How much can a company change in four years.

Graffiti Intelligence showed us his answers.

From helping customers achieve intelligent equipment more efficiently and competitively, graffiti intelligence spans the broader field of spatial intelligence, creating a smart solution cloud platform for “PaaS+SaaS+ smart devices including Cube Smart Private Cloud”, and building their own intelligent businesses for global giants through Cube Smart Private Cloud.

This is not only a technological leap forward, but also an ecological evolution.

On May 21, Graffiti Intelligence (hereinafter referred to as “Graffiti”) released a quarterly report. For the first time, the company achieved non-GAAP profit in the first quarter. After going through the wind and rain, graffiti ushered in the next period of rise.

01

Entering a new stage, the Graffiti Quarterly Report presents multiple highlights

There are four key points in this financial report:

1. Revenue and profit performance can be summarized as: revenue exceeded expectations and reached new highs in the off-season

In Q1 2024, Graffiti achieved total revenue of US$61.7 million, a year-on-year increase of 29.9%, exceeding market expectations. In terms of profit, Graffiti has achieved stable profit for 4 consecutive quarters, and non-GAAP net profit increased to US$12.3 million during the reporting period. In particular, the first quarter was usually a low season for graffiti revenue. Graffiti still achieved impressive results, fully confirming its strong profitability.

2. Combines rapid growth and high-quality growth

The company's financial indicators have improved across the board. In Q1, the company's gross margin reached a new high of 47.8%; net operating cash flow improved significantly month-on-month to US$14.5 million; cash on account was nearly US$1 billion.

3. The largest business segment ushered in a full recovery

The IoT PaaS business occupies an important position in Graffiti's overall revenue, accounting for more than 70%, and is undoubtedly the company's largest and most core business segment. Q1. IoT PaaS revenue was $45.6 million, up 35.7% year over year, and IoT PaaS net revenue expansion rate increased to 116% year over year.

“On the one hand, this growth is due to a recovery in overseas consumer electronics demand and a steady increase in global demand for intelligence, and on the other hand, due to our increasing share of the market, the elimination of major competitors in the industry's downward cycle from 2022 to 2023, and the shift of more leading brands from in-house IoT to our platform. We also continue to help our brand customers quickly launch new intelligent products through new product development and innovation.” Wang Xueji, founder and CEO of Graffiti Intelligence, said.

4. Business upgrade achieved good results

The company incorporated capabilities such as generative AI, embedded, and cloud software into Smart Solution smart device solutions. During the reporting period, the sector's revenue increased 37% year-on-year to US$7.5 million.

This first-quarter report card is proof that graffiti got off to a “good start.” The impressive opening performance not only indicates a high level of prosperity for the whole of 2024, but also probably marks the beginning of graffiti entering the next era of the intelligent world along with new technologies such as AI.

At this moment, it is necessary to re-examine the value growth potential of graffiti.

02

Resonance of the three factors from the perspective of the Bass model

We have various theoretical frameworks for evaluating the innovation value and commercial value of technology companies. Among them, the Bass Innovation Diffusion Model (Bass Model) has become a key tool for measuring the value growth of technology companies.

Technology products usually show distinct characteristics of innovation diffusion, and the Bass model can accurately depict the behavior of innovators and imitators, thus vividly showing the complete process of high-tech products from initial acceptance to widespread adoption.

By thoroughly analyzing the behavior of early adopters (innovators) and late-stage followers (imitators), the Bass model reveals the dynamic mechanism of market diffusion. Its key parameters — market size (M), imitation coefficient (q), and innovation coefficient (p) — provided us with in-depth market insight.

The outstanding performance of graffiti intelligence is an example of the synergy of these three factors.

Market Size (M): Breaking through borders

Focus on the trillion-level market

Market size (M) represents the potential volume of sales or total demand; in other words, it indicates the market limit that a product may reach.

The business boundaries of graffiti are rapidly expanding and entering a whole new phase.

Intelligent equipment is a key fulcrum for the early development of graffiti intelligence. With its IoT PaaS service, Graffiti helps enterprises achieve efficient product intelligence upgrades. In the IoT market, which is full of giants, graffiti has successfully occupied a considerable market share with this fulcrum.

Continued advances in technology and changes in market demand have enabled graffiti intelligence to continuously break through its own boundaries. Since four years ago, the company has moved from the intelligence of a single device to a new field of spatial intelligence. Today, Graffiti focuses on intelligent management and optimization of the entire environment and scenario, and its business scope has expanded to include spatial intelligence in industries including apartment hotels, community parks, travel and energy, and further spanning the “PaaS+SaaS+ smart device including Cube smart private cloud” smart solution cloud platform.

