Tuya Q4 2024 Earnings Call Transcript

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February 26, 2025
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Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc. Fourth Quarter twenty twenty four 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 will now turn the call over to your first speaker today, Mr. Raj Chai, Investor Relations Director of Tuya. Please go ahead, Raj.

Reg Chai
Reg Chai
Investor Relations Director at Tuya

Thank you. Hello, everyone. Welcome to our fourth quarter twenty twenty four earnings call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang and our Co founder and CFO, Mr.

Reg Chai
Reg Chai
Investor Relations Director at Tuya

Alex Jiang. The fourth quarter twenty twenty four 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 announcement, 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.

Reg Chai
Reg Chai
Investor Relations Director at Tuya

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

Moderator

Hello, everyone. Thank you for joining Tuya's fourth quarter twenty twenty four and full year twenty twenty four earnings call. In 2024, we achieved nearly 30% year over year revenue growth and reached two significant financial milestones. First, our inaugural quarterly and annual non GAAP operating profitability and second, our first ever annual GAAP net profit. The former validates TUI's unique business model, while the latter provides us with greater flexibility at the statutory shareholders' equity level, enabling us to take further strategic actions.

Moderator

These achievements strengthen our confidence in the company's future growth. 2024 was a year of unwavering commitment to AI research and development. In the second quarter of twenty twenty four, we launched the Tuya's proprietary AI large model, spatial large language model, while continuing to advance on device AI. Our goal is to leverage Gen AI to significantly enhance smart product experience, providing our customers with superior product competitiveness and end users with more valuable smart features and functionalities. We firmly believe that AI, IoT and cloud technologies will drive a new era of user experience and substantially increase the penetration of smart devices.

Moderator

Over the past year, we have almost made significant strides in upgrading Tuya's unique software and hardware integrated business model, extending beyond path into a hardware solution model, whether in our core strength smart home or in commercial verticals such as hospitality, real estate, mobility and renewable energy, we're dedicated to providing developers with increasingly competitive hardware solutions. This allows our customers to expand their competitiveness beyond powered by Tuya software capabilities into supply chain and hardware advantages. As a result, we have gained further customer recognition, driving an approximately 58% EOB growth in our smart solution revenue stream. Looking ahead to 2025, we will be fully committed to building the global AIoT developer ecosystem. This includes ongoing iterations of our AI agent and TuyaOS developer products as well as AIoT open source software solutions such as Tuya Open to build long term competitive advantages.

Moderator

Meanwhile, we remain committed to capitalizing on growth opportunities in international markets, accelerating the development of AIoT and AI applications worldwide and delivering long term value to our shareholders. To allow more time for discussion and Q and A, our Co Founder and CFO, Alex, will now provide more details on our business and financial performance.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Hello, everyone. I'm Alex. Today, I'd like to share an overview of our 2024 performance and our thoughts for the future. Before that, let me summarize our recent financial results. We wrapped up Q4 twenty twenty four on a strong note, delivering about $82,000,000 in revenue, representing a solid 27.4% year over year growth.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Given the higher base for the prior year, this growth demonstrates strong momentum. Our Q4 pass revenue reached about US59.3 million dollars up 25.7% year over year, driven by our strong foundational market position and a vertical position, enabling rapid transmission of customer expansion and end market demand into revenue. SaaS and others revenue was about $11,500,000 up 21.1% year over year benefiting from the stable growth of SaaS valued added services across our extensive devices space. Smart solution revenue reached about $11,300,000 growth by $45,500,000 year over year, supported by robust data demand across categories such as gateways, central controls and energy efficiency solutions. So for the entire year, our total revenue reached about $298,600,000 making nearly 30% year over year growth.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Our overall gross margin remains stable at around 47%, while annual operation expenses declined by approximately 10% year over year due to the continuing cost discipline of the company. As a result, revenue and gross profit growth efficiently translated into operation profit, leading to a 7.4% non GAAP operating margin and a 25.2% non GAAP net profit margin with GAAP profitability achieved for the first time as well. On the cash flow side, we generated around $80,400,000 in positive operating cash flow for the 2024. Following the dividend declared in August and paid in October, we ended Q4 with a net cash balance of over $1,000,000,000 maintaining a strong liquidity position. Throughout 2024, we observed sustained growth in end market demand, stable customer relationships and their increased investment in a smart product line and the rapid education and adoption of JNI and LAMs.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So this drives a positive response from the consumer electronics industries towards intelligence trends. For TUI, our unwavering commitment to the developer platform model combined with our unique software and hardware integrated approach and customer centric product expansion strategy, So that has amplified those industry tailwinds, helping both of us and our customers achieve solid business results. In 2024, the number of IoT PATHs premium customers grew by 11% to two ninety eight. Our revenue dollar expansion rate, so DBNER, exceeded 122% at the end of the Q4. Marching five consecutive quarters above one hundred percent and three consecutive quarters above 120%.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Our products and services offering provide customers with an all necessary technology and software to efficiently create competitive smart devices and bring them to market. So the dBA ER matrix reflects our continued ability to enhance our customers' competitiveness through 2U's technology leadership. As a B2B company, our top 10% revenue contributing customers maintained retention rate of about 97%, underscoring a strong thickness of our neutral, open and scalable technology platform. So our strategy strategically focus on key accounts has driven efficiency improvements too, evidently by about 3740% year over year increase in average revenue per customers and average gross profit per customers. Along with about 47% increase in company wide revenue per employee.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So at the same time, the scalability of two year ecosystem, our strong market positions has freed us from rigid marketing and sales experience, allowing us to dynamically allocate resources, strategically promote new products, capabilities, feature set and precisely target key markets and expand our influence as well. Consequently, our sales and marketing efficiency improves by about 40% year over year. In the past business, 2024 witnessed a more diverse and dynamic developer base, so contributing to solid year over year growth across all categories. Our product categories structures has become increasingly balanced and diversified, align well with the trend of customer expansion their product lines. In a highly fragmented and disparate global consumer electronic market.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

