leading real estate conglomerate in Thailand, Martin our serve private cloud collaboration in the country.
As growing prepaid sand influence in Thailand are almost go to buy in our collaborations with influential local companies, including conglomerates telecommunications operators and the top throughout the groups the insights and experience Calvert downloaded from our ventures in the Thai market will serve as the strategic.
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As we continue to enhance the Iot developer experience. We're now also exploring opportunities in valor beyond consumer electronics with developers and enterprises for example, the LNG saving sector with its practical and a sustainable nature garnered significant attention from global corporate customers.
In light of this we showcased that where residential PV energy storage solution at a W. E T.
Additionally, this module of Proficiencies have been seamlessly integrated into our SaaS offerings, a casing 0.2, as SMB Bluetooth mesh lighting control solution empowering more medium sized the business to easily achieved.
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Our smart device distribution business at the integral component of our software and hardware enrichment strategy as mentally.
Originate from new customers, we acquired things our strategic alignment in the middle of last year.
The gross profit of the segment in Q2 was approximately $149 million, marking a sequential growth of around 38% and a year over year increase of around 58, 2%.
The overall gross margin was 23% our flagship product solutions, such as <unk> gateways and central control screams as part of the Iot solution model contributed to the housing comprehensive smart device gross profit.
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Regarding our product lines in Q2, the comprehensive revenue from our voice Central control product line registered a year over year growth passing 60%.
The smart device solution model thing an impressive year over year surge of approximately 280% from them industry standpoint, Central control products Act at the entrance for out interaction possessing the capability to replace traditional panel switches.
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<unk> boasts robust competitiveness in this sector, our central control product solution and compassion of diverse area of operating systems.
Panel firm firmware. This also extends to software services features like multi media visual intercom gateway, that's us gestures and content in terms of hardware when offer full sized adaptability support for all committed communication protocols and.
And integration with popular controller Ics meeting the product requirements of mainstream brands worldwide.
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Our SaaS and other segment reported year over year revenue growth of 32% as Q2 revenue reached $9 4 million Boes breaking this down to key products as previously mentioned our cloud storage value added services consistently demonstrated strong revenue characteristics.
Amy the steady growth in device scale. These services have continuously delivered high quality revenues in the millions of dollars level more than doubling year over year as for SaaS sectors, such as hotel rental and our real estate achieved a moderate year over year growth. Despite the softer.
Economic cycle, Conversely, commercial lighting falling within the broader lighting industry reduced the year over year decline attributable to Mike microeconomic challenges.
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I also want to highlight another milestone we achieved in May 2023. So we are officially became the world's only company to offer support for both the vendor and edification, the VIP and non VIP scoped the product test patient authority the PAA within a matter of full stack solution.
This allows us to sign product test patient intermediates for PID to meet the requirements of any eligible <unk> member of the readout is capable of not only reducing the cost of matter device certification for developers, but also facilitating in almost in the controllable.
Implication process, allowing developers to advertise their products come to market. Moreover, can also provide comprehensive lifecycle management for PAA certification, enabling developers to focus on device development, while enjoying a similar experience.
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Overall during Q2 and the first half of 2023, the consumer electronics segment continued to face the residential.
Pressures of high inflation and the associated inventory.
Implications.
However, there are encouraging signs globally for example inflation rates in Europe .
States have presented to their lowest level in over two years anticipated sales for several of our key smart device categories are tending towards positive year over year growth joined from these external change and our internal matrix. We believe that we have navigated through the toughest times.
And we expect to return to year over year round of gross in the second half of the year.
Our leaner and a more streamlined operational structure and also give us the confidence to pursue ongoing improvements in our financial performance and we look ahead. We are looking forward to a future of sustained steady growth.
<unk>, therefore significant asset.
With that I'll now turn the call between our CFO jessi to provide everyone with a closer look at our financial performance.
That concludes the remarks Jerry.
As I review our results. Please note that all amounts are in U S dollars.
