Tuya Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 28, 2023

Key Takeaways

  • Total Q3 revenue of $61.1 million, up 35.7% YoY (43% adj. for FX), with a record gross margin of 46.7% and non-GAAP net profit of $10.1 million (16.5% margin).
  • Operating efficiency improved with non-GAAP operating expenses down 26.2% YoY and net cash flow from operations of $16.1 million, ending the quarter with $961 million in cash and investments.
  • IoT PaaS performance strengthened as revenue per premium customer grew 56% YoY (49% for ordinary customers), serving over 3,000 clients at an average of over $20,000 each.
  • Consumer IoT device segments rebounded sharply, led by smart lighting and electrical products (+140% YoY) and core lines like robotic vacuums and smart locks (100–180% YoY growth).
  • Global expansion accelerated with Europe now contributing ~30% of revenue and new partnerships with brands like Bosch in locks and major home appliance players, while the developer platform grew to 909,000 registered developers (+40.5% YoY).
AI Generated. May Contain Errors.
Earnings Conference Call
Tuya Q3 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc. Q3 2023 Earnings Conference Call. I'll now turn the call over to the first speaker today, Mr. Rashai, Investor Relations Director of Tuya.

Operator

Please go ahead, sir.

Speaker 1

Thank you. Hello, everyone. Welcome to our Q3 2023 earnings call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang and our CFO, Mr.

Speaker 1

Sidney Liu. The Q3 2023 financial results and webcast of this conference call are available at ir.tuya.com. A replay of this call will also be available on our website in a few hours. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward looking statements. With that, I will now turn the call to our Founder and CEO, Mr.

Speaker 1

Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by corresponding English translation. Thank you.

Speaker 2

Hello, everyone. Thank you for joining the Tuya's 2023 Q3 earnings conference call. Total revenue for the Q3 of 2023 reached $61,100,000 Marketing returned to year over year growth since the industry and economic downturn at the end of 2021. Revenue grew an impressive 35.7% year over year or approximately 43% when adjusting for change rate fluctuations. We again achieved a record overall gross margin 46.7 percent for the 2nd consecutive quarter.

Speaker 2

Our firmly focus on cost reduction and operating efficiency improvements resulted in a 26.2 percent year over year decline in our non GAAP total operating expenses in Q3. More importantly, our non GAAP net profit soared to $10,100,000 an increase of almost 5.7 times sequentially, representing a net profit margin of 16.5%. Net cash flow from operations improved both year over year and sequentially with a net inflow of about $16,100,000 Our net cash position at quarter's end was a strong $961,000,000 underpinning our long term strategic development. Overall, the Q3 saw robust improvement across all key financial metrics, signaling a positive turning point as we navigate out of the industry's cyclical downturn. Despite the system challenges like flat to 18 exchange rates and subdued consumer substantially, Our impressive performance in Q3 underscores our guidance for the post destocking cycle and a broader recovery in the IoT sector.

Speaker 2

As we look ahead, we are committed to expanding our quality customer base, enhancing product streams and the bench bringing to new markets beyond consumer electronics. Let me now share more detail about developments, thanks to the start of the Q3. In terms of our customer base and competitive positioning, our IoT Pass business has weathered nearly 2 years of industry downturn. During this challenging period, several competitors, particularly IoT divisions of large enterprises exceeded the market due to limited competitiveness of their products and uncertain investment returns. This shift opened opportunities for Touya.

Speaker 2

As we feel that we now have better global influence and competitiveness compared to 2 years ago to attract the more leading brands seeking efficiency, improve the margins and cost effectiveness in third party IoT platforms. We're forging new collaborations with top tier customers such as media for its overseas home appliance business, higher than the goal for new energy product IoT platform and Bosch for smart door locks solutions. Meanwhile, we want and serve customers worldwide through differential strategies and innovative products. This approach solidified our competitive standing globally and enabled us to effectively cater to unique market demands. The integrated hardware and software solution product strategies we initiated this year is already yielding strategic new customers and win scalable revenue growth.