This widespread adoption of technology continues to drive innovations across diverse product categories. This increasing variety of smart devices is fostering a more comprehensive approach to a spatial intelligence, enhancing user convenience and comfort, ultimately progressing towards the vision of interconnected and interoperable intelligence ecosystem. We're also pleased to see that our smart solution business model efficiently align with the need of top tier customers, achieving about 58% year over year growth in 2024. For instance, in response to the French government's energy subtype policy were seized and helped our French customers in becoming among the first to meet the country's energy efficiency subsidy standard. So this incentive programs is set up to helping millions of French households to achieve green energy saving.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

At this stage of smart technology development, whether in consumer electronics or industry specific applications, a rich ecosystem of smart devices is essential for top tier customers. In this regard, Tuya possessed a significant advantage over other players throughout its expansive developer ecosystem. As smart solutions further enhanced our ability to support customers, strengthen engagement and boost the market competitiveness. And in the same time, we remain committed to building a robust developer ecosystem. At the end of twenty twenty four, the number of registered developers on our platform reached around 1,320,000 with over 1,070,000 SKUs of smart devices developed onto our platform, spanning more than 3,000 products categories.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

We continue to foster an extensive ecosystem buying, for example, integrating with Google Home APIs to create seamless smart home experience and collaborating with Cherry to establish a new vertical home internal reliability ecosystem. At the same time, we're dedicated to expanding to your global influence, positioning ourselves as a reliable partner for the customers and developers worldwide. Our hence the home energy management system solutions has recognized in the United Nations Global Compact report 20 best corporate sustainability practices in twenty years highlighting TUI's commitment to sustainability. Additionally, we achieved MSCI ESG rating of A and wind ESG rating of A2 and we were included in the S and P Sustainability Yearbook China edition and so on. So next, I'd like to discuss two years' opportunity in device and edge AI.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

As a technology driven company, Tuya fully embraced the GM AI and the LAMs in early twenty twenty three. In Q4 of twenty twenty four, we launched the Tuya AI agent development platform, including all major large language models, including ChatGPT, QVM, DeepSeq, Dovao, late chat of Mistral, Gemini, Amazon Nova and Cloud, etcetera. So, two years LMM agnostic approach eliminates the complexity of developing smart devices and applications from the ground up, providing developers with a crucial middleware there that bridges AAVM's capabilities with real world applications. Those developers they can flexibly choose the most suitable AI models based on their business and marketing needs. While leveraging Twilio's templates, library or customer solutions customized solutions to develop AI devices and applications.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

This philosophy, aligned with Twilio's cloud agnostic strategy, ensuring customers do not have to worry about compatibility and sustainability of cloud services, IS, device types or hardware architectures. So those agnostic compatibility provide two year developers with unparalleled flexibility and adaptability, distinguishing us from single category solutions. Moving forward, we'll continue to prioritize AI devices and the spatial intelligence applications, focusing on areas such as audio video interactions, efficiency optimization and decision making automations. AudioVideo AI enhanced user devices interaction by enabling advanced content input and output mechanisms, while efficiency and decision making AI helping end users to optimize their smart devices and usage strategy to meet personalized and differentiated needs. We also continue to explore the application of Tuya's spatial LLAMs in energy management and other spatial intelligence scenarios as to.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

