Tuya Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 26, 2024

There are 7 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Tullia Inc. 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

Operator

Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker for today, Mr. Reg Chai, Investor Relations Director of Twilio. Please go ahead, sir.

Speaker 1

Okay. Thank you. Hello, everyone. Welcome to our Q2 2024 earnings call. Joining us today are Founder and CEO of TUYA, Mr.

Speaker 1

Jerry Wang our current CFO, Mr. Qi Liu and our Co Founder and incoming CFO, Alex Yang. The Q2 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 press release, which applies to this call as we will make forward looking statements.

Speaker 1

With that, I will now turn the call to our Founder and CEO, Mr. Yu Wang. Jerry will deliver his remarks in Chinese, which will be followed by corresponding English translation.

Speaker 2

Hello, everyone. Thank you for joining Tuya's 2024 Second Quarter Earnings Conference Call. The Q2 of 2024 was another milestone for Tuya with our revenue continuing to meet expectations and achieving a robust year over year growth of approximately 29%. Our 3 main business segments maintained strong gross margins, further reflecting our value proposition and the product advantages. Moreover, we've achieved our 1st costly non GAAP operational profit in the company's history with an operational profit margin of around 10%.

Speaker 2

This is an extremely encouraging profit level that not only validates the financial viability of Couya's business model, but also highlights our strong operational leverage and our relevant commitment to fulfilling our promises. With this, we have sequentially accomplished our short term operational targets and moving forward, we will continue to focus on long term revenue growth and enhancing profit margins. Today, on the occasion of this milestone, I primarily want to discuss with everyone the major facts concerning the company's fundamentals and long term development. Firstly, as the leading global cloud platform service provider, Tuya is at the new starting point in the smart technology and industrial landscape. This new beginning includes a better competitive environment and the reintegration of the smart consumer electronics and the business scenarios.

Speaker 2

In the Q2, our IoT Pass business experienced a year over year growth of approximately 32%, partly due to the industrial recovery and renewed consumer in 3 d A Zone affecting the robust XSpot data demand for household appliance and other consumer electronics during the quarter. More importantly, 3rd half's ability to acquire new clients and advance with the existing customers was amplified by more favorable competitive landscape. For example, in Europe, TUYA collaborated with France's leading energy integration firm, AIXtech, leveraging our Cardi net advantages in AI driven energy saving technology to deeply explore the energy saving market, which benefits from substantial policy subsidies and is the basic need in people's life. We aim to set industry benchmarks and jointly promote the implementation of sustainable smart solutions, Tuya provided software technologies including gen AI, strategic algorithm and platform capabilities as well as complete smart device solutions. In Latin America, we saw strong demand for smart transformation and the focus on opportunities for ISPs, collaborations in the past sector, servicing operator clients with Q and Smart Device solutions and exploring smart straight lighting projects in the software thin domain.

Speaker 2

Based on our extensive cooperation experience with leading telecom operator, we began replicating benchmark projects with leading service provider clients in countries like Central America, Colombia and Chile. In terms of consumer electronics brands, a 6 year old Brazilian smartphone brand emerged as one of the largest smartphone brands in Brazil, doubling its growth year over year. Our efforts in Latin America directly reflected in an increased revenue share from this region. In Asia Pacific, our operator customer base continued to expand with 2 additional operators deploying CUBE in the Q2, such as one of the largest telecom operators in VSPNAM and the other with the previous customer of Tuya's public cloud. The development of CUBE will help accelerate their smart business and open up opportunities for operations in smart home solutions and industrial solutions with Tuya.

Speaker 2

These customer collaborations in addition to recognizing Tuya's technology and the product capabilities as a basis for their initial partnerships also includes shifts from other platforms or modes of cooperation to Tuya. This demonstrates that companies are considering both efficiency and quality in their investments under the strong demand for smart solutions. In scenarios where there are limited choices for partners with such comprehensive technical service capabilities, Tuya possesses a significant competitive advantage in customer acquisition. 2nd, as a software technology company with over 80% of its revenue derived from various international regions, Twilio remains committed to delivering the best smart technology to global customers and consumers through different product models, ensuring they receive the best smart experience. This particularly includes the integration of JNEI Technology and the iteration and development of RISE new products.

