TUYA

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. Briefly informed that today's conference is being recorded. I'll now turn the call over to the first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya. Please go ahead.

Thank you.

Hi, Yang.

Hello, everyone. To our first quarter 2026 earnings conference call. Joining us today are our Founder and CEO, Mr. Jerry Wang, and our Co-founder and CFO, Mr. Alex Yang. Our results and webcast of the conference call are available at ir.tuya.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I'd like to 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 give his remarks in Chinese and English translation follows. Jerry, please.

Hello, everyone, and thank you for joining Tuya's earnings conference call for the first quarter of 2026. During the quarter, despite ongoing uncertainties in the external environment and disturbances from certain regional factors, the company delivered solid growth momentum and a strong execution capability. Benefiting from a continued recovery in downstream demand, our business scale has been expanding modestly since the fourth quarter. Total revenue increased by 8.3% year-over-year, with growth momentum improving quarter-on-quarter and posting positive growth for multiple consecutive quarters. Gross margin remained at a healthy level, reflecting the continued enhancement of our product value proposition and platform competitiveness. In terms of execution of our key strategies, we continue to advance our AI-driven development strategy. As we have mentioned earlier, AI is shifting from simple feature stacking towards deep integration with hardware devices and vertical industry scenarios.

It is gradually evolving from a mere conversational tool into an intelligent agent that interacts and operates in the physical world. This trend has been further validated by a richer portfolio of application offerings and customer scenarios in quarter 1 2026. At the same time, we are accelerating the transition of AI capabilities from the platform layer to application layer and the scenario-based products. With successful deployment across multiple real-world use cases, we keep upgrading our developer tools and platform capabilities, empowering growth global developers to access and apply cutting-edge AI technologies at lower cost and higher efficiency. The sustained growth in AI-related revenue also reflects steady progress across our commercialization efforts. During the quarter, we introduced a range of applications aligned with this direction, including the AI-powered smart life assistant, Hey Tuya, and AI Security Guardian.

The significance of these initiatives lies not only in single products, but in validating the capabilities of AI agents to move beyond handling digital tasks into physical world execution and device coordination. We are seeing AI gradually develop the ability to operate across both digital and physical worlds, marking a critical step forward in the real world deployment of physical AI. Looking ahead, we will further deepen our strategic focus on the following key areas. First, we will continue to advance AI-native application innovation. Centering on high engagement categories such as smart toys. We will accelerate the penetration and large scale adoption of AI capabilities in consumer scenarios, extending physical AI into a wider range of everyday use cases. Second, we will scale the global rollout of proven AI solutions, particularly in the energy and green technology sectors.

By bringing mature solutions to international markets, we aim to enhance our industry recognitions globally. Third, we will continue to strengthen our developer ecosystem. Through open platforms and enhanced tool capabilities, we will lower the barriers to AI application development and work closely with industry partners to drive deeper exploration and the commercialization of AI technologies. Now, let me turn the call over to our Co-founder and CFO, Alex Yang, for a closer look at our financial performance and business progress.

Hello, everyone. This is Alex. I will provide a brief overview of our first quarter results. Please note that unless otherwise stated, all figures are in US dollars and all comparisons are on year-over-year basis. In the first quarter of 2026, we generated total revenue of approximately $80.9 million, representing a year-over-year increase of around 8.3%. Despite ongoing uncertainties in external environment, the company maintained its steady growth trajectory. Our core platform business remained stable, while AI-related business continued to demonstrate a strong growth trend. Our operating margin continued to improve. GAAP operating margin reached 9.2%, representing a significant year-over-year increase, while non-GAAP operating margin was 10%. Net margin further improved to 19.5%, reflecting continued optimization in operating efficiency and cost structure.

Overall, the combination of improvements in revenue mix and disciplined expense management has driven sustained profitability gains. Before going to segment details, we would like to note that we have adjusted the names of certain business segments this quarter. The former SaaS and others segment has been renamed to AI application and others, reflecting our continued push forward AI-enabled software services and more applications accurately at capturing the transition from traditional cloud services to AI application services. The former Smart solution segment has been renamed to Smart Home and Robot Products, highlighting our increased focus on AI-powered home products, household robotics, and scenario-driven AI initial devices on the hardware side. We would like to emphasize that these changes are purely presentational and do not affect the revenue composition, recognition methods, or historical comparabilities of each segment.

Within our segments, the PaaS business generates revenue of $59 million this quarter, representing a year-over-year increase of approximately 9.8%. As customer demand gradually recovered, we continue to drive steady growth in our core business through ongoing optimization of our customer mix and those capabilities. At the end of this first quarter, the number of PaaS premium customers reached 306, reflecting the stability of our core customer base and the structural resilience of the platform business. The AI application & others segments generated revenue of $11.6 million in this quarter, representing a year-over-year increase of approximately 16.9%, continuing to outpace overall company growth.

This growth was primarily driven by increased revenue from the cloud software services and AI application services, including AI cloud storage, energy management and serving, value-added services like SMS and voice services, as well as app OEM and SDK offerings. This reflecting the continuous progress in commercialization of our AI applications. As more software products completed their AI-driven upgrades, this segment is gradually become a more growth-oriented and software service-centric component of our revenue mix. The Smart home & robot product segment generated revenue of $10.2 million, representing a year-over-year decrease of approximately 6.9%. The fluctuation in this segment primarily reflects our proactive effort to phase out relatively low-value hardware products and optimize the product mix, and reallocate resources towards higher value-added, especially AI-native hardware terminals.