2025 marks as the breakthrough year of device and edge AI. We plan to integrate AI capability across all categories within the two year developer platform, ensuring that every powered by two year devices is AI enabled by default in the future. Together with the global developer partner, we'll explore various innovations and scalable applications for AI device, continuously shaping a variable global AI IoT developer ecosystem. Looking ahead, intelligence will be involved through the integration of software and hardware. Construction differentiated scenarios throughout interoperable smart devices and meet the customized needs of individuals, households and spaces.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

The industry remain in penetration driven phase with a vast and promising total addressable market to achieve sustained growth will focus on the four key areas. The first, we'll continue to expand the global market penetration. We'll leverage a combination of PaaS, SaaS and Smart solutions to deepen our growth reach, particularly in Europe, Latin America and Asia Pacific region, we're increasing customer use cases. For the large enterprise customers, we offer Cube, our smart provide a private cloud solutions to help them to build secure and scalable enterprise level smart platforms. Second, advancing the AI device and applications, we're committed to leverage GMAI and LAMs to significantly enhance smart product experience, driven product competitiveness and delivering great values to the end users.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

We're continuing to innovating across high potential markets such as smart, companionship, smart outdoors, smart energy and smart spaces complementing and accelerating smart devices penetration by AI applications third, throughout our integrated hardware software smart solutions, we are helping top tier customers to speed up their product launches and establish differentiated competitive advantages across different category and regions, directly to increase end market penetration and delivering a greater and more sustained value. Fourth, maintaining a customer centric approach. We aim to serve high quality core customers efficiently, supporting their business growth, increasing customer stickiness and repeated purchases, and ultimately enhancing our operation average and efficiency. Last, to continue to build our global developer ecosystem, we continue to accelerate and refine 2U's AI agent platform, empowering developers worldwide to create a customized AI devices and scenario basis applications easily. Additionally, we'll leverage GMAI tools to improve developer to improve the development phases efficiency as well.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So finally, let's address some frequently asked topics from the capital market regarding to the internal operational efficiency. The share based compensation expenses and dividends. Throughout the 2024, our total headcounts has remained at about fourteen fifty employees reflecting about 12% reduction from 2023. And by Q4 of twenty twenty four, our average revenue per employee has exceeded early twenty twenty two levels by more than three times. So over 70% of our team consistently consists of R and D technology development and products person, so who drive rapidly product integration across 2UYA's business line and prepare for the next generation of opportunities.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Notably, 2UYA's revenue growth is not dependent on heavy investment in sales and marketing, which has been key factors in our stable and continuously improving profitability. We are committed to further improving the operation average, while our net profit structures and the quantity will become even more sustainable and organic. Regarding share based compensation expenses, the current quarterly accounting expenses primarily stem from the legacy Granite and issued the our ESOP in a higher evaluation years ago, which has become amortized in quarterly according to the vesting schedules. So those expenses are unrelated to any recent equity grants. As those legacy awards are gradually fully vested, SBC expenses will see a substantial decline starting in 2025, leading to a visible reductions in the accounting impact in our income statement, an improvement that's already evident in Q4 of twenty twenty four.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So earlier this day, ahead of this earnings call, our Board of Directors approved the second dividend for 2024, totaling about US37 million dollars Given our robust non GAAP margin, normally non GAAP metrics reflects the direct results of operational decision making, excluding external facts related to our business model. So those non GAAP margin and strong financial positions is what we the base we offer for the dividend with over $1,000,000,000 in net cash and seven consecutive quarters of positive operating cash flow from Q2 of twenty twenty three till now. We believe that Tuya is well positioned in sustained and long term growth throughout its competitiveness mode and while also rewarding our shareholders who has demonstrated steady fast support, we remain committed to driving forces in both our global business and capital markets. Overall, 2024 has been a profitable year for Twillia, marking our first year of operational profitability, the execution of our AI strategy and a breakthrough in our shareholder structure. During this strategic upgrade, we have been fortunate expenses multiple dimensions of progress and transformations, whether in achieving operational profitability, expanding our global footprint or optimizing our international shareholder base.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Notably, our partner with 65BP, our subsidiary of Temasek, the strategic investors has positioned them as Trulia's largest institution shareholder. Furthermore, our achievements has been strongly recognized by the market in early twenty twenty five. I believe this success is rooted in Tuya global presence, its unique hardware and software integrated business model and its strategic focus on the global developer platform. Thank you everyone. Operator, we can now begin with the Q and A.

Operator

Thank you. We will now begin the question and answer session. We will now take our first question from the line of Timothy Zhao from Goldman Sachs. Please go ahead Timothy.