Speaker 2

For example, like Europe, America and Japan, We actively participated in the broader matter and with technology and products as our focus are at the forefront of the global application and organization matter, implementing our IoT ecosystem, expanding our global influence in the IoT 2B service In emerging markets like Saudi Arabia, our ability to provide cost effective customized solutions led to breakthroughs with 2 major operators. In Africa, our natural software and hardware integrated solutions tailored to unique electricity pricing challenges led to a POC order from a renowned supermarket chain with our 200 stores in South Africa. Importantly, our initial success in Africa can be repeated across the region. Furthermore, in South America, the Tuya developer platform successfully replicated our Chinese OEM model to support local manufacturing in Brazil. We live in thermostat and the water purifier factories seeking our software solution for device management systems.

Speaker 2

We are optimistic about the e commerce channel as a huge market for practical consumer electronics devices like smart electricals, sensors and outdoor products, helping these lightweight categories achieve market promotion, distribution and end user aggregation. Over the past 2 years, we have consistently supported potential Chinese e commerce brands and growing into leading brands. For instance, several Tuya customers are now prominent in Amazon's top 10 in smart sockets, outdoor sockets and Bluetooth mini locks. We are unwavering in our commitment to product focus, innovation and improvement. In the Q3, after 18 months of development, our laser sweeping robot vacuum solution reached mass production.

Speaker 2

Our low power audio video solution for smart door locks, benchmark against industrial leaders also achieved the mass production. With the pro version of our home door lock products Q3 deployment volume increasing by over 100% year over year. We have also enhanced our oversea central control product lines such as the U. S. Back product metrics and added industry capabilities for pre installed market engineering installations in China.

Speaker 2

Our smart central control large screen integrating local building intercom and the cloud intercom capabilities, innovatively bridges indoor and outdoor intelligence. We We continue to strengthen our traditionally strong categories like smart electrical, which will remain significant contributor to the IoT consumer electronics sector in the long term. We're seeing downstream demand recover for this smart, light, practical IoT devices. We are committed to helping customers seize opportunities. For example, we released the dual brand router smart socket solution to adjust the common issue of mid band routers, significantly improving the network pairing success rate and experience.

Speaker 2

Entry, a customer of this solution has seen its brand sales explode, now ranking in top 10 on Amazon's platform. We're actively working to expand beyond the field of consumer electronics, bringing 3rds neutral out capabilities to more specialized areas. In Q3, we further refined our new energy and outdoor transportation products. For new energy, we released an integrated app supporting the storage, charge and use of solar power, completing the energy management use case from energy monitoring to energy load lead scheduling. Global leading metallic brands like IQOSOLA and DMEGC, PENDIAN, Dong Group have chosen Tuya's IoT task for their new energy storage business.

Speaker 2

In HDVAC integrated products, Tuya's industry subsystems have basically achieved the full functionality for mainstream industry demand and will soon form its closed loop solution with the system hardware. As for outdoor products, our 4 gs cellular DCU central control product has landed on e bike products. Besides focusing on high quality, innovative and valuable products as our core competitiveness, we are meeting the emerging needs of large group private clouds with our CubeSmart private cloud comprehensive solution. For example, we have made good progress in Southeast Asia real active use. Lastly, let's talk about the continuous growth of Puyo's foundational developer platform and ecosystem.

Speaker 2

In the Q3, we focused intensely on the foundational pillars of Path 2.0. These pillars encompass 4 category interconnectivities, seamless operational ability, rigorous security standards, independent and manageable development process and distinct to productive differentiation. Our efforts were channeled towards refining the developer experience, significantly enhancing both usability and operational efficiency. This strategic move has further empowered developers, granting them greater independence from the need for direct support from Tuya. In line with this, we have unified and restructured our official website developed platform, iot.tuya.comdevelopersite, developer.tuya.com and developer documentation center.

Speaker 2

Additionally, we launched a vibrant new developer forum at 3.2.3os.com. This platform acts as a dynamic hub offering extensive resources and collaborative spaces where developers can change ideas, troubleshoot challenges and unleash their creative potential. Marking a significant milestone, the number of development registered with Huya soared to about 909,000 by core end, reflecting the impressive year over year growth of approximately 40.5%. We also emphasize the application and empowerment of developed platform in the commercial sector. This approach is designed to empower our brand clients, enabling them to prop and refine bespoke to be solutions.