All comparisons.
On a yearly basis, unless otherwise stated.
In the second quarter of 2023, our total revenue reached $57 million and our gross profit was $26 6 million.
Both metrics have shown sequential improvements over the past three consecutive quarters.
However, both metrics recorded a decline on a year over year basis when.
When we excluded the impact of the depreciation of the RMB against the USD, which now has an exchange rate surpassing seven two.
Our revenue essentially remained stable compared to the same period last year, while our gross margin showed a.
X percent increased from the same period last year.
During the currency rate, we anticipate facing ongoing challenges related to currency exchange in the third quarter.
The global consumer electronics sector is grappling with.
The impact of heightened inflation.
However, our forward thinking and strategic interventions have yielded encouraging results.
A customer focused strategy, our average revenue per customer increased sequentially. Additionally, we've reported a significant uptick in revenue and gross profit.
Per employee basis.
Have noted a more applicable distribution in geography with revenue contribution.
Defining our <unk>.
Nation against the market headwinds.
Our blended gross margin for the second quarter expanded to 46, 7% from 42, 8%.
Having a historically high levels since our inception.
I'd like to emphasize the gross margin is pivotal for the long term sustainable growth of the company, reflecting the value of our services and the products bring to customers and securing our profitability. This margin is the testament to our value proposition the efficiency of our operation.
Our balanced approach between profitability and growth.
Let's breakdown in the second quarter, our Iot Pos gross margin increased to 44, 2% and 42, 5% in the same period last year. This uplift contributed 1212 percentage points to the year over year expansion of our blended gross margin for the quarter.
Presented a significant rebound of three seven.
Seven percentage points from the.
First quarter.
I always confident in the value proposition of our Iot products distinguished by our unique software capability.
Leading iot functions as well as effective pricing strategies and the management. However, given the macroeconomic downturn in inventory backlog, leading to slow moving issues across many enterprises are holding.
In Iot chips to us not exempt from this pressure to adjustments, we have refined our inventory management strategy, emphasizing prudent control over chip inventory levels and the strategic purchasing decisions.
Furthermore, we've been guiding our customers in their Iot solutions selection and when necessary utilizing specific pricing strategies to facilitate you mentioned reduction therefore, alleviating the financial impact of inventory allowance.
In the second quarter, we have effectively minimize the impact of this allowance.
Slide six central to recognize that inventory management and a potential write offs.
NAMIC areas influenced by market conditions, we remain confident in our ability to maintain them within reasonable levels.
So overall, a solid core business, we believe that Iot Pos will continue to be a stable and a robust contributor to our profitability.
Profitability.
The gross margin for our smart device distribution segment in the quarter reached 23%.
This segment has evolved from initially facility taking customers in acquiring smart device quickly easily and cost.
Activity to providing.
Logistics model and support of our clients.
With Iot solutions.
Solutions.
Aiding them in expanding product categories and penetrating new markets.
In the second quarter. This must device distribution segment contributed one 3% points to the year over year growth.
Both of our blended gross margin.
Gross margin of our software and other segment was at 74, 5% in the second quarter.
Characterized by it.
Diverse compensation, including SaaS to begin to see value added services.
Apps and various customer developments and smart private cloud projects, notably our cloud storage revenue continues to grow its profit contribution has become even more significant.
Accounting for approximately one eight percentage points of the year over year growth.
Our blended gross margin in the quarter.
Got it.
The consistent financial performance on the high value software value added services, coupled with expansion of our device ecosystem further affirmed our strategic direction and the confidence with future.
So as just detailed profitability of our business segments for the quarter, we believe that maintaining solid margins and the business segment level is crucial to ensuring the overall margin profit of our company.
Moving on to our operating activities and related expenses, we are presenting our operating expenses, our non-GAAP basis by excluding share based compensation expenses and the credit related impairment loss from our GAAP numbers.
This credit related impairment losses stem from our strategic investments in certain Iot related private companies.
