Q4 2024 Tuya Inc Earnings Call
Yi Yang, Xueji Wang, Reg Chai
Speaker Change: To answer questions. During the session you in each press star one on your telephone you would earn in automated message advising Johannes raced to withdraw your question. Please press star one again.
Speaker Change: Please be advised that today's conference is being recorded.
Rich: I will now turn the call over to your first speaker today, Mr. Rad should try Investor Relations director of two young. Please go ahead rich.
Jeremy: Thank you Hello, everyone and welcome to our fourth quarter 2024 earnings call joining us today are founder and CEO, Mr. Jeremy well and all of a coupon there yet.
Yeah.
Speaker Change: Fourth quarter 2024 financial results and webcast of this conference call are available at IR <unk> com.
Speaker Change: A replay of this call will also be available on our IR website.
Hours before we continue I refer you to our safe Harbor statement.
Speaker Change: Men, which applies to this call as we will make forward looking statements with that I will now turn the call Java founder and CEO, Mr. Huang Jeremy with delivery Heathrow marked in Chinese which will be followed by corresponding English translation Gary Please.
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Speaker Change: Hello, everyone. Thank you for joining <unk> fourth quarter, two 2024, and the full year 2024 earnings core <unk> 'twenty 'twenty four we achieved nearly 30% year over year revenue growth and reached two significant financial milestones.
Speaker Change: First our inaugural quarterly and annual non-GAAP operating profitability.
Speaker Change: Second our first Albert annual GAAP net profit the former validates <unk> unique business model allowed a ladder provides us with greater flexibility at this stage III shareholders equity level, enabling us to take further strategic access.
Speaker Change: Achievements strengthen our confidence in the company's future growth.
Speaker Change: Yes, so we I can't in the total area in front of you here on Saturday afternoon kill a fabulous we ask that you to add one more thing when you're not looking.
Speaker Change: So as you can only do I see I see.
Speaker Change: You don't go out and say I sounds like he says he.
Speaker Change: Your diet cookbook in how the tenants in the knee.
Speaker Change: Okay, Okay with just 10.
Speaker Change: Turning the corner.
Speaker Change: Obviously, I can't talk about AI Iot crowded in T cell count makes you don't change I know you won't have the Internet service.
Speaker Change: 'twenty 'twenty four with the yield on wavering commitment to research and development in the second quarter of 2024, we launched the TUI us preparatory AI larger modal spatial large language model, while continuing to advance R&D box AI or it can always still leverage Jimmy I just again.
Speaker Change: <unk> enhanced smart product experience, providing our customers with superior product competitiveness and Andy you. This was more valuable smart features and functionality, we firmly believe that AI Iot and cloud technologies will drive a new user experience and substantially increased penetration.
Speaker Change: Smart devices.
Speaker Change: What's your opinion on my agenda and tissue sense. It we haven't had to tell the same.
Speaker Change: Same with it some passive into dollar Indian timing a solution with it what does it tell me using your debt. So we got some bulk water and community time switching.
Speaker Change: So are you finding them down.
Speaker Change: Thanks, I had a couple well done that you can control internally the Indian hunting.
Speaker Change: <unk> is an important one.
Speaker Change: We are done.
Speaker Change: And I can.
Speaker Change: Keep going down in Cantel, Italy, you would say.
Speaker Change: They're not going to talk or would it have been treating them. That's macro looking solely about classes union till we abandoned Spanish companies.
Speaker Change: Over the past year, we have.
Speaker Change: Almost made significant strides in upgrading to ask unique software and hardware integrated business model extending beyond pass into a hardware solution model. What are they now are of course, Js smart home or in commercial verticals such as <unk>.
Speaker Change: Metallurgy real estate mobility, and renewable energy, we're dedicated to providing developers with increasingly competitive how do we have solutions. This allows our customers to expand their competitiveness beyond powered by <unk>, our software capabilities into supply chain and how do we have advantages and the results we have gained for.
Speaker Change: The customer recognition driving an approximately 58 <unk> in our smart solution revenue stream.
Speaker Change: Hello.
Speaker Change: Salvage vehicles can change, Ohio, Colorado Center for proton DNI wine found.
Westcott Thompson: Our Westcott Thompson.
Westcott Thompson: It is two album type I know Alex you came in right in time thing because in turnkey.
Speaker Change: You can choose your <unk> gone through 46, hundreds and that you treat them train Joanne we're killing it.
Speaker Change: Yeah. He moved up quite a father penal UAS handsets is since we had oh don't worry about it.
Speaker Change: Looking ahead to 2025, we will be fully committed to building that global AI Iot developer ecosystem. This includes ongoing integrations of our agents and OLS developer products as well as the open source software solutions such as <unk>, we are open to build a long.
Speaker Change: <unk> competitive advantages. Meanwhile, we remain committed to capitalizing on growth opportunities in international markets accelerating the development of a Iot and AI applications worldwide and delivering long term value to our shareholders.
Speaker Change: You can do it again in China without.
Eric Dey: <unk> CFO Eric Dey.
Speaker Change: To allow more time for discussion and Q&A, our co founder and our CFO, Alex will now provide more details on our business and financial performance.
