Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc. Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one once again. Please be advised that today's conference is being recorded. I will now turn the call over to your first speaker today, Mr. Reg Chai, Investor Relations Director of Tuya Inc. Please go ahead, Reg.

Thank you. Hello, everyone. Welcome to our fourth quarter 2024 earnings call. Joining us today are Founder and CEO of Tuya Inc., Mr. Jerry Wang, and our Co-Founder and CFO, Mr. Alex Yang. The fourth quarter 2024 financial results and webcast of this conference call are available at ir.tuya.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I refer you to our safe harbor statement in our earnings announcement which applies to this call as we will make forward-looking statements. With that, I will now turn the call to our founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese which will be followed by corresponding English translation. So, Jerry, please.

Hello, everyone. Thank you for joining Tuya Inc.'s fourth quarter 2024 and full year 2024 earnings call. In 2024, we achieved nearly 30% year-over-year revenue growth and reached two significant financial milestones. First, our inaugural quarterly and annual non-GAAP operating profitability. And second, our first-ever annual GAAP net profit. The former validates Tuya Inc.'s unique business model while the latter provides us with greater flexibility at the stage three shareholders equity level, enabling us to take further strategic actions. These achievements strengthened our confidence in the company's future growth. 2024 was a year of unwavering commitment to AI research and development. In the second quarter of 2024, we launched Tuya Inc.'s proprietary AI large model, spatial large language model, while continuing to advance on-device AI. Our goal is to leverage Gen AI to significantly enhance the smart product experience, providing our customers with superior product competitiveness and end users with more valuable smart features and functionalities. We firmly believe that AI, IoT, and cloud technologies will drive a new era of user experience and substantially increase the penetration of smart devices. Over the past year, we have also made significant strides in upgrading Tuya Inc.'s unique software and hardware integrated business model, extending beyond PaaS into a hardware solution model. Whether in our core strengths in smart home or in commercial verticals such as hospitality, real estate, mobility, and renewable energy, we are dedicated to providing developers with increasingly competitive hardware solutions. This allows our customers to expand their competitiveness beyond powered by Tuya Inc.'s software capabilities into supply chain and hardware advantages. As a result, we have gained further customer recognition, driving an approximately 58% ELV of grossing our smart solution revenue stream. Looking ahead to 2025, we will be fully committed to building the global AIoT developer ecosystem. This includes ongoing iterations of our AI agents and the Tuya Inc. OS developer products as well as AIoT open-source software solutions such as Tuya Inc. Open to build long-term competitive values. Meanwhile, we remain committed to capitalizing on growth opportunities in international markets, accelerating the development of AI, IoT, and AI applications worldwide, and delivering long-term value to our shareholders. To allow more time for discussion and Q&A, our Co-Founder and CFO, Alex Yang, will now provide more details on our business and financial performance.