As the segments undergoes structural adjustments, we expect its long-term profitabilities and scalabilities to gradually improve within a higher mix of a higher value production. From an operational perspective, several vertical this quarters has demonstrated structural opportunities driven by the integration of AI and smart hardware. In the security segment, our smart door lock business achieved 73% year-over-year growth, driven by upgrades in the multi-modeling Wi-Fi solutions, video intercoms, as well as AI voices and vision capabilities. PaaS revenue from Wi-Fi-enabled smart door locks increased 75% year-over-year growth. At the same time, the AI application revenues from the video-enabled locks increased substantially 500% year-over-year. This demonstrate that AI and multi-modeling capabilities are driving the traditional smart lock vertical to evolve from a standalone hardware model into a higher value business model of hardware plus software service plus AI capability combined.

In the energy sector, related PaaS products, including the EV chargers, metering products, and professional metering solutions, are emerging on new growth drivers. We are also continuous to advancing the higher value solutions such as AI-enabled display, gateway, and voice capabilities, providing a strong foundation for our customers' product upgrades and the future growth. In the AI energy, demand in the European market for home energy management, energy storage, and AI-driven energy-saving solutions continue to grow. During this quarters, we made solid progress in advancing AI energy-related initiatives with key milestones achieved in the commercialization of energy storage and ecosystem accessories. Our customers received a very positive feedback and secured multiple channel partnerships and orders at the exhibition such as Light+Building in Frankfurt and the Solar Solutions in the Netherlands. In the Singapore's HDB project, new capabilities, app panels, and deliverables are progressing on schedule.

AI energy is gradually evolving towards a comprehensive solutions model integrating hardware bundles, software, and AI orchestration, plus channel operations. From a regional and scenario perspective, Europe remains a key deployment market for energy and green technology solutions. With growing demand for AI energy, smart electrical systems, spatial intelligence applications, AI smartphone appliances, and AI safety and security products. In Asia Pacific region, the Singapore HDB projects continue to move through implementation and validation, while Southeast Asia and other emerging markets are beginning to generate opportunities in energy management, spatial intelligence, and SME scenarios as well. In China, AI-enabled smart door locks, AI toy, and AI home products, including AI companion, continue to attract strong customer interest, with some customers already advancing project upgrades and solution integrations.

On margins, our blended gross margin for this quarters was 46.9%, with a slightly year-over-year fluctuation, primarily due to the change in the product mix and certain upstream cost, you know, variations. By segment, gross margin for PaaS was 46.1%. Gross margin for AI application & others was 71.7%. Remain stable and reflecting the structural advantage of software and AI-driven business. The gross margin for Smart home & robot product was 23%, maintaining a level of above 20%. While advancing AI applications and high value, we continue to focus on the cost efficiency and product value. Our expenses, we maintain disciplined cost management during the quarter, with total operating expenses, OpEx, of approximately $30.4 million, while continually investing in core AI development and platform capability.

Improvements driven by AI and digitalization, and digitalizing public operations enable further operating leverage. In terms of profitability, we recorded profit from operations of about $7.5 million for this quarter. Non-GAAP profit from operations was approximately $8.1 million. Net profit reached $15.8 million. The improvement was primarily driven by positive contribution from gross profit growth, as well as lower share-based compensation expenses. Our net operating cash flow remained positive during this quarter. At the end of this quarter, the company's total cash equivalent, time deposits, and treasury securities amount to approximately $1 billion+. The strong cash positions provide solid support for our continuing investment in long-term AI capability development, our ability to navigate external uncertainties and opportunities, and our commitment to enhance shareholders' returns.

We will also prudently evaluate and pursue higher quality strategic investment opportunities. Overall, the company continued to deliver revenue growth and improved profitabilities amid a complex environment. While the accelerated development of AI application business is driven the ongoing evaluation of our revenue mix towards a higher value segment. Next, I will briefly walk you through our progress in the AI development ecosystem. Within our development ecosystem, during the first quarter, we continued to advance to the open source capabilities of TuyaOpen and further development on our AI agents. To better address the diverse needs of AI-native developers, we also launched our new offerings, including the ultra-lightweight agent kit for the hard developers and the Vibe Coding based on the powered by Tuya hardware applications. The Vibe Coding will be able to help lower the bar for many new developers as well.

Those tools enable developers to build a wide range of AI-native hardware products in a more flexible and agile manner. We remain committed to lower the bar for AI hardware and application developments while enhancing flexibility and openness, allowing developers, brands, solution providers to accelerate the process from ideation and prototyping to product commercialization. At the end of the first quarter of 2026, the number of registered AI developers on our platform exceeded 1.96 million, maintaining steady growth. At the same time, engagement within the Tuya Open community continued to increase. Based on our current acquisition data, the Tuya Open documentation platform has been accumulated over 340,000 views. With more than 16,000 community members. It has accumulated abundant open source projects, resources, and launched a standardized demo cases library covering mainstream applications scenarios and development needs.

TuyaOpen is gradually evolving from an open source framework into an open ecosystem infrastructure for AI hardware innovation. For our deployment perspective, AI capabilities are increasingly extending from the platform layer into a broader range of end device formats. Whether in AI-enabled door locks, energy management solutions, sensors, AI companion toys, or AI robots, they all reflect the same underlying trend. AI is evolving from isolated functions towards deep integration with the devices, scenarios, and user needs. This is fully aligned with our previously articulated vision of physical AI, enabling AI to engage in real-world environments and actively participate in sensory decision-making and execution in real life. In summary, our first quarter performance further validates the commercial viability of our AI strategy.