Speaker 2

Smart solution is our high value integrated intelligent solution that was developed by combining generated AI, embedded operating systems and the cloud software capabilities. Since we formulated a product strategy for smart solution in 2023 and selected high value software intensive device categories that deliver complete smart products, revenue from smart solution has been growing rapidly, achieving approximately 44% year over year growth this quarter, while maintaining a gross margin of nearly 27%. We believe this gross margin level highlights the value of Tuya's software and products as it is comparable to or even exceeds the overall business gross margin of some leading brands that design, produce and sell their products. Our past products and the smart solution complement each other, meeting the personalized needs of different types of customers and providing Tuya with more substantial revenue. This is a highly efficient business model for Tuya for 2 main reasons.

Speaker 2

First, the complete smart solutions for device greatly assist the customers in expanding their product categories, helping them accelerate their go to market process to gain a competitive advantage. At this stage of smartification, a rich product metrics and the smart product ecosystem are essential for ever leading customers' business. In this regard, Tuya has a significant capability advantage and smart solutions will help us better serve customers and enhance customer loyalty. 2nd, the core of smart solutions lies in generating revenue through products with more high value software capabilities and obtaining correspondingly more meaningful gross profit amounts. Software capabilities have always been 3rds strengths and through reasonable and controlled R and D investments in complete product solutions, we can achieve more scalable revenue and profits for each smart device.

Speaker 2

As present, most of our new customer collaborations involve smart solutions for devices. For example, in the Q2, we expanded our cooperation with fixed European brand customers with smart solution orders exceeding 500,000 units, which is approximately $5,000,000 We also secured orders from temperature control valves, gateways and other devices from Germany's leading retail chain with the total value reaching $1,000,000 Additionally, we signed a multimillion dollar annual smart solution contract with the Dutch company 5Y at 3rd Global Developer Conference, continuing our deep cultivation of the European commercial lighting market, among others. Since the Q2, we have continued to invest in device and edge AI, aiming to significantly enhance the smart product experience through Gen AI, thereby providing customers with better product competitiveness and the users with more valuable smart experience and features. We believe that the sense of intelligence should be the innovation of user experience driven by AI, cloud and other technologies and generally promoting the increase in penetration rates. I will give 2 product examples.

Speaker 2

The first one is the Smart Life Sleep product we have already showcased to the market. Generative AI will understand consumers' personalized emotional needs in different scenarios and control the device to present corresponding colors in the blinking atmospheres. The other one is a pet camera enhanced with Gen AI capability, which can intelligently capture interesting moments of pets and automatically generate commemorative videos with suitable BGM and effects giving users a delightful price when they open the app. We see that customers are very eager for such products with differentiated competitiveness. On the other hand, we are also introducing G and A capabilities into smart scenarios, helping users configure their inside smart scenarios through simple competitions, significantly lowering usage difficulty and barriers and promoting the use and the polarization of smart technology.

Speaker 2

Additionally, continuing to build the developer platform through Gen AI and improving the developer efficiency and experience is also part of our platform competitiveness. In the second half of twenty twenty four, we will successfully launch more new products related to Gen AI for our customers and the developers. Finally, at the 3rd point, Tuya's operating margin and financial leverage structure in the second quarter have fully validated unique value of Tuya's business model. Moving forward, based on our existing experience and the foundation, we'll continue to strive for further financial improvements and share Tuya's long term value with all those who support us on our journey, our partners, shareholders and employees. This special cash dividend is Tuya's first distribution, totally approximately $33,000,000 an amount roughly equivalent to our non GAAP net profit for the first half of twenty twenty four.

Speaker 2

The non GAAP metric simply put reflects the results of the company's direct business decisions at the operational level, excluding other factors unrelated to the business model. Based on this, Tuya achieved non GAAP operating profitability for the first time this quarter and achieved a solid operating margin. At the same time, considering the company's abundant net cash and the fact that we have already had the positive operating cash flow for 5 consecutive quarters from the Q2 of 2023 to this quarter, We believe that right now is an optimal moment with a solid foundation, while Tuya is capable of sustaining long term development on its own to start providing long term rewards to all those who have supported KUYA ensuring to have success. That's all for the business update. Lastly, as some of you may have seen in this morning's announcement, our current CFO, Jessie, will be stepping down from her role as CFO and Executive Director on September 16 due to personal endeavors.

Speaker 2

Over the past 5 years, Jessie's expertise in capital markets and finance has been crucial in shaping Huya's long term development strategy and growth. Her efforts in driving operational optimization and efficiency management have made outstanding contributions to improving Huya's business and the financial profitability. I would like to take this opportunity during this call to express our best wishes to Jessie and thank her for her significant contributions to the company over the past 5 years. Next, Jessie will share some additional financial data with everyone.