Some of those companies have encountered operational difficulties after facing two years of headwinds leading us to provision for impairment.
However, this has no material impact.
Operations and the business. Therefore is excluded from our GAAP numbers. We believe this provides better clarity on the trend of our operating expenses aligning with our management team reviews outperformance in.
In the second quarter of 2023, our non-GAAP .
Total operating expenses decreased by 32, 7% to 33 million from $49 1 million in the same period last year, our breakdown of our cost and expenses to provide additional clarity on.
Employee related costs, excluding share based compensation declined by 33, 2% year over year in Q2, and the costs related to office and a property leasing.
Currently decreased by 51, 6% combined this cost represented about 75% of our total non-GAAP operating expenses in Q2.
As of now our teams that have been further streamlined to around 500 employees. We continue to explore opportunities for further optimization in both our business and organizational structure.
<unk> and promotion expenses decreased by 17, 1% year over year, highlighting our commitment to budget control travel related expenses were nearly flat year over year and decreased sequentially cloud infrastructure now remains at.
A stable level flat year over year, our team remains committed to striking a balance between driving innovation and enhancing our cloud platform and are maintaining a large stable global operation system.
We're focusing on our cost efficiency professor.
Professional fee under G&A expenses dropped by 23, 4% from that of Q1.
Following.
Our annual reporting activities in the U S and Hong Kong year over year professional fees were down 37% compared to the same quarter last year. We are pleased to report that this overheads are now consistently managed and were contained the company remained dedicated to ensuring quality cooperate compliance and prefer.
<unk> services at a cost effective rate.
Next on the income statement is to financial income section. During Q2, we generated approximately $12 1 million in deposit interest income because of our conservative capital strategy. The income was recorded as our financial income for the quarter.
Well not elaborate on the remaining types of detailed expenses and income as they are not as significant to our overall financial performance.
As a result of our consistent efforts over several quarters. Our non-GAAP net loss has been steadily narrowing in the past quarters. In Q2, we achieved profitability by reporting a non-GAAP net profit of $1 5 million translating to a non-GAAP net profit margin of two 7% this transition from.
The loss to a profit is a significant milestone for us with encouraging indications from our business evident from stable gross margins and our disciplined approach to expense management, we remain optimistic about sustaining and progressing our financial trajectory.
Moving on to cash as of June 32023, our cash balance comparison cash and cash equivalents as well as short term investment reached $942 3 million. This represents a slight increase from the end of Q1, primarily due to an expansion of operating cash flow of $7 5 million.
<unk> cash flow is nominally.
Subject to fluctuations in working capital changes and payments terms our project between cash flow now stays at a much better level compared to a year ago.
Furthermore, our financial position remains strong our accounts receivable receivable turnover is less than a month with a majority of our business collaborations requiring prepayments from customers.
Our liability to asset ratio has consistently remained at or below 10% since 2021, and we have always been free from any interest bearing liabilities on long term capital commitments.
Finally, as articulated in Jerry strategic outlook, we remain confident in the long term perspective of our company with that operator, we're now ready to take questions. Thank you.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by Q and preparing to ask your question. Please ensure your point is a major locally. Additionally, when asking a question. Please state your question in Chinese.
Immediately translate that into English.
Everyone on the call. Thank you.
Our first question comes from Yang Liu of.
Morgan Stanley . Please go ahead.
Thanks.
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Quick question for John that you call a signal.
Now let me translate my question.
Congratulations for the non-GAAP breakeven this quarter and.
No question as it relates to the waste Demoed in the recent few months, we observe the export data.
And China is pretty weak.
And I would like to ask that based on communication.
Downstream.
For example, the OEM based in China, how about their customers' demand outlook, whether it's it was also impacted by the weak export.
The numbers on the.
The second question is.
Customer inventory.
We are happy to see that.
Management.
The second quarter year on year revenue growth to turn positive.
Due to the <unk>.
Inventory digestion of the customer side is so close to the end and about two.
Restocking inventory.
