Q1 2025 Tuya Inc Earnings Call
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Rhett: I will turn the call over to your first speaker today, Mr. Rhett shy Investor Relations director of <unk>. Please go ahead rich.
Speaker Change: Thank you.
Speaker Change: Hello, everyone and welcome to our first quarter 2025 earnings call joining us.
Speaker Change: Hi, everyone.
Andre: Andre CFO.
Speaker Change: The first quarter of 2025 financial results and the webcast of this call.
Andre: Core <unk> available to us.
Speaker Change: No layoffs.
Speaker Change: Lay off this call.
Speaker Change: Great.
Speaker Change: Website.
Speaker Change: Before we continue I refer you to our safe Harbor statement.
Speaker Change: Property, which.
Speaker Change: Applies to this call we will make forward looking statements with that I would announce an apology, our founder and CEO materially while Jeremy will deliver his remarks in Chinese which will be.
Jeremy: Followed by corresponding English translation Cherokee.
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Speaker Change: Hello, everyone. Thank you for joining <unk> earnings call for the first quarter of 2025.
Thank you.
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Speaker Change: This quarter building in a high growth space from Q1 last year, we achieved approximately 21 year over year revenue growth, while maintaining a solid gross margin are stable to structure and organizational management supported a strong operating leverage coupled with the continued.
Declining historical share based compensation expenses.
Speaker Change: A record GAAP net profit in what is traditionally an off season with a net profit margin of around 15% a significant improvement.
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Frank: Since the beginning of the year the macro environment has been like a rollercoaster from the rapid advancement of AI technology to trade fluctuations founder geopolitical precious the smart consumer electronics sector and its upstream and downstream supply change have faced a mass <unk>. Some of this we can.
Frank: Managing through internal adjustments while others.
Frank: Industrial wide response in such a contract.
Frank: Even more critical for us to stay the course strategically and leveraged our unique value to navigate uncertainties and embrace new landscape.
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Steven Chin: And how will that and Steven Chin.
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Steven Chin: I'm getting to after we put up in <unk>.
Steven Chin: <unk> syndrome.
Steven Chin: Against the heat treat them hanging <unk> following the launch of our agent developing platform last year with continued to expand our AI capabilities from cloud to device in Q1, covering a wide range of agents and our smart solutions.
Steven Chin: On April 20, <unk>, we hosted our first global developer conference of 2025, and Boeing for AI Ot development engines and theories of AI hardware solutions to support global developers and partners in commercial I being powered products. The conference attracted over 2700 <unk>.
Speaker Change: Attendant east, including Susie ASIC.
Speaker Change: Patients from customers across Europe, Latin America, South Africa.
Speaker Change: Asia Pacific, we firmly believe that <unk> unique platform model not only facilitates the deep integration of AI and smart hardware, but it also drives continuous improvement in industrial wide intelligence adoption.
Speaker Change: Yes.
Speaker Change: <unk> tissue processing skull cutting tool that were trading.
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Speaker Change: We <unk> know how to fight online team greenhouses are the incumbent.
Speaker Change: <unk> Oh don't worry about operationally, we will maintain efficient organization no execution safeguard a favorable environment for R&D and technology development and external uncertainties and remain disciplined in managing costs to maximize operating profits and shareholder returns.
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Speaker Change: So anytime soon and therefore.
Speaker Change: Now I'll now turn it over to <unk> co founder and our CFO Alex Yao.
Speaker Change: And walk you through the financial results and business highlights.
Speaker Change: Hello, everyone. This is Alex. Please note that all the figures I mentioned below in U S dollars and other.
Speaker Change: <unk> year.
Speaker Change: Year over year.
Speaker Change: Based.
Operator: conference call. At this time, all participants are in a listen-only mode.
Speaker Change: In Q1 of 2025, we deliver approximately.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Speaker Change: $74 7 million U S orders revenue and representing a year over year growth of about 21, 1%.
Speaker Change: As revenue grows by roughly 79% with strong procurement requests from major categories.
Operator: Please be advised that today's conference is being recorded.
Speaker Change: Led by home appliances.
Reg Chai: I'll now turn the call over to your first speaker today, Mr. Reg Chai, Investor Relations Director of Tuya. Please go ahead, Reg. Thank you. Hello, everyone. Welcome to our first quarter 2025 earnings call.
Speaker Change: Photo by security censoring electrical and aligning production.
Speaker Change: And others generated about $10 million revenue growing approximately 15, 5% year over year.
Speaker Change: Similarly, driven by the steady growth of <unk>.
Reg Chai: Joining us today are founder and CEO of Tuya, Ms. Xueji Wang, and our co-founder and CFO, Ms. Kai Xiao. The first quarter 2025 financial results in the webcast of this conference call are available at ir.tuya.com. A replay of this call will also be available on our website in a few hours.
Speaker Change: The best way David SaaS.
Speaker Change: Choices.
Speaker Change: Smart solution revenue reaches.
Speaker Change: $11 million with a year over year increase about.
Speaker Change: 47, 1% with excellent growth each month video products central control innovative appliances and professional lighting solutions.
Reg Chai: Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call. But we will make a follow-up statement.
Reg Chai: With that, I will now turn the floor to our founder and CEO, Ms. Xueji Wang. Xueji will deliver his remarks in Chinese, which will be followed by a corresponding English translation.
Speaker Change: From our original revenue assurance perspective.
Speaker Change: Europe accounted for about one third of the total revenue.
Speaker Change: And then come after that is issued.
Xueji Wang: Xueji, please.
Xueji Wang: 大家好,感谢大家参加2025年第一季度电脑会议。 Hello everyone, thank you for coming to the first conference of 2025. Hello everyone, thank you for joining Tuya's earnings call for the first quarter of 2025. In this quarter, based on the high-basis growth of QE last year, we achieved a growth rate of about 21% and a stable rate of net profit. At the same time, the stable team structure and organizational management model support a good sense of business. In addition, the history of equity base accounts, the cost burden continues to decrease, so we have achieved a record of GAAP net profit in the traditional season.
Speaker Change: Asia Pacific, Excluding China, and then China, and Latin America, and another month each of them contributing around 15% and today and with many regions such as the Pacific.
Speaker Change: And video is contributing in a combined 5% maintaining our diversified revenue structures and regional basis.
Speaker Change: It is worth to mention that.
Speaker Change: Since we empower and serve the smart hardware sector.
Speaker Change: Our revenue also reflects unique pattern.
Speaker Change: Since the analogy of the hardware industry.
Speaker Change: Especially on the international manufacturers, we presented results of the business actions and strategies for the past several quarters, while you have a number.
Xueji Wang: This quarter, building in a high growth base from Q1 last year, we achieved approximately 21% year-over-year revenue growth while maintaining a solid growth margin. Our stable team structure and organizational management supported a strong operating leverage. Coupled with the continued declining historical share-based compensation expenses, we achieved a record gap net profit in what is traditionally an off-season, with a net profit margin of around 15%, a significant improvement.
Speaker Change: In Q1 blended gross margin stood about.
Speaker Change: 48, 5% with all three revenue lines maintain steady margins.
Speaker Change: Specifically this quarter's past gross margin rose to 48, 4%, primarily due to structural improvements waiting but product mix change.
Speaker Change: Smart solutions and SaaS at gross gross margin of 25, 7% and.
Xueji Wang: Since the beginning of the year, from the acceleration of AI technology to the trade fluctuations under the influence of voluntary politics, the public environment is like a roller coaster. The smart consumer e-train and the cycle of upstream and downstream supply chains are facing great challenges. We can deal with some of the challenges through our own understanding. we need to face the whole industry together. In this context, we need to take a firm strategic approach, play our own unique role, go beyond uncertainty, and welcome new challenges. Since the beginning of the year, the microenvironment has been like a roller coaster.
Speaker Change: 74, 4%.
Speaker Change: Continuing to demonstrate the value proposition through software and technology.
Speaker Change: Anytime.
Speaker Change: Net operation expenses for this quarters roll $37 7 million in U S dollars.
Speaker Change: Only 18% decrease from the same period last year, mainly benefiting from a substantial reduction in share based compensation expenses.
Xueji Wang: From the rapid advancement of AI technology to trade fluctuations under geopolitical pressures, the smart consumer electronics sector and its upstream and downstream supply chains have faced immense challenges. Some of these we can manage through internal adjustments, while others require an industrial-wide response. In such a context, it is even more critical for us to stay core strategically and leverage our unique value to navigate uncertainties and embrace new landscapes.