Alex: Hello, everyone I'm, Alex today, I'd like to share an overview of our 2020 for fulfillment and our thoughts with feature.
Speaker Change: Before that let me summarize our recent financial results.
Speaker Change: We wrapped up Q4 to 24 on a strong delivery in about $82 million in revenue, representing a solid 27, 4% year over year growth.
Speaker Change: Given that higher base for the prior year this growth demonstrates strong momentum.
Speaker Change: Q4 pass revenue reached about $59 3 million <unk> app.
Speaker Change: 25, 7% year over year, driven by our strong foundational market position and value proposition.
Speaker Change: Enabling rapid transmission of customer expansion and end market demand into revenue.
Speaker Change: So us and others revenue was about $11 5 million of Darvish up.
Speaker Change: 21, 1% year over year.
Speaker Change: Benefiting from the stable growth of SaaS value added services across our extensive device space.
Speaker Change: Smart solution revenue reached about $11 3 million order growth growth by $45 five year over year.
Speaker Change: Supported by robust demand across categories, such as gateways central controls and energy efficiency solutions.
Speaker Change: So for the entire year.
Speaker Change: Our total revenue reached about.
Speaker Change: $298 $6 million, making nearly 30% year over year growth.
Speaker Change: Our overall gross margin remained stable at around 47%, while annual operation expenses declined by approximately 10% year over year due to the continuing cost discipline.
Speaker Change: The company as a REIT.
Speaker Change: Doug.
Speaker Change: Revenue and gross profit growth efficiency translated into a premium profit leading to.
Speaker Change: Seven 4% non-GAAP operating margin and 25, 2% non-GAAP net profit margin with.
Speaker Change: With GAAP profitability achieved for the first time as well.
Speaker Change: On the cash flow side, we generated around.
Speaker Change: $84 million in positive operating cash flow for the 2024.
Speaker Change: Following the dividend declared in August and pay in October.
Speaker Change: We ended Q4 with a net cash balance.
Speaker Change: Over $1 billion mainly.
Speaker Change: Maintaining a strong liquidity position.
Speaker Change: Throughout 2024, we observed.
Speaker Change: Sustained growth in end market demand.
Speaker Change: Cable customer relationships and their increased investment in our smart <unk> nine.
Speaker Change: The rapid agitation and adaption of G&A and other apps. So this drives a positive response from the consumer electronics industries towards intelligence trend.
Speaker Change: For two year.
Speaker Change: Our unwavering commitment to the developer platform model combined with our unique software and hardware integrated approach and customer centric production expansion strategy.
Speaker Change: So that has amplified those industry tailwind.
Speaker Change: Helping both of us and our customers achieved solid business results.
Speaker Change: In 2024, the number of Iot past premium customers growth by 11% to 289 298, our revenue data expansion expansion rate, so DBA or exceeded 122% at the end of the Q4.
Speaker Change: Mark you five.
Speaker Change: Consecutive harders about above 100% and three consecutive quarters above 110%.
Speaker Change: Our products and services offering provides customers.
Speaker Change: We then or necessary technology and software to efficiency efficiently, great competitive smart devices and bring them to market. So the D. Var metrics reflects our continued ability to enhance our customers' competitiveness through two yes technology leadership.
Speaker Change: As a BBB company are top 10% revenue contributing customers maintained.
Speaker Change: Our retention rate is about 97%.
Speaker Change: Underscoring our strong stickiness of our neutral open and scalable technology platform.
Speaker Change: Our strategy.
Speaker Change: Strategically focus on key accounts has driven efficiency improvements too.
Speaker Change: Evidently by about 30.
Speaker Change: 37% and 40% year over year increase in average revenue per customers and average gross profit per customers.
Speaker Change: Along with.
Speaker Change: 47% increase in company wide revenue per employee.
Speaker Change: So at the same time.
Speaker Change: The scalability of <unk> ecosystem, our strong market positions has freed us from rigid marketing and sales expenses.
Speaker Change: Allowing us to then Natalie allocate resources strategically promote new products capabilities feature set and precisely targeted key markets.
Speaker Change: And expand our influence as well.
Speaker Change: Consequently, our sales and marketing efficiency improved by about by about 40% year.
Speaker Change: Year over year.
Speaker Change: In the past business 2024 witness a more diverse and dynamic the developer base, so contributing to a solid year over year growth across all categories.
Speaker Change: Our product categories structures has become increasingly balanced and diversified.
Speaker Change: Well with the trend of a customer expansion there are product lines.
Speaker Change: In a highly fragmented and dispersed global.
Speaker Change: Consumer electronic market.
Speaker Change: There is widespread adoption of technology continuous to drive innovations across diverse product categories. This increasing virality of smart devices is forced in fostering a more comprehensive approach to a spatial intelligence enhancing user convenience and comfort.
Speaker Change: Ultimately progressing towards a division of <unk>.
Speaker Change: Interconnected and interoperable in patents ecosystem.
Speaker Change: We're also pleased to see that our smart solutions business model efficiency align with the needs of top tier customers.
Speaker Change: Shaving about 58% year over year growth in 2024.
Speaker Change: For instance.
Speaker Change: Response to the French governments energy subsidized.
Speaker Change: <unk> policy, we're seized and helped our French customers in <unk>.