Our core PaaS business continue to provide a solid growth foundation, while the deep integration of AI application services with physical hardwares is emerging as a new driver for the value creation. At the same time, we have achieved meaningful progress in deploying AI solutions across high-value scenarios such as energy, entertainment, and security. Looking ahead, we will remain focused on 2 key priorities: physical AI scenarios and higher value-added AI products. While maintaining financial discipline, we will accelerate the transition of AI technology from a 2-level capability to products with tangible commercial value, creating sustainable long-term returns to our shareholders. Thank you, all operators. We can begin the Q&A right now.

Thank you. We will now begin the question and answer session. To ask questions on the phone, please press star one and one and wait for your name to be announced. To cancel your request, please press star one and one again. One moment for the first question. As a reminder, to ask question, please press star one and one on your telephone.

First question, we have Yang Liu from Morgan Stanley. Please go ahead.

Thank you for the opportunity to ask questions, and congratulations on the solid result. I would like to ask about the value chain because a lot of the sectors are suffering from the chipsets shortage globally. Could management update us in terms of Tuya's situation in value chain, especially the chipsets sourcing? Also update us the pricing strategy, if there's any shortage or constraint from the value chain, and how to pass through the inflationary cost to the downstream. Thank you.

Thank you, Liu. Yes, we already noticed those kind of fluctuations around one and a half quarters ago. That's why we give a heads up of that type of trends around end of last year. The things we're doing is, the first one is that, considering of large buyers of some of the major chips that in the industry we are. The fluctuations we maintain as limited as we could because of the buying power. In the same time that for those costs that inevitably will have to increase, we'll pass through those costs to the downstream side. That would be the basic idea and how we've been doing.

You can notice that there are several reactions where we've been doing. The first one is that in Q1, we're really do some strategic purchasing before any cost change. You can notice that in our balance sheet that our inventory increased slightly. That majorly is that is kind of the procurement. We do that before the cost increased. That reflected to my inventory level, and including my net cash as well. That's the first one. We try to use a larger inventories to buying more times to working through the fluctuations.

The second one is that you already noticed that, especially on the PaaS side, the change or those kind of difference of the gross margin of PaaS reflects that we're really starting to pass through the cost. We didn't add the margin on the cost change because we don't want to bring more burden for my downstream side. That reduced slightly on my gross margin on the PaaS as well. We'll continue to keep focused on that and to working along with my customers and through those fluctuations. No matter using our scalabilities to manage the cost difference at the least level as we could, in the same time that we're using our inventories to try to bring more balance coming through with the time. That would be the basic idea there.

We found that the shortage and the density of the momentum continued to increase in Q2, in the beginning of Q2.

Thank you.

Thank you for the question. Our next questions will come from the line of Goldman Sachs. Mr. Timothy Zhao, please go ahead.

Thank you, management, for taking my question, and congrats on the solid results. I think my question is on the revenue front. I noticed that this quarter you achieved a pretty solid sequential acceleration on the revenue growth. However, given the very dynamic geopolitical and the macro environment globally right now, I was wondering what is your latest thoughts on the demand outlook and revenue growth outlook for the rest of this year? What measures have you taken to stabilize or further boost the demand? My second question is I noticed, as you mentioned, you changed the reporting line or changed the reporting name of the two of the segments that you report.

Just, could you further elaborate on the rationale behind and the specificity, AI applications and robotic products? Just wondering if you can share more color on your plan regarding these two specific sub-segments. Thank you.

Okay. Yes, thank you for that. First of all, on the market environment, we already noticed that, as we share the coverage when we released our Q4 results, we found that, while the international trading environment becomes stable after the November of last year. The momentum is starting to recover, and the customer is trying to return to a growing plan on the business side. It's not that conservative. Starting from December, we already see that they're starting to recover. It's not overnight, so they're doing that gradually. Even though in March we'll know that there will be a new fluctuation coming home. Overall speaking, that the downstream side is recovering. We have to break down into different sectors.

What we see here is that, like the appliances, like the energy, like the innovative devices, including the securities or the locks, we found that the growth momentums are more positive and almost for sure. Because no matter is that we found a more solid demand or pinpoint on the user side, or is and those sectors, those companies are doing a better. In some other sectors, like the lightings, we don't see significant recovery. It's kind of the still doing in what we call is into evaluating stage on the lighting side. Some sectors that those chipset cost variations, not from our side, but from their own side, like the cameras or like some control panels with a screen.

The memory chip cost variations will bring a more significant cost difference for the device side. The factories and the brands, they can do less to change that directions. That price increase might be significant for them. Like the camera for business, the entry-level cameras, usually the FOB price or the retail price will be like $20, and FOB will be below $10. During those kind of memory chip and the amount chip increase, we've noticed that the FOB price might be able to hit above $15. Which mean that the retail price have to increased around to $30-$35.

That significant increase on the retail price side might influence the consumer's buying decision. We already notice some sectors might be more sensitive or be more impacted more on the cost increase. Some will be more resilient. That will be on the product sector side. On the region side, combined with that is that still for the energy that Europe and Southeast Asia is a strong demand for, including Australia, is a very strong demand for the energy management solution. Especially in this year, while people are trying to notice that the energy become more and more, how can I say? Energy become more and more crucial and on the cost sustainability side. They have to pre-invest.