Speaker Change: A trend that is expected to continue.
Speaker Change: Excluding.
Speaker Change: Equity incentive and other non operational business factors are.
Speaker Change: Our non-GAAP net accretion expenses were $29 four U S, meaning use storage.
Speaker Change: 2% year over year.
Speaker Change: The vast majority of our operation expenses are related to product development and technical terms definitely teams.
Speaker Change: To the ground works that we're doing our AI transformation since 2002 and three.
Xueji Wang: After the launch of Tuya's AI Agent development platform last year, we have continued to promote the construction of AI capabilities from cloud to devices in the first quarter, covering all kinds of AI agents and smart solutions. On April 23, we held the first global developer conference in 2025, and released four AIoT development engines and multiple AI hardware product solutions, to support global developers and partners to realize the commercialization of AI products. The conference has attracted more than 2,700 live audiences, including customers from Europe, Latin America, South America, Asia, and other countries. We believe that the unique platform model not only helps AI and smart hardware to integrate deeply, but also will continue to drive the industry's smart penetration rate.
Speaker Change: We have competed well have completed the foundational EA productive development and service system.
Speaker Change: While maintaining a good discipline in ongoing development.
Speaker Change: Those structural improvements directly.
Speaker Change: Drive the release.
Speaker Change: Updating average, enabling us to achieve over.
Speaker Change: 11 million U S charters in GAAP net profit in Q1 more than double that of last.
Speaker Change: <unk> full year.
Speaker Change: non-GAAP net profit, which is $19 3 million U S dollars and nearly 60.
Xueji Wang: Following the launch of our Tuya AI agent development platform last year, we continue to expand our AI capabilities from cloud to device in Q1, covering a wide range of AI agents and smart solutions. On April 23rd, we hosted our first Global Developer Conference of 2025, unveiling four AIoT development engines and a series of AI hardware solutions to support global developers and partners in commercializing AI-powered products. The conference attracted over 2,700 on-site attendees, including enthusiastic participations from customers across Europe, Latin America, South Africa, and Asia-Pacific. We firmly believe that Tuya's unique platform model not only facilitates the deep integration of AI and smart hardware, but also drives continuous improvement in industrial-wide intelligence adoption.
Speaker Change: Percent year on year increase.
Speaker Change: With a non-GAAP net profit margin of between $5 <unk>.
Speaker Change: 8%.
Speaker Change: These metrics provides strong support of the company's future business operation capital expenditure and shareholder returns.
Speaker Change: So thats the increase a brief overview of Q1 financial performance and also in Q1 is a typical.
Speaker Change: Off season for the industry, we serve so we really focus our efforts on exploring ideas opportunities across our product lines.
Speaker Change: And the next I will talk about some key moves that we've made in our business.
Speaker Change: Over the past few months.
Speaker Change: As we anticipated at the beginning of this year.
Speaker Change: 25 March as a structural transformation year for the entire industry.
Speaker Change: Embrace AI, so EA is penetrating.
Speaker Change: Penetrating various industries.
Xueji Wang: Operationally, we will maintain efficient organization execution, safeguard a favorable environment for R&D and technology development amid external uncertainties, and remain disciplined in managing costs to maximize operating profits and shareholder returns.
Speaker Change: That precede the decent speed.
Speaker Change: And for two year and Thats my sector.
Speaker Change: Present, a clear window of strategic opportunity for the future.
Speaker Change: Although the physical nature of hardware devices means that the commercialization of AI capability on devices.
Speaker Change: Gradually and long term process.
Speaker Change: Technical and production reserves in software can take the lead and then that is precisely our strategy.
Speaker Change: So first we are committed to.
Kai Xiao: 接下来,更多的采访内容与业务动向,由CFO Alex直接与大家分享。 Now I will turn it over to Suya's co-founder and CFO, Alex Yang, who will walk you through the financial results and business highlights. Hello everyone, this is Alex. Please note that all the figures I mentioned below is in U.S. dollars, and all the comparison is year-over-year based. And in Q1 of 2025, we deliver approximately 74.7 million U.S. dollars revenue and representing a year-over-year growth of about 21.1 percent. The past revenue growth by roughly 70.9% with strong performance across major categories. and followed by security censoring and electrical and lighting products. Thus and others generated about $10 million revenue, growing approximately 15.5% year-over-year, primarily driven by the steady growth of in-depth research.
Speaker Change: Foundation, <unk> and generalizing the AI capability needed in the smart era to solve for the end users problems and issues. This allows developers to select whatever the name database on the commercial bush product designs, thereby promoting the adoption.
Speaker Change: So folks on for Airbus, So larger language module integration hardware investment edge deployment and <unk> acquisitions.
Speaker Change: We lease our four core engines at the end of April developer conference globally.
Speaker Change: The two year AI agent development platform.
Speaker Change: And then to adopt AI to open and headwinds to.
Speaker Change: So the two year AI agent development platform significantly reduced technically threshold for developers success any mainstream logic mentioned model in Butte various internet engines.
Speaker Change: Agents functions such as <unk>.
Speaker Change: Semantic.
Speaker Change: Understandings and image recognition.
Kai Xiao: To get violin lessons, subscribe to my channel. Smart Solution Revenue reaches approximately $11 million USD with a year-over-year increase about $1.5 billion. 47.1%. excellent growth in smart video products, central control, innovative appliances, and professional lighting. From a regional revenue source perspective, Europe accounted for about one-third of the total revenue and their income after that is Asian. Asia-Pacific, excluding China, and then China, and Latin America, and Latin America, each of them contributing around $50 billion. and then with many regions such as the Pacific. and Willow S. contributing in a combined of 5% maintaining diversified weaponry structures in regional bases.
Speaker Change: So that is both the agent development.
Speaker Change: AI. The second one provides a full process to chang from Hy pro forma edge AI modeling to smart cloud deployment greatly lowering the difficulty and circled a ton for AI hardware development.
Speaker Change: And to open.
Speaker Change: As our open source framework enables developers to preferred differentiated development.
Speaker Change: Innovations and integrated into our ecosystem.
Speaker Change: They had weak platform offers are controllable and secure edge computing environment for enterprise customers require localized.
Speaker Change: Deployment and data platform and comprises this entire system foams.
Speaker Change: Technique foundations of our.
Speaker Change: Our platform capabilities that provides a solid support for the largest scale implementation of air products in an upturn.
Kai Xiao: It is worth to mention that Since we empower and serve the smart hardware sector, our revenue also reflects the unique pattern and sincerity of the hardware industry. especially on the international manufacturing, representing the result of the business actions and strategies from the past several partners, or even a number. In Q1, blended gross margin stood about 48.5%, with all three revenue lines maintaining steady margins. Specifically, this quarter's past growth margin rose to 48.4%, primarily due to structural improvements driven by product mix change. Smart Solution and SaaS had a growth margin of 25.7% and 74.4%. continually to demonstrate the value proposition related through software.
Speaker Change: At the same time.
Speaker Change: We're increasing investment in the development of the ecosystem develop a acquisition around to the Oes to open and the <unk> five.
Speaker Change: AI development boards.
Speaker Change: Initially, establishing our content cross twos plus community triode frameworks for the developers.
Speaker Change: Since the developer conference.
Speaker Change: We have reduced eight open source DIY projects, such as open source desktop pets, AIG Bosch boxes and <unk>.
Speaker Change: And at building developer creativity incubation system.
Speaker Change: Our key five AI developer boat, which has started to be adapted throughout collaborations with multiple developer platform and our communities.
Our AI developer communities has grown by more than 10000 new members.
Kai Xiao: In the meantime, our net operating expenses for this quarter were $37.7 million, a nearly 18% decrease from the same period last year, primarily benefiting from a substantial reduction in share-based competition expenses. a trend that is expected to continue. excluding equity incentive and other non-operational business factors. Our non-GAAP net operating expenses were 29.4 million U.S. dollars, down 2% year-over-year. The vast majority of our operation expenses are related to product development and technical teams. Thanks to the groundwork led during our AI transformation since 2023. we have completed the foundational AI product development and service system while maintaining a good discipline in ongoing development.
Speaker Change: Next we're also committed to added identifying the product specific opportunities and driving customers production launches through our smart solution offering.
Speaker Change: Directly increasing our revenue and gross margin gross profit and achieving high quality commercial.
Speaker Change: <unk>.
Speaker Change: For example, in the energy demand will be.