Hello, everyone. I am Alex Yang. Today, I would like to share an overview of our 2024 performance and our thoughts for the future. Before that, let me summarize our recent financial results. We wrapped up Q4 2024 on a strong note, delivering about $82 million in revenue, representing a solid 27.4% year-over-year growth. Given the higher base for the prior year, this growth demonstrates strong momentum. Our Q4 PaaS revenue reached about $59.3 million, a 25.7% year-over-year increase, demonstrating a strong foundational market position and enabling rapid transmission of customer expansion and end-market demand. Other revenue was about $11.5 million, up 21.1% year-over-year, benefiting from the stable growth of SaaS validator services across our extensive device base. Smart solution revenue reached about $11.3 million, growing by 45.5% year-over-year, supported by robust data demand across categories such as gateways, central controls, and energy efficiency solutions. For the entire year, our 2024 revenue reached about $298.6 million, marking nearly 30% year-over-year growth. Our overall gross margin remains stable at around 47%, while annual operation expenses declined by approximately 10% year-over-year due to the continuing cost-saving initiatives of the company. As a result, revenue and gross profit growth efficiency translated into efficient profit, leading to a 7.4% non-GAAP operating margin and a 25.2% non-GAAP net profit margin, with GAAP profitability achieved for the first time as well. On the cash flow side, we generated around $80.4 million in positive operating cash flow for 2024. Following the dividend declared in August and paid in October, we ended Q4 with a net cash balance of over $1 billion, maintaining a strong liquidity position. Throughout 2024, we observed sustained growth in end-market demand, stable customer relationships, and increased investment in smart product lines and the rapid adoption of Gen AI and LAMs. This drives a positive response from the consumer electronics industries towards intelligence trends. For Tuya Inc., our unwavering commitment to the developer platform model combined with our unique software and hardware integrated approach and customer-centric production expansion strategy has amplified those industry tailwinds, helping both us and our customers achieve solid business results. In 2024, the number of IoT PaaS premium customers grew by 11% to 298. Our revenue dollar expansion rate, or DBNER, was 122% at the end of Q4, marking five consecutive quarters above 100% and three consecutive quarters above 120%. Our products and services offering provide customers with all necessary technology and software to efficiently create competitive smart devices and bring them to market. The DBNER metric reflects our continued ability to enhance our customers' competitiveness through Tuya Inc.'s technology leadership. As a B2B company, our top 10% revenue-contributing customers maintained a retention rate of about 97%, underscoring the strength of our neutral, open, and scalable technology platform. Our strategy, strategically focused on key accounts, has driven efficiency improvements too, evidenced by about a 37% and 40% year-over-year increase in average revenue per customer and average gross profit per customer, along with about a 47% increase in company-wide revenue per employee. At the same time, the scalability of Tuya Inc.'s ecosystem and our strong market positions have freed us from rigid marketing and sales expenses, allowing us to dynamically allocate resources, strategically promote new products, capabilities, and features, and precisely target key markets and expand our influence. Consequently, our sales and marketing efficiency improved by about 40% year-over-year. In the PaaS business, 2024 witnessed a more diverse and dynamic developer base, contributing to solid year-over-year growth across all categories. Our product category structures have become increasingly balanced and diversified, aligning well with the trend of customer expansion in their product lines. In a highly fragmented and dispersed global consumer electronics market, the widespread adoption of technology continues to drive innovation across diverse product categories. This increasing variety of smart devices is fostering a more comprehensive approach to spatial intelligence, enhancing user convenience and comfort, ultimately progressing towards the vision of an interconnected and interoperable intelligence ecosystem. We are also pleased to see that our smart solution business model efficiently aligns with the needs of top-tier customers, achieving about 58% year-over-year growth in 2024. For instance, in response to the French government's energy subsidy policy, we assisted and helped our French customers in becoming among the first to meet the country's energy efficiency subsidy standard. This incentive program is set up to help millions of French households achieve green energy savings. At this stage of smart technology development, whether in consumer electronics or industry-specific applications, a rich ecosystem of smart devices is essential for top-tier customers. In this regard, Tuya Inc. possesses a significant advantage over other players through its expansive developer ecosystem. Smart solutions further enhance our ability to support customers, strengthen engagement, and boost their market competitiveness. At the same time, we remain committed to building a robust developer ecosystem. At the end of 2024, the number of registered developers on our platform reached around 1.32 million, with over 1.07 million SKUs of smart devices developed on the Tuya Inc. platform, spanning more than 3,000 product categories. We continue to foster an extensive ecosystem by, for example, integrating with Google Home APIs to create seamless smart home experiences and collaborating with Cherry to establish a new and high co-home interim rapidly ecosystem. At the same time, we are dedicated to expanding Tuya Inc.'s global influence, positioning ourselves as a reliable partner for customers and developers worldwide. Our enhanced home energy management system solutions were recognized in the United Nations Global Compact report as one of the 20 best COVID sustainability practices in 2024, highlighting Tuya Inc.'s commitment to sustainability. Additionally, we achieved an MSCI ESG rating of A and a WINS ESG rating of A2, and we were included in the S&P Sustainability Yearbook China Edition. Next, I would like to discuss Tuya Inc.'s opportunity in device and edge AI. As a technology-driven company, Tuya Inc. fully embraced Gen AI and LAMs in early 2023. In Q4 of 2024, we launched the Tuya Inc. AI agent development platform, including all major large language models, such as ChatGPT, Huwin, DeepSeq, Dobang, Play chat of Miss Chow, Gen Nine, Amazon Nova, and Cloud, etc. Tuya Inc.'s LMM-agnostic approach eliminates the complexity of developing smart devices and applications from the ground