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Okay. Thank you for nuance question.
Our box demand to start with the conclusion.
The past few months, we actually observed and ongoing improvement in inflation in Europe , and the U S. The total sell out of Iot product for all our brands customers. During the first half of this year showed a modest year over year growth.
So.
Despite we do noticed a recent export number with me.
China.
We hold a cautiously optimistic view.
What the future demand for and the consumer Iot electronic products.
And first from a macroeconomic perspective, this being a notably ethane inflation.
As of July 2023, the inflation rate in the European Union has dropped to 5% what are the U S has still a slight rebound to three 2% in July following a decreased two 3% in June .
Since peaking in the mid to late last year, the decline has been pronounced especially.
Especially in the first half of this year.
However, both on the CPI figures and the core CPI indicators. Most of you suggest that the risk associated with inflation and not completely eliminated and the prices of some consumer goods to remain high reclining continuous observations by companies in this sector.
In China after a first half year resurgence in travel related spending retail sales of consumer goods in the mid of the year dropped to a lower single digits year over year growth rate, but stabilized.
In July .
Regionally speaking our perception is that the overall trend is similar across the regions.
But with differences in details for example in the United States.
Even though the overall consumer electronics market was sluggish in Q2, there was still a decent demand.
For home appliances.
By a relatively stable year over year.
Growth was 50 products.
And an improving situation for electrical products in Europe primary countries remained a good rebound in consumer spending with us.
There is strong demand for energy efficiency related products, we have.
<unk> a strong resurgence in categories like gateway controls 50 centers.
And some home appliances electrical product in China based on official data given the remaining spending on travel tourism and the food during the first half of the year since.
Consumer electronics like cell phones exhibited weak performance.
Actually in Europe , due to People's demand for 50, and energy efficiency certain certain categories stood out even amidst the overall weak electronic demand.
Other imagine emerging global market.
Such as.
Southeast Asia Middle East Latin America.
Have rebounded pretty well however.
Lighting segment continues to face substantial pressure are seeing from the performance of leading global lighting companies.
That have reported their results.
Overall, we believe the long term development Chen with Iot consumer electronics sector should be steady and consistent.
Both enterprises and consumers will continue to explore and are focused on realizing the value of Iot.
Yes.
As the world's leading Iot cloud platform with a high market value, we overall growth pattern should align with overall brands and the use of sell out.
The growth trend in the industry.
And then come to the inventory.
Question from from New young.
The mid of this year, we observed our downstream UNC has markedly improved and we expect it will return to a healthy level by the end of this year.
At the end of last year, we devised a method to estimate downstream inventory levels by comparing.
The.
Total Iot devices activation.
With our sales.
Onstream includes OEM brands retail channels and all other entities between us.
And the consumer we previously anticipated that downstream inventory will continue to be digested throughout 2023, and the by the end of this year with a return to a healthy level seen in 2019 to 2020 current downstream inventory progress aligns with our expectations.
Patients.
A recent survey of top customers worldwide also indicate.
Very impressive due to individual business plan or strategic strategies. However, the general feedback suggest that inventory management has returned to a controllable state.
Two years ago, the consumer electronics, the pine train built excessive inventory.
During two to three quarters.
Due to chip shortages and price tag. This was followed by an almost two years inventory destocking cycle, we believe that moving forward.
Business on the value chain of consumer electronics will plant and operate more rationally and nonetheless and in overall inventory management will return to a steady state.
So considering the positive inflation Chen and are nearing the end of a two years in lunch at the Destocking inventory cycle, we are.
Confident that after a.
New of six quarters, our revenue will show a year over year growth in the second half of the year.
So this is my answer to the questions.
Okay go to next question.
Thank you. Thank you we now have our next question from Timothy <unk> of Goldman Sachs. Please go ahead.
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Thank you. Thank you management for taking my question and congrats on the strong results.
I have two questions one is on the gross margin trend.