Speaker Change: Announced the core now.
Speaker Change: Our energy assistant.
Speaker Change: With the features strategy with features like the strategy with Commendation.
Speaker Change: Power generation forecasting load at a indication and energy consumption dynamics combined with the supporting hardware such as <unk> energy Starwood Houston.
Speaker Change: Chuck a breaker and energy data controllers.
Speaker Change: Forms a comprehensive integrated hardware software solution, primarily tucking in the Europe and subsidy the ACO market.
Speaker Change: Nvidia with EBITDA production, we continue to advance the <unk> capability of smart screens and video devices focusing on models for detecting.
Kai Xiao: those structural improvements directly. drive the release of of Creating Average, enabling us to achieve over... 11 million U.S. dollars in gap net profit in Q1, more than double that of last year. years for years. Non-GAAP net profit reaches 19.3 million US dollars, a nearly 60% year-on-year increase. with a non-gap net profit margin of This matrix provides strong support of the company's future business operation, capital expenditure and shareholder return.
Speaker Change: Objectives vehicles Brewers and claims combined with the sound recognitions and anomaly detection to build it.
Speaker Change: Integrated hardware and software January production solutions, not the Congress basic homesick.
Speaker Change: Safety needed and extended to semi commercial.
Speaker Change: Commercials in areas like in hotels and real estate.
Speaker Change: In the meantime, we're also actively promoting external ecosystem collaborations to amplify that enable efforts of an <unk> platform.
Speaker Change: For example in Q1, we partner with volcano agents under by dance to integrate with the dual about RG language module into two agents tobacco platform.
Kai Xiao: So that includes a brief overview of Q1 financial performance, and also in Q1 is a typical off-season for the industry we serve. So we usually focus our efforts on exploring ideas, opportunities across our product lines.
Speaker Change: Further enhancing the motto model in understanding and that interaction capabilities of our agents. In addition.
Speaker Change: We are collaborating come marginally with leading players in the retail and <unk>.
Kai Xiao: And next, I'll talk about some key moves that we made in our business over the past few months. As we anticipated at the beginning of this year, 2025 marks a structural transformation year for the entire industry. embrace AI. So AI is penetrating, penetrating various industries. at pretty decent speed, and for Tuya, and as much as I can. This presents a clear window of strategic opportunity for the future. Although the physical nature of hardware devices means that the commercialization of AI capability on devices gradually and now I'm going to approach. technical and products resource in software can take the lead.
Speaker Change: Martino infants industries to join development smart hardware, such as Wearables and.
Speaker Change: Home robots.
Speaker Change: Advancing the application of AI in children and families and shareholders.
Speaker Change: Collaborations with upstream and downstream partners will further enrich our capabilities and ecosystem scope.
Speaker Change: Strength into Eos strategies that in a smart frankly our sector.
Speaker Change: That creates extensively.
Speaker Change: Projects that are global developers and customers can refer.
Speaker Change: And replicate.
Speaker Change: Although the AI hardware ecosystem community on our product developments are still in the early stage.
Kai Xiao: And then that is precisely our strategy. So first, we are committed to Foundationalizing and generalizing the AI capability needed in the smart era to solve the end users' problems and issues. This allows developers to select whatever they needed based on their commercial goals and product designs, thereby promoting the AI adoption. So focus on four core areas, so large language model integration, hardware development, edge deployment, and open source ecosystems. We released our four core engines at the end of April Developer Conference globally. the Tuya AI agent development platform, and the Tuya.ai, Tuya Open, and Headquarters. So the two AI agent development platforms significantly reduce the technical threat hold for developers to access any mainstream logic language model and build various intelligence.
Speaker Change: We believe that explorations in functionality <unk>.
Speaker Change: Experience and the business models, we have opened up space for two year and the entire system industries futures business exchanges.
Speaker Change: <unk> the foundation of new engines of the long term growth.
Speaker Change: So they are above is our sharing <unk> Q1, 'twenty to unify financial performance in the region of company developments.
Speaker Change: Though there has been partially improvements in the extensional environment recently.
Speaker Change: Uncertainty remains.
Speaker Change: <unk> balance.
Speaker Change: We will continue to operate.
Speaker Change: You did agency and two non term approach of the technique driven and the platform enable developments laying a solid foundation on the ALLL to track continually see capturing industry certainty trends and creating long term value for <unk>.
Speaker Change: Finally, a piece of good news, so MSCI reason to operate it.
Kai Xiao: agents, functions such as other Spaniards, and image recognition. So that is for the agent development. Toyota AI, the second one, provides a full-process tool chain from high-performance edge AI modeling to smart car deployment, greatly lowering the difficulty and search time for AI hardware development. and Tuya Open. as our open source framework enables developers to perform differentiated development. innovations, and integrate it into your ecosystem. The Hedwig platform offers a controllable and secure edge AI computing environment for enterprise customers requiring localized deployment and data platforms and compressors. This entire system forms the technique foundations of our AI platform capabilities that provides a solid support for the large-scale implementation of AI products in the long term.
Speaker Change: Our.
Speaker Change: 20 to 25 ESG rating.
Speaker Change: Similarly into double a.
Speaker Change: And particularly in the fields of a secure and compliant to the achieved a score of 10 points. Thanks to its extensive compliance experience and through our framework, we believe that whether in business operations or emerging areas such as ESG steadfast progress will bring we will.
Speaker Change: <unk> and recognitions.
Speaker Change: Thank you all operators and ran out we can begin our Q&A section.
Speaker Change: We will now begin the question and answer session to ask a question now Please press star one on your telephone Lake for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Generally when asking a question. Please state your questions in Chinese first then immediately translate that into English for the convenience of everyone on the call once again Thats Star 114 questions.
Speaker Change: We will now take our first question from the line of young Neil from Morgan Stanley. Please ask your question young.
Kai Xiao: At the same time, we're increasing investment in the development ecosystem, developer ecosystem around TuyaOS, TuyaOpen, and the T5 AI development board. Initially, establishing a content plus tools plus community trialed frameworks for the developer.
Speaker Change: Okay.
Speaker Change: Q1 of <unk>.
Speaker Change: Yes.
Speaker Change: What are you gaining with younger ones.
Speaker Change: Do you agree on that.
Speaker Change: We also way Iot.
Speaker Change: Iot kind of option.
Speaker Change: All of them.
Speaker Change: It's a long shot.
Speaker Change: Sure.
Speaker Change: Jim.
Speaker Change: Jean <unk>.
Kai Xiao: This is the developer conference. We have released eight open source DIY projects, such as open source desktop packs, AI voice boxes, and AI robots. aimed at building a developer creativity incubation system. Our T5 AI developer board has started to be adapted throughout collaborations with multiple developer platforms and communities. And our AI developer communities has grown by more than 10,000 new members. Next, we're also committed to identifying the product-specific opportunities and driving customers' product launches through our smart solution offering. directly increasing our revenue and gross profit and achieving high-quality commercial conversions. For example, in the energy domain, we launched the Cornell AI Energy Assistant.
Speaker Change: Or should we dovetail the jamba.
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Speaker Change: The $2 million or if you don't call. It a grocery has changed our lives.
Speaker Change: The trend at all.
Speaker Change: Similarly, we shall Diana <unk>.
Speaker Change: You can change as required.
Speaker Change: Sam syndrome.
Speaker Change: Let me translate my question two questions here. The first one is regarding the.
Speaker Change: Iot development, two alpha development platform could management share what kind of AI hardware.
Speaker Change: We will incur mothball our shipment.
Speaker Change: Signpost that we are observing what kind of phone.
Speaker Change: Hardware okay.
Speaker Change: Relative fast the second question is regarding the customers' behavior in the past along two months given the huge volatility.
Kai Xiao: with features like the strategy recommendation, power generation forecasting, load authentication, and energy consumption dynamics. Combined with supporting hardware such as all-in-one energy storage system, circuit breaker, and energy data controllers, it forms a comprehensive integrated hardware software solution, primarily tapping into Europe and Southeast Asia markets. In video-related AI products, we continue to advance the AI capability of smart screens and video devices, focusing on models for detecting objectives, vehicles, birds, and flames, combined with sound recognitions and anomal detections to build an integrated hardware and software general production solution that covers basic home Safety needs to be extended to semi-commercial scenarios like hotels and real estate.
Speaker Change: Tariffs.
Speaker Change: Management this year.
Speaker Change: With our customers.
