Tuya Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc's fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question and answer session. Please be informed that today's conference is being recorded. I'll now turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to our fourth quarter and fiscal year 2025 earnings call. Joining us today, our founder and CEO, Mr. Jerry Wang, and our co-founder and CFO, Mr. Alex Yang. The fourth quarter and Fiscal year 2025 financial results and webcasts of the conference call are available at ir.tula.com. A replay of this call will also be available on our IR website in a few hours. 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 over to our founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by a corresponding English translation.

Jerry, please.

Hello, everyone. Thank you for joining Tuya Learning School for the first quarter 2025.

In 2025, against a complex and evolving external environment, we maintained stability across our platform business, delivered steady full-year revenue growth,

and achieved a notable improvement in gap profitability. At the same time, we made solid progress in building a more systematic AI capability framework.

In 2025, the company's annual income will be $3.2 billion, with an increase of about 7.8%. Stability and cash flow quality will continue to improve. These results reflect the stability of core platform business and reflect our continuous improvement in resource focus and execution discipline.

For full year 2025, we generated total revenue of $320 million, representing a year-over-year increase of approximately 7.8%. Profitability and cash flow quality continued to improve. This result reflects the resilience and stability of our core platform business. as well as our ongoing process in prioritizing resource allocation and execution discipline.

On the

strategic front, we continued to incubate new AI plus IoT application scenarios and accumulated the systematic integration of AI capabilities across our platform and the device ecosystem. AI is moving from a mere overlay of discrete features into fully deployable operational applications.

As part of our AI strategy, we introduced the AI-powered Smart Life Assistant

Through a more intuitive and tangible entry point integrating AI agents with hardware devices, we aim to help users enjoy a more comfortable and absolute home experience, accelerating the real-world adoption of AI capabilities across a broader range of everyday scenarios.

Our awareness of AI and smart hardware integration is becoming more and more clear. AI is entering the stage of overlapping capabilities, integrating with the device ecosystem and industry scenarios. Its value is more reflected in the improvement of application maturity, income structure, and efficiency structure. We believe that as AI moves from the tool of dialogue to participate in the real world, the industry's demand for system stability, practicality, and eye-catching needs is clearly increasing.

AI is progressing beyond the stage of capability overlay. and entering a phase of deep integration with device form factors and the industry specific scenarios. Its value is increasingly reflected in application maturity, improved revenue structures, and the enhanced operational efficiency. We believe that as AI evolved from a conversational tour into an intelligent agents capable of engaging in real-world operations, industry expectations for underlying system stability, real-time responsiveness and scalability are increasing significantly. The impact of AI extends beyond enhancing product experiences. It is also reshaping application architecture and transforming modes of ecosystem collaboration. As AI applications continue to mature, their value will increasingly be reflected in their replicability and capacity to scale effectively across real-world deployments.

In the future of Taiwan, we will continue to advance around three things. First, continue to strengthen the ability of the AI native platform to support millions of developers to design and implement thousands of AI equipment and applications. Second, accelerate the landing and scale-up of AI services in key scenarios. Third, expand the development ecosystem and support developers to build a prosperous and successful developer community.

Looking ahead, we will continue to advance our strategy across three key priorities. First, we will further strengthen our AI native platform capabilities, enable them to more effectively support millions of developers in creating a diverse range of next-generation AI devices and applications. Second, we will accelerate the deployment and the scalable expansion of AI application service across key scenarios. Third, we will deepen our investments in developer ecosystem growth and enhance our support for developers, fostering a vibrant community grounded in innovation and commercial success. Now, let me turn the call over to our co-founder and CFO, Alex Yang, who will share more details about our financial performance and the business progress.