Speaker Change: On the first to meet the country's energy efficiency.
Speaker Change: Subsidy standard so this.
Speaker Change: Incentive programs is setup to helping millions of French households to achieve green energy savings.
Speaker Change: At this stage of smart technology development, whether in consumer electronics industry specific applications, our reach ecosystem of smart devices is essential for top tier customers.
Speaker Change: With regard to persist.
Speaker Change: A significant advantage over other players throughout its expansive developer ecosystem.
Speaker Change: As smart solutions further enhanced.
Speaker Change: Ability to support customers strengthen engagement and boost the market competitiveness.
Speaker Change: And in the same time, we remain committed.
Speaker Change: Two building a robust developer ecosystem.
Speaker Change: The end of 2024, the number of re gesture developers on our platform reached around $1 32.
Speaker Change: Minion with over one point.
Speaker Change: One 7 million Skus of smart devices developed onto our platform.
Speaker Change: Spanning more than 3000 products categories with.
Speaker Change: We continue to foster an extensive ecosystem buying for example.
Speaker Change: Integrating with Google home API is to create seamless smart home experience and collaborating with <unk> to establish a new vertical.
Speaker Change: And what HEICO home.
Speaker Change: Interim wrap ability ecosystem at the same time, we're dedicated to expanding to a global influence.
Speaker Change: Positioning ourselves as a reliable partner for the cost for the customers and developers worldwide are hence the home energy management system solutions has recognized in the United Nations Global Compact report.
Speaker Change: <unk> best corporate sustainability practices in 20 years, highlighting <unk> commitment to sustainability.
Speaker Change: Additionally, we achieved MSCI ESG rating of a and wind ESG rating of <unk> and we were included in the S&P sustainability Yearbook, China edition.
Speaker Change: And so long.
Speaker Change: So next I'd like to discuss <unk> opportunity in device and edge AI.
Speaker Change: As a technology driven company to a fully the inbound embraced the Jimmy <unk> and <unk>.
Speaker Change: <unk> in early 2023.
Speaker Change: In Q4 of 2024, we launched the Trulia agent development platform integrating all major larger language models, including chat GBT fueling deep sake.
Speaker Change: <unk>.
Speaker Change: Les chat of MS trial, Gemini, Amazon, Nova and cloud et cetera, So it <unk> an agnostic approach.
Speaker Change: It eliminates the complexity of developing smart devices and applications from the ground up.
Speaker Change: Providing developers with a crucial made aware there that bridges.
Speaker Change: <unk> capabilities with <unk> applications those developers they can flexibility to choose the most suitable AI models based on their business and the market needs.
Speaker Change: Leverage into Es templates library or customer solutions customized solutions to develop AI devices and applications.
Speaker Change: This philosophy in line with the Thule as cloud agnostic strategy, ensuring customers did not have to worry about compatibility and sets an ability of cloud services ice device types or hardware architectures.
Speaker Change: Yes.
Speaker Change: So those agnostic profitability provide developers with unparalleled.
Speaker Change: Flexibility and adaptability.
Speaker Change: Wishing us from single category solutions.
Speaker Change: Moving forward well.
Speaker Change: Continue to prioritize AI devices, and especially intelligence applications focusing on areas such as audio video interactions.
Speaker Change: Efficiency optimization and decision making automation.
Speaker Change: Audio video AI enhanced user devices interactions, enabling advanced content input and output Mackenzie as well efficiency and decision, making AI, helping end users to optimize their smart devices and usage strategy to meet personalized and differentiated needs.
Speaker Change: We also continue to explore the application of <unk> is a special area of amps in energy management and other spatial intelligence scenarios as Stuart.
Speaker Change: 2025 remarks at the breakthrough year of device.
Speaker Change: Hi.
Speaker Change: We plan to integrate AI capability across all categories within the <unk>.
Speaker Change: Ensuring that every powered by two of our devices is enabled by default in the future.
Speaker Change: Together with a global developer partner.
Speaker Change: <unk>, whereas innovations and scalable applications.
Speaker Change: For AI device continuously shaping a variable global AI.
Speaker Change: Iot developer ecosystem.
Speaker Change: Looking ahead intelligence will involved through.
Speaker Change: The integration of software and hardware.
Speaker Change: Construction differentiated scenarios throughout interoperable smart devices and to meet the Paris.
Speaker Change: Customized needs of individuals households, and spaces. So industry remain in penetration driven phase with a vast and promising total addressable market to achieve.
Speaker Change: Sustained growth, we will focus on the following key areas. The first one.
Speaker Change: We continue to expand the global market penetration.
Speaker Change: We'll leverage a combination of Paas SaaS and smart solutions to deepen our gross reach particularly in Europe, Latin America and the.
Speaker Change: Asia Pacific region, we're increasing customer use cases for the large enterprise customers where offer cure.
Speaker Change: Our smart provide a private cloud solutions to help them to build a secure and scalable enterprise level smart platforms.
Speaker Change: Second advanced in the AI device and applications, we're committed to leverage Jim AI and <unk> to significantly enhanced smart product experienced trillium product competitiveness and delivering great value to the end users will continually to innovating amtrust high potential market such as smart.
Speaker Change: Yeah.