Speaker Change: Thank you.
Speaker Change: Yes. Thank.
Speaker Change: So for the first question is where do we see here.
Speaker Change: Sectors, we fund that will be two major directions that you're more interested the first one is that the <unk> and the.
Speaker Change: <unk> and <unk>.
Speaker Change: Interaction interacted experiences. So one example is the Buda theaters, we mentioned that in the I think that in the past quarter.
Speaker Change: So to be able to help.
Speaker Change: People to recognize the white lines and to interact with it and then that'll be lengthy and the second one second.
Speaker Change: Typical use.
Speaker Change: Use cases.
Speaker Change:
Speaker Change: The <unk> order the type.
Speaker Change: Type of use case for kids.
Speaker Change: Use the larger language models capabilities.
Speaker Change: You can have a new way to interact with the key issue is education.
Speaker Change: Entertainment and as a component as well so that would be that we don't want and so recently.
Kai Xiao: In the meantime, we're also actively promoting external ecosystem collaborations to amplify the enable efforts of the AI platform. For example, in Q1, we partnered with volcano engines under ByteDance to integrate with a dual bio-large language model into Tuya AI agent development platform. further enhancing the multi-modeling, understanding, and interactions capabilities of our AI agents. In addition, we are collaborating commercially with leading players in retail and retail.
Speaker Change: An update about the kids is that in China, we already signed.
Speaker Change: So JV partnership with hydro one to which we will talk to you.
Speaker Change: The <unk> group in China.
Speaker Change: We're looking for to help them to launch the production into the market pretty soon.
Speaker Change: And so that's the one theme so any type of audio video and new interactive experience based on magic number to model.
Speaker Change: And the second is the data based.
Speaker Change: <unk>.
Speaker Change: Dynamic decision, making so one typical use cases will be the energy management system for our core now and just go through that agent.
Kai Xiao: Thank you. Martino Infants Industries to join development of smart hardware such as AI wearables and home robots, advancing the application of AI in children and family-centered services. collaborations with upstream and downstream partners will further enrich our capabilities and ecosystem scope. Strengthen Tuya's strategies depth in a smart front-rear sector. that creates exponentially. projects that global developers and customers can refer and replicate.
Speaker Change: The agents based on the new modeling will be able to continue is to not only collect and manage this got to order status from the either the.
Speaker Change: Yeah.
Speaker Change: Energy generators, but also upon that.
Speaker Change: Energy consumptive.
Speaker Change: Assumption differences, but also in the same time not the agent will be able to come out different type of strategy and turn it into the specific actions and continuing to re analysis of the new strategy and improve that so that it can help to do a lot to improve the energy efficiency savings.
Kai Xiao: Although the AI hardware ecosystem, community and product developments are still in the early stage. We believe that explorations in functionality experience and business models will open up space for Tuya and the entire industry's futures business experience. Laying the foundation of new engines of the long-term growth.
Speaker Change: Total consumptions.
Speaker Change: More greener.
Speaker Change: So even though.
Speaker Change: The energy Bill directly.
Speaker Change: So that will be the two very typical trends definitely we found that to show more interest.
Speaker Change: Have more short term.
Speaker Change: Interactions coming from directly from our customers and to the market Ashville, So that'd be the first question.
Kai Xiao: So there above is our sharing on 2SQ1 2025, financial performance and vision of company development. Although there has been partial improvement in the existential environment recently. Uncertainties remain. and Wei Spang. We will continue to operate. to diligently and to long-term approach of the technique-driven and platform-enabled developments, laying a solid foundation on the AIoT track, continuously capturing industry certainty trends, and creating long-term value for Tuya.
Speaker Change: And.
Speaker Change: The second one yes.
Speaker Change: The Teva have become a major topics for the entire market not only United States.
Speaker Change: So in the past couple of no.
Speaker Change: Personal fall fashion week sled after the new tariff.
Speaker Change: Topic ratios I think with the <unk>.
Speaker Change: Very direct reaction from the customer and it seems that every people on the international trained.
Speaker Change: Many pipeline.
Speaker Change: More conservative.
Speaker Change: And hesitated.
Speaker Change: Is it is it yet because nobody knows at what it comes out so right now is that people are waiting for some certainty.
Kai Xiao: Finally, a piece of good news, MSCI recently updated our 2025 ESG rating. from single A into a double A. In particularly, in the field of secure and compliances, Tuya achieved a full score of 10 points, thanks to its. We believe that whether in business, operations, or emerging areas such as ESG, steady fast progress will bring rewards and recognition.
Speaker Change: Yes, even though we have that kind of 90 days of certainly between China and U S.
Speaker Change: People are starting to do some.
Speaker Change: Careful decisions based on the 90 days terms.
But I think of the number of tons that we need to.
Speaker Change: Waiting for the final analysis between them.
Speaker Change: National negotiations that'd be one thing but.
Speaker Change: <unk> has mentioned that for the short tonne every people are slowing down or become more.
Speaker Change: Conscious about any.
Speaker Change: Proactive or aggressive decisions, but to the unique business model and <unk> is that the first one.
Operator: Thank you all operators, and right now we can begin our Q&A session. Thank you. We will now begin the question and answer session.
Speaker Change: The tariffs are not to USA.
Operator: To ask a question now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change:
Speaker Change: At at Ash, because by the way dealers will be a portion all key components and technology, especially the software of the finished finished goods so that tablet more directly.
Operator: Additionally, when asking a question, please state your questions in Chinese first and immediately translate them into English for the convenience of everyone on the call. Once again, that's star 11 for questions.
Speaker Change: Related to my customers.
Speaker Change: Either my brand customers online and manufacturer customers.
Yang Liu: We will now take our first question from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang. Thank you very much for the opportunity to ask questions. First of all, congratulations to the company for its very strong performance. I have two questions.
Speaker Change: It'll be lumpy, so we like the into rapid.
Speaker Change: And indirectly connected.
Speaker Change: Connected.
Speaker Change: And the second one is that.
Speaker Change: And so for us in the past couple of years, what <unk> been doing is we just follow the flow of that.
Yang Liu: The first one is, as an IoT development platform, can you help us look at which AI hardware has started to show a strong trend in the amount of shipments? The second question is also about the impact of tariffs. I want to hear what the management has seen in the past month or two, some changes in customer behavior. Because we experienced a very high tariff, and then it dropped again. The behavior of the customer or the action of the order may be a little late. I also want to follow up on this situation. Let me translate my question.
Speaker Change: If there is the trend that the entire global Inc.
Speaker Change: Economy, we localize these.
Speaker Change: Manufacturing supply chain, we just flow to the customers to do that so another half to be stick to.
Speaker Change: One or some specific manufacturers specific locations to right now.
Speaker Change: Capture so we shortfall related to comparability to other countries out there that.
Speaker Change: The second one and then the third one is that so the tablets are.
Speaker Change: Majorly folks on the finished goods.
Speaker Change: And as of today. It is the only portion portion of the cost of that.
Speaker Change: So that'll be that's well before the tariffs were more.
Speaker Change: For us that will pay more attention on the macro.
Speaker Change: Impact.
Yang Liu: I have two questions here. The first one is regarding the AIoT development. Tuya as a development platform, could management share what kind of AIoT hardware is doing well in terms of shipment? Are there any samples that Tuya observed? What kind of AI hardware can outperform relatively fast?
Speaker Change: So starting from the volume for Ashish demand impact on the U S market, so whether that will bleed into the retail price raising.
Speaker Change: And to lower the buying forces for the end user of the American panels, and also that whether that kind of.
Speaker Change: Yeah.
Speaker Change: Single.
Speaker Change: Nation economy impact to kind of be bringing.
Xueji Wang: The second question is regarding the customer's behavior in the past one or two months, given the huge volatility in tariffs. Could management share what the customer is doing in the past two months? Thank you. Yes, thank you, Dil. So for the first question, what we see here for the AI sectors, we find that there will be two major directions that are more interesting. The first one is that the audio and the video. interaction, interacted experiences. So one example is Butterfield, we mentioned that in the, I think that in the past. so to be able to help people to recognize the wildlife.
Speaker Change: A wider multinational.
Speaker Change: Mark Green economy.
Speaker Change: <unk>.
Speaker Change: Slowing down or recession, setting and that would be the more an entre.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question now please press star one on your telephone.
Speaker Change: We will now take our next question from the line of Timothy Zhao from Goldman Sachs. Please ask your question Timothy.
Speaker Change: Hum.