up, providing developers with a crucial middleware layer that bridges LMM's capabilities with real-world applications. Developers can flexibly choose the most suitable AI models based on their business and marketing needs. We are leveraging Tuya Inc.'s templates library or customized solutions to develop AI devices and applications. This philosophy aligns with Tuya Inc.'s cloud-agnostic strategy, ensuring customers do not have to worry about compatibility and sustainability of cloud services, device types, or hardware architectures. Our unique capability provides Tuya Inc. developers with unparalleled flexibility and adaptability, distinguishing us from single-category solutions. Moving forward, we will continue to prioritize AI devices and spatial intelligence applications, focusing on areas such as audio-video interactions, efficiency optimization, and decision-making automations. Audio-video AI enhances user-device interaction by enabling advanced accounting input and output mechanisms, while efficiency and decision-making AI help end-users optimize their smart devices and usage strategies to meet personalized and differentiated needs. We also continue to explore the application of Tuya Inc.'s spatial LAMs in energy management and other spatial intelligence scenarios as well. 2025 will mark a breakthrough year for device and AI. We plan to integrate AI capability across all categories within the Tuya Inc. developer platform, ensuring that every device powered by Tuya Inc. is AI-enabled by default in the future. Together with global developer partners, we will explore various innovations and scalable applications for AI devices, continuously shaping a valuable global AIoT developer ecosystem. Looking ahead, intelligence will evolve through the integration of software and hardware, constructing differentiated scenarios throughout interoperable smart devices and meeting the customized needs of individuals, households, and spaces. The industry remains in a penetration-driven phase, with a vast and promising total addressable market. To achieve sustained growth, we will focus on the following key areas. First, we will continue to expand global market penetration, leveraging a combination of PaaS, SaaS, and smart solutions to deepen our growth reach, particularly in Europe, Latin America, and the Asia Pacific region. We are increasing customer use cases. For large enterprise customers, we offer CUBE, our smart private cloud solutions, to help them build secure and scalable enterprise-level smart platforms. Second, advancing AI devices and applications, we are committed to leveraging Gen AI and LAMs to significantly enhance smart product experience, drive product competitiveness, and deliver great value to end users. We are continually innovating across high-potential markets such as smart companionship, smart outdoors, smart energy, and smart spaces, complementing and accelerating smart device penetration by AI applications. Third, through our integrated hardware-software smart solutions, we are helping top-tier customers speed up their product launches and establish differentiated competitive advantages across different categories and regions, directly increasing end-market penetration and delivering greater and more sustained value. Fourth, maintaining a customer-centric approach, we aim to serve high-quality core customers efficiently, supporting their business growth, increasing customer stickiness, and repeated purchases, and ultimately enhancing our operational leverage and efficiency. Last, to continue building a global developer ecosystem, we will continue to accelerate and refine Tuya Inc.'s AI agent platform, empowering developers worldwide to create customized AI devices and scenario-based applications easily. Additionally, we will leverage Gen AI tools to improve developer efficiency as well. Finally, let's address some frequently asked topics from the capital market regarding internal operation efficiency, share-based compensation expenses, and dividends. Throughout 2024, our total headcount has remained at about 1,450 employees, reflecting about a 12% reduction from 2023. By Q4 of 2024, our average revenue per employee has exceeded 2022 levels by more than three times. Over 70% of our team consistently consists of R&D, technology, development, and product personnel, who drive rapid product integration across Tuya Inc.'s business lines and prepare for the next generation of opportunities. Notably, Tuya Inc.'s revenue growth is not dependent on heavy investment in sales and marketing, which has been a key factor in stable and continuously improving profitability. We are committed to further improving operational leverage while our net profit structures and quality will become even more sustainable and organic. Regarding share-based compensation expenses, the current quarterly accounting expenses primarily stem from legacy grants and issues made in higher valuation years ago, which have become amortized quarterly according to the vesting schedules. These expenses are unrelated to any recent equity grants. These legacy awards are gradually fully vested, and SBC expenses will see a substantial decline starting in 2025, leading to a visible reduction in the accounting impact on our income statement, an improvement that is already evident in Q4 of 2024. Earlier this day, ahead of this earnings call, our Board of Directors approved the second dividend for 2024, totaling about $37 million, keeping our robust non-GAAP margin. Normally, non-GAAP metrics reflect the direct results of operational decision-making, excluding external factors related to our business model. This non-GAAP margin and strong financial position is what we base the dividend on, with over $1 billion in net cash and seven consecutive quarters of positive operating cash flow from Q2 of 2023 till now. We believe that Tuya Inc. is well-positioned for sustained and long-term growth through its competitive moat while also rewarding our shareholders who have demonstrated steadfast support. We remain committed to driving forces in both our global business and capital markets. Overall, 2024 has been a profitable year for Tuya Inc., marking our first year of operational profitability, the execution of our AI strategy, and a breakthrough in our shareholder structure. During this strategic update, we have been fortunate to experience multiple dimensions of progress and transformations, whether in achieving operational profitability, expanding our global footprint, or optimizing our international shareholder base. Notably, our partnership with 65VP, our subsidiary, Optumatiq, and strategic investors has positioned them as Tuya Inc.'s largest institutional shareholder. Furthermore, our achievements have been strongly recognized by the market in early 2025. I believe this success is rooted in Tuya Inc.'s global presence, its unique hardware and software integrated business model, and its strategic focus on the global developer platform.