Speaker 2

A prime example of this strategy is in action was at our developer conference this September hosted at the Zhongshan stage in China. During these events, we signed a cooperation agreement with OZURON. We see advanced commercial functionalities of the Tuya IoT developer platform at our disposal, while collaboratively guiding Osram in developing their own distinctive hardware and software integration. This awesome branded solution encompasses areas such as entire homes and real estate, hotels, rentals, commercial linings and the building management around others. In conclusion, I have shared with you today the concrete outcomes of our strategic initiatives in business and product development.

Speaker 2

These accomplishments are a testament to Tuya's dynamic response and the strategic recalibration in response to the challenges we have faced over the past 2 years. As we approach the final stage of inventory normalization and win this Audi Consumer electronics steadily finding its footing, we are confident that our persistent efforts will yield a sustainable results. These strategies are set to guide to our path of health insurance. Going forward, we are focused on striking a balance between growth and profitability, thus ensuring we create enduring value for our customers, the wider industry, our shareholders and our dedicated employees. That concludes my remarks.

Speaker 2

Next, I will hand over to our CFO, Jesse, to introduce our financial data.

Speaker 3

That concludes the remarks by Jerry. As I review our results and provide more colors on the numbers, please note that all amounts are in U. S. Dollars and all comparisons are on a year over year basis unless otherwise stated. In the Q3 of 2018, our total revenue reached RMB 61,100,000, up 35.7 percent year over year and continue to show a strong sequential improvement over the past 4 consecutive quarters.

Speaker 3

Similarly, during the quarter, we were still under depreciation impact of the RMB against the USD, which adversely hits our total revenue by 7.3% points. Our IoT Pass revenue in the 3rd quarter was RMB45,800,000, a year over year increase of 48.1%. In terms of categories, in the 3rd quarter, the most impacted discretionary consumer electronics categories over the past 2 years, smart lighting and electrical products constituted the main force of this year over year rebound with the segment revenue growth about 140% year over year. Small and the big home appliance grew by 50% year over year. The Q3 of last year was the most severe time for downstream destocking and the growth of this quarter benefited greatly from the end of destocking cycle.

Speaker 3

Moreover, with execution of product focus and enhancement strategies, our core product lines such as vacuum robots, breakers and home locks with technological depth have grown by approximately 100% to 180% year over year. Regarding customers, our 3rd quarter revenue primarily driven by the recovery in customer order size and improved customer revenue efficiency. Taking our main IoT PaaS business as an example, our premium customers' IoT Pass revenue per customer in the 3rd quarter increased by 56% year over year. And the same metric for ordinary customers also grew by about 49%. Overall, our platform and the product served over 3,000 customers in the Q3 with an average revenue per customer exceeding US20000 dollars setting a new historical high.

Speaker 3

Our smart device distribution business, now maybe more aptly called IoT smart device solutions, achieved a revenue of $6,800,000 in the 3rd quarter, a year over year increase of 32.1%. With the continuous advancement and the implementation of the smart device solution strategy, we are now quite proficient in this business model and continue to generate robust scalable revenue. For instance, the smartwatch solution alone secured about US3 $1,000,000 of orders in the form of finished devices in Japan since this Q3 to be delivered according to customers' demand schedules. The SmartTag Locator solution also contributed significantly to orders and revenue and so on. Our staff and others business had a revenue of $8,500,000 in the 3rd quarter, reflecting a 5% year over year decline.

Speaker 3

Excluding the exchange rate impact, this segment's revenue in the 3rd quarter was actually relatively stable, showing a slight increasing trend year over year. As a collection of CUBE, smart private cloud, value added services and the customized software and also various subsegment of SaaS, they show different trends according to business strategy and execution. For example, the cloud storage value added services contributed about US2.5 million dollars in revenue in this quarter, maintaining a very robust and a continuous month over month growth. The acceptance and the delivery of the Cube Private Cloud project generated over RMB5 1,000,000 in revenue. Customer development and some other new customer number based one time value added services decreased by about 15% to 20% year over year under the execution of our customer focused strategy.

Speaker 3

We're focusing on expanding high quality customers. Going forward, we anticipate a gradual shift in SaaS and others business segment toward a more core business centric structure. Regarding the overall revenue recovery in different regions, we have observed healthy growth in Europe, Southeast Asia and Latin America. Our blended gross margin in the 3rd quarter was 46.7%, sustaining the historical high level for the Q2. Each of the 3 business segments exhibited strong margin profiles.