The huge variety of application scenarios has contributed to the growth of the TAM market by tens of times. This is a key transformation, marking the company's entry into a broader market, entering a new stage of development, and laying the foundation for the company's value growth.

In addition to the positive impact of market size, the behavior of early adopters (innovators) and late-stage followers (imitators) affects market penetration. The behavior of these two is described by an innovation coefficient p and an imitation coefficient q, respectively.

Innovation Factor (p): Embracing AI

Continue to promote innovation and help developers “upgrade”

A high innovation coefficient p-value means that the product or technology is highly attractive and can quickly attract early adopters.

Compared to the imitation coefficient, the innovation coefficient reflects more of the ecological effect and “siphon” effect of innovation. The acquisition of this part of customers also essentially relies on the appeal brought by a strong level of innovation.

For a technology product-driven company like Graffiti, it fully embraced generative AI in early 2023. And the layout surrounding the AI field is becoming an important point of interest for opening up greater market potential and creating greater commercial value in the future.

Natural technical genes enable graffiti to fully explore and utilize AI technology to continuously promote innovation. In particular, based on the company's cloud platform technology genes and huge smart hardware ecosystem, graffiti is also being fully invested in the research and development of generative AI, continuously exploring development opportunities in the fields of intelligent equipment, spatial intelligence, and intelligent solutions.

Among them, in the direction of spatial intelligence, graffiti adds its AI capabilities to the daily management of spatial scenes, so that users can obtain generative AI device functions and management experiences, AI-driven intelligent scene experiences, or scene analysis and linkage solution recommendations.

Graffiti Intelligence's Smart Solution smart solution can be said to be a microcosm of its innovative strategy in the AI era. It not only reflects the technical depth of Graffiti Intelligence in the fields of AI, AIGC, embedded operating systems, and cloud software, but also shows its ability to integrate these technologies to create greater customer base value.

For example, in devices such as smart central control systems, smart watches, and smart light strips, graffiti intelligence greatly enriches the user's interaction experience and improves operation efficiency through integrated AIGC-enabled voice recognition technology. This intelligent interaction method enables users to achieve more accurate and convenient home control, leading the new trend of smart home life.

At the same time, in the field of pet equipment, Graffiti Intelligence uses GenAI and other technologies to thoroughly analyze pet behavior patterns, customize personalized toys and games for pet owners, and create highly interactive sound and visual effects. These innovations not only bring more entertainment and happiness to pets, but also deepen the emotional bond between pets and owners, providing pet owners with a richer and more loving product experience.

It is worth mentioning that Graffiti launched its own big AI model, Cube AI, at the Global Developers Conference on May 29. Thanks to the large scale of smart devices in the global graffiti ecosystem, AI will generate optimal energy saving and emission reduction strategies based on customer IoT data and specific scenario requirements to provide customers and users with leading AI technology product value in the field of spatial intelligence.

Through these specific application examples, it is easy to see that graffiti transforms the advantages of AI technology into actual value brought to customers and users. This not only truly empowers customers to improve their core competitiveness, but also further strengthens customer loyalty and satisfaction with the smart graffiti brand.

In the wave driven by AI technology, graffiti not only enhances their own innovation efficiency, but also greatly facilitates the adoption and application of their products and services, helps developers “upgrade” their development capabilities, and helps them efficiently make competitive products. At the same time, it has further accelerated the widespread application and spread of innovative technology. The Graffiti developer platform played a central role in this process, invigorating a multi-intelligence ecosystem involving brands, OEMs, partners, and end users.

As a global cloud developer platform, Graffiti is committed to integrating AI technology into the core of the development process, bringing developers the most avant-garde, convenient and efficient development experience. For example, developers can use AIGC capabilities to enter the development process through simple dialogue and interaction, generate UI interfaces, or check problem logs and return code suggestions through AI.

In addition, AI will also help developers analyze the strengths and weaknesses of user feedback and product features, so that developers can improve, iterate and innovate products. By the end of the first quarter, the number of registered developers on the graffiti platform had exceeded 1 million.

The continuous iteration of AI capabilities on the developer platform allows graffiti to help developers interact and communicate widely between smart devices, providing a fertile ground for technological innovation. This AI ecosystem not only accelerates the evolution and iteration of technology, but also injects innovative vitality into the entire industry, leading the entire industry in a more efficient and intelligent direction

Imitation coefficient (q): building a highly sticky customer base

Open up a global service network

The innovation coefficient p mainly affects the early stages of the diffusion process, that is, the introduction period of a new product or technology, while the imitation coefficient q plays a greater role in the later stages of the diffusion process, promoting the spread of the product or technology to a wider range of consumers.