Speaker 3

Thank you, Jerry, for sharing the company's growth strategies and the long term development philosophy. And also thanks for your kind words. Now I will discuss our financial results and provide more detail on the numbers that are covered by Jerry. Please note that all figures are in U. S.

Speaker 3

Dollars and all comparisons are on a year over year basis unless otherwise stated. In the Q2 of 2024, our total revenue reached $73,300,000 up 28.6 percent year over year. Excluding the adverse impact of exchange rates between the U. S. Dollar and RMB, our year over year growth would have been 31%.

Speaker 3

Most importantly, we achieved non GAAP operational profitability for the first time this quarter with a solid profit margin of 10%. This core financial figures demonstrate that Tuya's strategies and efforts are yielding positive results. As Jerry mentioned, we're encouraged by the fact that Tuya is in a stronger financial and operational position. Our IoT Pass revenue in the Q2 was $54,300,000 representing a year over year growth of 32%. Regarding product categories, we saw robust demand growth across all product categories, with home appliances experiencing the highest year over year growth of about 65% due to our efforts on delivering high value products to our customers.

Speaker 3

And the lightning and electrical achieved an approximately 30% of year over year growth due to the normalization of downstream inventory compared to the same period last year. From a regional revenue demand perspective, Europe continues to be our largest market accounting for about onethree of the total revenue demand. The Asia Pacific region and Latin America have seen a continuously accelerated demand growth with contributions rising clearly compared to last year. The Asia Pacific region accounted for around 1 third of the total revenue demand, while Latin America's demand contribution increased to nearly 10% nearly 10% to 15% in the second quarter. The structure of regional revenue contribution is similar to Q1, which is a state we are pleased to see and aim to maintain.

Speaker 3

On the customer front, we served approximately 3,000 customers in the Q2 of 2024, a slight decrease from the same period last year. The fluctuation in the number of customers in a single quarter is partly related to downstream customers' order placements and their own operational turnovers. Overall, however, our key account customer strategy has built a larger top tier customer pyramid with increased customer efficiencies serving as the best evidence. In Q2, our per capita revenue and the per capita gross profit continued to see significant year over year increase of about 53% 57%, respectively. Additionally, our 12 month DBM year has sequentially rebounded for 3 quarters, returning to 127% at the end of this quarter.

Speaker 3

The gross margin of IoT Pass was 47 point percent this quarter, remaining at a stable and healthy level, with an improvement of around 3 percentage points year over year. This improvement was driven by a higher proportion of high margin products in our portfolio, such as home appliances, including smart kitchen and the pet devices. Our Smart Solutions segment recorded revenue of $9,400,000 in Q2, an increase of approximately 44.2% year over year. During the quarter, we continued to achieve strong results in outdoor, central control and energy saving device solutions, such as smart temperature control devices. The transformation of the smart solution business has served as an important tool for us to increase customer thickness and meet their demands for competitiveness in device intelligence.

Speaker 3

As Jerry mentioned earlier, strategically, smart solutions complement our past products by providing customers with the smart devices they need in the form they desire, whether for the retail market or commercial projects. For Tuya, past leverage our established PBT ecosystem to win with volume, while smart solutions win with pricing through the quality and the value embedded in our software. The synergy between the two has driven growth in both revenue and profit as well as improving revenue efficiency. Our SaaS and other sector recorded revenue of CNY9.6 million in the Q2 of 2024. This was a stable quarter due to adjustments in revenue restructuring.

Speaker 3

Revenue of high value software value added services such as cloud storage and CubeSmart Private Cloud Solutions remained substantial. The overall gross margin for SaaS and others was 71% in Q2, consistent with our expectations based on the mix of services. Regarding the operating activities and expenses, I will provide a detailed view on a non GAAP basis, which excludes certain items to give a clearer picture of our operational efficiency. We continue to present our operating expenses primarily on a non GAAP basis. In Q2 2024, our non GAAP total operating expenses decreased by 15.6 percent to CNY 27,800,000 from RMB 33,000,000 a year ago, largely due to reduced employee related costs in R and D, sales and marketing and G and A expenses, as we now maintain a more streamlined team compared to the Q2 of last year.

Speaker 3

These results were achieved not only through internal organization and the team management optimization, but also through our continuous efforts to improve efficiency by embracing new technologies. Under our comprehensive strategy of embracing Gen AI, we are applying Gen AI to improve our internal development, operations, marketing and the logistic efficiencies, our workforce is expected to remain relatively stable this year. Regarding sales and marketing activities, we continue to adopt a strategy of appropriately increasing market activities in line with revenue growth and the market activity needs. For example, in the Q2, we received significant attention by hosting the Global Developer Conference in Shenzhen at the end of May. One of our next major events will be participating in IFA in Berlin in early September, where we will showcase the new experiences Gen AI can bring to the industry and developers.