Operator, we can now begin with the Q&A.

Thank you. We will now begin the question and answer session. To withdraw your question, please press star one one again. We will now take our first question from the line of Timothy Zhao from Goldman Sachs. Please go ahead, Timothy.

Thank you, Alex, for taking my question and congrats on the very strong end to the year of 2024, and I think your presentation is very helpful. I have two questions here. One is that I think on AI in PaaS and in your smart solution business management, can you further elaborate on what kind of usage scenarios you are seeing?

Yep. Thank you for the question. Yeah. So for the AI, what we see here is that this will be a really good year for AI, and we consider it as the first year that we can really turn AI devices into reality. What we see as the priority of the AI opportunities on the device side is that we will start with all the audio and video interaction devices, which means that it is bringing a new way for people to interact through audio and video with the device. So that will be one thing. No matter if it is some use cases we showed in the last quarters, like the pet feeders, the bird feeders, and the pet-related appliances, and some control panels on the wall with a screen as well. So that will be one thing. The second thing is that all those types of nanotech devices that need complex decision-making. One significant use case is energy solutions. Because for comprehensive energy solutions, you need to be able to read through dozens of variables from different types of devices and from outside factors like the weather, utility data, etc., and then make some adjustments and automatically make new decisions to operate the device in different ways. So AI definitely will help in that part. So that will be something. Also, what we see as a very interesting new type of stuff will be the old type of toys. We found that kids will be the perfect adapters for AI because they do not have any stereotypes about existing technologies, so they grab anything as a fashion, and they just easily tap in. Since January after CES, we really got plenty of customers reaching out to us, bringing different ideas on how they can integrate AI into toys. That will be some of the incubating categories, which are not catching up yet, but I believe there will be more booming stars throughout the entire year or even in the next couple of years. While AI is starting from the very fundamental stuff like LAM, someone can bring an easier approach to the market to activate all the new ideas. So while the battery becomes low, and you have thousands of companies and developers joining in, that will become a robust state market. We are looking forward to it. So there might be thousands of different types of things coming after.