Speaker Change: Home gateways are good humanity.
Speaker Change: See you consider taking on Tien tsin.
Speaker Change: Yes.
Speaker Change: So Danielle tailwind.
Speaker Change: Your line is home detail either.
Xueji Wang: So that's basically all of them. of the use case for kids, that use the larger language models and capabilities, that you can have a new way to interact with the kids, show as education, as entertainment and as a company as well. So that would be the one. And so recently, The update about the kids is that in China we already signed a strategic partnership with Hai Zi Wang, which we talked here. the TOI group in China. And we're looking forward to have them to launch the products into the market. And so that'd be one thing.
Speaker Change: It sounds from Goldman.
Speaker Change: Goldman <unk> group, which are tied to go will be harder to achieve.
Speaker Change: Hi.
Speaker Change: So I'm not sure if I'm in too.
Speaker Change: It will be hard at that Ed.
Speaker Change: Now on Macondo era op triple from the timeshare for the.
Speaker Change: Quadrant hornbill women in Iot the past the Dino concho jumping on that ship.
Speaker Change: So Glenn you women junior in the showroom.
Speaker Change: Alright seem quite soon Sean how do you weigh its homepage on these elements argued to Wuxi, China industrial record you'd mentioned that sure.
Speaker Change: No Macondo Iot parts demand.
Speaker Change: It's all been deemed it sounds kind of you could you should.
Speaker Change: Shuffle.
Speaker Change: <unk>.
Speaker Change: Ali <unk> turbine yet.
Speaker Change: Could you see Japan.
Xueji Wang: So any type of audio, video, new, interactive. experiments based on larger networks model. And the second is on the data-based computing. dynamic decision making. So one typical use cases will be the energy management. for our call now. And through that, the AI agents, based on the new modeling, will be able to continue to not only collect analysis that all those datas from the either the from the energy generators, but also from the energy consumption devices, but also in the same time that the agent will be able to come out different type of strategy and turn that into the specific action.
Speaker Change: I don't know how quite frankly.
Speaker Change: I was thinking back to them for taking my question and congrats on the very strong quarterly results to.
Speaker Change: Two questions here. The first question is on the amortization wondering how all in which area.
Speaker Change: I would have to plan to might highest.
Speaker Change: He is supreme by AI and what is the difference in terms of the pricing model and the cost between the new Iot products services versus the traditional Iot services that you provide and.
Speaker Change: And secondly is on your full year and second quarter.
Speaker Change: Outlook on revenue and profitability could management share any color and specifically on the <unk>.
Speaker Change: Iot Pat segment, we have seen very steady upward trend in gross margin.
Speaker Change: <unk>.
Speaker Change: Provide an outlook for the segment as well thank you.
Speaker Change: Yes, Thank you I think that.
Xueji Wang: and continue to reanalyze the new strategy and improve that. So that can help to do a lot to improve the energy efficiency, whether it's saving the total consumption. be more greener or saving the energy bill. So that will be the two very typical trends that we find that show more interest and have more short-term. coming directly from the customers and to the market. So that'd be the first one.
Speaker Change: For the first question. It's a good one that's all my customers been asking.
Speaker Change: End of last year.
Speaker Change: So.
Speaker Change: What.
Speaker Change: We are offering for the.
Speaker Change: For the AI capabilities to the customers that we seamlessly and integrate the <unk> into my existing three business model. So as to offer that as Apache SaaS solution. So for the customers will be very liver flatly.
Speaker Change: They don't have to be activated for a new type of business model and how can mix that with their existing one so it's like a seamless transition.
Xueji Wang: And the second one, yes, the tariff has become a major topic for the entire market, not only the United States. And so in the past couple of, no, in the past four or five weeks right after the new tariff I think the very direct reaction from the customers is that every people on the international trading pipeline become more conservative. and Heizi Heizi, because nobody knows what comes out. So right now, people are waiting for some certainty. And even now, we have 90 days of certainty between China and the U.S. people are trying to do some very careful decisions based on the 90 days term.
Speaker Change: And therefore, the further income that.
Speaker Change: Given that offer us maybe to AI empowered new patch.
Speaker Change: And new SaaS.
Speaker Change: We will consider some of the repricing.
Speaker Change: One example is that.
Speaker Change: Recently, we offered for the I'll do it.
Speaker Change: Interacted AI based on that and that's also the past pricing will be different than the record.
Speaker Change: Regular patch in the same categories. So that'd be one so we can look for that to either.
Speaker Change: We use the seamless offering to speed up the penetration of the entire.
Speaker Change: Smart devices penetration in the global market, all we use that to repricing some of the offerings. So that'd be that'd be one thing.
Xueji Wang: But I think that number turns out to be... are waiting for the final answers. That would be one thing. But I have to mention that for the short time, every people are slowing down or become more conscious about any. proactive or aggressive decisions. But the unique business model and value proposition for Tuya is that the first one. The tariff and not to directly acted on us because what we deliver will be a portion or key component and technology, especially the software, of the finished goods. So the tablets are more directly related to my customers. either my brand customers or my manufacturer customers, so that'll be one thing.
Speaker Change: And.
Speaker Change: And so also that will be very.
Speaker Change: Z to continually to enlarge our partnership with option providers because right now the major.
Speaker Change: Latin English model are providing through the major cloud guy so at least the same way and how we collaborate with them on the cloud infrastructures when all week coupled with them.
Speaker Change: <unk> model with a large number of models. So that is the first.
Speaker Change: Answer for the first question and.
Speaker Change: On the second one, yes, that's combined with or without tariffs.
Evan: Evan we don't do the we don't involve in the international.
Speaker Change: Supply chain of training business directly.
Evan: We're very deeply integrated into that part.
Evan: A core part of that so the Teva Indeed Brean.
Xueji Wang: So we are like the indirect. indirectly and connect. And the second one is that, so for us, in the past couple of years, what we have been doing is that we just follow the flow. If there's the trend that the entire global economy are re-localizing the manufacturing supply chain, we just follow the customers to do that, so not have to be stick to one or some specific manufacturers in specific. So right now, the manufacturer should be short already. However, already the country's down. That will be the second one. And the third one is that so the tablets are majorly focused on the Finnish food.
The shorthand bumping.
Evan: About the about the demand cycle.
Evan: So like I described that typically in the major weeks of April.
Evan: For all of those kind of.
Order shipments to United States and a lot of people.
Evan: Most people put a pause button on that and.
Evan: And with Tennessee until we got to the the two countries make agreement.
Evan: So where we're seeing that this will this tour Paris topics on the globally immediately from China and U S. But also impacted.
Evan: Impacted.
Evan: Into the southeast Asia and in Mexico.
Evan: Partial to your cash flow. So it's that type of tariff topics, we will bring on bumping right.
Evan: And in the short term, maybe a quarter or two.
Xueji Wang: and the situation is only a portion of the cost of that goods. So that's one. But for the tariffs, for us, we'll pay more attention on the macro impact. So starting from the buying forces demand impact on the U.S. market, so whether that will bring into the retail price raising. And to lower the buying forces for the end user of the American pedals. And also that whether that kind of... And nation economy impact is going to bring a wider multinational macroeconomy. slowly and down, always sessions. So I think that'll be the more. Thank you.
Evan: It depends on how soon that we can make agreement and provide the certainty for the commercial for the commerce worked right.
The businessman awaiting and.
Evan: To see that.
Evan: Typical price that they can pay extra and how they can absorb that so for the short term that will be a bumpy, but it is not the first time, we've experienced that so this kind of new type of terms.
Evan: The.
Evan: Challenge of Lightning strike took a patient since 2009.
Evan: <unk>.
But it seems like the harsher bumpy.
Evan: So for the short term, there's still uncertainty for that.
Evan: Even in the U S market it only covers less than 10% of them all of our business, but yes, let's do 10%.
Evan: So thats uncertainty and.
Evan: It's a simple us and my customers, we just wait and see and every for both trying to two.
Operator: As a reminder, to ask a question now, please press star 11 on your telephone.
Evan: A more careful actions and decisions.
Evan: The single day a week.
Evan: That's what we see.
Timothy Zhao: We will now take our next question from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy. Thank you, Guan Yiceng, for giving me the opportunity to ask this question. And congratulations to the company for its very strong performance in the first quarter. I have two questions for Guan Yiceng. The first one is about AI.
Evan: Then challenge.
Evan: And but for the long term that.
Evan: We believe that in a year or next year.