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

Thank you. Thank you, management for taking my question and congrats on the very strong to end the year of 2024 and I think your presentation is very helpful. I have two questions here. One is that I think on AI in PaaS and in your smart solution business, management, further elaborate on what kind of usage scenario that you are seeing?

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. Thank you for the question. So for the AI, what we see here is that this will be a really good year for the AI and we'll consider as a first year that we can really turn the AI devices into reality. What we see the priority of the AI opportunities on the device side, so we'll start with all the audio and video interaction devices, which means that to bring a new way to have the people interact through the audio and video to the device. So that will be one thing.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So no matter is some use cases where you show that in the last quarters like the pet feeders, like the bird feeders and the pet related appliances and some control panels on the wall with a screen as well. So that will be one thing. And the second thing is that all those type of analytic type of the devices not need a complex decision. So one significant use case is energy solution, because for comprehensive energy solutions, you need to be able to read through dozens of variables from different type of devices and from the outside factors like the weather, like the utility data, etcetera. And then make some adjustment automatically or very dynamically making new decisions to operate the device in different ways.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So the AI definitely will help in that part. So that will be something. And also what we see is a very interesting new type of stuff will be the all type of toys. So we found that the kids will be the perfect adapter for AI because they don't have any stereotype about any existing technology, so they grab anything as a fashion, so they can they just easily tap in. And so since then, January, after the CES, we've really got plenty of customers reach out to us, bringing different ideas that how they can integrate AI into toys.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So that will be some of the, what I see, incubating categories we're starting to catch now. But I believe there will be more booming stars throughout the entire year or even in the next couple of years. And while the AI starting from the very fundamental stuff like the LAM, someone can bring an easier approach to the market to activate all the new ideas. And so while the barrier become low and you have thousands of thousands of company and the developer join in, so that will become a robust market what we're looking forward to do. So there might be thousands of different type of things coming after.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

That's it.

Operator

Well, Timothy, do you have any follow-up questions?

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

Sure. Can you hear me well?

Operator

Yes, we can. Please proceed.

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

Great, great. Sorry about that. Yes, my second question is regarding your margins. Just wondering, I think with the AI enhancing the demand for IoT, what is the unit price like trend over time and how that will impact your margin? I think it's more on the gross margin level.

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

And can you also talk about your OpEx given I think you have been investing on AI and operating efficiency on the OpEx level has been quite high. Just wondering how do you think about your operating leverage into 2025? Thank you.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. So the first one is that the AI will be still in a very early stage. So we're not making a final decision or the we didn't make up the final call about how we're going to commercialize the AI. So we tried different type of commercial use cases. And in one word is that we're starting to deploy the AI into all three business models we have, including the PaaS, the SaaS and solutions.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So we offer the AI in different ways based on what type of needs it is. So that would be one thing. And so sometimes it will be a new offering that we provide to the market, so we will be pricing that as a new product. So for that part, the margin will depend on not only the cost, but also depends on the demand. This depends on what type of reasonable pricing we'd like to put into the market to scale it.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And another part is that the sum of the AI, if we think that will be very, very we want to put that as the default features that by enhance our all customers to improve their competitiveness. So we'll integrate that into our existing path solution too. So the margin impact, I think that in the short term, I don't have visibility for that because the scale may not be growing that significantly to influence our overall margin. So that will be smaller pie at this moment. And in the long run, I believe that AI will bring more values, but we will not committed to win because for sure that the focus for us I mean, the priority for us is always scalability.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes, that would be one thing. And second thing about the OpEx, so like I mentioned earlier, we're starting to invest in the AI once the GMII occurs back to early of twenty twenty three. So it's not a new investment for us. Throughout the past two years, we're ready to relocate our resources internally and by improve our talent structures in some roles to be capable of building AI already. So right now, there are a lot, lot of departments in my company that are all AI ready now, so which means that I don't have to recruit a team to rebuild things all over again.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

It's already been there. And so for this year, we will slightly increase some of specific application investment by the demand of the market slightly. And also in the same time, we're looking forward to see what will be the right opportunity or right type of way that we can market it in a better efficiency since that's it come with a new concept. So you better make some noise. But that type of impact, we'll see that it's very controllable.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So I'll say that will not improve the OpEx significantly. It will be in a very management level.

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

Thank you. That's very helpful.

Operator

Thank you. We will now take our next question from the line of John Roy from WTR. Please ask your question, John.

John Roy
Managing Director at Water Tower Research LLC

Can you hear me okay?

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes, I can hear you, John.

John Roy
Managing Director at Water Tower Research LLC

Great, great. Excellent year last year, very well done. So I was wondering about SaaS and its growth prospects. Do you see that as something that could really change the landscape or is that just more of an add on?