That's it. Well, Timothy, do you have any follow-up questions?

Sure. Can you hear me well?

Yes. We can. Please proceed.

Great. Great. Sorry about that. Yeah. I missed my second question regarding your margins. Just wondering, I think with AI enhancing the demand for IoT, what is the unit price trend over time and how will that impact your margin? I think it's more on a gross margin level. The team also talked about your OpEx given, I think, you have been investing in AI and operating efficiency on the OpEx level has been quite high. Just wondering how do you think about your operating leverage into 2025?

Thank you. Yeah. So the first one is that AI will still be in a very early stage. We are not making a final decision or we did not make the final call about how we are going to commercialize AI. We tried different types of commercial use cases. In one word, we are starting to deploy AI into all three business models we have, including the PaaS, the SaaS, and solutions. We offer AI in different ways based on what type of needs it is. So that would be one thing. Sometimes it will be a new offering that we provide to the market, so we will be pricing that as a new product. For that part, the margin will depend not only on the cost but also on the demand. It depends on what type of reasonable pricing we would like to put into it. Another part is that some of the AI, if we think that it will be very, very, we want to put that as the default features that enhance all our customers to improve their competitiveness, we will integrate that into our existing PaaS solution too. So the margin impact, I think, in the short term, I do not have visibility for that because the scale may not be growing that significantly to influence our overall margin. So that will be a smaller pie at this moment. In the long run, I believe that AI will bring more value, but we will not commit to rent because, for sure, the focus for us, I mean, the priority for us is always scalability. Yeah. That will be one thing. The second thing about the OpEx, like I mentioned earlier, we are starting to invest in AI once Gen AI occurred back in early 2023. It's not a new investment for us. Throughout the past two years, we have already relocated our resources internally and improved our talent structures in some roles to be capable of building AI. Already. So right now, there are a lot of departments in my company that are ready. Now, which means that I do not have to recruit the team to rebuild things all over again. It's already been there. So for this year, we will slightly increase some of the specific application investments by the demand of the market, slightly, also at the same time, we are looking forward to seeing what will be the right opportunity or right type of way we can market it more efficiently. Since it comes with a new concept, it better make some noise. But that type of impact is very controllable. So it will not improve the OpEx significantly. It will be at a very manageable level.

Thank you. That's very helpful.

Thank you. We will now take our next question from the line of John Roy from WTR. Please ask your question, John.

Can you hear me okay?

Yeah. I can hear you, John.

Great. Great. An excellent year last year. Very well done. So I was wondering about SaaS and its growth prospects. Do you see that as something that could really change the landscape, or is that just more of an add-on?

Yeah. That's a good question. Thank you for that. So the first one is that SaaS is based on our deployment on the base of the total deployment of our devices. So that will be a later business model versus the first, whether it's in the PaaS, which means that we need to enlarge and scale the PaaS. On top of that, we can do more SaaS. That will be one thing. The second thing is that we are facing structural improvement in the PaaS model, which means that we are trying to increase the portion of the recurring models in the SaaS type, not only the software base but also the recurring software base. That will be a second thing. So for that part, I am not worried about the growth, and I will pay more attention to the stickiness of the customers, whether they can use that type of thing. As long as they can use that, the payments, the continually annual bank payment will be a very strong base for us. That will be the second thing. The third thing is that within the PaaS, there will be some portion of that for the commercial software. So it's not the consumer-facing one. For the commercial one, in the past three years, the major market that we are trying to do this business line is in Asia and China. Because that's within the COVID period, which means that it brought us difficulty to be able to incubate new business across the global basis. Starting from late last year, we are starting to duplicate those use cases in different countries. We try to bring that into the global market. We really have some really positive progress there, no matter in Latin America, Southeast Asia, and Europe too. So for that part, right now, we are approaching a bigger total addressable market on a regional basis, and we have already found the duplicate applications or products that have proven to work out, and we already have a customer base that's applying with the recurring models. So for the SaaS, I believe there will be our long-term growing business, and I am not looking forward to any short-term surprising or short-term significant improvement. But in the long run, back to five years, that will be a very, very joyous thing for us.

