Tuya Inc (TUYA) 2024 Q3 法說會逐字稿

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc. third-quarter 2024 earnings conference call. (Operator Instructions). Please be advised that today's conference is being recorded.

早安，晚上好，女士們先生們。感謝您的耐心等待，歡迎參加塗鴉公司 2024 年第三季財報電話會議。（操作員說明）。請注意，今天的會議正在錄製中。

I'll now turn the call over to your first speaker today, Mr. Reg Chai, Investor Relations Director of Tuya. Please go ahead, Reg.

現在我將把電話轉給今天第一位發言者，塗鴉投資者關係總監 Reg Chai 先生。請繼續，雷格。

Okay. Thank you, Emma. Thank you. Hello, everyone. Welcome to our third-quarter 2024 Earnings Call.

好的。謝謝你，艾瑪。謝謝。大家好。歡迎參加我們的 2024 年第三季財報電話會議。

Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang; and our CFO, Ms. Alex Yang. The third-quarter 2024 financial results and 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.

今天加入我們的是塗鴉創辦人兼執行長王傑瑞先生；以及我們的財務長 Alex Yang 女士。2024 年第三季財務業績和本次電話會議的網路直播可在 ir.tuya.com 上取得。本次電話會議的重播也將在幾個小時後在我們的網站上提供。

Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. With that, I will now turn the call to our Founder and CEO, Mr. Wang. Jerry will deliver his remarks in Chinese, which will be followed by corresponding English translation. Now, Jerry, please.

在我們繼續之前，我請您參閱我們的收益新聞稿中的安全港聲明，該聲明適用於本次電話會議，因為我們將做出前瞻性聲明。現在我將把電話轉給我們的創辦人兼執行長王先生。Jerry將以中文發表講話，隨後將有相應的英文翻譯。現在，傑瑞，有請。

(Interpreted) Hello, everyone. Thank you for joining Tuya's third-quarter 2024 earnings call.

（譯）大家好。感謝您參加塗鴉2024年第三季財報電話會議。

In the third quarter, we achieved our performance goals by prioritizing practical strategies and focusing on execution, revenue growth accelerated to 34% year-over-year increase. We maintained high operating efficiency, thus achieving a non-GAAP operating margin of around 9%. Our substantial interest income added to the bottom line resulting in a non-GAAP net profit margin of around 25%.

第三季度，我們以務實策略為主，注重執行力，實現了業績目標，營收年增至34%。我們維持了較高的營運效率，從而實現了 9% 左右的非 GAAP 營運利潤率。我們的巨額利息收入增加了利潤，導致非 GAAP 淨利潤率達到 25% 左右。

These results were underpinned by the effective execution of our business strategies, coupled with ongoing efficiency initiatives that tightly controlled budgets and expenses, sustaining operating leverage as we did in last quarter. Next, I will delve into some details on our business performance in the quarter. In the third quarter, all three of our business segments delivered solid revenue performance. IoT PaaS revenue increased by over 26% year-over-year, maintaining a steady recovery momentum.

這些業績的基礎是我們業務策略的有效執行，加上嚴格控制預算和費用的持續效率舉措，維持了我們上季的營運槓桿。接下來我會詳細介紹一下我們本季的經營業績。第三季度，我們的三個業務部門都實現了穩健的收入表現。IoT PaaS營收年增超過26%，維持穩定復甦動能。

The smart solutions segment achieved over 100% year-over-year revenue growth. This was driven by strong market demand, particularly in the home appliance category, where we have consistently observed robust global demand throughout the year, aligning well with our product planning and market expectation. Our focus on energy-efficient products and solutions has significantly contributed to this revenue growth. Additionally, our close collaboration with key customers has enabled them to align their product planning and launches with market trends. Lastly, revenue from the SaaS and other segments grew by approximately 17% year over year with our core cloud software value-added services increasing by over 50% year over year.

智慧解決方案業務營收年增超過100%。這是由強勁的市場需求推動的，特別是在家電類別，我們全年持續觀察到強勁的全球需求，這與我們的產品規劃和市場預期非常吻合。我們對節能產品和解決方案的關注為這一收入成長做出了重大貢獻。此外，我們與主要客戶的密切合作使他們能夠根據市場趨勢調整產品規劃和發布。最後，SaaS等業務收入較去年同期成長約17%，核心雲端軟體加值服務較去年同期成長超過50%。

In the consumer market, it is imperative for businesses to build thoroughly, understand and capture the core needs of end users. We are dedicated to continuously launching innovative and competitive products, understanding our customers' business objectives and building even closer partnerships. At the recently concluded 2024 EFA in Berlin, we unveiled numerous new product capabilities. By leveraging cloud-based dynamic algorithms and generative AI, we aim to significantly enhance the user experience and value of smart products in terms of interaction, efficiency and functionality. Additionally, in line with our philosophy of cultivating and understanding the industry, we have iterated and expanded a wide range of solutions and product portfolios across various homes and commercial use cases. This encompasses home energy efficiency, comfortable living spaces, pet care, security and protection, sports and healthcare, entertainment and education, convenient mobility, and more.

在消費市場，企業必須深入建立、了解並捕捉最終用戶的核心需求。我們致力於不斷推出創新和有競爭力的產品，了解客戶的業務目標並建立更緊密的合作夥伴關係。在最近於柏林結束的 2024 年 EFA 上，我們公佈了許多新產品功能。透過利用基於雲端的動態演算法和生成式人工智慧，我們的目標是在互動、效率和功能方面顯著提升智慧產品的使用者體驗和價值。此外，根據我們培育和理解行業的理念，我們迭代並擴展了各種家庭和商業用例的廣泛解決方案和產品組合。這包括家庭能源效率、舒適的生活空間、寵物護理、安全和保護、體育和醫療保健、娛樂和教育、便利的旅行等等。

Our global customer collaborations and expansion efforts progressed steadily in the third quarter. Our dollar-based net expansion rate, which measures growth among existing customers stood at 124%, a healthy and stable level. Our largest market, Europe, exhibited stable demand with smooth progressing partnerships with both new and existing clients. In other regions, we secured several key regional customers, including a leading private label brand in Canada, covering categories such as seasonal lighting and pet products, a top home appliance group in emerging markets like Brazil and well-known consumer safety brands in Chile. All of these are leveraging the Tuya platform for their strategic initiatives.