They have more willing to pre-invest on any energy efficiency. For that part. For some other regions, like the Latin America, they are more price sensitive. Like I mentioned, that some sectors like the cameras for this market consider that they have a lower buying power based on the macroeconomy in that sector, in that region. For them, that's. Some sectors will meet some challenge out there. For us is that still that we're trying to use our very comprehensive hardware category mixed and combined with a multi-region mix to going against different type of fluctuations. We're always looking for opportunity in some regions that to balance the seesaw on the other side. That's overall for the macro environment.

The second one is for the AI transition. Mainly is the AI application or the home robot products. Both sides that we're looking for to give the market the signal is that we're doing so hard to reallocate our resources since 2023 that to transit our previous, we'll call it, the first version of smart devices offering into the AI initial offering. Starting from the end of 2023, we're really upgrade our entire platform architectures into large language model agnostic, which mean that since end of 2023 and all those decision-making on the platform side for the device and the software applications can be based on the different large language model or the mainstream one.

In 2024, May of 2024, we already launch our hardware agent platform that enable our customer to design an agent on top of the devices. Make the devices be more smart and doing some things autonomously. Even no customers understand what it is, what is the agent. In last year, we launched our new AI platform as a new AI foundation that including the multi-modeling offerings, including the open source projects to open some new doors for the new innovative ideas for those customers, give them a bridge, giving a path that how they can combine technology into innovative ideas and make it come true.

In April, in our new developer summit, we launched our new offerings, including the agent kit that allow the hardware designers to do things more freely and including our Vibe Coding, and tools that right now they can design any software, including the apps, including the firmware on the hardware side, including the cloud services. They can do that all through Vibe Coding. All the things we're doing is that we to show that we are kind of initial in AI user and AI enabler. For that things, we're trying to upgrade our offering in those two segments. Take the AI application, for example. We're really starting to provide that for all the AI cloud storage on the camera side that right now come with AI capability.

Customer will be able to customize the event. It's not just a dummy detect any movement on the picture and give you the alarm. You can find that you get so many false alarm, then you have to turn down the notification, right? Because the camera cannot tell whether it's something you should pay attention to or not. Any, like, the delivery boys come by, that anyone come from your door that you get alarm. Starting from there that you can build an event that, so if it's a package, so don't give me notification. If someone stay at my front door, like, over 10 minutes a day, I notice. If someone showed up every day and seems like very suspicious, give me a notice.

People start to be able to create their own event and then have the camera to watch out for them. That things will be provide significant more values and killing more annoying pain point for the end user side. That kind of seamless upgrade on those kind of offerings is it's a natural upgrade for our previous SaaS offering. We think that right now, we're starting to provide more and more AI capabilities seamlessly to the previous SaaS. We show that the normal users starting to subscribe that services because of the AI offering, and then we're doing the upgrade on the AI applications. That's no matter if it's a scale, it's a agent, or it's a purely services on the recurring model.

For the home products and robotics, some scenarios include like the companion. That's when we're offering the 2 AI toy, 1 AI toy. For some customers that, some customers, they have their own brands, they have their own very good toy design capabilities and the channel distributions, but they don't have the capability to design things from scratch. Especially if they don't know anything about coding, they don't know anything about the circuit boards, about the microphone array design. For some of that part, we're starting to offer in the entire solution. Through that, we'll put more focus not on some, what we call is the 1st generation of smart devices. We're trying to focus more on the AI, what we call AI-native devices. Like the toy.

They need the multi-modal capability. They need the very huge noise canceling and the microphone array design engine. They need the string projection technologies to reflect different type of reactions from the toy side. For that part, that's how we allocated the resources since last year. Right now for this segment, the directions is that we guide the entire department to focus on all those kind of AI-enabled and AI-native devices. Usually, those devices will come naturally with AI, not only the AI feature, but combined with larger opportunity for the AI application business. That's how we driving force to that. Not a kind of connected devices segment anymore. It's become a more AI-native offering for those customers by helping through that. Yeah.

That would be the typical use cases.

Thank you very much.

Thank you for the question.

For the very detailed explanation.

Thank you. Now next questions will come from the line of Kai Xiao of CICC. Please go ahead.

Thank you. This is Kai, and I have two questions. First one is on computation. Following the emergence of agents, on device agent deployment has become an industry trend. Could you share how has the competitive landscape evolved in Q1, and how do you view Tuya's advantage in this field? And my second question is on R&D. Could you share how is the company applying AI tools like agent coding tools in internal R&D, and what's the potential impact on margin and profitability? Thank you.

The first one, I already covered some of the parts in the market environment side. As we see here is that 2 things. The first one is since the customer is trying to kind of escape from over conservative, I mean, momentum in U.S. years, they're trying to get back into the growth path. What we're doing is that we just identify the right roadmap along with them and to fulfill that and help them to providing a better products, better offerings on their shelf, on their own channels, and to catch the customers, catch their own end users, what I mean. In the same time, we really see that end user's thickness on AI are growing very healthily.

Which mean that more and more users are trying at whatever AI features and AI offerings. I believe that it's not that significant right now, but in the near futures, the consumers, when they're sourcing the smart devices, AI features or what type of AI features will be kind of the key differentiations or key factors for them to make the decision. We are very happy to see that since second half of last year's, that our penetration among my ecosystem to integrate AI capabilities we offer to their new products design and become significant and proved. That will help us capture the trend. That's for the, for this part.