The second half of this year as you already got here that the revenue will improve on a year on year basis, and secondly is regarding the journey to AI.
Paul do noted that I think you already lost certain part items shifts strategies, a few months ago could imagine this year for the color on your thoughts on how to.
Have you entertained at AIG.
That will impact your business model. Thank you.
Okay. Thanks, Laura Thomas' question.
Firstly, let me address the question about.
Gross margin.
So beyond promising signals in revenue, we are particularly inspired by our.
Gross margin since Q1 of 2019, our gross margin has consistently improved from initial 24% to almost 47% this quarter. Despite challenges like the pandemic inflation any inventory issues.
Several reasons contribute to this steady improvement of gross margin firstly, the proportion of high margin products in Iot parts business has been increasing secondly, the overall high margin stuff.
The revenue contribution to the total revenue has been continuously grow reaching to about 16%.
In 2023, Q2 lastly, the transformation of the business model of the smart device distribution business.
Estimate pretty big.
Improvements to the gross margin.
That segment gross margin improved from about 10% to now 23%.
Looking forward.
Our expectation.
We are likely to maintain a steady gross margin.
We are now also focused on the growth of the company we are looking for new.
New direction of growth and some new business.
Chi out initially usually we will make the gross margins are more aggressive to attract new customers.
So balance that we we expect a steady gross margin for the.
For the near future.
And then come to <unk>.
Second question about AI.
In the midst of a boom.
In Q1 this year, we shared our insights on the direction, we are optimistic about upgrades and efficiency that <unk> can bring to.
Iot developers and end users our perspective remains consistent and we're currently working on various ITC related projects. Firstly, a common approach in Iot industry is the utilization of AI in customer services, we're leveraging AI to.
AI empowered <unk> customer support, enabling more intelligent and flexible conversation with users, thereby providing more personalized and high quality services. Additionally by obtaining onto US documentation, we can pinpoint and the users user issues with more precision and <unk>.
<unk> responses and the interactions this not only enhances the user experiences, but also significantly boost efficiency for end users enterprise developers.
And the <unk> internal R&D team. The second direction is to empower developers for instance to our staff development framework now allows for the Alto generation of.
General service codes based on described requirements such as device inquiries.
Scenario inquiries, thus insurers that developers when creating the Iot device management platforms are similar needs can significantly improve efficiency reduce development costs and the entry barriers and maintain code quality and the consistency it enables developers to concentrate more.
On the development and innovation business logic.
Sure.
The first direction.
AI assistant, we're not referring to speakers, but mobile apps, our central control panels, which interactive screens. This AI assistance enable end users to similar at least the top enjoy Iot scenario setting bridging the gap between various fragmented intermediate links for example, when a.
User says help me annualized energy consumption from August 3rd top they can instantly view of the corresponding analysis result on AI assistant interface, followed by personal lines, the recommendation for energy saving or other usage scenarios and so forth. Besides the broader directions just mentioned.
Our staff into a specific case related to enterprise level project, we assisted clients in generating device management strategies using AI, specifically, we begin by customer training several popular language models based on industrial verticals, creating professional mode.
Models.
Understand device operation in energy saving requirements users condensates their needs such as maximum energy saving.
First comfort.
Model, considering historical data predict device usage under different strategies, it wasted costs and impact of our strategy implementation presenting users with several optimization option.
The entire process eliminates the need for in ticket Powermeter configurations and it's.
Carried out through into interactive dialogue with the primary goal being to enhance user energy efficiency and the comfort finally, it's crucial to emphasize that one off AIC says. Most notable features is to transformation of human machine interaction methods, whether the output result, MIT expect.
Patients, whether they are commercially viable and how cost effective aig's it in various scenarios.
And ticket industrywide of questions that are still being split.
Currently.
In our segment.
The early stage of AI journey.
The operator can move to next question.
Thank you. Our next question comes from mainly around the SEC. Please go ahead.
Thank you ladies and gentlemen.
Thank you.
Please go ahead.
Sure.