Speaker Change: Companionship smart, our door smart energy and smart basis.
Speaker Change: Complementing and accelerating smart devices penetration by applications.
Speaker Change: Third throughout our integrated hardware software Smart solutions, we're having top tier customers.
Speaker Change: To speed up their product launches and establish differentiated competitiveness advantages across different categories and regions.
Speaker Change: Rapid increase and market penetration and deteriorating a breeder animal sustain about it.
Speaker Change: Fourth maintain our customer centric approach.
Speaker Change: We aim to serve a high quantity core customers efficiency supporting our business growth, increasing customer stickiness and repeated purchases.
Speaker Change: And ultimately enhancing our operating leverage and efficiency.
Speaker Change: Last so continue to build our global developer ecosystem will continue to.
Speaker Change: X rate and we find <unk> <unk>.
Speaker Change: Agent platform.
Speaker Change: Empowering developers worldwide to create a customized add devices and scenario basis applications easily. Additionally will average <unk> is to improve the developer.
Speaker Change: Improve the development phases efficiency as well.
Speaker Change: So finally, let's address some frequently asked top topics from the capital market regarding to the internal operating efficiency.
Speaker Change: The share based compensation expenses and dividends.
Speaker Change: Throughout the 2024, our total head count has remained at about.
Speaker Change: 1450 employees, reflecting about 12% reduction from two anti Tim three.
Speaker Change: And by Q4 of 2024 hour average revenue per employee has exceeded.
Speaker Change: Alrighty.
Speaker Change: 2022 lab levels by more than three times.
Speaker Change: It's over 70% of our team consistently year.
Speaker Change: Consists of R&D technology development, and a products person, so who drive rapidly the product integration across Iis business nine and prepare for the next generation of opportunities.
Speaker Change: Notably <unk> revenue growth is not dependent on heavy investment in sales and marketing, which has been key factors in a stable and continually improving profitability.
Speaker Change: Our committed to further improving the operation average.
Speaker Change: While our net profit structures and quantity will become even more sustainable and organic.
Speaker Change: Regarding share based compensation expenses, the current quarterly accounting expenses, primarily stemmed from the legacy granted.
Speaker Change: Issued.
Speaker Change: Sure.
Speaker Change: Our ESR.
Speaker Change: In a higher evaluation years ago.
Speaker Change: Which has become a more ties in.
Speaker Change: In quarterly according to the vesting schedules.
Speaker Change: So those expenses unrelated unrelated to any recent equity grants.
Speaker Change: As this legacy awards are gradually falling.
Speaker Change: Vast at SBC expenses were seeing.
Speaker Change: Substantial decline starting in 2025.
Speaker Change: Leading to a visible reductions in the accounting impact in our income statement.
Speaker Change: The improvement that's already.
Speaker Change: Evident in Q4 of 2024.
Speaker Change: So earlier this stay ahead of this earnings call our board of directors approved the second dividend for 2024.
Speaker Change: Totally about.
Speaker Change: $37 million.
Speaker Change: Given our robust non-GAAP margin.
Speaker Change: Nominee non-GAAP metrics reflects the direct results of operational decision, making.
Speaker Change: Excluding external facts unrelated to our business model so.
Speaker Change: non-GAAP <unk>.
Speaker Change: Margin and strong financial positions is Huawei the base, we offer for the dividend with over $1 billion in net cash and seven consecutive quarters of positive operating cash flow from Q2 of 2023 till now.
Speaker Change: We believe that <unk> is well positioned and sustain our long term growth throughout its competitiveness mode.
Speaker Change: And while all also rewarding our shareholders, who has demonstrated steady fast support.
Speaker Change: We remain committed.
Speaker Change: Two driven forces in both our global business and capital markets.
Speaker Change: Overall <unk> has been.
Speaker Change: Profitable year to year.
Speaker Change: Marking our first year of operational profitability and the execution of our strategy and a breakthrough in our shareholder structure.
Speaker Change: During this strategic update.
Speaker Change: <unk> been fortunate.
Speaker Change: Expenses multiple dimensions of progress and transformation.
Speaker Change: In achieving operational profitability, expanding our global footprint.
Speaker Change: Optimizing our international shareholder base.
Speaker Change: Notably our partner with 65 BP.
Speaker Change: Offset salary of traumatic.
Speaker Change: <unk> investors has positioned them as <unk> largest institution shareholder. Furthermore.
Speaker Change: Our shipments has been strong and recognized by the market in early 2025 I believe this success is rotated into a global presence.
Speaker Change: Unique hardware and software integrated business model.
Speaker Change: And its strategic focus and a global developer platform.
Speaker Change: Thank you everyone. Operator, we can now begin with the Q&A.
Speaker Change: Thank you we will now begin the question and answer session. As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to.
Speaker Change: To withdraw your question. Please press star one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: We will now take our first question from the line of Timothy <unk> from Goldman Sachs. Please go ahead Timothy.
Timothy: Thank you. Thank you management for taking my question and congrats on the very strong to end the year of 2000 and school and I think your presentation. It's very helpful.
Timothy: Two questions here, one is that I think on AI in pad in here, it's not pollution. Ben is measurement further elaborate on what kind of usage scenario that you guys see.
Timothy: Yes. Thank you for the question.