Great. Thank you for that. So, obviously, the dividend is very nice, and you have a pretty significant cash position. What is your view on the acquisition front? Is that something you're actively watching? How are the prices in that market?

I think that, and I am thinking of you mentioned about M&A. Right? M&A. Right.

Yep.

Yes. M&A is always an open option for us. We keep screening what type of extension, what type of companies or partners can be our extension, either to extend our scope of coverage of different types of scenarios or to have a vertical solution, a more vertical solution provider for specific industries. So we keep screening on that. Yeah, so I think that's an option for us. I think the key part is that the first one is that no matter with or without acquisition, those guys should be our developers. So the first priority is to have a very strong global developer ecosystem. I think that will be our major focus. At the same time, anyone within the ecosystem that can show a better potential, no matter if it is horizontally extending our scope or vertically improving our vertical industry insights, for that part, we can easily identify that. Yeah. We will keep it at a low end. We will keep for anyone to help us to find some interesting targets too. Have anyone introduced to me.

Will do. Thank you so much. And, again, congratulations.

Thank you. We will now take a question from the line of Kai Xiao from CICC. Please ask your question, Kai.

Hey. How's it going? Congratulations on the strong quarter. So my first question is regarding the IoT part. What's the current downstream demand for IoT parts, and which countries and categories do you think have more potential, and how can we unlock gross margin? The second question is regarding the high-quality customers. We see the number of customers have very strong growth. What do you think is the further potential for the company to further expand the high-quality PaaS customers in the future, and can Gen AI help in the acquisition of more high-quality customers?

Thank you for the question. So the first one, for the PaaS, as we can find in our business, it's very strong showing that we have a very balanced structure on the business. So no matter if it is on the regional side or on the category side. Right now, the business comes from over 3,000 categories on the Tuya Inc. platform. We do not rely on any single category, which means that we are quite diversified on the category side. So that's what I mean. Whenever or whatever type of new booming stars in the smart devices market occurs, for sure, there is someone making that into the Tuya Inc. platform, into the Tuya Inc. ecosystem, not from somewhere else. So for sure, we will cover any new opportunities on the regional side. Right now, we are very dense too. The largest regional market in Europe only covers slightly over one-third of our business. I mean, on the end-user demand. For all other countries, North America, Latin America, Asia, and Australia, including China domestic, they are quite balanced. We do not rely on any single regional market too, which brings us a very good barrier or very good protection for any type of change happening right now in the geographic scenarios. That would be one thing for the PaaS. For the second question, I think the major customer here is that right now, for the first ten years of the establishment of this company, a larger portion of the ecosystem comes from the consumer field. What we found here is that two extensions on the customer side. The first one is that for the past three years, we have more and more customers and use cases from the non-consumer field, no matter if it is commercial, industrial, and that type of thing. Also, in the company, we have new business lines just focused on that part. So that will be one thing. That will be a total extension of some new types of customers from that part, including the telecom carriers. We got and will continue to have new telecom carrier partners coming in. Yeah. So that will be one thing. The second thing is that exceeding from the device-based stuff, in the near future, we believe there will be more and more spatial solutions being needed, and the spatial solution providers will be a different type of company too. Before that, no matter if it is for the property manager, warehouse manager, logistics, those kinds of managers of some type of space, the house, the building, the warehousing, or some asset too, those types of solutions before AI technology happens, they do not have a comprehensive write-up solution to the pinpoint. While the spatial models and spatial solutions we design can meet that, that can help us to open another door too. So that will be what we call the new brassman plus. That's it.

Thank you, Kai. Do you have any follow-up questions?

That's all. Thank you.

Thank you. Our next question comes from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang.