Hello, everyone. This is Alex. I will now provide more details on our fourth quarter and four years' results. Please note that all the figures are in U.S. dollars and all the comparisons are year-over-year, unless stated otherwise. In the fourth quarter of 2025, we generated total revenue of approximately 48.5 million U.S. dollars, representing a year-over-year increase of 3%. Against the backdrop of continuous conscious industry demand and more conservative customer procurement cycles, we achieved our 10th consecutive quarter of year-over-year growth. In the fourth quarters, our blended growth margin was 47.6%, while non-GAAP operating margin improved to 11.1% compared with 10.3% in the same period last year. Non-GAAP net margin reached 24.4%. Net operating cash flow totaled 23.5 million US dollars, making the 11th consecutive quarters of positive operating cash flow. Gross margin remains stable, underscoring the company's pricing power driven by the product value and technology capabilities, as well as the strong competitive positioning of our platform-based business model in a dynamic market environment. From a four-year perspective, Our stable growth in 2025 became even more pronounced. Our four-year revenue reached over $322 million, representing a year-over-year increase of 7.8%. Blended gross margin of the full year improved to 48.2%, up 0.8 percentage points from 2024. Non-GAAP operating margin reached to 10.5%, an increase of 12.9 percentage points year-over-year, while non-GAAP net margin rose to 24.9%. Four-year non-GAAP net income reached to a record high of $80.1 million, of approximately $4.7 million U.S. dollars compared with 2024. Among our segments, so the past business delivered stable performance, generating revenue of over 230 million U.S. dollars, representing a year-over-year increase of 6.5%, against the backdrop of extended customer margin cycles We maintain stable growth in our core business by optimizing our customer mix and enhancing our product capabilities by empowering my customers to provide more competitive applications. At the end of 2025, the number of PaaS premium customers reached 291, continuing to contribute structurally stable revenue to the PaaS business, such as diversified structures without reliance on any single customer group has further strengthened our resilience in a vital operating environment. The Seth and others business generate a full year revenue of 44.8 million US dollars representing a year-over-year increase of 13.4%. Of this total, Recurring services revenues grows by 37% year-over-year, emerging as a key growth driver of the SAS. So we're looking forward to enlarge this segment faster by this recurring model. On a four-year basis, revenue growth from the SAS and other business outpaces the company's overall revenue growth. This strong performance highlights the continued expansion of cloud software revenues, especially those AI-enabled softwares, and reflects the gradual realization of the lifecycle value from the platform software capabilities as the installation base of the device expands. Our smart solution business generates four-year revenue of 45.7 million US dollars, making an 8.9% year-over-year increase. In this segment, we observed that AI capabilities are stimulating demand in certain new product categories while also enhancing the overall pricing powers of our product offerings. At the end of the 2025, our total cash and cash equipment amounted to over 1 billion US dollars. 17 million US dollars, together with the time deposit and the treasury securities record as a short-term and long-term investment. This net cash providing ample flexibility to support AI capability development, ecosystem expansion, and potential capital allocations initiatives. So four-year profitability was primarily driven by three factors. First, the continuous datability of our core platform business. Second, the initial revenue contribution from AI-related products and applications. Third, disciplined expense management and the realization of operating leverage. So on the AI ecosystem side for the developers, so within our developer ecosystem, we continue to advance the open source capabilities of Tuya Open and further development our AI agent platform. So by end of the 2025, the number of registered AI plus IoT developers exceeded to 1.8 million, representing a 37% year-over-year increase. The cumulative number of AI agents on the two-year platform reached about 16,000. spanning a wide range of smart product categories. As the application deployments enable, AI capabilities are being integrated across a variety of end-user products, gradually establishing standardized pathways for AI applications. Recently, we hosted an overseas development event centered on hands-on AI hardware applications. So including the first hackathon held in Silicon Valley, this event attracted over 300 developers, and which about 90% of them are from overseas. All participating projects were built and demonstrated on the real hardwares using Tuya T5 AI development boards, completing the journeys from concept to a functional prototype within only 48 hours. This enabled AI capabilities to be to be able to operate directly on physical devices. So those products span multiple scenarios, including AI companion, wearables, and desktop AI terminals, as well as applications in education and security. So some of those products have already entered subsequent incubation stage and attracted commercial interest. Beyond customer-facing products and ecosystem development, we have rapidly applied AI internally to enhance the development efficiency. So for instance, in short-term front-end development process, nearly 40% of the codes is generated with AI assistance. This has significantly shortened our R&D integration cycles and reduced the cost of repetitive development. So those efficiency gains enable us to maintain the pace of the products and solution integrations while controlling the headcounts growth. So building on this foundation, we plan to launch the AI development tools for the developers within these years. And through the AI coding services, web coding, we aim to further lower the barriers for AI hardware development and boost to AI developer efficiencies by enabling more low-code and no-code developers to participate in the AI hardware and industry and application ecosystem. So this initiative will help expand the developer base while accelerating the commercialization of AI applications. Finally, so with the maturation of the physical AI technology, so the opportunity for deep integration between AI and physical world has arrived. Our launch of Hey Tuya is to build on this site Without waiting for the large scale of deployment of like the able embodied robots, H2OA leveraged hundreds of millions of the existing powered by Tuya smart devices worldwide to enable AI to fully perceive and proactively interact with the real world today. So it draws on understanding and reasoning on large models while seamlessly interacting within with the smart devices that helps manage daily tasks. So this represents a new form of integrated situational AI that's making the benefits of AI tangible and immediately accessible rather than these things closer promised. So in summary, the 2025 showcases the company's continuous progress across its business structures, profitability models, and competitive competitivity frameworks on the technical side. So throughout 2025, 2EI's physical AI technology was validated for feasibility in smart devices, giving rise to a wide range of AI hardware forms, leveraging our accumulated strength across our developer community's hardware ecosystem and global delivery capabilities. So we are well positioned to to a continuous advance in AI deployment and transforming it into a sustainable, long-term competitive advantage. Looking ahead, we'll continue to focus our efforts in these directions. First, we will further categorize the platform-level AI capabilities to enable more efficient AI applications of AI across diverse device and industry scenarios. By lowering the technology barriers, we aim to help new players bridge the technology gap and accelerate this adaption of AI and innovations in the hardware industry. Meanwhile, throughout Hey Tuya, our next generation AI assistant, we will establish a new standard for interactive experience in smart devices through AI, accelerating a mass market penetration of smart products. Finally, we'll maintain cost discipline, consistently improving our profitability quantity and long-term competitiveness. Thank you, operator. Right now we can begin the Q&A section.