我們的全球客戶合作和擴張工作在第三季穩步進展。我們衡量現有客戶成長的以美元計算的淨擴張率為 124%，處於健康穩定的水平。我們最大的市場歐洲表現出穩定的需求，與新舊客戶的合作關係進展順利。在其他地區，我們獲得了多個重要的區域客戶，包括加拿大領先的自有品牌，涵蓋季節性照明和寵物用品等品類，巴西等新興市場的頂級家電集團以及智利的知名消費安全品牌。所有這些都在利用塗鴉平台來實施其策略性舉措。

Furthermore, in more mature markets, the Tuya platform remains the preferred choice for enterprises aiming to enhance operational efficiency or transitioning from traditional systems to third-party platforms. We believe this customer level developments amplify the value and capability of the Tuya platform and reflect the favorable competitive landscape in which we operate.

此外，在較成熟的市場，塗鴉平台仍然是企業提高營運效率或從傳統系統過渡到第三方平台的首選。我們相信，這種客戶層級的發展放大了塗鴉平台的價值和能力，並反映了我們營運所在的有利競爭格局。

We are also committed to building our developer community by striving to ensure that every developer interested in smart technology has access to the latest cutting-edge information. In the third quarter, we hosted two major developer conferences. The first with the inaugural European edition of the Tuya Global Developer Conference held at the Berlin Exhibition Center during the EFA event themed Smart by Nature, exploring the synergy of AI and sustainability.

我們也致力於建立我們的開發者社區，努力確保每位對智慧技術感興趣的開發者都能接觸到最新的前沿資訊。第三季度，我們舉辦了兩場大型開發者大會。第一個是在 EFA 活動期間在柏林展覽中心舉辦的首屆歐洲版塗鴉全球開發者大會，主題為 Smart by Nature，探索人工智慧與永續發展的協同作用。

Partners such as AWS and Think, which is a well-known European e-commerce platform for comprehensive smart home solutions discussed innovative application of generative AI and the practical implementation of sustainabilities. These discussions garnered significant attention from developers. Vestel as one of Turkey's largest home appliance manufacturers also shared success case studies.

AWS、歐洲知名智慧家庭綜合解決方案電商平台Think等合作夥伴共同探討了生成式人工智慧的創新應用和永續發展的實際落地。這些討論引起了開發人員的極大關注。Vestel作為土耳其最大的家電製造商之一也分享了成功案例。

At the end of September, during our global developed conference in Suzhou, industrial leaders such as Siemens and Haier Smart Home shared their visions of the future. They showcased how to leverage Tuya Cloud developed platform to build intelligent ecosystems, bringing green digital and smart home living experience to users. By the end of the third quarter, the number of registered developers on the Tuya platform further increased, reaching approximately 1.26 million. Moving forward, we will continue to gain insights into market demands, consistently empower developers and deliver more smart products that meet consumer expectations.

9月底，在蘇州舉行的全球已開發國家大會上，西門子、海爾智家等行業領導者分享了他們對未來的願景。他們展示瞭如何利用塗鴉雲開發的平台來建立智慧生態系統，為用戶帶來綠色數位化、智慧家庭的生活體驗。截至三季末，塗鴉平台註冊開發者數量進一步增加，達到約126萬人。未來，我們將持續洞察市場需求，持續賦能開發者，推出更多滿足消費者期望的智慧產品。

In the industrial and specialized channel markets, we continue to make progress as planned by developing and replicating benchmark projects. For example, our business model for telecom operators this year involves leveraging our Cube Intelligent Private Cloud solution to initiate collaborations combined with the delivery of core smart device categories. This approach is aligning with our expectations and has begun to see continuous implementations.

在工業和專業通路市場，我們繼續按計劃推進標竿項目的開發和複製。例如，我們今年針對電信營運商的業務模式涉及利用我們的Cube智慧私有雲解決方案來發起合作並結合核心智慧設備類別的交付。這種方法符合我們的期望，並且已經開始持續實施。

The development among our telecom operator customers base is advancing steadily. We have signed new agreements with two leading operators in Thailand and Vietnam and are receiving consistent reorders from smart devices from existing customers who have already deployed our solutions. Additionally, our home energy management system business has achieved substantial progress. We successfully secured a benchmark project with the Singapore Housing and Development Board. And over the next few quarters, we will officially enter the product implementation and delivery phase for this project.

我們的電信營運商客戶群發展穩步推進。我們已與泰國和越南的兩家領先營運商簽署了新協議，並持續收到已部署我們解決方案的現有客戶的智慧設備再訂單。此外，我們的家庭能源管理系統業務也取得了長足的進步。我們成功獲得了新加坡住房和發展局的標竿計畫。在接下來的幾個季度裡，我們將正式進入該專案的產品實施和交付階段。

Overall, third quarter 2024 was the period of steady progress for Tuya as we executed our established growth strategies to deliver robust financial results. This commitment has also brought us shareholder level recognition. You may have seen yesterday's announcement over the weekend, 65 Equity Partners at an independently managed wholly owned investment platform of Temasek entered into an agreement with New Enterprise Associates, one of Tuya's key shareholder since our founding in 2014 to purchase approximately 13% of Tuya's total issued shares. This investment reflects their strong confidence in Tuya's vision and aligns closely with our international expansion strategy. The Asia Pacific region, particularly Southeast Asia, is a rapidly growing emerging market, presenting enormous opportunities for us.