What we see that will always be kind of the early adapter and to notice the trend for the industry maybe two or three quarters ahead, is that because I can see that what type of technology my customer is trying to pre-study, starting to try, and when they starting to implement that into the new product roadmap and produce that. What we see is that in that you consider as a early education for the entire industry or in most of the sectors we cover, that to give them type of the right educational coach, that AI will be considered as the next generation of key differentiations for any new things they built and to the market. They need to try that or need to try to understand and to learn that.

Starting from the second half of last year, that the customers, majority of the new products or the new projects that they kicked off, they try that. The new products they start to offer maybe at the end of the last year or at the second half of this year. Bring that into market, going through a long procedure into the development, manufacturing, logistics, and to the end of design. That what we see here. It will be a very positive trend. On the second part is, for the AI usage, I'd like to share some things. First one is that, at the end of last year, the front end, which means that those ones design the UI user interface and the UX user experience, using a most of our R&D set overall.

At the end of last year, around 40% of the codes we design for UI side are doing through AI. That's the first one. We're improving that as well, considering that in this year, in this Q1, that the AI coding capability improved a lot. We found that we can use more AI to do more terminals, including the agent kit I mentioned for the hardware designers. The agent kit, a significant part of that is doing by AI. While we open that kit, we also combine with the Vibe Coding tool for that kit as well.

Which mean that not us design the agent kit for AI, the customer will be do that through the Vibe Coding more freely as well, and very quickly to turn that into a hardware prototype. In the same time, the AI usage is not only used for the R&D. All our departments, including the Financial, including the Human Resources, including the Legal Department, we're using heavily through AI. No matter it's improving our efficiencies on some office processing, office work processing, but also including the data analytics, the BI and decision makings, et cetera. We consider that AI to improve the efficiency in two parts. The first one is that to release some of my labors to focus more on higher value works. That's the first one.

The second one is that even on the coding side, on the development side, that is to enlarge our capacity that to meet the future demand growth. We already noticed that while more and more AI-native developer coming in, that trend is very good one, is that in this year, we noticed more and more new developers that not come from the hardware industry. Which mean that people trying to identify that the AI capability might be a new opportunity for new team to engage in the new smart devices business sectors that only come in a new idea and something that didn't happen in the hardware world before.

A special one is like the toy companion ones that many of my very fast-growing customers in the toy sectors, they are not toy players out there. We'll see including some of the youth market, like they do the batch, is a animation batch, is the folks on the cartoon. Those batch players, they don't have that business before. That type of industry breakthrough or crossover players, and they require more on the AI capability usage themselves, and also they are more come with the AI initial ideas or native ideas. Not only to reduce the cost, but also use the same level of cost to improve the capacities to capture those demands. That's where we'll have more priority to check out too.

Like I mentioned that, the net cash flow considered as a strategic strategy for the company, not only for the future competition, but also for the future opportunity. I think that's even more important is that while the industry are growing faster and, some breakthrough happen, especially like the crash over happened, that we're not hesitate to increase the investment to capture those demands. I think that will be the overall momentum and so how we use the AI and we empower customer with AI. What we see that we need to be a very powerful AI user, and until then, we'll be able to empower customers.

Thank you.

That's all. Thank you.

Thank you for the questions. Our last questions will now come from the line of Matt Ma of Jefferies. Please go ahead.

Hey, good morning, management. Thank you for taking my question. I have 2 questions. The number 1 is on the Smart home & robot product segment. I would like to know how do we think about the growth trajectory of this segment in 2026? Should we expect a growth recovery in the coming quarters? My second question is on the AI application segment. We are seeing that the growth margin of this segment has declined by 2.7 percentage point year-over-year in the 1st quarter. Are there any specific reasons behind that? That's all. Thank you.

The 1st one is for the Smart home & robot product that we're looking for to have the recovery in the coming quarter or in the coming 2 quarters. Because it's a structural change, we have to make the hard decisions. You can see that even to maintain the revenue and the gross profit growth, in the same time, we cut off some of the production. Even we got the orders, we decided we're not to do that anymore because we don't like the model out there for the long term. There is structural hard decisions. Even we'll miss some not that good numbers, we're looking to speed up to catch it up.

We're having a new offerings starting to taking places in Q2, and we're looking for to capture on orders and to deliver that to make it up. Either it's end of the Q2 or it's Q3, we're looking for to get that recovery. That's the first one for the Home and Robot Production. For the AI Applications, yes, we found a seasonal difference. It's very interesting that we found that the key part is that the AI Applications is relying on the usage of the end users based around the devices that are running. The typical things that we found that maybe is that in the Q1, the U.S. usage is always kind of the lower seasons for the entire year.

That's why that, why the usage is kind of low, so the service-based revenue is become lower for us. Maybe one of the reason is that, the Q1, many of the users, kind of the new users and will have the new devices for the Christmas, for the holiday season promotions. While they start to try the products, usually the combined with some of the vacations, the usage start to dropped. We're looking for to see that the natural recovery and on the usage side will start to taking places on Q2. That will be the stuff. It's kind of very interesting one.

Got it. Thank you.

Thank you for the question. I'll now hand the call back to management team for closing remarks. There are no more questions from the line. Allow me to sign the call back. Thank you.

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

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

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. [Operator Instructions] 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 are 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 webcast of the conference call are available at ir.tuya.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?