Evan: Too.
Right after that.
Evan: The.
Evan: Negotiations being settled.
Evan: The entire demand and penetration, we will put it back into the normal mode and or the buying cycles.
Timothy Zhao: I would like to ask, if we consider from a relatively large monetary perspective, which aspects of the company's plan to monetize these opportunities brought by AI? What are the differences between the pricing methods of IoT products and services and the traditional pricing methods and costs of IoT PaaS? The second question is about the prospects of our annual income and profits. I would like to ask Guan Yiceng to share with us how we view the income and profits for the second quarter and the entire year. We see that the interest rate of IoT PaaS is in a relatively stable upward trend.
Evan: The GTS will get into the normal cycles again.
Evan: So that would be what do we see for the.
Evan:
Evan: For the short term.
Evan: And for the past and margin I think thats, the posh and his telco reproach already proven that we take the high value propositions of an entire industrial cycle.
Evan: Well.
Evan: A good with it and we're satisfied with that.
Evan: So for US is that we don't have the strong.
Evan: Honestly, we don't think there will be very necessary have to continue to push the margin into a higher cycle, because we're really being the highest.
Timothy Zhao: Will this trend be further seen in the second half of 2025? I will quickly translate it. Thank you, Guan Yiceng, for taking my question and congrats on the very strong quarterly results. Two questions here. The first question is on the AI monetization. Wondering how, in which area, Tuya would like to plan to monetize the opportunities brought by AI? What is the difference in terms of the pricing model and cost between the new IoT products and services versus the traditional IoT PaaS services that you provide? Secondly, on your full year and second quarter outlook on revenue and profitability, could management share any color?
Evan: Vertical position and the entire one including myself hires and in my customers were ready to take away the high position for that.
So we think that the key part is that to maintain.
Evan: The.
Evan: The position, but also in the same time be able to.
Motivates the either myself or my customers to continue to invest on the sectors I think that Thats a.
Evan: This.
Evan: It will be more important for us.
Evan: Because they are and activity will ensure that.
Evan: Continuing to improve the penetrations continues to fundamental innovations to turn them into reality and bring that into market.
Kai Xiao: Specifically on the IoT PaaS segment, we have seen a very steady upward trend in gross margin of this segment. Could management provide an outlook for this segment as well? Thank you. Yeah, thank you. I think that for the first question, it's a good one. That's all my customers been asking, you know, at the end of last year. So what Tuya offering for the AI capabilities to the customers, that we seamlessly integrate the AI capability into my existing three business model. So I still offer that as a patch or as a solution. So for the customers will be very, frankly, that they don't have to be educated for a new type of business model and how can mix that with their existing one.
Evan: So for the posh, we think of that.
Evan: It will be fine for us just to maintain the right range.
Evan: And for.
Evan: How we do that in the past two or three years, so really satisfied with that.
Evan: We don't have to ensure pushed to the next level.
Evan: Okay.
Evan: Thank you that's very helpful.
Evan: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone keypad, we will now take our next question from Kai Hsiao Fancy ICC. Please ask your question Kai.
Kai Hsiao: Ctrip Arnie.
Kai Hsiao: Yes.
Kai Hsiao: Then the question Bob.
Kai Hsiao: Thank you.
Kai Xiao: So it's like a seamless transition. And for the AI income that even I offer as a maybe it's AI empowered new patch, or AI new sash, that we will consider some of pricing. Some example is that recently we offered for the audio interactive AI based on the LLMs. So the path pricing will be different than the regular my regular patch in the same category. So that would be one. So we can look for that either we use the seamless AI offering to speed up the penetrating of the entire smart devices penetration in the global market, or we use that to repricing some of the.
Kai Hsiao: Okay.
Kai Hsiao: Hey, Doug.
Kai Hsiao: Keeping the industry.
Kai Hsiao: Hi, Paul.
Kai Hsiao: Got it.
Kai Hsiao: Okay.
Kai Hsiao: So you can see what kind of delta.
Kai Hsiao: Yes.
Kai Hsiao: Yes.
Kai Hsiao: Sure.
Kai Hsiao: Sure sure.
Kai Hsiao: Hopefully you Brian.
Kai Hsiao: It sounds like you're kind of Eric.
Doug Dietrich: Eric Hi, Doug Dietrich.
Kai Hsiao: Hum.
Kai Hsiao: Okay.
Kai Hsiao: Yes.
Kai Hsiao: Hi, Bob.
Kai Hsiao: Sure.
Kai Hsiao: Uh huh.
Kai Hsiao: So thanks management and congratulations for the June quarter.
Kai Hsiao: Two questions first.
Kai Xiao: So that would be one thing. And. And so also that will be very easy to continue to enlarge our partnership with the upstream providers. Because right now the major, like the large language model are provided through the major cloud guy. So this is the same way like how we cooperate with them on the cloud infrastructures. Right now we cooperate with them in the same model with a larger language. So that'd be the first. answer for the first question. And the second one, yes, that's combined with a tariff. Even we don't do the, we don't involve in the international.
Kai Hsiao: Could you share your.
Kai Hsiao: The appropriate of your cooperation between our core <unk>.
Kai Hsiao: Given the project can be expect in the coming quarters.
Kai Hsiao: Could you share the chunk of the expansion of our <unk> antibody.
Kai Hsiao: Paris.
Kai Hsiao: And the difference on the table.
Kai Hsiao: Okay application between domestic markets and overseas market. Thank you.
Kai Hsiao: Yes, so I. Thank you for the questions. So the first one on this talking about the.
Kai Hsiao: Singapore use cases right.
Kai Hsiao: To put it into wider coverage, so Singapore use case will be typical.
Kai Hsiao: Progress with that you took in places for the commercial.
Kai Xiao: supply chain or training business directly but also we are we are very deeply integrated into that part we are a core part of that so the Taverks indeed bring the shorthand bump. about the demand cycle. So I can describe that very typically in the major weeks of April, that for all those kind of order shiftments to the United States. And a lot of people, most people put a pause right around that and wait. until that the two countries make a So we're seeing that this will have topics globally, majorly from China and US, but also site impact.
Kai Hsiao: Industrial.
Kai Hsiao: <unk> solutions.
Kai Hsiao: The partnership we had or the contract we signed with the Singapore government is front of the STB, So Singapore home.
Kai Hsiao: Divestment theory, and the managing over 1.4 million Singapore.
Kai Hsiao: Topic apartments, so majority of our Singapore citizens living in the government provided a rental apartments and SUV manage that and what we're offering is a centralized energy management platform. That's helped in to April not only essentially in the.
Kai Hsiao: Different consumptions.
Kai Hsiao: In each of the apartments, that's mine contribute a significant cost.
Kai Hsiao: Assumption of the total Singapore nation.
Kai Xiao: to the Southeast Asia and Mexico. and Apache of UF Asheville. So that type of time topics will bring a bumping ride and in the short term, maybe in a quarter or two. It depends on how soon that we can make agreement and provide the certainty for the commercial, for the commerce world, right? All the businessmen are waiting to see that how, what type of price that they can pay extra and how they can observe. So for the short term, there will be a bumping. But it's not the first time we've experienced that. So there's kind of new tariff terms. The Challenge of Raising Structural Capacities since 2018.
Kai Hsiao: Sure.
Kai Hsiao: And but also we offer them some controller so to help them to identify how each of the households being used in our power to what type of devices by what proportion and then through some AI enabled to modeling and.
Kai Hsiao: <unk>.
Kai Hsiao: And control actions to reduce that and assume our over one half years POC with STB before we signed the contract.
Kai Hsiao: There will be significant.
Kai Hsiao: Reductions about the total consumption of the Polish which can help the Singapore government to which they want to be up.
Kai Hsiao: The pioneer of AR.
Kai Hsiao: ESG nation or smart nation.
Kai Xiao: So, but this seems like the harsher bump. point. So for the short term, there's still uncertainty for that. And even U.S. market only covers less than 20% of our business. But yeah, that's still 20%. So that's uncertainty. It's the same for us and my customers. We just wait and see. And everything about trying to a more careful actions and decisions every single day or week. So that's what you see, and then challenge exists. And but for the long term, we believe that in a year or next year, that's it. I mean right after the... negotiations being settled.
Kai Hsiao: That'd be one and the Stb's plan is that they will.
Kai Hsiao: We're ready.
Kai Hsiao: We're finalizing the deployment implementation of the entire pad crunch and they were really starting to produce the first shipment of the devices. It's energy hub in the home in the home and.