整體而言，2024 年第三季是塗鴉穩定發展的時期，我們執行了既定的成長策略，以實現強勁的財務表現。這項承諾也為我們帶來了股東層面的認可。大家可能已經看到昨天週末發布的公告，淡馬錫旗下獨立管理的全資投資平台65 Equity Partners與自2014年成立以來塗鴉的主要股東之一New Enterprise Associates簽訂協議，收購塗鴉約13%的股份已發行股票。這項投資體現了他們對塗鴉願景的堅定信心，並與我們的國際擴張策略緊密結合。亞太地區特別是東南亞是一個快速成長的新興市場，為我們提供了巨大的機會。

We remain committed to seizing growth opportunities in international markets, advancing global AIoT, smart devices, and commercial and industrial applications and delivering value to our long-term shareholders. We are thrilled to welcome 65 Equity Partners, the investment platform of Temasek as a significant shareholder of Tuya.

我們將繼續致力於抓住國際市場的成長機會，推動全球AIoT、智慧設備以及商業和工業應用的發展，為我們的長期股東創造價值。我們很高興迎來淡馬錫投資平台 65 Equity Partners 成為塗鴉的重要股東。

Lastly, we welcome our current Vice President of Financial, Claire Yan Zhang to the Board of Directors as an Executive Director. With her extensive experience in financial management and a big four accounting firm, Ernst & Young, Claire will bring valuable expertise to the Board, aligning with Tuya's commitment to diversity.

最後，我們歡迎現任財務副總裁張艷女士加入董事會擔任執行董事。憑藉在財務管理方面的豐富經驗以及四大會計師事務所安永會計師事務所的經驗，Claire 將為董事會帶來寶貴的專業知識，這與塗鴉對多元化的承諾保持一致。

Now I will hand over to Alex to provide further financial details.

現在我將交給 Alex 提供進一步的財務細節。

Thank you, Jerry, and hello, everyone. This is Alex. Now I will discuss our financial results and provide more details on the numbers that are covered by Jerry. Please note that all the figures are in US dollars and all the comparisons are year over year, unless stated otherwise.

謝謝傑瑞，大家好。這是亞歷克斯。現在我將討論我們的財務業績，並提供有關傑瑞所涵蓋的數字的更多詳細資訊。請注意，除非另有說明，所有數據均以美元為單位，所有比較均按年計算。

In the third quarter of this year, our total revenue reached USD81.6 million, up to 33.6% year over year. Most importantly, our P&L continued the trends established in Q2. Each business segment maintained a solid gross margin, reflecting the value of our products. This led to attractive gross profit growth alongside revenue growth. At the same time, we executed our business operations and product strategies with streamlined and limited operation cost and expenses.

今年第三季度，我們的總營收達到8,160萬美元，年增33.6%。最重要的是，我們的損益表延續了第二季確立的趨勢。各業務板塊均維持穩健的毛利率，反映了我們產品的價值。這導致了具有吸引力的毛利成長和收入成長。同時，我們以精簡且有限的營運成本和費用執行業務營運和產品策略。

As a result, we achieved a solid non-GAAP operating margin, expanding from the breakeven level of Q2. And our IoT PaaS revenue in the third quarter was USD57.9 million, representing a year-over-year growth of 26.4%. Looking at the product categories, our focus on home appliances enabled impressive year-over-year growth of around 40%, while other categories remained stable. Geographically, our global revenue structure was well balanced. However, driven by increased energy saving orders, Europe's revenue contribution saw a slight uptick in this quarter.

因此，我們實現了穩固的非公認會計原則營業利潤率，從第二季度的損益平衡水準擴大。第三季我們的物聯網PaaS營收為5,790萬美元，年增26.4%。從產品類別來看，我們以家電為主，年增40%左右，其他品類維持穩定。從地理上看，我們的全球收入結構非常平衡。不過，在節能訂單增加的帶動下，本季歐洲的營收貢獻略有上升。

On the customer side, the scale of customers we served increased slightly compared to the same period last year, aligned with our focused strategy on customer expansion and service. As of the end of the Q3 2024, our dollar-based net expansion rate stood at a healthy 124%. We believe this demonstrates strong demand from our existing customer base for Tuya's products, providing a solid foundation for revenue growth and allowing us to confidently pursue new customers. Q3 gross margin was 46%, remaining at a stable and healthy level compared to the same period of 2023. Since overall gross margin reflects the structural mix of margins across our business segments, it is influenced by the revenue composition of each segment.

客戶方面，我們服務的客戶規模較去年同期略有成長，與我們聚焦客戶拓展和服務的策略一致。截至 2024 年第三季末，我們以美元計算的淨擴張率維持在 124% 的健康水準。我們相信，這表明我們現有客戶群對塗鴉產品的強勁需求，為收入成長奠定了堅實的基礎，並使我們能夠自信地尋求新客戶。第三季毛利率為46%，與2023年同期相比維持穩定健康的水準。由於整體毛利率反映了我們各個業務部門的利潤結構組合，因此它受到每個部門收入組成的影響。

Looking at the components, the gross margin for all three of our revenue segments remained constant with the previous level. The slight increase in PaaS gross margin and a slight decline in smart solutions gross margin were pre-eminently due to the product mix changes. We'll consider that as a regular one. So regarding operation activity and expenses, I will provide a detailed view on a non-GAAP basis, which excludes certain non-business related items to give a clear picture of our operation efficiency. We continue to present our operating expenses primarily on a non-GAAP basis.