[Interpreted] Hello, everyone. Thank you for joining Tuya's earnings call for the fourth quarter 2025. In 2025, against the complex and evolving external environment, we maintain stability across our platform business, delivered steady full year revenue growth and achieved a notable improvement in GAAP profitability. At the same time, we made solid progress in building a more systematic AI capability framework. For full year 2025, we generated total revenue of USD 320 million representing a year-over-year increase of approximately 7.8%. Profitability and cash flow quality continues to improve. This result reflects the resilience and stability of our core platform business as well as our ongoing progress in prioritizing resource allocation and execution discipline. On the strategic fronts, we continue to incubate new AI plus IoT application scenarios and accelerated the systematic integration of AI capabilities across our platform and the device ecosystem. AI is moving from a mere overlay of these great features into fully deployable operational applications. As part of our AI strategy, we introduced the AI-powered smart life assistant, Hey Tuya CES. Through a more curated and tangible entry point integrating AI agents with hardware devices, we aim to help users entry a more comfortable and effortless home experience, accelerating the real-world adoption of AI capabilities across a broader range of everyday scenarios. Our understanding of the integration pathway between AI and smart products is becoming increasingly clear. AI is progressing beyond the stage of capability overlay and enduring a face of deep integration with device form factors and industrial specific scenarios. Its value is increasingly reflected in application maturities, improved revenue structures and enhanced operational efficiency. We believe that as AI evolves from a conversational tool into intelligent agents capable of engaging in rural 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 deployment capability and capacity to scale effectively across real world deployments. Looking ahead, we will continue to advance our strategy across 3 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 scalable expansion of AI application service across key scenarios. Third, we will deepen our investment in developer ecosystem growth and enhance our support for developers fostering robust unique growth 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 full year results. Please note that all the figures are in U.S. dollars and all the comparisons are year-over-year unless stated otherwise. So in the fourth quarter of 2025, we generated total revenue of approximately USD 48. 5 Million (sic) [ USD 84.5 million ], representing a year-over-year increase of 3%, against the backdrop of the continuous conscious industry demand and a more conservative customer procurement cycles. We achieved our tenth consecutive quarter of year-over-year growth. In the fourth quarter, our blended gross 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 USD 23.5 million, making the 11th consecutive quarters of positive operating cash flow. Gross margin remained 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 full year perspective, our stable growth in 2025 became even more pronounced. Our full year revenue reached over USD 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 2.9 percentage points year-over-year, while non-GAAP net margin rose to 24.9%. Full year non-GAAP net income reached to a record high of USD 80.1 million, up approximately USD 4.7 million compared with 2024. Among our segments, so the PaaS business delivered stable performance, generating revenue of over USD 230 million, representing a year-over-year increase of 6.5%, against the backdrop of extended customer margin cycles. We maintained stable growth in our core business by optimizing our customer mix and enhancing our product capabilities, but empowered our customers to provide a more competitive applications. At the end of 2025, the number of PaaS premium customers reached to 291, continuing to contribute a structurally stable revenue to the PaaS business. Such a diversified structures without reliance on any single customer group has further strengthened our resilience in a vital operating environment. The SaaS and others business generated a full year revenue of USD 44.8 million, representing a year-over-year increase of 13.4%. Of this total, recurring services revenues rose by 37% year-over-year, emerging as a key growth driver of the SaaS. So we're looking forward to enlarge this segment faster by this recurring model. On a full year basis, the revenue growth from the SaaS and other business outpaced the company's overall revenue growth. This strong performance highlights the continued expansion of cloud software revenues, especially those AI-enabled software and reflects the gradual realization of the life cycle value from the platform software capabilities as the installation base of the device expands. Our Smart Solutions business generates full year revenue of USD 45.7 million, 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 power of our product offerings. At the end of 2025, our total cash and cash equivalent amounted to over USD 1 billion, precise will be USD 1,017 million, together with the term deposit and the treasury securities recorded as a short-term and long-term investment. This net cash providing ample flexibility to support AI capability development, ecosystem expansion and potential capital allocation initiatives. So full year profitability was primarily driven by 3 factors. First, the continued stability 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 of our AI agent platform. So by end of 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 Tuya platform reached about 16,000, spanning a wide range of smart product categories. So as the application deployment level, AI capabilities are being integrated across a variety of end-user products gradually establishing standardized pathway for AI applications. Recently, we hosted our overseas development events 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 hardware using Tuya T5 AI development board. Completing the journeys from concept to a functional prototype within only 48 hours. This enabled AI capability 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, like in short-term front-end development process, nearly 40% of the code is generated with AI systems. This has significantly shortened our R&D integration cycles and reduced the cost of the repetitive development. So those efficiency gains enable us to maintain the pace of the product and solution integrations while controlling the headcount growth. So building on this foundation, we plan to launch the AI development tools for the developers within this year and through the AI coding services, web coding, we aim to further lower the barriers for AI hardware development and a boost to our 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 likable, embodied robots, Hey Tuya leveraged hundreds of millions of the existing powered by Tuya smart devices worldwide to enable AI to perceive and proactively interact with the real world today. So it draws on understanding and reasoning large models while seamlessly interacting 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 distant other products. In summary, the 2025 showcases the company's continuous progress across its business structures, profitability models and competitive frameworks on the technical side. So throughout 2025, Tuya's physical AI technology was validated for visibility in smart devices, giving rise to a wide range of hardware forms, leveraging our accumulated strength across our developer communities, hardware ecosystem and global delivery capabilities. So we are well positioned 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 this direction. First, we will further capitalize the platform level AI capabilities to enable more efficient applications of AI across diverse device and industry scenarios, by lowering the technology barriers, we aim to help new players breach the technology gap and accelerate this adoption of AI innovations in the hardware industry. Meanwhile, through our 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, all, operator. Right now, we can begin the Q&A session.