Timothy: Okay.
Timothy: For the year and what we see here is that.
Timothy: This will be a really good year for the AI and we will consider as a first year that we can really turn on the air devices into reality.
Timothy:
Timothy: What we see the priority of the AI opportunities on the device side. So we'll start with all the audio and video interaction devices, which means that to bring a new way to have the people we tracked through the audio and video to the device. So that'd be one thing and the matter is some use cases.
Timothy: This is really showed that.
Timothy: In the last quarters like the pet feeders.
Speaker Change: The Berta Peters and the pet related appliances and.
Speaker Change: And some control panels on the board with the with the screen as well so that will be one thing and the second thing is that all of those task and nanotech type of devices not need.
Speaker Change: Complex decision so one.
Speaker Change: Significantly use cases is energy solution.
Speaker Change: Because full comprehensive energy solutions, you need to be able to read through dozens of variables from different different types of devices in the fund.
Speaker Change: And outside factors like the weather is like the utility data et cetera, and then make some adjustment.
Speaker Change: Our Connecticut, where we.
Speaker Change: Dynamically, making new decisions to operate the devices differently. So the AI definitely we're helping that part.
Speaker Change: So that'll be something and also what we see it's a very interesting and new type of staff will be the type of toys.
Speaker Change: That.
Speaker Change: So we thought that the key will be the perfect adapter for AI because.
Speaker Change: They don't have any stereotypes about any existing technology. So they grab anything as a fashion. So they can they just easily that in and so season in January after the CES, We're really got painted customers reach out to us screening different ideas that the holiday can integrate AI into toys.
Speaker Change: So that would be some of the.
Speaker Change: But I see incubating categories with standard catching up but I believe there'll be more bromine starch throughout the entire year or even in the next.
Speaker Change: A couple of years and while.
Speaker Change: The AI starting from the very fundamental staff left the area Ann.
Speaker Change: One can breathe easier approach to the.
Speaker Change: To the market.
Speaker Change: To activate all the new ideas.
Speaker Change: So while the back the Barra become low.
Speaker Change: And you have.
Speaker Change: Thousands of thousands of company and the developer joining in.
Speaker Change: So that will become a robust eight market of overdue can vote to do so there might be a thousands of different type of fees coming after.
Speaker Change: Yeah.
Speaker Change: That's it.
Speaker Change: Timothy do you have any follow up questions.
Speaker Change: Sure can you hear me well.
Speaker Change: Yes, we can please proceed.
Speaker Change: Great great sorry about that.
Yes.
Speaker Change: Second question is regarding your margins just wondering I think with the AI.
Speaker Change: I haven't seen the demand for Iot.
Speaker Change: The unit price.
Speaker Change: That trend over time, and how that will impact your margin I think it's more on the gross margin level and also talk about your opex keeping I think you have been investing on.
Speaker Change: AI and opening of prudency on the Opex level has been quite high just wondering how do you think about your operating leverage in 2008 five thank you.
Speaker Change: Yes, so the first one is that.
Speaker Change: There will be still in a very early stage, so we're not making a <unk>.
Speaker Change: Final decision or the wood Didnt make up the final call about how we can commercialize the AI. So we tried different type of commercial use cases.
Speaker Change: In one word is that.
We're starting to deploy the AI into all three business models, we have including the past the SaaS and solutions. So we'll offer the AI in differently based on what type of.
Speaker Change: And what else needs it is.
Speaker Change: That'd be one thing and so.
Speaker Change: Sometimes it will be a new offering that we provide to the market. So we will re pricing that is in other new products so for that part.
Speaker Change: The margin will depend.
Speaker Change: Not only the cost but also it depends on the demand despite depends on what type of unreasonable pricing will have to put into the market to scale. It.
Speaker Change: Another party is that to some of the AI. If we think that will be very very.
Speaker Change: We want to prove that the default features not to buy enhance our all customers and to improve their competitiveness. So we'll integrate that into our existing population.
Speaker Change: So the margin impact I think that in the short term.
I don't have visibility for that because of the scale may not be growing that significantly influence our overall margin.
Speaker Change: That will be smaller pie at this moment and in and around that I believe that <unk> will bring more values, but well enough I will not.
Speaker Change: <unk> committed to.
Speaker Change: Because for sure that the.
Speaker Change: The focus for us I mean, the priority for us is always scalability.
Speaker Change: Yes that would be one thing and the second thing about the Opex. So.
Speaker Change: And as I mentioned earlier, we're starting to.
Speaker Change: We're starting to invest in the AI <unk> occurs back too early of 2023, so it's not a new investment for us throughout the past two years, we are ready.
Speaker Change: Relocated our resources internally and by.
Speaker Change: Improve our tenant structures.
Speaker Change: In sum Roes to be capable of building AI.
Speaker Change: And already so Rana.
Speaker Change: Let us department.
Speaker Change: My company.
Speaker Change: <unk>.
Speaker Change: AI ready.
Speaker Change: Now, so which mean that I don't have to recruit a team to rebuild opinions all over again, it's already been there.
Speaker Change: And so far this year.
Speaker Change: We will slightly increase some of the specific and application investment.
Speaker Change: By the <unk>.