從組成部分來看，我們所有三個收入部門的毛利率均與先前的水平保持不變。PaaS毛利率的小幅成長和智慧解決方案毛利率的小幅下降主要是由於產品結構的變化。我們會將其視為常規的。因此，關於營運活動和費用，我將提供非公認會計準則基礎上的詳細視圖，其中排除某些非業務相關項目，以清楚了解我們的營運效率。我們繼續主要根據非公認會計原則列報我們的營運費用。

Before discussing non-GAAP operating expenses, I'd like to mention that in early September, following our Q2 operational profitability milestone, we adjusted the exercise prices of our options held by all the employees to the current value of our shares. We did this to thank our colleagues for their unwavering support as we navigated through cycles and reached new milestones. This onetime adjustment resulted in approximately USD10 million in additional onetime equity incentive expenses, of which USD9.5 million was recognized in this quarter's operating expenses, with the remainder to be amortized over the coming quarters.

在討論非公認會計準則營運費用之前，我想提一下，九月初，在第二季度營運獲利里程碑之後，我們將所有員工持有的選擇權的行使價格調整為我們股票的當前價值。我們這樣做是為了感謝我們的同事在我們度過週期並達到新的里程碑時給予的堅定支持。這項一次性調整導致約1,000萬美元額外一次性股權激勵費用，其中950萬美元計入本季營運費用，其餘部分將在未來幾季攤提。

Turning to operating expenses. In Q3, our non-GAAP total operating expenses decreased by 5.9% to USD30.1 million from USD32 million a year ago. Following the near comparison of team structure adjustments in the second half of 2023, our non-GAAP expenses has since stabilized year over year. Sequentially, our operational expenses in this Q3 increased by approximately USD2.3 million compared to Q2, primarily due to typical fluctuation in items on the expenses side and the income side, such as tax refunds. As revenue growth year over year, we'll adjust the budget according to as needed. Other non-personnel operating expenses such as marketing and travel has remained at a relatively balanced level. Overall, we remain committed to the efficient and focused business expansion to maximize and stabilize Tuya's profitability at this stage.

轉向營運費用。第三季度，我們的非 GAAP 總營運費用從一年前的 3,200 萬美元下降 5.9% 至 3,010 萬美元。經過2023年下半年團隊結構調整的近似比較，我們的非公認會計準則費用自此逐年穩定。隨後，我們第三季的營運費用比第二季增加了約230萬美元，主要是由於費用端和收入端項目的典型波動（例如退稅）。隨著收入逐年增長，我們將根據需要調整預算。行銷和差旅等其他非人員營運支出維持在相對平衡的水平。總體而言，我們仍然致力於高效、專注的業務擴張，以最大化和穩定塗鴉現階段的獲利能力。

This quarter, we achieved a non-GAAP operating margin of 9.1% and non-GAAP net margin of 24.7%. Net margin exceeded operation margin due to the contribution of interest income, which is substantial due to our large net cash balance. While fluctuations in operation expenses may cause slight profit margin variations, we are pleased with our current profit level and optimistic about the future improving operating leverage in the future. In terms of cash, Q3's operating cash flow was net inflow of USD23.9 million, reflecting our strong cash leverage. Our net cash balance increased to USD1,023.9 million, further strengthening Tuya's financial reserves and preparing us for future shareholder returns.

本季度，我們實現了 9.1% 的非 GAAP 營業利潤率和 24.7% 的非 GAAP 淨利潤率。由於利息收入的貢獻，淨利潤率超過了營業利潤率，而由於我們大量的淨現金餘額，利息收入相當可觀。雖然營運費用的波動可能會導致利潤率略有變化，但我們對當前的利潤水平感到滿意，並對未來營運槓桿的改善持樂觀態度。現金方面，第三季經營現金流淨流入2,390萬美元，體現了我們強大的現金槓桿。我們的淨現金餘額增加至10.239億美元，進一步增強了塗鴉的財務儲備，並為我們未來的股東回報做好了準備。

This concludes my presentation of the company's financial performance. So with that, operator, Emma, we are now ready to take questions. Thank you.

我對公司財務表現的介紹到此結束。那麼，接線員艾瑪，我們現在準備好回答問題了。謝謝。

(Operator Instructions) Tom Tang, Morgan Stanley.

（操作員指示）Tom Tang，摩根士丹利。

(interpreted) Congratulations on a very strong result for the quarter. So I have two questions. First one is on the outlook for the fourth quarter. So if we can share some more color on it and if we have seen any changes in the customer behavior after potential tariff increases in the US?

（解釋）祝賀本季取得了非常強勁的業績。所以我有兩個問題。第一個是第四季的展望。那麼，我們是否可以分享一些更多的信息，以及在美國可能提高關稅後，我們是否看到客戶行為發生任何變化？

And the second question is on the GPM. So our smart solution is a quite sizable amount in terms of our total revenue now. So do we expect the GPM to stay stable over the next few quarters? Or if there's going to be some further changes due to the product mix change? Thank you.

第二個問題是關於毛利率的。因此，就我們現在的總收入而言，我們的智慧解決方案是相當可觀的。那麼我們預期毛利率在未來幾季會保持穩定嗎？或者是否會因產品結構的變化而發生一些進一步的變化？謝謝。

Yes, thank you for that. So for the question one, firstly, that we will mention that for Q3 for us will be a steady season, a steady growing season, which proves that our strategy on the business side and also the efficiency of our operations. So we'll continue to do that. For Q4, right now, we see that positive season, but it's only like 40 days past for Q4. Also we have a long vacation in China, so that influenced majority of the manufacturers.

是的，謝謝你。所以對於第一個問題，首先我們要提到，第三季對我們來說將是一個穩定的季節，一個穩定成長的季節，這證明了我們在業務方面的策略以及我們營運的效率。所以我們將繼續這樣做。對於第四季度，現在我們看到了積極的季節，但第四季度才過去 40 天。而且我們在中國有一個很長的假期，所以這影響了大多數製造商。

So I will not have the clear visibility of our entire Q4. But when we see that Q4, it's also a stable and steady and regular season for us. We continue to chasing on that, so we are optimistic about what we can have in Q4, even without precise visibility. And speaking of the tariff issues for United States, what we see here is that it's not the first time about the tariff. So that thing has already been going on for a couple of years.