[Operator Instructions] we will now take our first question from the line of Yang Liu from Morgan Stanley.

Congratulations on the solid results. I have 2 questions. The first one is regarding the recent tax rate change at the U.S. side, whether that will have any impact to our business outlook going forward. And my second question is regarding the recent upstream memory and other chipset supply constraints and whether it will impact Tuya business? Let me translate my question to Chinese. [Foreign Language]

Yes. Thank you, Mr. Liu. So the first question is, yes, that's considered as a positive indicator that about tariff reductions recently. But the demand didn't react immediately yet. But we really see that the customers' confidence levels about the a better environment to do the business, especially global manufacturing trading, so should improve. So people have a more positive and more confidence that macro economy 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 will consider the global situation will be more dynamic. So -- and those type of reason 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 like reset the tone of the tax level, maybe to 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. So until now, most of the manufacturers, they started back to work today. I mean, today that we did today. So many of the manufacturers didn't start to offer new price and try to take it new orders. So we'll see. But anyhow, we are very positive and directions looking forward to. And while overall costs 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 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 we're considered as significant buyers in these sectors, so many of our -- I mean all our suppliers will ensure that we will get fulfillment of our orders, no matter what. That's the first one. At the same time, since last Q4, we really starting to prepare how can I say, quite good inventory levels to going against 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 rate, we continue to keep a close eye on that. Right now, we didn't meet that immediately increase, like I mentioned that because of the buying process. But if this kind of intensity is starting to increase without limit, we're not sure. So we'll keep closing on that. But anyhow, because of the special value proposition that the company will be doing so far, so that kind of increase on the supply side will not impact our demand or significantly our gross margin side. But we'll keep closing on that. It seems that it will be less for another 1 or 2 quarters. Thank you.

We will now take our next question from the line of Timothy Zhao from Goldman Sachs.

Great. Congrats on the very solid results. I also have 2 questions here. One is, I think, a more broader question about the company's position in the Agentic AI world. Given we have seen continued progress in the Agentic AI capabilities, how should we think about as value proposition to the customers in your path 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 Tuya and your customers? And it's actually, 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 talked about going forward, you 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 more promising. And just wondering if you can share more details. [Foreign Language]

Thank you, Timothy. So yes, it's a nice question. So first one is that about the macro side, we are happy to see that more customers starting to thinking about how they can create their own differentiation, 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 we're starting to enable the manufacturing players to embrace the -- and the smart technology is starting with IoT. It's the same stuff. If they cannot do that, but want it, we have to offer it. So for all the time, of the company's history, we continue to offer 2 things. The first thing is that if they don't have the capacity right now, we'll offer them an off-the-shelf solution turnkey. And if they will have some capability, we continue to educate them to do that and then we offer them infrastructure to allow them to do that some extra values, they want to create more freely. So I think that's the what we call ecosystem were to create, so it's not like just keep selling stuff. They don't have to do that now. So we're happy to see that we already have a significant amount of the customers who already have their own kind of in-house capability to create their own differentiation and make their own innovations. We're happy to see that. So the same as that we continue to enable our customers to build their own like the device level, innovations and application network. So I think AI makes no difference. We also 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 increase some turnkey solution for them, they can grab and go. At the same time, we'll continue to have the very deep and active conversations with their engineering team. Okay, what they can take for now? And what they can be in the future? And what -- how Tuya can enable them to do that more efficiently than faster without the overwhelming onboarding. So we'll continue to do that the same way. So -- but what we think that make 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 in the future. But right now, you don't have to tell people that AI 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, I mean, on the user experience side. I think that's the first one. And so the second one is on the SaaS recurring stuff.I think the key driver for that is that remember our past, we continue to deploy a significant amount and scale of the devices overall with or without any type of recurring services out there. So which means that we will have a large base. And at the same time, coming along with AI. So some what we call existing categories only come with IoT before, and we really see that combined with AI capability, we will be able to offer some extra experience and values on the same type of the device which is already deployed on the household. So in 2025, we continue to offer some new services on the same type of the 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 at the same time, we're trying to offer more recurring services out there. And we believe that will be a long term, especially for some AI initial products, which will mean that the new type of applications since they want those kind of new recurring models, we started to put in place from the beginning. So I think that's for the SaaS recurring. We continue to grow that. I think that will be one of the fastest growing segment in our middle term for the recurring. And the third 1 is for the AI applications, I think that we already shared some of overviews and in late last year. So for the -- those segments that AI will be able to provide more significant values, we believe will be -- right now will be two. The first one is that all the multi-modeling applications, including the video and audio interactions and analysis. So including the companion toy and security. So those type of products will really have a significant base, and we have new players coming in. But come along with AI, so either you make those device interactions more smoothly and also combined with the perceptions of the video and audio, the devices will be able to provide more sense 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, so you -- or Tuya side, you really could be able to provide some educational level of the interactions by providing the language, providing the right -- understanding drive emotion, providing the right feedback and providing the right type of knowledge to the target customers. So that will be the first one. Making modern applications, especially on audience video interactions. And the second one is data analytics and decision-making. So our typical use cases is for energy management. So coming on with a full cycle device deployment for the energy web cycle, including the generation of energy, storage, consumptions and metering, you'll be able to understand how the electricity will be moving, I mean, translate 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 jump one step ahead is not only providing you the data analytics and suggestions, but they will be able to make the decisions that how you'll be able to control your dishwasher in a different way, how you'll be able to manage your battery bank in a different way, how we'd be able to manage the AC and heating system in a different way, combined with variable pricing in different timing, combined with the generation of your solar panel, combined with what kind of battery we have in home right now. So -- and either to reduce the total cost directly, so that will be a typical showcase is that AI is not providing the tool. AI will be able to provide the outcome. So people will really see directly that what will be the TCO, what will be the total values they can get for the life cycle of the usage of these type of devices and they pay for the services as well. So the data and analytics and decision-making will be another part. -- beyond energy, we're looking for more scenarios in that segment as well. So that's estimate.

