00:00I think we can get started with a bigger picture question because if there's anything that's really clear out of the CS, I think is that real move into embodied or physical AI, so the integration into devices now, but how does that actually work for 2U Smart and what is your place in the ecosystem as well?
00:17Yes, and thank you for having us, Anna. So 2U, what we offer is we're running as an AI cloud platform and open the toolkit for any type of hardware developers all over the world who want to design any type of smart devices easily and efficiently. And so through that, we're building developers' ecosystems, connecting the manufacturers, the design houses, the engineers, and brands and distribution channels together.
00:41So it's essentially about enabling IoT or Internet of Things and devices. So where are the companies that you're working with? Where are they from? And what are the sorts of geographies that you're targeting? Because obviously this is really a key market for Chinese companies that are looking to get exposure to the U.S. and other parts of the world.
00:59Yeah, so for us, we're kind of like the really global footprint all over the world. Right now, we help the brands all over the world. Over 7,000 brands come from over 100 countries out there. And behind them, there will be manufacturers cover over 12 countries. So we're working with every single hardware manufacturer basis all over the world right there.
01:19What's the consumer adoption look like? Because I think this is obviously a very specific audience that comes to CES and is really interested in being, I guess, on the edge of these devices. But for the everyday consumer, where are they at in terms of adoption of AI?
01:34Yeah, so for us, those devices my customers built and selling to, I found that close to 20% of the users come from the United States. Around 30% come from Europe, 15% come from China, and 16% come from out of China in Asia, and 12% come from Latin America.
01:53And I still have 5% come from Africa and the Middle East. So it's quite widespread out. And it showed us that the AIoT can really help people to make their life easier. So it will be the common demand for the people's lives.
02:05I was interested in your latest earnings that you had at the end of last year that in the call, it did come up a few times about this softer demand you're expecting for the fourth quarter, which I found a little surprising, just given that there's usually a seasonality factor attached to fourth quarter demand as well.
02:21So how did that actually pan out, that period? And what is your expectation for 2026?
02:27Yeah, I think that eventually the Q4 will comply with what we expected. It will be kind of the soft term because of the macro economy. We'll find that there will be a lot, lot of a challenge intensity through that.
02:38But in 2026, we found that we will be bouncing here. The first one is that most of the companies, including my customers, right, people cannot survive in a very conservative level of operation anymore.
02:50People still, the nature is grow the business, so looking forward to expand. And the second one is that looking around for the CES, we found that we have more and more categories which don't have the AIoT before, but this year they're starting to embrace the AI into their own application.
03:05So which means that we open more new doors and have a larger total adjustment market.
03:09So what would be your prediction then in terms of growth in percentage terms? How much are you expecting to expand this year?
03:18I think that for this year, we're looking forward to have a more decent growth. So like we expected at the beginning of the 2025. So it will be a good double digit number there.
03:27A double digit growth you're expecting for 2026. Okay. Let's talk then about navigating some of the issues, though, because tariffs has been a big one.
03:37And you've spoken a bit about geopolitical uncertainties. Do you see that having a bearing on to you this year?
03:43I think that tariffs always change. We want to try to do the international business, right, because it's adding cost.
03:49But the most problem is not about the cost. It's about whether you have a stable cost.
03:54So I think for the 2025, the most challenging part is that you have a dynamic, I mean, momentum that people are not sure what eventually the cost is going to look like.
04:06And so finally, we spend a couple of quarters across different countries, right. We have the segment for most of the countries.
04:13And then people know that, okay, what will be the next year cost going to look like? How can we set the price? And then people know what to do with that.
04:23You're looking to repurchase up to 10 percent of shares that have been issued in a share buyback program that you just recently announced.
04:31Given the size of the opportunity and you're saying that you can see that big growth this year, why are you looking at a share buyback now or repurchase now as opposed to more aggressively spending on R&D, for instance?
04:43I think the first one that we have a deeper pocket that even actually all the buybacks actually have enough capital to invest on my R&D, invest on my new innovations.
04:55So that's the first one. And the second one that the buyback has shown that we think that right now the share price is underevaluated based on what my business model looks like and what the future is going to be.
05:06So the buybacks that we think will be on the financial side will be valuable for the company to increase my ROE.
05:13But don't try to balance on that because the buybacks, people understand that they're going to reduce the free flow.
05:18So we try to balance the liquidity and the right ROE of the overall company.
05:23If you think the share price is undervalued, what is the fair price, do you think, or where do you think it should actually be sitting?
05:31Oh, gosh, I think that's a year.
05:32If you think about that, if we manage to maintain a very good growing speed with a very good financial model about the profitability and also on the right now that the market, I mean, the sector we're in right now is AI hardware.
05:51I think that you can easily find the right comparables on that part.
Be the first to comment