所以我不會清楚地了解整個第四季的情況。但當我們看到第四季時，這對我們來說也是一個穩定、穩定、常規的賽季。我們將繼續追求這一點，因此即使沒有精確的可見性，我們對第四季的表現仍持樂觀態度。說到美國的關稅問題，我們看到這並不是第一次涉及關稅問題。所以這種事情已經持續了好幾年了。

And maybe two things. The first one is that we see that in the past few years, so even the geopolitical situation, what we see here is that the customers already starting to relocate their supply chain. We're already supplying that, which means that we're not impacted directly, but the customers always need to trade, always need to source in and buying the products from wherever they need it in the world. We are just fulfilling that. That will be one thing.

也許還有兩件事。第一個是我們看到在過去幾年中，即使是地緣政治局勢，我們在這裡看到的是客戶已經開始重新安置他們的供應鏈。我們已經在供應這些產品，這意味著我們不會受到直接影響，但客戶總是需要進行交易，總是需要從世界上任何需要的地方採購和購買產品。我們只是在實現這一點。那將是一回事。

The second thing, what we see even that with relocation of the supply chains, still the world needs China so much. So no matter what, any significant amount of the Chinese components still shipping to the global supply chain. So that will be something, we just follow the flow. We just keep serving our customers and either locally or remotely to their suppliers in whichever countries they're located. So I think that will be one thing.

第二件事，我們看到，即使供應鏈發生了轉移，世界仍然如此需要中國。因此，無論如何，大量的中國零件仍然運往全球供應鏈。所以這會是一些事情，我們只是順其自然。我們只是繼續為我們的客戶提供本地或遠端服務，無論他們位於哪個國家。所以我認為那會是一回事。

Demand is still steady because end users continue to use that. So they'll purchase wherever they can to find the best cost point to locate their own supply chain. That's for question one.

需求仍然穩定，因為最終用戶繼續使用它。因此，他們會盡可能地進行採購，以找到最佳成本點來定位自己的供應鏈。這是針對第一個問題的。

For question two, you see that our three business segments, they actually in total different vertical. We have to follow different business and common senses in this industry. So for the smart solutions, it will be so deeply bounded with hardware, which means that I can never compare with a gross margin versus the software. It's a totally different model. But we think that the smart solution is so valuable because we help the customer to provide differentiation and provide very competitive new cutting-edge products and experience to the market to continue to enable them to become the leader. So we'll enlarge the portion of the smart solution for sure, and we really see the potential. So through that, the overall gross margin of the company will decrease gradually, but we consider that as a very healthy way because each of the segment is competitive.

對於第二個問題，你會看到我們的三個業務部門，它們實際上完全不同的垂直領域。我們必須遵循這個行業的不同業務和常識。因此，對於智慧解決方案來說，它將與硬體緊密相連，這意味著我永遠無法將毛利率與軟體進行比較。這是一個完全不同的模型。但我們認為智慧解決方案如此有價值，因為我們幫助客戶提供差異化，為市場提供非常有競爭力的新尖端產品和體驗，以繼續使他們成為領導者。因此，我們肯定會擴大智慧解決方案的部分，我們確實看到了潛力。因此，公司的整體毛利率將逐漸下降，但我們認為這是一種非常健康的方式，因為每個細分市場都具有競爭力。

So we are more concerned about the segments, not the overall gross margin. And in the same time that the growth of each of the segments doesn't require a significant increase on our expenses and costs, which means that we still maintain a very good leverage to grow our overall business. So even though the gross margin rate is declined a little bit in the long run, but in the same time, the total amount of the gross margins will be able to provide enough beneficial and profitability for the company. That's it.

所以我們更關心細分市場，而不是整體毛利率。同時，每個細分市場的成長並不需要我們的費用和成本大幅增加，這意味著我們仍然保持著非常好的槓桿來發展我們的整體業務。因此，儘管長期來看毛利率略有下降，但同時毛利率總量仍能為公司提供足夠的效益和獲利能力。就是這樣。

Timothy Zhao, Goldman Sachs.

提摩西·趙，高盛。

(interpreted) Thank you management for taking my question. I have two questions here. The first one is regarding the IoT PaaS business. Just wondering if you can give us any color on your outlook on the downstream demand for the IoT PaaS business and any demand difference across different vertical segments? And secondly, I'm pretty glad to see that we have anchor investors coming in this quarter and given that your margin is already quite stable, and the company also has pretty ample cash resources. Just wondering if you can share some idea about the future shareholder return policies, that would be great. Thank you.

（解釋）感謝管理層提出我的問題。我在這裡有兩個問題。第一個是關於物聯網PaaS業務。只是想知道您能否為我們介紹一下您對 IoT PaaS 業務下游需求的展望以及不同垂直領域的需求差異？其次，我很高興看到本季我們有錨定投資者加入，考慮到你們的利潤率已經相當穩定，而且公司也擁有相當充足的現金資源。只是想知道您是否可以分享一些有關未來股東回報政策的想法，那就太好了。謝謝。

Yeah. Thank you for that. So for the IoT PaaS, for us, momentum, what we see here is that this year will be a rebounding year because majority of the consumer electronic players or companies in the world starting to working out from the -- working out from the cycle of the inventory over inventory issues, starting from 2021, 2022. So it's a rebounding year. And what we see the momentum among our customers is that they're really starting to reinvest and kick off the multiple projects, I mean, among every customers for the IoT fields.