Thanks, John .
John .
Yes.
Thank you.
Thank you Tony.
Okay.
Thank you Glenn.
And I think if you recall nishu.
Okay.
Sure.
Thanks Giovanni.
Oh.
Let me translate myself.
Thanks for taking my question.
My first question.
What kind of feedback.
Yes.
Downswing in areas.
That's right.
More resilience to support our full year, Greg on the relatively weak demand.
And my second question is that.
We see each quarter is the first time that Cherokee. Thank.
Thank you Ben.
Okay.
Tom.
Alright.
Okay. Thank you.
Please give us more color.
Thank you.
Yeah.
Okay.
Thank you for the question, let me first address.
The.
The growth patterns of different categories, so differences in our different categories business quite noticeable.
Our performance aligns well with the chance highlighted earlier for.
Each region, however between <unk> and the final consumer to business operations and the decisions of downstream companies also play a significant role. So this quarter our performance was significantly hampered by license.
But most non lighting sector have already achieved a modest year over year growth for example, the <unk> sensors sector. This quarter has almost.
Levels of year on year. This can be attributed to the fact that during.
Volatile period, the fundamental demand was 50 and protection remained stable.
Alliance sector has shown year over year growth since the first quarter of last year.
With an impressive growth exceeding 20% of the Q2 quarter.
Very positive signs put them, while we remain bullish on our renewable energy.
Segment itself as well.
Valeo generated from integrating renewables devices with other Iot home devices. While we're just starting we believe we are among the global competitive enterprises when it comes to integrating <unk>.
<unk> Iot with new energy products, our residential PV energy storage Iot solution displayed at AWS <unk> not only manage traditional household electricity consumption, but also visualizes real time energy flow from solar power generation.
And then just storage batteries distribution and the Consumptions to electrical vehicle charging you can optimize energy usage strategies and assist homeowners in managing household energy efficiently.
In especially like.
Europe , Australia in terms of faster than other segments and smart scenarios we've discussed.
Scenarios like cloud storage and intelligence business early areas earlier there.
There are distinct differences in business models and a product for instance software services addressing and the use of Richard demand to have a more pronounced advantage.
First being our direct to be to be offering is greatly influenced by cooperate budget decisions and business development efforts.
We remain resilient in this area the pandemic disrupted our global promotion of Paas offering years ago, but as restrictions ease towards the end of last year. We started our efforts focusing mainly on China market in southeast Asia regions, we have been making steady progress in Thailand, we secured a project with <unk>.
Is it groups. Furthermore, replicating our benchmark project and Spanish student apartments, we secured another project.
In the UK.
And now I'll go to the second question about the.
Profitability. So we will continue to prioritize.
Assuming a non-GAAP operating breakeven at La <unk>.
While maintaining quality business operations, we will explore new Avenue for growth. Our main operation focuses include first we will rigorously maintain an efficient model efficient organizational scale and continue to stick.
Areas for adjustments and optimization second we will consistently identify methods to reduce costs and improve efficiency within our operations, including refining our business model.
Thirdly, as we explore new growth directions, we will remain rational in our capital expenditure always keeping an eye on the return on investments.
So in summary, we are committed to.
To pushing our topline revenue.
Returned to a growth trend.
Furthermore.
Two but.
The basis of sustained our gross profit margins. Furthermore, we aim to maintain a reduced non operating.
non-GAAP operating expenses, we help to achieve our non-GAAP operating breakeven we think the next.
Next a few quarters.
And we aim to maintain non-GAAP net profit.
In the future.
So that's on the answers thank you.
Yes.
Thank you Dan no additional questions at this time I'll now hand back to the management team for any closing remarks.
Okay.
Thank you all again for joining our call. If you have further questions. Please feel free to contact us I'll request through our IR website, we look forward to speaking with everyone.
Our next earning calls have a good day.
Yes.
This concludes today's call. Thank you for joining you may now disconnect.
Yeah.
[music].
Okay.