Speaker Change: Demand of the market slightly and also in the same time, we're looking forward to see what will be the right opportunity a right type of.
Speaker Change: Way that we can market in a battery efficiency since that's come with a new concept. So you better make some noise, but is that type of impact we will see that it's very controllable. So I will say that we're not improve the opex significantly it will be.
Speaker Change: In a very manageable level.
Speaker Change: Thank you that's very helpful.
Speaker Change: Thank you.
Speaker Change: We will now take our next question from the line of John Roy from <unk>. Please ask your question John.
John Roy: Can you hear me okay.
Speaker Change: Yes, I can here John.
Speaker Change: Great excellent year last year, very well done so I was wondering about SaaS and its growth prospects.
Speaker Change: Do you see that.
Speaker Change: And that could really.
Speaker Change: <unk> the landscape or is that just more of an add on.
Speaker Change: Yes, that's a good question and thank you for that so the first one is that.
Speaker Change: SaaS is based on our.
Speaker Change: Deployment of the I mean on the base of the total deployments of our devices so that will be.
Speaker Change: Later business models versus the first from others in the past, so which mean that.
Speaker Change: We need to Inarch and scale of the past and on top of that we can pull more SaaS that'll be lengthy and second thing is that.
Speaker Change: We are facing.
Speaker Change: Sure.
Speaker Change: Structural improvement in a SaaS model, which means that we are.
Speaker Change: Which way to increase the portion of the recurring models in the SaaS type not only the software base, but also the recurring software base. So that'll be a second thing.
Speaker Change: And so for that part two and not worry about the the growth.
Speaker Change: So I'll put more.
Speaker Change: Pay more attention.
Speaker Change: The stickiness of the customers, whether they can use that type of thing as another user. So the payment the continually annually payment will be a very strong base for us that will be the second tier and the third thing is that.
Speaker Change: Within the past so there'll be some portion of that is for the commercial software. So it's not that that is not a consumer facing one so for the commercial one in the past three years, the major market and we started to do this business now is in Asia and China.
Because that's where the Colgate period, so, which mean that it would bring us difficulty to be able to incubate new business cross the global basis and starting from late last year. We are starting to duplicate that are use cases in different countries, we try to bring that into a global market, where really have some really.
Speaker Change: Positive progress there no matter in Latin America, Southeast Asia and in Europe. So for.
Speaker Change: That apart right now we are approaching to a bigger total addressable market on the.
Speaker Change: Regional basis, and we're very fond of the duplicative boat applications or products that are proving to worked out and we're ready to have a customer base. That's.
Speaker Change: Apply with a recurring models so for the SaaS I believe that will be our non time growing.
Speaker Change: Business Tonight.
Speaker Change: We're not looking forward to ash any short ton.
Speaker Change: Surprising or short term.
Speaker Change: Significant improvement, but for the non round, maybe after five years that'll be a very very Jewish networks.
Speaker Change: Great. Thank you for that so obviously the dividend is very nice and you have a pretty significant cash position.
Speaker Change: What is your view on the acquisition front is that something you're actively watching.
Speaker Change: How are the prices in that market.
Speaker Change: And I think that.
Speaker Change: I'm thinking about you mentioned about mmm right MMA right yes.
Speaker Change: Yes.
Speaker Change: Yes, MMA is always an open option for us and so it keeps screaming and what type of extension what type of companies or partners can be our extension either to expand our scope of coverage of different type of scenarios or to be up.
Speaker Change: And to a vertical solution a more vertical solution provider for specific industries. So it keeps screaming on that end.
Speaker Change: <unk>.
Speaker Change: Yes, so I think thats an option for us.
Speaker Change: I think that the key part is that the first one is that the.
Speaker Change: No matter with or without acquisition too.
Speaker Change: And those guys should it be should it be our developers. So the first priority is to have a very strong global developer ecosystem I think that will be our major.
Speaker Change: Focus in the same time anyone maybe with DNA ecosystem that can show.
Speaker Change: A better potential no matter as Lachlan mentioned, it's at horizon, only extend our scope of Verde create that improve our.
Speaker Change:
Speaker Change: And vertical industry insights so for that part so we can easily identify that yes.
Speaker Change: I will keep it out of the ground will keep us for anyone to help us to find some interesting target to have anyone introduced me.
Speaker Change: Will do thank you so much and again congratulations.
Speaker Change: Thank you.
Speaker Change: We will now take question from the line of Cai Shell Fancy ICC. Please ask your question Kai.
Speaker Change: Okay.
Speaker Change: Hey, a quick one here.
Speaker Change: Sure Glenn.
Speaker Change: So Greg I don't coupons search algorithm <unk> cellular huge or shipper beyond may here with Jeremy.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: <unk> <unk> you Doug.
Speaker Change: Okay.
Speaker Change: Taco alternatives.
Speaker Change: Should the Pasco Portio please construction in Atlanta.
Speaker Change: Joe is now called <unk>.
Speaker Change: <unk> you would see perhaps kubota champion superb number now.
Speaker Change: Well that's in there.
Speaker Change: Should we feel truly.
Speaker Change: Truly come to conclude your towards going towards a golden cool.
Sure.
Speaker Change: Now once again.