是的。謝謝你。因此，對於物聯網PaaS，對於我們來說，勢頭，我們在這裡看到的是，今年將是反彈的一年，因為世界上大多數消費電子參與者或公司開始從——從循環週期中開始工作。所以今年是反彈的一年。我們在客戶中看到的勢頭是，他們真的開始再投資並啟動多個項目，我的意思是，在物聯網領域的每個客戶中。

So ready for future competitions and expansion. That would be one thing. So while you have more investment and the resources coming in in these verticals, pretty sure that they will continue to continue to grow for the customer side. And for Tuya side we continue to provide two drivers for the business. So first one is the product and on the PaaS side, so we continue to expand to any type of the new use cases and scenarios and across our categories.

為未來的競爭和擴張做好準備。那是一回事。因此，儘管您在這些垂直領域擁有更多的投資和資源，但可以肯定它們將繼續為客戶帶來成長。而對於塗鴉方面，我們繼續為業務提供兩個驅動程式。第一個是產品和 PaaS 方面，因此我們繼續擴展到任何類型的新用例和場景以及跨我們的類別。

But most importantly that we're starting to deploy and we're starting to provide some of the AI based services for the customers to help them to build some AI empowered devices or AI empowered use cases for the end users so that can be kind of the killer app of key differentiations and new features that we can see in the market. So that would be one. So we use the product to be the driver with the new innovation, new technology. And the second driver for Tuya is the customer expansion especially on the enterprise level. So for that part, as you can see that we're starting to incubate our SaaS business around three years.

但最重要的是，我們開始部署，並開始為客戶提供一些基於人工智慧的服務，幫助他們為最終用戶建立一些人工智慧支援的設備或人工智慧支援的用例，這樣可以我們在市場上看到的具有關鍵差異化和新功能的殺手級應用程式。所以這就是其中之一。所以我們用產品來驅動新的創新、新技術。塗鴉的第二個驅動力是客戶擴張，尤其是企業層級的客戶擴張。因此，就這一部分而言，正如您所看到的，我們開始孵化 SaaS 業務大約三年。

So that type of the solution is more focused on the enterprise level. So other than the consumer companies -- consumer-related companies, so the enterprise type of company or industrial solution providers are different type of the players in the market. So through that, we continue to have more and more customers in that field, including the telecom carriers, including the projects we just shared along with the Singapore HDB for the government public apartments, around 1.3 apartments in Singapore, et cetera. That kind of industrial players and enterprise level of the players will become a new growing forces and drivers for Tuya as well. So we continue to expand more and to come in deeper.

因此，此類解決方案更側重於企業層級。因此，除了消費者公司——消費者相關公司之外，企業類型的公司或工業解決方案提供者是市場參與者的不同類型。因此，透過這一點，我們在該領域繼續擁有越來越多的客戶，包括電信營運商，包括我們剛剛與新加坡建屋發展局共享的政府公共公寓項目、新加坡約1.3套公寓等項目。這樣的產業玩家和企業級玩家也將成為塗鴉新的成長動力和驅動力。因此，我們繼續擴大規模並深入研究。

So that will be the past growth. So we maintain the optimism on this field because we have a very steady customer base, as you can see, our DBNER and premium customer amounts. In the same time, we continue to cover wider with new fields on the enterprise solution level. So that would be one thing, question one.

所以這將是過去的成長。因此，我們對這一領域保持樂觀，因為我們擁有非常穩定的客戶群，正如您所看到的，我們的 DBNER 和優質客戶數量。同時，我們在企業解決方案層面不斷涵蓋更廣泛的新領域。所以這是一回事，問題一。

And on question two, so yeah, for sure that for the past 10 years, since the beginning of Tuya, we always take the shareholders' return as a high priority when we operate in the company. And in this Q2 will be the first time we issued a dividend. It's a special dividend for the shareholders. Like I mentioned in last quarter, it's not a regular one because we don't hit the annual profitability yet. But we don't want the shareholders to wait another two quarters. So we issued a special dividend. It's a special one.

關於第二個問題，所以，是的，可以肯定的是，在過去的10年裡，自從塗鴉成立以來，我們在公司營運時始終將股東回報作為重中之重。今年第二季將是我們首次發放股利。這是股東的特別股利。就像我在上個季度提到的那樣，這不是常規的，因為我們還沒有達到年度獲利能力。但我們不希望股東再等兩個季度。所以我們發行了特別股利。這是一個特別的。

So we will consider the dividend as a regular basis. So every year that more based on the non-GAAP profitabilities, we use as a benchmark to evaluate and how much we can return to the shareholders as a dividend. That's it. Thank you.

所以我們會考慮將股息作為定期的基礎。因此，每年我們都會更多地基於非公認會計準則的獲利能力作為基準來評估我們可以向股東回報多少股利。就是這樣。謝謝。

Kai Xiao, CICC.

肖凱，中金公司。

(interpreted) So this is Ben from CICC Research, and I have two questions. And the first question is about the SaaS sector, whose revenue growth accelerated in Q3. So could you give us some color on the growth drivers and future outlook for the SaaS sector? And another question is regarding the artificial intelligence. Could you give us some updates on the Gen AI monetization and future plan? And if there are some revenue contribution guidance, that will be great. Thank you.

（解釋）這是中金公司研究部的Ben，我有兩個問題。第一個問題是關於SaaS產業，第三季營收成長加速。那麼您能為我們介紹一下 SaaS 產業的成長動力和未來前景嗎？另一個問題是關於人工智慧的。您能為我們介紹一下 Gen AI 貨幣化和未來計畫的最新情況嗎？如果有一些收入貢獻指導，那就太好了。謝謝。

Thank you for that. So for the SaaS, the key part is that we continue to identify the potential verticals that AIoT can help -- can provide value to killing the pain point with a reasonable cost level. So I think that will be the key part. So we consider that as a PSF stage, which means that we keep evaluating the market and to identify and figure out the right solution that fits it. So for the SaaS side, right now, we really see several -- very potential and scalable market direction there, including the hospitality.