Speaker 3

On the other hand, by co marketing with customers and hosting exhibitions, we help reduce our own costs, while also assisting customers in increasing their industry influence. Driven by strong revenue growth, enhanced efficiency, a stable gross margin supported by our products, strong value proposition and excellent control over expenses and costs, the Q2 marked Tuya's first ever non GAAP operational profitability. We are confident in this achievement because Tuya's business model allows for profit growth at the top line without requiring significant additional expenses. As a result, this profit will largely translate into profit increments for the company, which is why our non GAAP operating profit margin directly reached around 10% in the 2nd quarter as the first time achieving a breakeven. This milestone also indicates that Tuya has entered a new phase of business operations, one that is self sustaining.

Speaker 3

Finally, in the Q2, we continued to record approximately $12,500,000 in interest income, providing additional capital for our daily operations. We continue to follow a consistent capital strategy, prioritizing the protection of our principal while maximizing fund supplements. As a result, our non GAAP net profit reached $20,800,000 setting a new quarterly record. Operating cash flow continued to exceed $10,000,000 and our net cash reached over $1,000,000,000 by the end of the Q2. Overall, we are thrilled about the quarter to changes in our financial performance in the Q2 and believe that Tuya Now has a solid financial and operational foundation, allowing us to reward our supporters with cash dividends.

Speaker 3

Looking ahead, we are committed to continue driving top line growth, operating leverage, healthy cash flow and shareholders' return. This concludes my presentation on the company's financial performance. Over the past 5 years, Tuya has experienced significant growth and transformation, and I'm proud to see that Tuya today has become a public company with strong competitive advantages, sustainable financial growth, healthy profitability, and ample capital reserve. Alex, our co founder and colleague I deeply respect, will be succeeding me as CFO. Alex played a key role in early stage fundraising for Tuya before I joined, and he was also a key member during our IPO road shows.

Speaker 3

Post IPO, Alex also attended a lot investor communications, and he has a lot of capital market experiences. So he will join us for the Q and A session.

Speaker 4

Hello, everyone. I'm excited to engage in many discussions with you in the future.

Speaker 3

With that, operator, we are ready to take questions. Thank you.

Operator

Thank for the convenience of everyone on the call. Please stand by for our first question. And our first question is going to come from the line of Yang Liu with Morgan Stanley. Your line is open. Please go ahead.

Speaker 5

Let me translate my question. My question is about the future demand outlook. Given we'll be facing a relatively high base starting from second half last year, What will be the expected top line growth? And whether the almost 30% growth in first half can be sustained in second half? Thank you.

Speaker 4

Yes. Thanks for the question. This is Alex. So I'd like to address this question from both external and to a specific perspective. As a company embedded within its industry and at this current level, 2 years strategy is to seize right opportunities and take actions that align with our capabilities and vision.

Speaker 4

Thus, so the macro economy environment is crucial as it has been demonstrated over the past 3 years. However, what's even more critical is how the company position itself to capitalize on opportunity and expand revenue in the face of competition and market dynamics. So externally, we observe that after a recover in the first half of this year, the macro economy environment has stabilized. You might have closely followed China expert data for the first half and the second quarter, which serve as a significant indicator of global demand within the global supply chain. For example, driven by factors like inventory replenishment in Europe and the U.

Speaker 4

S, a new demand from emerging markets like Southeast Asia. The number of household appliances export from China grew by approximately 25% year on year in the first half of this year, according to Chinese custom data. So this is a robust result. Of course, smart devices extend beyond just home appliances, and we've seen similar trends in other categories, such as strong recovery and growth in the smart lighting in the first half, with consumer security products also performing solidly. Additionally, in observable market, we've noted that some downstream companies in non smart sectors of consumer electronics have also shown quite good performance.

Speaker 4

With their market positioning and value chain stages being similar to this who our customers in consumer electronics sectors. Of course, you might have noticed by July data, although household appliances export in July still achieved a year on year growth of 16% in value and 23% in volume, there was slightly slowdown in momentum on a month on month basis. This is a normal phenomenon due to the seasonal and cyclical nature of the consumer electronics with peak and off peak seasons. Generally, Q3 is a relatively off season, while Q4 is a peak season due to the promotional preparation before Christmas and Black Friday. So taking these factors into accounts, we believe in the industry is in a positive state of development.