Thank you. We will now begin the question and answer session. To ask a question now, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for our first question. We will now take our first question from the line of Yang Liu from Morgan Stanley. Please ask your question. Yang, your line is open.

Thanks for the opportunity to ask question and congratulations on the solid result. I have two questions. The first one is regarding the recent tax rate change at the U.S. side. whether that will have any impact on our business outlook going forward. And my second question is regarding the recent upstream memory and other chipset supply constraint and whether it will impact Tuya's business. Let me translate my question to Chinese. Thank you, Mr. Liu.

So the first question is, yes, let's consider the positive indicators about the tariff reductions and recently. But the demand didn't react immediately yet, but we really see that the customers' confidence levels about a better environment to do the business, especially global manufacturing, trading, So people have more positive and more confidence that the macroeconomy will become more stable and better this year. But the demand and order didn't show up immediately. Two reasons. The first one is that still people consider the global situation will be more dynamic. And those type of reasons to reductions maybe will not be a sustainable level. So in the near future, maybe in March, that maybe new executive order will come up. So we'll just reset the term of the tariffs level, maybe into the 15% or a little bit higher. So that's the first one, dynamic. So people rather not overreact. And the second one is that this kind of news is happening during the Chinese New Year. Till now, most of the manufacturers, they're starting back to work today. I mean, today, literally today. So many of the manufacturers, they're starting to offer new price and try to make new orders. So we'll see. But anyhow, it will be a very positive direction we're looking forward to. And while overall cost eventually will bring down somehow, And so the customers will be able to have more confidence to enlarge the demand. That's the first one. And the second one is, yes, since the last Q4, we're really starting to notice that the shortage of the production capacity of the semiconductor side. And the first one is that the shortage will not impact us because considered as significant buyers in this sector, so many of our, I mean, All our suppliers will ensure that we will get a fulfillment of our orders, no matter what. That's the first one. In the same time, since last Q4, we've been trying to prepare quite good inventory levels to go in again those kind of dynamics in the supplying cycles. So that's the first one. So shortage is not a problem for us. And about the cost rates, we continue to keep closing on that. Right now, we didn't meet that immediate increase. Like I mentioned, that's because of the buying forces. But if this kind of intensity is starting to increase without a limit, we're not sure. So we'll keep closing on that. But anyhow, because of the special value position that the company has been doing so far, so that kind of increase on the supply side will not impact on our demand or significantly on our gross margin side. But we'll keep closing on that. Seems that it will last maybe for another one or two quarters. Thank you.

Thank you, Alex.

Thank you. We will now take our next question from the line of Timothy Chow from Goldman Sachs. Please ask your question. Your line is open.