謝謝你。因此，對於 SaaS 來說，關鍵部分是我們繼續識別 AIoT 可以幫助的潛在垂直領域——可以提供價值，以合理的成本水平消除痛點。所以我認為這將是關鍵部分。因此，我們將其視為 PSF 階段，這意味著我們不斷評估市場並確定並找出適合它的正確解決方案。因此，對於 SaaS 方面，目前我們確實看到了幾個非常有潛力且可擴展的市場方向，包括酒店業。

As I mentioned that like the recent project that we signed contract with HDB in Singapore, it's a hospitality solution we provided and combined with energy management. And energy will be another one, so another sectors and outdoor will be another one, including logistics. So that will be the verticals we find potential to. And so we already have some standardized solution proven and worked with strategic customers as a pilot program. So for that part, I think the space and the ceilings will come better whether we're looking forward to duplicate the use cases with a similar type of the strategic customers in new fields.

正如我所提到的，就像我們最近與新加坡 HDB 簽訂的合約一樣，這是我們提供的酒店解決方案並與能源管理相結合。能源將是另一個領域，因此另一個領域和戶外領域也將是另一個領域，包括物流。這將是我們發現潛力的垂直領域。因此，我們已經擁有一些經過驗證的標準化解決方案，並與策略客戶合作作為試點計劃。因此，對於這一部分，我認為無論我們是否希望在新領域中與類似類型的策略客戶複製用例，空間和天花板都會更好。

So that would be one thing. That will be the key drivers for SaaS. And speaking of the AI, what we see is that, right now, we are working on providing two type of services through AI. So one is that we will integrate the AI capability along with the hardware. So we -- and essentially, it becomes not a smart device, it becomes AI devices.

所以那是一回事。這將是 SaaS 的關鍵驅動力。說到人工智慧，我們看到的是，目前我們正在努力透過人工智慧提供兩種類型的服務。所以一是我們將人工智慧能力與硬體結合。因此，從本質上講，它不再是智慧型設備，而是人工智慧設備。

So one of the typical use cases is the bird feeder. So it's a bird house and comes along with a camera and comes along with a food container. So you put that in the backyard on the tree and then whenever one bird comes in and then you get a picture, or you get a selfie of the bird. And come now combine that with AI algorithms that we prop with AWS called recognition. It's an algorithm provided by AWS, where we integrate that into the application.

因此，典型的用例之一是餵鳥器。這是一個鳥屋，有相機和食物容器。所以你把它放在後院的樹上，然後每當一隻鳥飛進來時，你就會得到一張照片，或者你會得到一隻鳥的自拍照。現在將其與我們透過 AWS 支援的稱為識別的人工智慧演算法結合起來。它是 AWS 提供的演算法，我們將其整合到應用程式中。

And then -- so the feeder not only takes photos about the bird, but also tells you what species it is, what's the behavior of this bird. And then you'll be able to easily either educate your children, right, okay, let's try to learn the birds or you can show off any rare species coming to your house rather than your neighbors. So that will be one thing. So it has become a nature native AI device. Another direction is that -- and we're trying to provide some AI services on top of the device as a software-based level.

然後——所以餵食者不僅會拍攝這隻鳥的照片，還會告訴你它是什麼物種，這隻鳥的行為是什麼。然後你就可以輕鬆地教育你的孩子，對吧，好吧，讓我們試著學習鳥類，或者你可以炫耀任何來到你家而不是鄰居的稀有物種。所以這將是一回事。所以它已經成為一個天然的原生AI設備。另一個方向是——我們正在嘗試在設備之上提供一些基於軟體的人工智慧服務。

So one thing is that when we combine GenAI with pet devices, so like the pet feeder in home, so the feeders can and visual your behaviors, the behaviors of your pet, maybe your cat or your dog and then automatically generate different type of video footage and come along with a nine, coming on with the background music. And then you understand, okay, my cat and dog are at home right now, they're playing Game of Thrones, maybe game of paw. So that type of interesting footage is generated by AI. So we can -- we'll start trying to provide that type of services on the software levels. And so with the existing, what we call version 1 smart devices, we'll be able to have some AI-based experience.

所以一件事是，當我們將GenAI 與寵物設備結合時，就像家裡的寵物餵食器一樣，餵食器可以視覺化您的行為，您的寵物（可能是您的貓或您的狗）的行為，然後自動產生不同類型的影片鏡頭和九號一起出現，伴隨著背景音樂。然後你就會明白，好吧，我的貓和狗現在在家，他們正在玩權力的遊戲，也許是爪子遊戲。所以這種有趣的鏡頭是由人工智慧生成的。所以我們可以——我們將開始嘗試在軟體層級提供此類服務。因此，利用現有的、我們所謂的第一版智慧型設備，我們將能夠獲得一些基於人工智慧的體驗。

So that will be the two directions we're trying to pitch. And right now, it's still in the pilot stage. So we still run some POCs, still run some pilot customers, but not provide them everywhere. And also, we consider very carefully about how we can business -- monetize that coming on naturally with the business model. So by the end of this year or at the beginning -- by the end of this year and beginning of 2025, and we'll be able to show more use cases how we can turn AI into an application.

這將是我們試圖推動的兩個方向。而目前，還處於試點階段。因此，我們仍然運行一些 POC，仍然運行一些試點客戶，但不會在所有地方提供它們。而且，我們非常仔細地考慮如何開展業務——將商業模式自然產生的貨幣化。因此，到今年年底或年初——到今年年底和 2025 年初，我們將能夠展示更多如何將人工智慧轉化為應用程式的用例。

And we believe that that will become one of the catalyst for Tuya and our overall IoT. And one of the key things uniqueness for Tuya is that right now, one of the largest challenges for AI is what type of applications, what type of features its commercial, and/or have the space to commercialize because it's more like the -- right now, it's more like the trial tools, better to have, not must be. But tangible for Tuya is that we have the device, we help the customer to build the device. So naturally, the device itself, when it's sold, you know that the end users are buying that for the future and especially when the AI device comes with a totally different pricing point than the regular smart device, you know that people are buying that for the AI. So since the beginning we have commercialized that.