So the first implementation about the software platform and the hardware into the first part of the households, where took in places around the end of the Q3.
Kai Hsiao: Their plan is to be able to finish the phase one entire penetration of the homes in three years.
Kai Hsiao: Yes, so that'd be one when stuff and we are very excited about it because that will be show that.
Kai Hsiao: Not only providing a DIY devices to penetrating homes improvement.
Kai Hsiao: So those kind of decentralized devices, but we should have able to provide a centralized solutions through the right channels like Suvs to happy entire.
Kai Xiao: and the entire demand and penetrations will put it back into the normal model. And all the buying cycles and GTMs will get into the normal cycle. So that would be what we see for the short term. And for the past margin, I think that the past historical records have already proven that we take the high value propositions of an entire industrial sector. and well. for good with it, and we're satisfied with that. And so for us is that we don't have the strong. We don't think it will be very necessary to have to continue to push the margin into a higher cycle because we will really be in the highest.
Regional and users to improve their lunch, yes, so that'd be one and also we found that.
Kai Hsiao: Use of Singapore.
Kai Hsiao: The.
Kai Hsiao: Perfect.
Kai Hsiao: Use cases spot.
Kai Hsiao: And we'll be able to duplicate that and to.
Kai Hsiao: Influenced that the SaaS Asia other.
Kai Hsiao: Southeast Asian countries like the rent apartments at a global special management solutions and <unk>.
Kai Hsiao: Already show a good potential of growth in southeast Asia.
Kai Hsiao: So that's one thing and then not only for the.
Kai Xiao: that's the position in the entire one, including my suppliers and my customers. We really take a very high position. So we think that the key part is to maintain and... position but also in the same time be able to motivate either my suppliers or my customers to continue is to invest on these sectors I think that's That would be more important for us. because their activity will ensure that we are continuous to improve the penetrations, continuous to find more innovations, to turn that into reality and bring that into market. So for the past, we think that it will be fine for us just to maintain at the right range.
Kai Hsiao: Apartments management, but also we're really penetrate quite well in some of the telecoms and.
Kai Hsiao: Players in that area too.
Speaker Change: Yes, so that'd be one thing.
Speaker Change: And also in the same time two weeks later, we will open our new Singapore offices.
Speaker Change: And by providing.
Speaker Change: Abiding are more.
Speaker Change: Local resources to supporting our customers' penetrations implementations, but also in the same time to search for all business opportunities in that area.
Speaker Change: Extending the developer market.
Speaker Change: No.
Speaker Change: And that'll be the answers for that.
Speaker Change: But I think the whole parts.
Speaker Change: And.
Speaker Change: Okay.
Operator: and for us, how we do that in the past two or three years, so we're satisfied with that. we don't have to ensure to push to the next level. Yeah. Thank you, that's very helpful. Thank you. As a reminder, to ask a question, please press star 11 on your telephone keypad.
Speaker Change: Yeah. So so nothing for that and then for the.
Speaker Change: Accordingly.
Matt: Hi, Matt.
Matt: Could you repeat the question. So the second one is about the returns that shareholders returns right.
Matt: Yeah.
Speaker Change: The expansion.
Matt: The other parts.
Matt: And so they've been sold yet.
Matt: Okay.
Kai Xiao: We will now take our next question from Kai Xiao from CICC. Please ask your question, Kai. Thank you, Management Team, and congratulations on a very strong performance record. I have two questions.
Matt: Developers are already here is that.
Matt: I think it's just started.
Speaker Change: I think Ryan after the.
Speaker Change: The diptych expansion in January.
Kai Xiao: First, I would like to ask the leaders to update us on the progress of the two projects in Singapore, as well as the progress of the two projects in Chile, as well as this year's revenue volume. Alex just mentioned that we have more product updates in terms of energy. I would like to ask if we would like to see more similar cooperation projects in the future. This is the first question. The second question is, as you just mentioned, we have reached more than 10,000 AI developers. I would like to know what the regional distribution of AI developers is like at present.
Speaker Change: So the first one is that we found a majority of my customers and developers are reaching out back to us to asking about it.
Speaker Change: Or the <unk> offering.
Speaker Change: In the past.
Speaker Change: On the recognition side is that.
Speaker Change: They know AI is there.
Speaker Change: And a lot of news about AI, but they don't really think that does it.
Speaker Change: AI offering will be connected to their existing business.
Either it's more expensive to expensive affordable or it would be too difficult.
Kai Xiao: If we compare the speed of development of domestic and overseas AI applications, can we see any difference? These are my two questions, and I will translate them. Thanks, Management Team, and congratulations for the joint quarter. I have two questions. First, could you share the progress of your cooperation with Singapore and Chile, and any similar projects can we expect in the coming quarters? And second one is, could you share the geography extension of two AI developers, and is there any difference on the development of AI applications between domestic market and overseas market? Thank you. Yeah, so thank you for the questions.
Speaker Change: So I think that right after the dip.
Speaker Change: <unk> exposure.
Speaker Change: Both in.
Speaker Change: America, and China market every coastal nowhere to that they.
Speaker Change: They can bring AI into the physical use cases, and then I think the first one is that we've got so many calls.
Speaker Change: And and then use that time windows to launch either launch on new platform. The AI agent in development platform, but also to hold dollar.
Speaker Change: Two to manage that at our developer conference does that bring a very positive and very active feedback.
Speaker Change: And so right now the air developer penetration is that we're starting to educate.
Speaker Change: Those customers, who cost and by telling them what capabilities out of there in the platform and how they can do.
Kai Xiao: So the first one is talking about the I would like to put it into wider coverage, so Singapore use case will be a typical progress we'd like to take in places for the commercial. or Industrial IoT solutions. So the partnership we had or the contract we signed with the Singapore government is from the HDB, so it's Singapore Home Development Bureau. And they're managing over 1.4 million Singapore public apartments. So the majority of Singapore citizens living in the government-provided rental apartments. And it's HDB-managed that. And what we're offering is that it's a centralized energy management platform.
Speaker Change: Upon those capability to turn that into the.
Speaker Change: Devices used cases is monica educating period and right now obviously that the demand come from the global market. So majority of mine.
Speaker Change: Major of our key customers either from Europe.
Speaker Change: America from 19 America and Southeast Asia.
Speaker Change: So.
Speaker Change: Those are major those customers will have very strong retailers and channels will have very strong branch who can.
Speaker Change: Can do quite well about to the end users etch patients and marketing so those customer will be the major cost.
Kai Xiao: that help them to able not only censoring the... different consumptions in each of the apartments, that might contribute a significant consumption of the total Singapore nation power. And but also we offered them some controller. So to help them to identify how each of the households been using the power, through what type of devices, by what purpose, and then through some AI-enabled modeling and control actions to reduce that. And through our over 1 and 1⁄2 years POC with HDB before we signed the contract, there will be significant. about the total consumption of the powers, which can help the Singapore government to reach what it wants to be.
Speaker Change: And on the demand side and on the technical development site.
Speaker Change: So in two parts. The first part is that those ones who are folks.
Speaker Change: Term, the AI or <unk>, the AI capability into the device. So it's small.
Speaker Change: Following right.
Speaker Change:
Speaker Change: Penetration on that device development and manufacturing so maybe up bigger portion come from mainland China, but still we got multiple one from Korea from Turkey from Southeast Asia.
Speaker Change: And so that following that perfectly fit the penetration about to the hardware manufacturing deployment.
Speaker Change: That's the first one and the second one is about software. So software I'll say, that's a more diversified and either it's a different type of software innovators through the MTP protocols.
Kai Xiao: the pioneer of EFG Nation or SMART. So that's what we want. And the HTB's plan is that we'll really... We're finalizing the deployment implementation of the entire platforms and we're really starting to produce the first shipment of the devices. It's an energy hub in the home, and so the first implementation about the software platform and the hardware into the first part of the household will take place around the end of the year. And their plan is to be able to finish the phase one entire penetration of the homes in three years. So that will be one stuff.
Speaker Change: And more comfort on the mobile Internet and developer ecosystem and also the car debased develop Hirsch and.
Speaker Change: Who come through the cloud infrastructures into US yeah. So it's a multi year supply on the global basis.
Speaker Change: Okay.
Speaker Change: So I think that thats for the first quarter.
Speaker Change: Quarter or including till now it should show in the phase one it's about the recognition of our capability at.