Great. Good morning, management. Thank you for taking my question, and congrats on the very solid results. I also have two questions here. One is, I think, a more broader question about the company's value proposition in the agentic AI world. Given we have seen continual progress in the agentic AI activities, how should we think about value proposition to the customers in your PaaS and SaaS business? And will the AI technology advance actually enhance the self-development capabilities of your customers? And how should we think about the long-term relationship between 2EI and your customers? And essentially, I think you mentioned that in the SaaS business, the recurring revenue actually increased quite dramatically last year. Just wondering if you can further elaborate on that. And second question is that also in your remarks, you talk about Going forward, we want to accelerate the AI deployment of the key application scenarios. Just wondering if you can also further elaborate on this as well. For example, what scenarios that you see are more promising and just wondering if you can share more details. 我很快翻译一下,感谢关于层接受我的提问。 我这边有两条问题。 第一个可能是一个稍微偏宏观的问题。 We see that the ability of Agentech AI has made significant progress and breakthroughs in the global market. How should we consider the value of opposition between the customers of PaaS and SaaS? Will the technical ability of AI lead to the improvement of our customers' self-reliance, or the increase of self-reliance, or the decrease in cost? What are the additional changes in our long-term relationship with customers? One more detail is that the recurring revenue in our SaaS business has increased significantly. Could you elaborate more on what the driving factors behind this are? The second is that you just mentioned that we will further accelerate in this year's special application scenarios. Yeah, thank you, Timothy. So, yeah, it's a long question.

So the first one is about the market side. We are happy to see that more customers are starting to thinking on how they can create their own differentiations, how they can build their own capabilities in their own R&D side, because we're happy to see that. Otherwise, we have to offer that. So I think that AI makes no difference for past 10 years' experience is that while we're starting to enable the manufacturing players to embrace the And the smart technology, starting with IoT, it's the same stuff. If they cannot do that, but they want it, we have to offer it. So for all the time of the company's histories, we continue to offer two things. The first thing is that if they don't have the capability right now, we offer them the off-the-shelf solution turnkey. And if they really have some capability, we continue to educate them to do that. And then we offer them infrastructures to allow them to do that, some extra values they want to create more freely. So I think that's what we call ecosystem where to create. So it's not like they just keep selling stuff. They don't have to do that, no. So we're happy to see that we really have a significant amount of the customers who really have their own kind of in-house capability to create their own infatuation and make their own innovations. We're happy to see that. So the theme is that we continue to enable our customers to build their own device level innovations and application level. So I think AI makes no difference. We always continue to do the same thing, including 2025. The showcase is that for some new players, they don't know nothing about that, but they only have some ideas how they want to bring AI into their business we create some turnkey solution for them. They can grab and go. In the same time, we'll continue to have the very deep and active conversations with our engineering team. Okay, what they can take from now and what they can build in the future and how Tuya can enable them to do that more efficiently and faster without the overwhelming burden. So we continue to do that the same way. But what we think that makes us very excited about is that several years ago, you still need to convince or tell people how the smart devices are promising business. You still need to tell them that this will be the future. But right now, you don't have to tell people that AI is future. Every people are buying that. So the key part is that they really have the concept in their mind and how you'll be able to help them to make that faster and more efficiently and more competitively on the user experience side. I think that's the first one. And so the second one is on the slash recurring stuff. I think that the key driver for that is that Remember our past, we continue to deploy a significant amount of scale of the devices overall with or without any type of recurring services out there, which means that we will have a large base. And in the same time, come along with AI, so some what we call existing categories, We only come with IoT before, and we already see that combined with AI capability, we will be able to offer some extra experience and values on the same type of devices, which are already deployed on the households. So in 2025, we'll continue to offer some new services on the same type of hardware. And then we see that it should work out. And even on the existing recurring services, like some storage services, by offering extra AI capability, we make the services more valuable or more feasible for the end user side. So we either continue to enlarge our recurring consumer base, in the same time we're starting to offer more recurring services out there. And we believe that will be a downturn, especially for some AI initial products, which will mean that the new type of applications, since they won, those kind of new recurring models will start to take place from the beginning. So I think that's for the SaaS and recurring. We continue to grow that. I think that will be one of the fastest growing segments in our middle term. That's for the recurring. And the third one is for the I think that we already shared some of our overviews in late last year. So for those segments that AI will be able to provide more significant values, we believe right now will be two. The first one is that all the multi-modeling applications, including the video and audio interactions and the interactions and analysis. So including like the companions, toy, securities. So those type of products will really have a significant base and will have new players come in. But come along with AI, so either you make those device interactions more smoothly and also combine with the perceptions of the video and the audios, the devices will be able to provide more things. like the security side that you will be able to protect the people's home more precisely without bringing any false alarms. And like for the companion side or toy side, you really could be able to provide some educational level of the interactions by providing the right language, providing the right understanding, the right emotion, providing the right feedback, and providing the right type of knowledge to the target customers. So that will be the first one, multi-modeling applications, especially on audio and video interactions. And the second one is data analytics and decision making. So a typical use case is for energy management. So come along with a full cycle device deployment for the energy lifecycle, including the generation of energy, storage, consumptions, and metering. you'll be able to understand how the electricity be moving along, I mean, transit from the grid into each of the devices, how people want to manage the flow. And through all the data, you'll be able to know, and then the AI will be able to, you know, jump. One step ahead is not only providing you the data analytics and suggestions, but the AI will be able to make the decisions as to how you'll be able to control your dishwasher a different way, how you'll be able to manage your battery bank a different way, how you'll be able to manage the AC and heating system a different way, combined with variable pricing in different timing, combined with the generation of your solar panel, combined with what kind of battery you have in your home right now, and either to reduce the total cost directly. So that will be a typical showcase is that AI is not providing the tools. AI will be able to provide the outcome. So people will see directly what will be the TCO, what will be the total values they can get for the life cycle of the usage of this type of devices. And they pay for the services as well. So the data analytics and decision making will be another part. And beyond energy, we're looking for more scenarios in that segment as well. So that's it, Timothy.