Speaker 4

The next key question is what Twilio will do and should do. In this context, Jerry's earlier presentation has also outlined Twilio strategy and focus area quite clearly. Currently, 2 year operates a cubic model comprehensively covering the intelligence needs of the enterprises. So the x axis represents the diverse needs of customers. For instance, some customer poses strong supply chain capability, but the lack of a cloud and software intelligence, where 2 years past products come into play.

Speaker 4

Others need complete end to end smart device and business capabilities, which is where 2 years smart device solutions and CubeSmart private cloud products meet their needs. Some other customers require operational functions, so Tuya offers SaaS software products like the cloud storage. So that's for X. And the y axis represents industry diversity, covering everything from single smart consumer electronics, retail products to a multiple categories ecosystem of smart homes, commercial scenarios and specific industry attributes like the space saving energy efficiency, all fully supported by 2 platforms. So lastly, the z axis represents the geographical diversity.

Speaker 4

As a global smart cloud platform service providers, our customers, developers and ecosystem partners span the globe, providing a solid foundation of our overall business and performance to tackle regional challenges and seize opportunities. You've seen that our European business remains steady, but the growth rate in Latin America and Southeast Asia are even more impressive. So this has contributed significantly to the 29% year on year revenue growth in the first half and the 10% non GAAP operation margin achieved in Q2. So looking ahead to the second half of this year, it's well known that due to the ordering pattern of the downstream smart consumer electronics industries and a high base of year on year revenue growth in Q3 on 2023 as comparable period, it's challenging to provide an accurate year on year number today. However, considering all the above characteristics and competitive advantages together, we remain optimistic about continuing year on year growth in our core business in the second half of this year.

Speaker 4

Thank you.

Speaker 1

Thank you.

Operator

Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Timothy Zhao with Goldman Sachs. Your line is open. Please go ahead.

Speaker 6

Thank you for taking my question. I have two questions here. Your question is regarding the OPEC and operating profit trend in the second half of this year. And secondly, after a special dividend announcement of the measurement of the longer term shareholders in the queue?

Speaker 3

Okay. Thanks, Timothy. I think your first question is about our forward looking of operating profitability. And the second question is about our long term view of cash dividend. So I would take on this first question and Alex will take on the second question.

Speaker 3

So achieving profitability is not something that can be decided 1 quarter and accomplished next. It is fundamentally about the business model and the strategic direction followed by the collective execution efforts of the entire organization. Reaching non GAAP operating breakeven this quarter is a significant milestone and achieving a 10% margin on our first attempt is something we considered to be a strong outcome. Moving forward, we will continue to balance growth with profitability, with the next goal being to expand our scale of revenue so that the margin and profit figures become more meaningful. To this end, we have a solid foundation and experiences that we can share.

Speaker 3

First, Tuya's income statement has a rather clear financial logic. Thanks to our business model, our enterprise services developer community and platform, we do not need to make significant incremental investments to acquire customers to generate revenue. So this means that the additional gross profit generated will under effective cost control translate directly into profit and a significant portion. Our overall gross margin is a structural result of the combined gross margins across our 3 major business segments, which themselves reflect market competition and product value. While there will be quarterly fluctuations, the margins remain stable overall.

Speaker 3

From a gross profit perspective, our gross profit has seen considerable and efficient growth over the past year, alongside the revenue and the current size of our team. This growth in gross profit is our source of profitability. 2nd, our cost control measures have been evident to everyone. Since the end of 2021, we have consistently maintained a downward trend in expenses, with non GAAP operating expenses remaining slightly over $30,000,000 over the past several quarters. Admittedly, the return to revenue growth has given us the confidence to modestly increase market and sales investments as needed, but we will rigorously control costs overall, balancing the need for operating leverage and profitability and ensuring that every dollar is spent wisely.

Speaker 3

Overall, on the operational side, we hope and are willing to see non GAAP quarterly operating margins maintaining a similar level to Q2. Regarding net profit and net profit margin, due to the expectation of interest rate cuts and considering market volatility beyond Xueya's control, we will strive to secure supplementary financial gains while ensuring capital protection. As for GAAP operating profit or loss in net profit, they may experience quarterly fluctuations due to some non operational factors, such as share based compensation expenses and the class action litigation costs, etcetera. However, we believe this doesn't affect the judgment of Tuya's fundamental business operations. And that's we'll go for the big dividend question.