Speaker Change: So this is panther onset birch and congratulation for the strong quarter for Mark quick question regarding the <unk>.
Speaker Change: So what's the current downstream demand for Iot pumps, and rich countries and categories.
Speaker Change: Things have more potential and the hunter that outlook.
Speaker Change: Gross margin and the sixth question with regarding the high quality customers. So we see the customer the number of customer kind of fairly strong growth.
Speaker Change: So what do you think for further potential for the company to further expand and high quality customers in the future.
Speaker Change: In that liquidation.
Speaker Change: More high quality customers. Thank you.
Speaker Change: Thank you for the questions. So the first one that for the past.
Speaker Change: As we can find in our.
Speaker Change: Our business is very.
Speaker Change: It's very strong showing that.
Speaker Change: We have a very balanced straw.
Speaker Change: Structure on the business. So no matter is on the regional side or on the category side. So right now the business come from over 3000 categories on the <unk> platform. So we didn't rely on any single category.
Speaker Change: So, which mean that they will either diversify in a category side. So that's what I mean.
Speaker Change: We'll never or whatever type of new <unk>.
Speaker Change: <unk> starch.
Speaker Change: Smart devices market occurs for sure that there is somewhat making that into our platform into our ecosystem.
Speaker Change: Some of our house so for sure that will cover any new opportunities and on the regional science right now while were advanced to so the largest regional market of Europe only cover is slightly over one third of our 35 of our business.
Speaker Change: On the end user demand and for all other countries North America and Latin America.
Speaker Change: On.
Speaker Change: Asia, and Australia, including China domestic so they are quite balanced so we didn't rely on any single region market.
Speaker Change: And which bring us a very good.
Speaker Change: Barrier all very cute.
Speaker Change: Protections for any type of.
Speaker Change: Change happening on the on the right now the.
Speaker Change: The geographic.
Speaker Change: Scenarios.
Speaker Change: So that would be one thing for the past.
Speaker Change: And.
Speaker Change: For the second question.
Speaker Change: For the second question I think at a major customer here is that as of right now.
Speaker Change: For the first 10 years of these documents of this company.
Speaker Change: And the.
Speaker Change: Larger portion of the.
Speaker Change: Ecosystem come from the customer fields.
Speaker Change: So what we found here is that.
Speaker Change: Two extensions on the customer side.
Speaker Change: First one is that.
Speaker Change: For the past.
Speaker Change: Three years.
Speaker Change: More and more customers in use cases come from non consumer foods.
Speaker Change: No matter its commercial one industrial one.
Speaker Change: And that type of things.
Speaker Change: And also in the company will have new business lines, just focus on that part so that'd be one thing that will be totally extension.
Speaker Change: Some new type of customers from that part.
Speaker Change: And including the telecom carriers, so we got.
Speaker Change: <unk> continues to have new telecom carrier partners coming in yes.
Speaker Change: So that'd be one thing and the second thing is that.
Speaker Change: And.
Speaker Change: Exceeding from that device based stuff.
Speaker Change: In the near future as we believe there'll be more and more spatial solutions being nearly and the special solution provider <unk> to be a different type of company too.
Speaker Change: And before that no matter is for the lack of the property manager.
Speaker Change: Warehouse management logistics, so those kind of matches some type of space and the house the beauty.
Speaker Change: Their housing.
Speaker Change: Some asset too.
Speaker Change: So those type of solutions.
Speaker Change: Before.
Speaker Change: AI technology happens they don't have a comprehensive writeup solution to care to the pinpoint and while the special models and spatial solutions. We design can meet that so that it can help us to open another day or two so that will be too.
Speaker Change: Why do we call it the new <unk> plus.
Speaker Change: That's it.
Todd: Thank you Todd do you have any follow up questions.
Speaker Change: Okay. Thank you.
Todd: Thank you.
Speaker Change: Our next question comes from the line of young Leal from Morgan Stanley. Please ask your question young.
Young Leal: Okay. Thank you for the opportunity to ask.
Speaker Change: Question two questions.
Young Leal: First one is on the ultra low cost structure.
Speaker Change: Structure, because what is observed.
Young Leal: In the past few quarters.
Speaker Change: Oh, sorry.
Young Leal: Our growth recover meaningfully.
Young Leal: Well the spot.
Young Leal: Mutual growth.
Young Leal: Volatile.
Young Leal: So just kind of a change of mix.
Young Leal: Change is so critical to the overall gross margin. So I would like to hear your view in terms of the sleep expense lines in the afternoon.
Young Leal: Both rates going forward, whether it will have meaningful.
Young Leal: Oh gosh.
Young Leal: Gross margin.
Young Leal: Just my first question.
Young Leal: And my second question is regarding.
Young Leal: What's your view.
Young Leal: Our computation.
Young Leal: Sure.
Young Leal: The Iot solutions provider.
Young Leal: Bruce.
Young Leal: <unk>.
Young Leal: Hyper scaler organized to develop Iot.
Young Leal: Hardware themselves or the zinc steel.
Young Leal: Or is it a booming market with a lot of smaller.
Young Leal: Product development company in the.
Young Leal: Our market share.
Young Leal: We continue to have a lot of value to those customers.
Young Leal: Thank you.
Young Leal: Yes, so for the <unk>.