One aspect of a higher q value is the recognition of customers who have accepted products and services. Customer stickiness can be said to be an important reference basis. Another aspect is the scalability and ease of use of products and services, which can make products and services more accepted by customers.

Through the construction of the “PaaS+SaaS+ Smart Device including Cube Smart Private Cloud” smart solution cloud platform, Graffiti has successfully created a series of benchmark cases, laying the foundation for its high imitation coefficient. Thanks to the positive reviews from existing customers, it has also attracted more potential customers to start using its products and services.

As Wang Xueji mentioned during the performance call this time, the company observed that a group of new-face developers and brand customers on the cloud platform are thriving. Among them are a number of overseas Chinese e-commerce companies with more R&D and brand capabilities compared to e-commerce 45 years ago, as well as well-known brand players from North America, India, and Europe that focus more on localized service models. A steady base of new and old customers has enabled the company's overall growth rate to exceed that of the industry.

Here, you might as well use the example of cooperation with the French company Xanlite to see in detail how the company can achieve a high “imitation coefficient.”

The cooperation between Graffiti Intelligence and Xanlite began with the intelligent upgrading of lighting products. As early as 2018, the two sides joined hands to launch the smart home brand KozII. Since then, KozII has become one of the top smart home brands in France. As Xanlite responded positively to France's energy saving policy, it began to participate in energy transition-related businesses.

In May of this year, the cooperation between the two sides reached a new milestone. At the “Zhejiang-France High-tech Industry Innovation Cooperation Matchmaking Conference” held in Paris, the two sides formally signed a cooperation agreement to jointly promote a new energy saving path for smart homes. In this partnership, Graffiti Intelligence will use cutting-edge technologies such as GeNAi and cloud computing to work with Xanlite to accelerate the implementation of smart home solutions in France and Europe, bringing families a more efficient and greener smart living experience.

From the initial collaboration on lighting products to advancing the integration of advanced energy-saving kits and smart home systems, it is easy to see Graffiti's remarkable achievements in meeting customer needs, providing lasting value, and deepening partnerships. This not only reflects the company's outstanding performance in terms of customer stickiness, but also shows its ability to enable strategic transformation and continuous innovation at different stages of enterprise development.

In fact, the experience of cooperation with Xanlite in France also gave it an opportunity to further expand its cooperation network in the region. In 2019, Graffiti also established a partnership with French industrial pioneer Schneider Electric. This collaboration focuses on the development of the Wiser smart home automation platform and aims to jointly promote the innovation and application of smart home solutions by integrating the technical advantages of both parties.

In the same year, Graffiti also reached a deep cooperation with CALEX, a well-known European lighting company, at the Expo. Previously, Graffiti Intelligence also helped CALEX's lighting products complete the coverage of mainstream retail channels in about 6 countries in Western Europe.

Through this series of collaborations, Graffiti Intelligence has not only strengthened its technical strength in the smart home field, but also further expanded its influence in the European and global markets through the brand influence and market position of its partners.

In fact, Graffiti Intelligence's cooperation cases are not limited to specific regions, but span many countries and regions, which continues to enhance market expansion opportunities for its products and services.

For example, cooperation projects with Schneider Electric were successively implemented in markets such as Asia Pacific, Australia, and Europe during the subsequent cooperation process. Another example is the cooperation reached with TCL in various categories of home appliances, and Graffiti has successfully brought smart devices to customers in dozens of countries where TCL has spread.

It can be said that through a series of collaborations around the world, Graffiti has continued to expand its market influence, and has also used the market position and user base of partners to enhance the credibility of the brand and effectively promote the market spread of products and services.

As mentioned in the financial report, the company's continued overseas expansion and a more balanced global business layout have made the graffiti business more resilient and promising than three years ago. “We can keenly sense and capture new intelligent trends in various regions of the world, and better serve global graffiti customers and Chinese manufacturing companies going overseas.”

03

epilogue

From the perspective of the Bass model, it is easy to see the significant value growth potential of graffiti intelligence. It can be said that the expansion of market size (M), technological leadership of innovation coefficient (p), and customer stickiness construction of imitation coefficient (q) have jointly built the foundation for the company's continued growth.

With the continuous advancement of technology and the continuous expansion of market demand, graffiti intelligence is also becoming an important force driving the development of the intelligent era with its strong innovation ability and global layout ability. (End of full text)