Speaker 3

Notably, the gross margin of the smart device distribution segment in the 3rd quarter reached 26.9%, a substantial increase from 12.9% in the same period last year, setting a new historical high. We believe that gross margin is the most direct reflection of the value of our smart device solution. Moving on to our operating activities and related expenses. We are presenting our operating expenses on a non GAAP basis by excluding share based compensation expenses and credit related impairment loss from our GAAP numbers. We believe this provide a better clarity on the trend of our operating expenses aligning with how our management team reviews our performance.

Speaker 3

In the Q2 of 2023, our non GAAP total operating expenses decreased by 26.2 percent to RMB32 1,000,000 from RMB43.4 million in the same period last year. Our employee related costs, excluding share based compensation, declined by 28.9% year over year in Q3 and the costs related to offices and the property leasing concurrently decreased by 13.9%. Collectively, this cost request represented about 74% of the total of our non GAAP operating expenses in Q3. As of now, our team size has been adjusted to a relatively stable state at just under 1500 headcounts. Marketing and promotion expenses decreased by 23.9% year over year.

Speaker 3

This disciplined approach to cost control of promotion expenses coupled with a noteworthy rebounding revenue served as a testament to the importance of operating with efficiency. Travel related expenses also decreased 20.4% year over year. As revenue returned to growth, we're ready to make investments in the business as needed to further pursue business opportunities. But overarching premise is always to maintain a balance between business investment and profitability. Additionally, in the Q3, non GAAP G and A related expenses overall increased, mainly due to routine compliance related professional services projects such as consulting fees, legal, advisory fees, etcetera.

Speaker 3

In the Q3, we obtained about $13,100,000 in financial income, mainly interest income. Only cash included cash bank demanded deposit as well as time deposits recorded as short term and long term investments totaling RMB961 million. We believe these funds can well balance the company's short term business working capital needs and the long term development requirements. For example, we are evaluating some feasible plans related to our own office buildings and the land use rights with objective of achieving long term cost saving and supporting the company's long term operational needs. Finally, as a result of our consistent efforts over several quarters, the company's non GAAP net income expanded significantly by 567 percent to $10,000,000 in the next third quarter, a substantial turnaround from the negative $15,300,000 in the same period last year.

Speaker 3

Similarly, our net operating cash flow also showed same trend increasing by by 114 percent to $16,000,000 in the 3rd quarter, a huge improvement from the spend of $13,500,000 in the same period last year. Overall, the comprehensively improved financial results not only means that the major strategic direction we set last year and this year has helped us achieve continuous improvement in quarterly financial results, but also indicates the company is on the right track. With that, operator, we're now ready to take questions. Thank you.

Speaker 2

Thank you.

Operator

For the confidence of everyone on the call. Thank you. We have our first questions from the Ming Yuan from CICC. Please go ahead.

Speaker 4

So let me translate myself. Thank you, management, for taking my questions. First off, congrats on your strong performance. My query primary concerns is my side and my questions are as follows. First is about the outlook for downstream demand in next year.

Speaker 4

And second is about the past. In past, which category shows the most growth potential? And in our SaaS, which downstream scenarios are comparatively more promising. My third question is that what are the strategic plans and growth outlook across different global regions? Thank you.

Speaker 3

Okay. Thank you. Firstly, overall, we have found that IoT consumer electronics are highly sensitive to inflation. During the year of high inflation from last year to early this year, the growth trend in discretionary electronic consumption, which including IoT devices, slowed down significantly compared to 2021. Afterward, although it reached a relatively stable new balance as inflation slowed, It was suppressed again with a short rebound of inflation in like July, August and September this year.

Speaker 3

However, at present, we observe the end purchase of consumer electronics is in a moderately positive direction, which is in line with our expectation for long term growth in IoT penetration. From the perspective of end sales, specifically by region and categories, We observe the following. By categories, since October and the sales in all categories have recovered to some extent with household appliances, especially robotic vacuum cleaners and security sensors performing very well. Electrical products also showed a good recovery trend. However, lighting devices is still in a pretty weak demand situation.

Speaker 3

In terms of the region, we found out Southeast Asia, South America and also in Europe, the safety products are doing pretty well. And also other categories are gradually recovering in a pretty healthy direction. In China, apart from home appliance and the robotic vacuum, other categories are relatively weak, but the trend is upward since Q4. The U. S.