Speaker 4

Yes. So the dividend is a topic of great interest to everyone. So let me take the opportunity to expand the special dividend announced. So first of all, it's called special dividend because there is no legal definition of non GAAP earnings. Under GAAP, Sotria has not achieved a full year profitability due to relatively large non cash share based compensation expenses.

Speaker 4

So which make it difficult to issue a final or annual dividend from a compliance or prudence standpoint. So however, the actual dividend amount of approximately RMB 33,000,000 corresponds to 2 years' non GAAP net profit for the first half of this year. So we base this decision on our current non GAAP operating profit level, cash flow, net cash position and other relevant core financial indicators, planning the dividend amount and the timing based on all these considerations, including actual net profit. We do believe that it is right approach to prioritize performance first and then build our long term and sustainable shareholder return model, while ensuring the company can invest and grow according to its strategic needs. Thank you.

Speaker 3

Operator, we can go for next question.

Operator

One moment please. And our next question is going to come from the line of Kai Zhao with CICC. Your line is open. Please go ahead.

Speaker 2

Thanks, management. This is Ben from CJS Research and congratulations for the strong quarter. So my question is regarding the Gen AI. As you mentioned, Gen AI is an important strategy for Huya. Could you further share some of your progress in Gen AI such as key AI functions, typical customer case, customer feedback and your further AI investment budget as well and some color on the gen AI monetization progress would be great.

Speaker 2

Thank you.

Speaker 4

Yes. So currently, we are actively developing several smart devices products based on GM AI technology, which covers the various categories such as smart watches, smart rings, AI headphones and smart speakers and AI glasses. So each products aim to further integrate large model capability on top of their existing functions to provide a more personalized and intelligent user experience. So for example, smartwatches and rings will be able to generate more personalized AI reports to users, enhancing interactivity through AI watch faces or GPT voice assistance. So AI headphones currently support transcription and summarization.

Speaker 4

And we plan to expand to the capability to include real time transcription and translation in the future. So those categories complement TUYA's smart ecosystem well, which is why they have gained popularity in emerging markets like APAC and Japan. So additional of GM AI capability will significantly enhance the competitiveness of 2 year solutions, creating better customer engagement and the user experience. So those products are currently under intensive development within ourselves. So with many projects expected to enter trial productions in the Q4 of this year, for example, we plan to launch smart speaker products with the GM AI capability, including a Chinese version in Q4 and gradually introduce this AI capability into our PaaS offering for developers.

Speaker 4

So overall, revenue from AI smart devices and software products may begin to manifest gradually starting next year. So regarding the monetization of GM AI, we believe there are 2 relevant feasible approaches. So the first is to integrate those capability into products for customers and developers to use as they see fit. This way, the products they create will inherently process streaming capability, which can be sold to downstream end users such as consumers who can subscribe to GMI features through their smartphone on a pay per user basis. So this is classic SaaS model, so which has the advantage of now imposing additional costs on our customers, thereby helping to us differentiate products gain market shares.

Speaker 4

With stable revenue generated through value turning payment at the end user level we have. The second approach is increasing GMAT capability as additional and a profit price within our products, such as a PaaS or smart solution model. So the benefit of it is allow us to precisely target customers who have real competitive need and a strong desire to excel into the Smart Business. So we will select the most suitable and business driving charging model for different category and scenarios.

Speaker 2

Thank you.

Operator

Thank you. We've reached the end of the call, and I would now like to hand it back to the management team for any closing remarks.

Speaker 1

Okay. Thank you all again for joining our call today. If you have any 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 call. Have a good day today.

Speaker 1

Thank you. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.

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Key Takeaways

  • In Q2 2024, revenue rose 28.6% YoY to $73.3M and Tuya achieved its first non-GAAP operating profit with a ~10% margin, validating its business model’s financial viability.
  • The IoT Pass segment grew 32% YoY, led by 65% growth in home appliances and strong regional demand in Europe, Asia Pacific, and Latin America.
  • Smart Solutions revenue jumped 44% YoY with a ~27% gross margin, driven by high-value device solutions and the integration of Gen AI to enhance product differentiation.
  • Tuya declared a $33M special cash dividend—equivalent to its H1 non-GAAP net profit—highlighting robust cash flow generation and a net cash position exceeding $1B.
  • Tuya is ramping up Gen AI investments in next-gen smart devices (e.g., sleep products, AI pet cameras) and PaaS enhancements, targeting subscription and premium monetization models.
AI Generated. May Contain Errors.
Earnings Conference Call
Tuya Q2 2024
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