Speaker Change: <unk> patient about the developer kit and then.
Speaker Change: Laughter prototype POC and demonstration different deployment.
Kai Xiao: And we are very excited about it, because that will be sure that's a... Not only providing our DIY devices to penetrating homes improvement through those kind of decentralized devices. But we should be able to provide a centralized solution through the right channels, like HDBs, to have entire. regional end users to improve their lives. Yeah, so that'd be one. And also, we found that using Singapore as a perfect use case spot, we can and will be able to duplicate that and to influence that the South East Asian, other South East Asian countries like the rental apartments, like what we call spatial management solutions and really show a good potential of growth in South East Asia.
Speaker Change: Alright, thank you.
Speaker Change: We will now take our next question from the line of John Roy from Water Tower Research. Please ask your question John.
John Roy: Yes, I don't have a slightly different question I was wondering if you could give us any insight into how youre using AI internally.
John Roy: Internal processes documents co development et cetera, and if that can really possibly.
Speaker Change: Increased margins and decreased costs going forward. Thank you.
John Roy: Yeah. Thank you John so.
Speaker Change: I think the every single department within the company originally starting to using different types of add too.
Speaker Change: Can take some some of the examples like for marketing team right now.
Speaker Change: A majority of all of the marketing resources, we use gen.
Speaker Change: <unk> generated three.
Kai Xiao: So that's one thing. And not only for the... departments management, but also were really penetrated quite well in some of the telecoms. players in that area. Yeah, so that'd be one thing.
Speaker Change: So we don't we don't recur.
Speaker Change: Lots of labor based designer to do that and including.
Speaker Change: Our operation team to do all of those come online training Webinars I think of the project I think a big portion of the.
Kai Xiao: And also, in the same time, two weeks later, we will open our new Singapore offices. And by providing more local resources to supporting our customers, penetrations, implementations, but also in the same time to search for all business opportunities in that area. and Xuanyi to global market. And that would be the answers for the Singapore. and... Yeah, so that's it for that.
Speaker Change: <unk> content to agenda.
Speaker Change: And also we have our.
Speaker Change: <unk>.
Speaker Change: Ticked up light view to the end users of <unk> and.
Speaker Change: That marketing side, and including the the legal and human resources side, we're using AI to help us either to do the research and review on the.
Speaker Change: And the candidates resume.
Speaker Change: With a key.
Speaker Change: Key words that would identify.
Speaker Change: And also to help us to double check with all of those standardized com.
Speaker Change: Contracts have come directly from the customer side to see that without any modifications et cetera to use that to.
Kai Xiao: And then for the... Hi, man. Did you repeat the question? So the second one is about returns, right? The shareholders' returns. uh the extension of AI developer and so yeah, so yeah, developers, what we hear is that, I think it's just started. And I think right after the the DeepSeek expansion in January and so the first one is that we find majority of my customers and developers are reaching out to back to us to asking about all the AI capability offering because in the past. On the recognition side is that the They know AI is there and a lot of news about AI, but they don't really think that the AI offering will be connected to their existing business.
Speaker Change: Prove the efficiency of our internal protecting of the.
Speaker Change: Either the HR and legal process, so that'd be one thing.
Speaker Change: Another use case is about the development for sure.
Speaker Change: We're using <unk> to do the project management.
Speaker Change: And an entity.
Speaker Change: <unk> about the progress of the development and the.
Speaker Change: The coding double checking.
Speaker Change: The bogging pre setting and.
Speaker Change: Maintenance of the card infrastructure, so it will be called <unk>.
Speaker Change: Intense of the card services as well.
Speaker Change: So that'd be tobacco things, we believe that in the future that you mentioned that we mentioned not only providing the capability to help the customers to build more commercialized or more are higher.
Speaker Change: <unk>.
Speaker Change: <unk> products, but also in the same time that we.
Speaker Change: Continues to using AI internally to improve our operation efficiency and so either lowering the cost of.
Kai Xiao: either it's more expensive, too expensive, unaffordable, or it will be too difficult. So I think that right after the deep sea exposure, both in. America and the China market, every coast and aware that they can bring AI into the physical use cases And then I think that the first one is that we got so much medical And then we use that time windows to either launch our new platform, the AI Agent Development Platform, but also to hold our, to launch that at our developer conference. So that brings a very positive and very active feedback. And so right now, the AI developer penetration is that we're trying to educate those customers who call us and by telling them what capabilities are out there in the platform and how they can develop upon those capabilities to turn that into the real devices use cases.
Speaker Change: The operation are too.
Speaker Change: Increase the income through our customers to enhance our lab operating average.
Speaker Change: That'd be some basic thanks, so much.
Speaker Change: Thank you so much and congratulations on the quarter.
Speaker Change: Thank you for that excited about the long term future. Because this is the only very starting point for the <unk> penetration for the physical worked very very early.
Speaker Change: We're very excited about it.
Speaker Change: Alright, thank you.
Speaker Change: There are no additional questions at this time I will now hand back to the management team for closing remarks.
Speaker Change: Okay. Thank you everyone. Thank you operator, and thanks for all of you for participating on the state of Florida.
Speaker Change: <unk>.
Speaker Change: See you next week.
Speaker Change: And have a nice day today.
Speaker Change: Goodbye.
Kai Xiao: It's more like an educating period. And right now we see that the demand comes from the global market. So the majority of my... major or key customers either from Europe. from America, from Latin America and Southeast Asia. So those customers have very strong retail channels, or have very strong brands, who can do quite well about the end-users' education and marketing. So those customers will be the major. and others on the demanding side. And on the technical development side... And so in two parts, the first part is that those ones who are focused on turn the AI or integrate the AI capability into the device.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect your lines.
Kai Xiao: So it's more following the right penetration on the device development and manufacturing. So maybe a bigger portion comes from mainland China. But still, we got multiple ones from Korea, from Turkey, from Southeast Asia, too. So that perfectly fits the penetration about the hardware manufacturing deployment. That's the first one. And the second one is about software. So software, I'll say that it's more diversified. And either it's through different type of software innovators through the MCP protocols. And more come from the mobile internet developer ecosystem. And also the cloud-based developers and who come through the cloud infrastructures into us.
Kai Xiao: Yeah, so it's more diversified on a global basis. I think that's for the first quarter or including till now, it should show in the phase one. It's about the recognition about capability, education about the developer kit, and then a lot of prototype POC and demonstration deployment. All right, thank you.
John Roy: We will now take our next question from the line of John Roy from Water Tower Research. Please ask your question, John. Yeah, I have a slightly different question.
Kai Xiao: I was wondering if you could give us any insight into how you're using AI internally, internal processes, documents, code development, etc., and if that can really possibly increase margins and decrease costs going forward. Thank you. Yeah, thank you, John. So I think the every single department within the company already is trying to using different type of AI tools. I can take some some of the examples, right, like for marketing team, right now that the majority of all the marketing resources we use are generated through AI. So we don't we don't require a lot of labor based designer to do that.
Kai Xiao: And including our operation team to do all those kind of online training webinars, I think the majority, I think a big portion of the webinar content are generated through AI2.
Kai Xiao: And also we have our Take a look at the technical component. and the candidates resume and with a with a key. key words that we identify, and also to help us to double check with all those standardized contracts that come directly from the customer side to see that whether there's any modifications, etc. So use that to improve the efficiency about the internal processing of the So that'd be one thing. And another use case is about the development, for sure, that we're using AI toolkit, different UI kits, to do the project management and analyzing about the progress of the development, and the coding, double checking, debugging, pre-setting, and maintenance of the code infrastructure.
Kai Xiao: So what we call the auto-patrolling on the maintenance of the cloud services. Yeah, so that would be typical things. We believe that in the future, like we mentioned, not only providing the capability to help the customers to build more commercialized or more a higher ROI. products, but also in the same time that we continue to use AI internally to improve our operation efficiency. And so either lowering the cost of the operation or to increase the income to our customers to enhance our lab operating average.
Kai Xiao: That would be some basic examples. Thank you so much and congratulations on the quarter. Thank you for that excited about the long term future because it's the only very starting point for the AI. for the physical work. Very, very early. We're very excited about that. All right, thank you. There are no additional questions at this time. I'll now hand back to the management team for closing remarks. Okay, thank you everyone. Thank you, operator, and thanks for all of you for participating on State of the Port. So, see you next week, see you next quarter, and have a nice day today.
Reg Chai: Bye. Goodbye. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.