Speaker 3

Region shows overall relatively weak performance, but electrical and security categories are showing good signs of recovery. Overall, each region according to its economy and the environment characteristics has different trends in end IoT electronics consumption. And we will continue to maintain communications with downstream customers to actually respond and seek opportunities according to different market situations. However, it should be noted that our IoT PAS revenue is affected by both the destocking cycle and end sales. Note that the year over year performance of end sales in some categories does not completely align with our shipment downstream.

Speaker 3

For example, the lighting categories showed relatively weak end sales in Q3, basically from our brands to consumers, but our shipments achieved a significant year over year growth in Q3 in terms of IoT Pass. This is mainly due to the downstream replenishing their lighting inventory. As lighting products due to the large price difference between smart and non consumer smart and non smart versions were the most affected categories in terms of inventory destocking Q3 last year. In terms of the downstream inventory, the overall situation is in line with our expectations. Combining Tuya's IoT PAS shipments and end sales in the same way as we previously the end sales in the same way as we previously did, we estimate that inventory held by downstream business, which include OEMs, brands and retail channels, has decreased from over a year at its peak time to about 4 to 5 months now and will further reduce by the end of this year, returning to a level of 2019.

Speaker 3

Therefore, we feel that inventory destocking cycle is nearing its end and returning to a relatively normal stage. And in terms of the SaaS part, as we mentioned, the SaaS and others revenue have including several different products. We have seen great growth potential in CUBE, which we promoted this new product. It's a private cloud IoT software. We prepared for large groups globally for those companies to realize their own IoT capabilities.

Speaker 3

This potential stems partly from Cube's smart private cloud serving those large conglomerates, allow it to reach revenue levels in 1,000,000 of U. S. Dollar when it's implemented to those large corporates. Additionally, Cube's strategic position is not only limited to just onetime private cloud deployment. But in the long term, CUBE is a tour and a bridge for establishing a long term cooperation relationships with large key accounts for 2 years.

Speaker 3

And once those large corporates installed the Cube Cloud for themselves, they would start to connect the IoT devices, which are powered by Tuya to their own cube. So we're confident that after the private IoT platform is built for those large corporates, we can unleash the value of Tuya's IoT capabilities and solutions, generating subsequent long term IoT services related revenues. In SaaS and other products, we are also optimistic about the hotel SaaS, commercial lighting SaaS and the smart real estate full house SaaS products. The hotel industry with its massive room demand and the market segmentation offers immersed potential for a vast number of non luxury hotel brands seeking competitive differentiation. Smart hotel experiences such as intelligent ordering, contact less checking and home management are significant competitive advantages.

Speaker 3

Commercial Lighting, given its expressive lighting needs and the potential for expansion beyond lighting to include energy saving, conservation and management. And Gallipoli has a huge market space. The real estate industry has been subdued in China in recent years. But looking abroad, leveraging our strong influential outside of China, we have identified the demand for smart real estate and for home IoT solution needed this year in Southeast Asia and Australia markets. And we plan to start serving this regional customers next year with Cube products combined with Full House IoT solution and smart real estate solutions.

Speaker 3

And we have been signing contract with several large customers in Southeast Asia and Australia, including some very large distributor channel and the real estate conglomerate companies in those regions. So this is my question and I'll answer the first question. Operator, you can move to next question.

Operator

Thank you. Thank you. We have our next question from Liu Yang from Morgan Stanley. Please go ahead.

Speaker 5

Let me translate my question to English. The first one is regarding the geographic breakdown. I would like to ask management to provide more color on the contribution geographic contribution to your especially like Southeast Asia, China, U. S, Latin America, Europe, these areas? The second question is regarding the IoT SaaS business.

Speaker 5

Because this quarter, Tuya strategically gave up some of non core SaaS and other business. I would just like to confirm whether the approaches have come to an end or there's still some ongoing impact in Q4? Thank you.

Speaker 3

Okay. Thank you, Yan. Yes, I'm happy to answer about regional revenue contribution question. Before that, I want to first give a background. When we talk about the regional revenue contribution, we actually company do a lot of analysis to go to the fundamental revenue contribution.