我們相信，這將成為塗鴉和我們整個物聯網的催化劑之一。對於塗鴉來說，關鍵的獨特之處之一是，目前人工智慧面臨的最大挑戰之一是什麼類型的應用程式、什麼類型的功能可以商業化，和/或有商業化的空間，因為它更像是——對的現在，它更像是試用工具，最好有，而不是必須有。但對於塗鴉來說，有形的是我們擁有設備，我們幫助客戶建造設備。因此，很自然地，設備本身在出售時，您知道最終用戶會為未來購買它，特別是當人工智能設備的定價點與常規智能設備完全不同時，您知道人們會為了未來而購買它。智能。所以從一開始我們就將其商業化。

So I think that will be a special one. So we'll try different types of use cases and demonstrations and then we can easily testify that among my customers what type of things I can commercialize and bring that into scale. That's it. Thank you.

所以我認為這將是一個特別的。因此，我們將嘗試不同類型的用例和演示，然後我們可以輕鬆地在我的客戶中證明我可以將哪些類型的事物商業化並將其規模化。就是這樣。謝謝。

John Roy, Water Tower Research.

約翰·羅伊，水塔研究。

Thank you for taking my question and congratulations on a very strong quarter. If we could take a step back for a second, obviously, the revenue growth has been solid for the last couple of quarters and a lot of talk about enterprise. I was kind of wondering how long do you think this can continue? In other words, how much runway do you kind of see given the current markets do you have?

感謝您提出我的問題，並祝賀本季表現強勁。如果我們可以退後一步，顯然，過去幾季的營收成長一直很穩定，並且有很多關於企業的討論。我有點想知道你認為這種情況還能持續多久？換句話說，考慮到目前的市場，您認為還有多少跑道？

I think that's -- so talking about that, I would like to pull back a little bit about the vision where we started this company. And we believe that no matter if it's IoT or AI in the future, I mean, long run, maybe after 10 years, it will become a fundamental technology, like the Internet right now, everything is in the Internet connected. So -- and so when we're reviewing the penetration of IoT or with AI, it's extremely low. So right now, it will be low single-digit numbers. So if you have to ask me about the weather and how the business is going to move forward, I will say that in the next 10 years, maybe after 10 years, after 20 years, everything defaultly needs to be connected, needs to be smart and we can imagine that.

我認為，說到這一點，我想稍微回顧一下我們創辦這家公司的願景。我們相信，無論未來是物聯網還是人工智慧，我的意思是，從長遠來看，也許10年後，它會成為一項基礎技術，就像現在的互聯網一樣，一切都在互聯網中連接。因此，當我們審查物聯網或人工智慧的滲透率時，它的滲透率非常低。所以現在，這將是較低的個位數數字。所以如果你要問我天氣、業務要如何向前發展，我會說未來10年，也許10年後、20年後，一切預設都需要互聯，都需要智能化我們可以想。

So what we're doing is that we continue to enable those first movers in their vertical fields to turn them into IoT ready or into AIoT ready. I think that will be the key driver for us. So that's why we -- all the investment we're doing is that we can find the right use cases that make sense for their vertical, and we provide standardized easy-to-use toolkits for the developers and scale that. So I think that will be the key part.

因此，我們正在做的是，我們繼續幫助垂直領域的先行者將他們轉變為物聯網就緒或人工智慧物聯網就緒。我認為這將是我們的關鍵驅動力。這就是為什麼我們所做的所有投資都是為了找到對其垂直領域有意義的正確用例，並且我們為開發人員提供標準化的易於使用的工具包並進行擴展。所以我認為這將是關鍵部分。

Right. And as a follow-on to that, the investments you're making, do you feel like they're at a good level right now? Or do you feel like there's going to be a possible need to accelerate R&D in the coming years?

正確的。作為後續，您正在進行的投資，您覺得現在處於良好水平嗎？或者您認為未來幾年可能需要加速研發？

Yeah. So in the past two years because we -- we were facing a cycle back then. So we really adjust our strategies into a more aggressively invested and expansion strategy into a more reasonable and what we call micromanagement. And so for this one, what we've seen is we really stabilized our expenses and investment. So even inside the company, we continue to invest in some new use cases, but still at a very reasonable level. And so we're looking forward to stabilize our profitability and our expense rate.

是的。所以在過去的兩年裡，因為我們當時面臨一個週期。因此，我們確實將策略調整為更積極的投資和擴張策略，更合理的微觀管理。因此，對於這一點，我們看到的是我們確實穩定了我們的支出和投資。因此，即使在公司內部，我們也繼續投資一些新的用例，但仍然處於非常合理的水平。因此，我們期待穩定我們的獲利能力和費用率。

Great. Thank you so much.

偉大的。太感謝了。

(Operator Instructions) There are no additional questions at this time. I'll now hand back to the management team for any closing remarks.

（操作員說明） 目前沒有其他問題。我現在將向管理團隊交回總結發言。

Okay. Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. So have a good day today. Thank you.

好的。再次感謝您今天加入我們的電話會議。如果您還有任何疑問，請隨時聯絡我們或透過我們的 IR 網站提出請求。我們期待在下次財報電話會議上與大家交談。所以今天過得愉快。謝謝。

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

感謝您參加今天的會議。這確實結束了該程式。您現在可以斷開連線。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.

此文字記錄中標記（翻譯）的部分是由現場通話中的口譯員說出的。口譯員由贊助本次活動的公司提供。