Thank you. Thank you for the detailed answers.

Thank you. We will now take our next question from Min Ran Lee from CICC. Please ask your question, Min Ran. Your line is open.

Thank you, management, for taking my question and congrats on the results. My first question concerns the demand side. Given the recent geopolitical risk, How does management assess the potential impact on 2S international operation? And looking at the current environment in this year, how do you perceive the recovery in demand across the overseas market? And my second question, I would like to ask about the shareholder return. Do you hold a very healthy cash position and your profitability continues to improve? Could management share if there are any more specific plans or considerations for shareholder returns as we move through 2026? Thank you very much. 我很快翻译一下我的这个问题。 感谢关业长的提问, 也恭喜公司长进的业绩。 The first question is about demand. We have seen a change in global demand for land. How will the company's overseas business be affected? At the time of 2020, how does the management system observe the rapid pace of demand in the overseas market? The second question is about shareholder returns. The company's current cash reserve is quite abundant, and its operating capacity is also improving. So, thank you for the questions.

The first one is that a very core part of that from MS, like the tariff questions. So, the first one is that, yes, the global situation will become more and more dynamic, right? We're really starting to get used to that coming on with our customers as well. So, right now, we see that the We get to be able to see more positive indicators in that direction, either reductions of the tariff on the global side, anyhow, right, to any type of pathways, but we really see that people require, the commerce require a better environment to do the business, and people cannot cut each other off. So we really see that, so the end demand continue to increase. Because the technology really provides value for the end users, and they want it. And they use that more and more often. So that's what we see. And this is inevitable. I mean, you can have a return on that. So coming on with the end demand increase, and so all the commerce level, that people just figure out how they'll be able to fulfill their demands, and navigate through all the dynamic factors, including the tariff, including the reallocation of the supply chain globally, etc. So for us, we just follow the flow, is that we come along with the customers to focus on, first one is to provide our offering, technical offering to help them to build whatever application that makes sense for their end users and to be able to scale it. So that's the first one, to make them be able to provide the right thing. In the same time that the We continue closely to manage the cost to come along with the different allocation of our services on the global side. Right now, we can deploy the services on whatever countries my customers are. We already did. And right now, my customers are really starting to build different type of production. They already have different type of production centers across 11 countries all over the world. So we just follow the flow and help them to achieve that more gently. So I think that's overall what we see for the global situation in science. And so this year we really see that people looking forward to have the rebound versus 2025 because 2025 will be kind of the over-conscious situations and people don't know what will happen and things happening like every week. And so people don't... people are not willing to do even a long-term cross-reporter decisions. So they keep that decision very frequently and precisely, more than macro decisions. But this year, people will see that the sustainability on the situation is starting to become better. So they try to rebalance from the over-conscious competence level. So that's for the market side. And second side for the return of the shareholders as what we've been doing for the past two years. We continue as the shareholders return as one of the prioritized targets for the company as well. So we continue to provide a very sustainable and strong market. foundations on the operations side, including the net cash flow, including the profitability, including the growth of the revenue, including the health of the revenue structures and the margin. So the return of the shareholders will become our long-term strategy as well. So we just announced we'll have a new round of the dividend for the shareholders as well. So coming out as a practice for us is one or two times the dividend a year. So that will be what we're doing for the shareholders' returns. And also, in the same time, the dividend will be more reflected on our level of net operating cash flow and profitability. So that's what we're looking forward to.