Speaker 3

For example, European brands using Tuya's IoT pass to realize their IoT devices and then sell in Europe region, we will consider its ultimate revenue from Europe. But from a financial statement, the because all the brands, they provide orders usually to China OEMs and China OEMs give orders to us. So from a financial statement, it will be a revenue from a China OEM customer, but ultimately it's from Europe. So right now, when we're talking about the revenue contribution from region, we're talking about the ultimate revenues from which region. So this is an analysis done by a company.

Speaker 3

It's not 100% accurate, but it largely reflects the trend. So based on our calculation analysis in Q3, Europe has becoming the largest revenue contribution region. It's around 30%. And China and the United States each contribute to just less than 20% close to 20%. And the Southeast Asia and also Australia, we call this region that basically excludes China, the Asia Pacific, exclude China region, has grown pretty well in Q3 and has grown to around 15% revenue contribution.

Speaker 3

And also the entire Latin America has shown a pretty good trend in the last few years. So Latin America now contribute to the revenue just more than 10%. So that's the overall region contribution and we think this is a relatively balanced contribution and we will continue to use our technology to serve the clients from all the regions and to have the corporates and the consumers enjoy the value from the IoT technology. In terms of the second question, the major transition in the SaaS businesses in the past, we have certain revenue related to one time customers' needs. For example, OEM app, usually new brands a huge percentage of new brands, they would like to pay a one time fee for OEM app services and also there's customized software revenue from brand customers.

Speaker 3

So in the last 2 years, we have been focusing on to first is to focus on high quality customer rather than a huge numbers of new customers. So this one time new customer related OEM app revenue decrease. And this will maybe continue 1 or 2 more quarters then will be stable. And in terms of the customization software revenue and we feel recurring software revenue, for example, like the cloud storage and SaaS revenue, a more high value software revenue we wanted. And also, we want more developers to do the onetime customization work for brands for our conglomerate customers.

Speaker 3

So we also have introducing those onetime revenue opportunities to developers. So that's why onetime revenue customized software income also decreasing. This is pretty much stabilized by now. And going forward, we believe when the transition of SaaS and others business stabilized, it will still continue a healthy growth. So that's my answer to Yang's question.

Speaker 5

Thank you.

Operator

Thank you. We have our next question from Timothy Zhao from Goldman Sachs. Please go

Speaker 4

ahead. Let me translate myself. How does management see the competitive landscape in IoT industry and Twilio's competitive advantage? And also the second question is, what's the company's plan in using of capital? Thank you.

Speaker 3

Okay. Thank you. We believe IoT market is what with extensive future potentials. So we have been keep learning from the environment and improving our business model. And we believe Tuya occupy a unique position in IoT industry.

Speaker 3

And our advantages in the developer and open ecosystem are primarily reflected the following prospect. We broadly and inclusively support various devices types and protocols, cloud access models and OEM app developments, offering this to developers, customers and partners with 0 technical barriers for them, make it very user friendly open for our customers and developers. So Tuya position as a neutral technology provider supports customer and the brand in establishing their own IoT business and joining our huge ecosystems for interoperation user experiences. This comprehensiveness and the compatibilities allowed Twya to serve 95% of the global markets of independent commercial and brand customers. We also tailor our own capabilities to customer needs with a variety of products generating long term revenue, which this is our main product strategy.

Speaker 3

This approach is not confined to the OS based model of cloud license module in IoT PaaS products or key categories IoT device solutions nor is it limited to purely cloud development capabilities for SaaS development or private cloud deployments. 2 year prioritized its platform ecosystem and the customer service strategy over rigid constraints of revenue model amongst our performance metrics. This allow us to cover a broader range of global customer with more diverse developer products, making the platform more user friendly and open. So we believe this has been our key positioning and the values in terms of our accumulation in this industry for almost 9 years. And regarding the second question for the use of capital, in terms of capital usage, we maintain a rigorous approach in our operations, managing our funds and the budgets strictly and striving to preserve cash through safe highly liquid fixed deposits or other monetary fund instruments, meeting the needs of daily operations and the long term plans.

Speaker 3

Regarding capital expenditures, we will cautiously watch for suitable merger acquisition opportunities. Additionally, we might like other companies invest in necessary fixed assets for long term operations. So that's my questions that's my answers for Goldman Sachs' question. Operator, we can move to next question.

Speaker 2

Thank you.

Operator

There are no additional questions at this time. And I will now hand back to the management team for any closing remarks.

Speaker 3

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

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