We will now take our next question from Mingran Li from CICC.

Congrats on the strong results. My first question concerns the milestone. Given the recent geopolitical risk, how to best assess the potential impact on Tuya's international operation. Looking at the current environment in this year, how do you perceive the recovery in demand across the overseas markets? And my second question, I would like to ask about the shareholder returns. Tuya holds a very healthy cash position and your profitability continues to improve. Could management share if there are any more specific plans or announcements for shareholder returns that have been moved forward to 2026? [Foreign Language]

Yes. So thank you for the questions. The first one is that I already covered part of that from MS, the tariff questions. So the first one is that, yes, the global situation will become more and more dynamic, correct? We're trying to get used to that come along with our customers as well. So right now, we see that we get to be able to see more positive indicators in that direction, either reductions of the tariff on the global side anyhow 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 continued 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 never reverse that. So coming out with the end demand increase. And so all the commerce level that people just figure out a way how they'll be able to fulfill the demand. and go through -- navigate through all the dynamic factors, including the tariffs, including the reallocation of the supply chain globally, et cetera. 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 be able to scale it. That's the first one, to make them be able to provide the right thing. In the same time that we continue to closely to manage costs to align with a different allocation of our services on the global side. right now, the -- we can deploy the services on whatever countries my customers are, we really did and right now, my customers are really starting to build a different type of production, and they really 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 agility. So I think that, that's overall what we see for the global situation side. 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 or cross-portfolio decisions. So they keep the decision very, I mean, frequently and precisely what macro decisions. But this year, people will already see that the sustainability of the situation, we're starting to build something better. So they try to rebound from the over conscious companies level. Yes. So that's for the macro side. And so for second side, for the return of the shareholders, as our -- as what we've been doing for the past 2 years, we continue as a shareholders' return as one of the prioritized target for the company as well. So we continue to provide a very sustainable and strong 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 a long-term strategy as well. So we just announced, we have a new round of the dividend for the shareholders as well. So coming on is continue as a practice for us is that the 1 or 2 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 where we feel.

Our next question comes from Matt Ma from Jefferies.

Congrats on solid results. My question is regarding on the Smart Solutions 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 with our thought process and could we expect a relatively strong growth in the Smart Solutions segment in 2026? [Foreign Language]

Yes. So thanks for the question, Matt. So the first 1 is that I think combined with the previous questions and answers. So for the more promising, that's promising. Maybe I mean we will have more confidence level 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 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 visible for the end users. And so that's the one. And so we have a more confidence level in that segment. At the same time, it continues to reach other segments and what will be the new innovative ideas that combined the AI deeply integrated with the existing device capabilities. We continue to support both as well. And but which we -- 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 devices that didn't exist before, which are starting to emerge because of the AI. So that will be 2, 3 new stuff. Same as a toy, nobody thinks that a companion type of toy will become existing before 2025. So this type of new concept of applications. We're looking for have more because we have more talent 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 chemistries out there. So new categories, which I don't name that, even we don't know how should we call that, but we'll find more uses. That's the first one. That's the first question. And second one is on Smart Solutions. So let me describe the better proposition of Smart Solutions is that if those type of hardware type that help our customers to differentiate themselves and those differentiators, the customers prefer yet to do that because that either there will be more efficiency or that will be a must be. So a significant -- I mean, 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 work. So the customers come from the -- how can I say the pet products work, they know that some of those -- their customers are looking for to interact with wildlife like that. So that's customer and consumer or user insight and concept ideas. So if they want to do that, they have to cover all the technology gap. And 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. I mean for them, if they do that individually. And also, in the same time, that type of innovations need a deep intuition on the software and hardware development directly. So instead of waiting for Tuya to offer the PaaS maybe that doesn't show up in our past road map ever. So this is that how they can work closer with Tuya if we can make that happen. So through that, we think that we buy in this concept and then we make it as -- we'll offer it as a solution because we can directly make that happen and then they can try out the concept. So that will be the typical situation for the smart solution is actually we're looking for those differentiated type of offering to the market that can help my customer outstand themselves in their own segment, in different regions, in different categories, in different vertical channels, et cetera. So we only focus on this. So that you can see that for the smart solutions, even on the hardware business, we maintain as 20% plus margin. Reason being is that we only choose those higher value products with the differentiation and with the special technical offering and touched as a very precise targeted consumers that they're willing to pay high. So that will be how we do. So consider smart solution will be kind of the higher value segment type of the devices among all my PaaS orders. So this will continue to do. So really, our solutions will become the flagship model for my PaaS customers, specific PaaS customers in the new year. So we continue to work on with our product road map year-over-year and the flagship types they ask us to offer as a solution.

There are no further questions at this time. I will 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 Tuya's IR team. Good bye 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. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]