Thank you for the opportunity to ask questions. Two questions here. The first one is on the outlook of the revenue structure. Because we observed in the past few quarters that IoT SaaS and other growth recovered meaningfully, while the smart device distribution growth has been largely volatile, this kind of change is very critical to the overall gross margin. So I would like to hear your view in terms of the three business lines going forward and whether it will have a meaningful impact on your blended gross margin. That is my first question. My second question is regarding your view on the competition in the AIU for the IoT solution provider. Do you see more hyperscalers who would like to develop an IoT of how they manage themselves, or is it still a booming market with a lot of smaller product development companies in the market that Tuya Inc. can continue to add a lot of value to those customers? Thank you.

Yeah. So the question, I think that's our three business models because they come in with two to three different approaches to the customers. Overall, the margin level of each of the business models will be kind of stable. For the PaaS, we believe that the overall margin for PaaS will remain at around 45%. We think that will be reasonable or slightly over 45%. For the SaaS, because it's software-based, we think that over 70% will remain. On the solution side, because we follow the hardware route, while you scale the volumes, while the customer scales the volume too, sometimes you have to sub that some of the profit to the customer. We believe that on the solution side, maybe by scaling it into, we double that or we scale that on a bigger base, the margin of solutions will slightly decline a little bit, but not that much. We think that we will continue to maintain the solutions margins over 20 or 21%. So that will be overall the nature of the margins underneath each of the business models. Putting that together, what we find is that the PaaS will continue to provide a stable growing base for the entire Tuya Inc. business because that will be essentially everything that the customer needs to procure. Purchase and SaaS, like I mentioned earlier to John's question, I think that the SaaS will be more of a long-term growing curve for that. We are not incurring continuous enlargement of the device base and the customer base, and we deploy those services on top of that. Converting more of them to pay the recurring revenue will be a long-term journey. But remaining similar growth with the PaaS, maybe that will be our expected. The solution, because the solution comes from my PaaS customers, they claim out for a solution rather than the development toolkit on the PaaS side. So the solution is that we convert to more and more customers' demands directly from my PaaS base. So for that part, the solution might grow faster. While the solution becomes a larger pie of my total revenue, my overall gross margin rate, gross margin, my GPM, we believe that in the long term, will slightly decrease a little bit. Everything that would be reasonable. I mean, the margin would, because I have a bigger part of the solution side, would come with a lower margin compared with the other two business models. So for that part, we think that would be good. But that's not a problem for us. I believe that the key to evaluating the gross margin is that you need to break down each of the business models and tell the value of that. Whether that value reflects the right margins as that business model, and you need to compare that business model to the industry level. So the SaaS is compared to other SaaS companies or other SaaS peers, and the PaaS is for the PaaS team. So yeah, that's the point I'd like to try to make. So it's a very stable business model, and the structure will start to change slightly.

Thank you. How about the second question, which is the outlook for the competitive landscape in AIU for the IoT?

Yeah. I think that's I think I really covered part of the question. Right? I think that right now, the good part for AI is that right now is that we're in a very positive and active momentum for the market, not for the capital market, but I mean, for the hardware industry. So we have a lot of movers as either designers or manufacturers or solution providers. Right now, we process three. Right? I mentioned, it's either the video, audio interactive, or the decision-making analytic one. The toy. We believe that there will be thousands of at least thousands of more vertical use cases coming from. It's very early stage, and the issue is that we get so many players on the field trying different types of ideas. What we need to do is that we offer them a toolkit to easily turn their ideas into two. I think that will be the unique value that Tuya Inc. provides. Also, that's why we have such a successful developer ecosystem. Not to let them get away from doing everything in-house. We offer them a shortcut to testify their ideas. I believe that this year will be kind of a very starting line for the AI device. You can find millions of new devices out there. A lot of people are trying, and some were approved, worked out, and started to scale that. Maybe some not. They redesigned that. So yeah, I think that will be the momentum we're looking forward to seeing. So what we do is that, just like I mentioned, I'm continuing to lower the barrier for anyone trying to get in.

Thank you.

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

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

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