Young Leal: Question I think of that.
Young Leal: Our three business models because.
Young Leal: They are coming with a totally different approach to the customers. So overall.
Young Leal: The margin.
Young Leal: Level of each of the business models will be kind of.
Young Leal: Stable so for the past, we think we believe that so the overall.
Young Leal: Margin for cash will remain at around.
Young Leal: 45%, we're thinking that will be reasonable or slightly over 45.
Young Leal: And for the SaaS, because the software base I think that over 70% will be remained and on the solution side, because we will follow the hod water gain.
Speaker Change: So while you have <unk>.
Speaker Change: Scale the volumes low the kosmos scaled the volume too and sometimes you have to subsidize some of the profit with customers. So we believe that on the solution side maybe by.
Speaker Change: We scale it.
Speaker Change: Into.
Speaker Change: We doubled that scale that in a bigger base.
Speaker Change: Maybe the margin of solutions with slightly declined a little bit.
Speaker Change: But not that much.
Speaker Change: We think that that will continue to maintain their solutions margins over 20, or 20 months, so that'll be that'll be overall.
Speaker Change: The margin or the nature of the margins underneath each of the business models and put that together and what we're finding is that as of the past will continue to provide a stable growing base for the for the entirety of our business because that will be essentially everything that the customer need to procure purchase.
<unk>.
Speaker Change: And.
Speaker Change: SaaS like I mentioned earlier to John's question. So I think that the SaaS will be more long term growing curve for that so we're not entirely so it continues to enhance the device space and the customer base and we do provide those services on top of that and convert more of them to pay the recurring revenue.
Speaker Change: That will be a long term journey.
Speaker Change: Many similar growth.
Speaker Change: Past, maybe that'll be that'll be our expected to end solution because solutions come from my past customers their claim for solution rather than that.
Speaker Change: The development toolkit front.
Speaker Change: So in the past nine so solution is that that will convert to more and more customers demand directly from Manhattan from our past based.
Speaker Change: So for that apart.
Speaker Change: The solution might grow faster.
Speaker Change: And while solution become a larger pie of my total revenue.
Speaker Change: And so my.
Overall general gross margin rate gross margin.
Speaker Change: <unk> GPM.
Speaker Change: We believe that in a long term was slightly.
Speaker Change: Decrease a little bit further things that would be reasonable.
Speaker Change: I mean the margin.
Speaker Change: Because I have a bigger pie of the solution side will come with a lower margin compared with the other two business models so for that part.
Speaker Change: We think that will be better.
Speaker Change: Not a problem for us.
Speaker Change: I believe that the key to evaluate their gross margin is nothing need to break down each of the business model and tell the value of that weather.
Speaker Change: Is that the values reflect to the right margins as that business models.
Speaker Change: <unk>.
Speaker Change: And then to compare that business model to the industrial level.
Speaker Change: So the SaaS is comparable to other SaaS company or other SaaS peers.
Speaker Change: Pierre and passes further faster so.
Speaker Change: Yes, that's the plan that Victor <unk>.
Speaker Change: So it's very stable business model.
Speaker Change: And the structure was stock changed slightly.
Speaker Change: Okay.
Speaker Change: Okay. Thank you.
Speaker Change: The second question.
Speaker Change: Our outlook for the competitive landscape.
Speaker Change: You have for that.
Speaker Change: Our team.
Speaker Change: Yes, I think that the.
Speaker Change: I think a really cover part of the question I think on that right now the good part for AI is Atlanta is a very positive and active momentum for the market now for capital market, but I mean is there further.
Speaker Change: But.
Speaker Change: Matt hardware industry.
Speaker Change: And so we have lost lot of Woolworths.
Speaker Change: Other designers and manufacturers.
Speaker Change: Solution providers.
Speaker Change: And so right now we processed three.
Speaker Change: <unk> is either the video audio and track interacted.
Speaker Change: And all of the decision, making and analytic one in that time, but we believe that there will be thousands of at least one thousands of more.
Speaker Change: Vertical use cases were coming from so it's very early stage and this year is that we've got so many players on the field try different types of ideas.
Speaker Change: So why do we need to do is that we offer them a toolkit.
Speaker Change: To easily turn their ideas into June.
Speaker Change: I think that will be the unique value to provide and also that's why we have such a successful developer ecosystem.
Speaker Change: So no so to let them get away from to everything in house.
Speaker Change: We offer them a shortcut to.
Speaker Change: To testify at the ideas that believe that this year will be kind of very starting nine for the AD device that you can find a millions of new devices out there a lot of people training and.
Speaker Change: Some were approved working out and starting to scale that maybe some not that we redesigned that.
Speaker Change: So yes.
Speaker Change: Yes, I think that will be the momentum we're looking forward to to see.
Speaker Change: And so what we do is that to just like.
Speaker Change: Like I mentioned I'm, continuing to lower the barrier for anyone to get in.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one.
There are no additional questions at this time I will hand back to the management team for any closing remarks.
Speaker Change: Okay. So thank you again for joining our call Tonight.
Speaker Change: Tony.
Speaker Change: If you have any further questions. Please feel free to contact us or our request through our website. We look forward to be speaking with everyone next earnings call have a good one.
Speaker Change: Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.