Very clear. Thank you. Thank you. Our next question comes from Matt Ma from Jefferies. Please ask your question, Matt. Your line is open.

Hello, good morning. Thank you for taking my question and congrats on the solid results. My question is regarding on the smart solution segment. We noticed that the company showcased multiple AIoT products at CES last year. And which product categories does the company have higher confidence in sales growth in this year? And when we are Thinking about product category expansion, what's our thought process? And could we expect relatively strong growth in the smart solution segment in 2026? 所以我的问题主要是关于这个smart solution这一块的这个业务。 我们去年在这个CES展上亮相了很多这个AIoT的这个产品。 I'd like to ask Guan Yicheng, in 2026, which products will we be more confident in? And when we think about expanding the products of Smart Solutions, what kind of considerations will we have? And can we expect a faster growth in this business in 2026? Thank you.

Yeah, so thanks for the question, Matt. So the first one is that I think combined with the previous questions and answers, so for the more promising, quote as promising maybe, I mean, we will have more confidence levels, categories that can achieve a higher growth, enabled by AI. So those categories will be those devices that can use more AI capabilities. naturally so including those kind of video and audio interactions and safety stuff and toy what we call entertainment stuff and appliances so those energy and those will be those segments will find that the AI can use more they can use more AI capabilities than ever and some of the capability will directly deliver as a value that becomes and visible for the end users. So that's one. And so we have a more confidence level in that segment. In the same time, we continue to reach other segments and what will be the new innovative ideas that combine the AI deeply integrated with the existing device capabilities. We continue to search for that as well. But what we're looking for, we think that we're going to see in 2026 is that gradually you'll find more and more new type of device that didn't exist before will start to occur because of the AI. So that will be totally new stuff. Same as a toy, nobody thinks that a companion type of toy will become realistic. before 2025. So this type of new concept of applications, we're looking forward to have more because we have more talents coming into the industry. We have more players coming into the industry. The new ideas come across different world will create a very, very interesting chemistry out there. So new categories, which I don't name that, even we don't know How should we call that? But we will find more issues. That's the first question. And the second one is smart solutions. So like I described, the better proposition of smart solution is that it's those type of hardware type that help my customers to differentiate themselves. And those differentiators, the customers prefer to do that because that there will be more efficiency or that will be a must be so a significant I mean a typical use cases for that is like the bird feeders I mentioned a couple of times out there is that that's just a concept of ideas that might works so the customers come from the I can say the the pet products world they know that the sound as some of those their customers are looking to interact with wildlife like that. So that's just consumer or user insight and concept ideas. So if they want to do that, they have to cover all the technology gap. It will be kind of overwhelming for them, and not only because of the lack of capabilities of the engineering team, but also that investment can be huge for them if they do that individually. And also in the same time, that type of innovations need a deep integration on the software and hardware development directly. So instead of waiting for Tuya to offering the past, maybe that doesn't show up in our past roadmap ever. So this is how they can work closer with Tuya if we can make that happen. So through that, we think that we buy in that concept and then we offer it as a solution because we can directly make that happen and then they can try out the concept. So that would be the typical situation for the smart solution is that we're looking for those differentiator or differentiated type of offering to the market that can help my customer outspend themselves in their own segment, in different regions, in different categories, in different verticals. channels etc so we only focus on this so that I can see that for the smart solutions even on the hardware business we maintain as a 20% plus margin reason being is that we only choose those higher valued products with the differentiations and with the special technical offering and touch it as a very precise targeted consumers that they're willing to pay higher so so that will be So consider a smart solution will be kind of the higher value segment type of the devices among all my past orders. So this will continue to do. So usually, our solutions will become the flagship model for my past customers, specific past customers in the new year. So we continue to work along with our product roadmap year over year. and the flagship types they're asking us to offer as a solution.

Thank you. That's very helpful. Thank you.

Thank you. There are no further questions at this time. I'll now hand back to the management team for closing remarks.

Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact 2S IR team. Goodbye and see you next quarter.

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