Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s Third Quarter 2023 Earnings Conference Call. I'll now turn the call over to the first speaker today, Mr. Reg Chai, Investor Relations Director of Tuya. Please go ahead, sir.

Thank you. Hello, everyone. Welcome to our third quarter 2023 earnings call. Joining us today, are Founder and CEO of Tuya, Mr. Jerry Wang and our CFO Mr. Jessie Liu. The third quarter 2023 financial results and webcast of this conference called 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. Jerry Wang. Jerry will deliver his remarks in Chinese which will be followed by corresponding English translation. Thank you.

Hello everyone. Thank you for joining the Tuya's 2023 Q3 earnings conference call. Total revenue for third quarter of 2023 reached $61.1 million, marking return to year-over-year gross since the industry and economic downturn at the end of 2021. Revenue grew an impressive 35.7% year-over-year, or approximately 14% when adjusting for exchange rate fluctuations. We again achieved a record overall gross margin of 60 -- of 46.7% for the second consecutive quarter. Our firmly focus on cost reduction and operating efficiency improvements resulted in 26.2% year-over-year decline in our non-GAAP total operating expenses in Q3. More importantly, our non-GAAP net profit soared to $10.1 million, an increase of almost 5.7 times sequentially, representing a net profit margin of $0.165 cents. Net cash flow from operations improved both year-over-year and sequential was the net inflows of about $16.1 million. Our net cash position at quarter's coders and was a strong $961 million underpinning our long-term strategic development. Overall, the third quarter saw robust improvements across all key financial metrics, signaling the positive turning point as we navigate out of the industry's cyclical downturn. Despite persistent challenges to like fluctuating exchange rates and subdued consumers spending, our impressive performance in Q3 underscores our readiness for the post-destocking cycle and a broader recovery in the IT sector. As we look ahead, we are committed to expanding our quality customer base enhancing productions and venturing into new markets beyond consumer electronics. Let me now show more detail about developments since the start of the third quarter. In terms of our customer base and competitive positioning, our IoT PaaS unit has weathered nearly two 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…

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 on a year-over-year basis unless otherwise stated. In the third quarter of 2023, or our total revenue reached $61.1 million, up 35.7% year-over-year and continue to show a strong sequential improvement over the past four consecutive quarters. Similarly, during the quarter, we were seeing underdepreciation impact of RMB against the USD which adversely hits our total revenue by 7.3%. Our IoT product revenue in the third quarter was $45.8 million a year-over-year increase of 48.1%. In terms of categories, in the third quarter the most impacted discretionary consumer electronics categories over the past two years smart lighting and electrical products constituted the main force of this year-over-year rebound with the segment revenue grow about 140% year-over-year. Small and the big home appliance grew by 50% year-over-year. The third quarter 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. Moreover, with execution of product focused enhancement strategies, our core product lines such as vacuum robots, breakers and homolocks, with technological steps have grown by approximately 100% or 180% year-over-year. Regarding customers, our third quarter revenue primarily driven by the recovery in customer order size and improved customer revenue efficiency. Taking our main IoT part business as an example, our premium customers IoT parts revenue per customer in the third 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 third quarter with an average revenue per customer exceeding $20,000, setting a new historical high. Our smart…

[Operator Instructions] We have our first questions from the Mingran Li from CACC. Please go ahead.

Let me translate myself. Thank you, management for taking my questions. First off, congrats on your strong performance on. My query primarily concerns in my side and my questions are as follows. Firstly, is about the outlook for downstream demand in next year. And second is about the past -- in past which category showed the most growth potential and in our SaaS which downstream scenarios are comparatively more promising. My third questions is that what are the strategic trends and growth outlook across different global wages? Thank you.

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 earlier this year, the growth trend in discretionary electronic consumption which including IoT devices slowed down significantly compared to 2021. Afterwards, although it reached a relatively stable new balance, as inflation slowed. It was suppressed again with a sharp rebound on inflation in like July, August and September this year. However, at present we observed the end purchase of consumer electronics as in monetarily 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 observed the following. By categories since October, end 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. In terms of the region, we've 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. region showed overall actively 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 actively respond and seek opportunities according to different market situations. However, it should be noted that our IoT part revenue is affected by both the…

Thank you. [Operator Instructions] we have our next question from Liu Yang from Morgan Stanley. Please go ahead

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 Tuya -- actually like Southeast Asia, China, U.S. and Latin America, Europe area. The second question is regarding the IoT SaaS business, because this quarter Tuya strategically give up some of the non-core SaaS and other business. I would just like to confirm whether the projects have come to an end, or there is still ongoing impact in fourth quarter. Thank you.

Okay, thank you, Yang. Yeah, I'm happy to answer about regional revenue contribution question. And before that, I want to give a background, when we talk about the regional revenue contribution, we actually company do a lot analysis to go to the fundamental revenue contribution, for example, a European brands using Tuya's IoT parts, to realize their IoT devices, and then sell in Europe region will consider its ultimate revenue from Europe. But from a financial statement, because all the brands they provide orders, usually to a China OEMs and China OEMs keep orders to us. So from a financial statement, it will be a revenue from a China, OEM customers, but ultimately from Europe. So right now, when we're talking about the revenue contribution from region we're talking about the ultimate revenue is from which region. So this is analysis done by a company, it's not 100% accurate, but it's largely reflect 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 exclude China, the Asia-Pacific, exclude China region, has grown pretty well in Q3 and has grown to around 15% revenue contribution. And also, the entire Latin America has shown a pretty good trends 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 the 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.…

Thank you. Thank you. We have our next question from Timothy Zhao from Goldman Sachs, please go ahead.

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

Okay, thank you. We believe IoT market is locked with extensive future potentials. So we have been keep learning from the environment and improving our business model. And we believe Tuya occupy unique position in IoT industry. And our advantages in the developer and open ecosystem are primarily reflected the following perspectives. We broadly and inclusively support various devices types and protocols, cloud access models and OEM App developments, offering this to developers, customers and part partners with zero 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 brands, in establishing their own IoT business and adjoining our huge ecosystems for inter operation user experiences. This comprehensiveness and the compatibilities allowed Tuya 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. This approach is not confined to the OS-based model of cloud license module in IoT parts products, or key categories, IoT device solutions, nor is it limited to purely cloud the development the capabilities for SaaS development or private cloud deployments. Tuya prioritize its platform ecosystem and a customer service strategy over range of constraints of revenue model, a month of performance matrix. This allows us to cover a broad, broader range of global customer with more diverse developer products, making the hassle 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 nine years. And regarding the second question of for the use of capital. In terms of capital usage, we maintain a rigorous approach in our operations, managing our funds and budgets, strictly and striving to preserve cash through safe highly liquid fixed deposits or other money -- monetary Fund instruments, meeting the needs of daily operations and the long term plan. Regarding capital expenditures we're cautiously watched 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 you can move to next question.

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

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 earning calls. Have a good day.