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes, that's a good question. Thank you for that. So the first one is that SaaS is based on our deployment of the I mean on the base of the total deployment of our devices. So that will be later business models versus the first what is the path, which means that we need to enlarge and scale the PaaS and on top of that, we can grow more SaaS. That will be one thing.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And second thing is that we are facing a structural improvement in the SaaS model, which means that we are we try to increase the portion of the recurring models in the SaaS type, not only the software base, but also the recurring software base. So that will be the second thing. And so for that part, I'm not worried about the growth. I'll put more pay more attention on the stickiness of the customers, whether they can use that type of thing as long as they can use that. So the payments, the continually annually payment will be our very strong base for us.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

That will be the second thing. And the third thing is that within the past, so there will be some one portion of that is for the commercial software. So it's not the consumer facing one. So for the commercial one, in the past three years, the major market that we're trying to do this business line is in Asia and China. So because that's within COVID period, so which mean that it bring us difficulty to be able to incubate new business across the global basis.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And starting from late last year, we're starting to duplicate that use cases in different countries. We try to bring that into global market. We really have some very positive progress there, no matter in Latin America, Southeast Asia and Europe too. So for that part, right now, we are approaching to a bigger total addressable market on the regional basis. And we really found the duplicatable applications or products that proven to work out, and we already have a customer base that's applying with recurring models.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So for the fact, I believe that will be our long term growing business line. We're not looking forward to any short term surprising or short term significant improvement, but for the long run, maybe after five years, that will be a very, very juicy enough for us.

John Roy
Managing Director at Water Tower Research LLC

Great. Thank you for that. So obviously the dividend is very nice and you have a pretty significant cash position. What is your view on the acquisition front? Is that something you're actively watching?

John Roy
Managing Director at Water Tower Research LLC

How are the prices in that market?

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

I think that I'm thinking you mentioned about MMA, right, MMA?

John Roy
Managing Director at Water Tower Research LLC

Right.

John Roy
Managing Director at Water Tower Research LLC

Yes.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. MMA is always an open option for us and so we keep screaming and what type of extension what type of companies or partners can be our extension either to extend our scope of coverage of different type of scenarios or to be a to have vertical solution a more vertical solution provider for specific industries. So we keep screaming on that. And yes, so I think that's an option for us.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

I think the key part is that the first one is that no matter with or without acquisition two, those guys should be our developers. So the first priority is to have a very strong global developer ecosystem. I think that will be our major focus. In the same time, anyone maybe within the ecosystem that can show a better potential no matter like I mentioned it's that horizonally extend our scope or vertically that improve our vertical industry insights. So for that part, we can easily identify that.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. We'll keep it out of there. And we'll keep for anyone to help us to find some interesting target too. If you have anyone introduce to me.

John Roy
Managing Director at Water Tower Research LLC

Will do. Thank you so much. And again, congratulations.

Operator

Thank you. We will now take question from the line of Kai Hsiao from CICC. Please ask your question, Kai.

Kai Xiao
Analyst at China International Capital Corporation (CICC)

So this has been from CIC Research and congratulations for the strong quarter. So my first question is regarding the IoT parts. So what's the current downstream demand for IoT parts and which countries and categories you think have more potential and how can we outlook the gross margin? And the sixth question is regarding the high quality customers. So we see the customer the number of customers have very strong growth.

Kai Xiao
Analyst at China International Capital Corporation (CICC)

So what do you think the further potential for the company to further expand the high quality PaaS customers in the future? And will GenAI help in the acquisition of more high quality customers? Thank you.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Thank you for the questions. So the first one for the past, as we can find in our business, it's very strong showing that we have a very balanced structure on the business.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So no matter it's on the regional side or on the category side. So right now, the business comes from over 3,000 categories on the Twilio platform. So we didn't rely on any single category. So which means that we're quite diversified in the category side. So that's what I mean that whenever or whatever type of new booming stars in the smart devices market occurs, for sure that there are someone making that into your platform, into your ecosystem, not from somewhere else.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So for sure that we will cover any new opportunities. And on the regional side, right now, we're very balanced too. So the largest regional market, Europe, only covers slightly over one third of 35 of our business and on the end user demand. And for all other countries, North America, Latin America, Asia and Australia, including China domestic, so they're quite balanced. So we didn't rely on any single region market too, and which bring us a very good barrier or very good protections for any type of change happening on the right now the geographic scenarios.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So that would be one thing for the past. And for the second question for the second question, I think the major customer here is that right now for the first ten years of the establishment of this company and there are larger portion of the ecosystem come from the consumer field. So what we found here is that two extensions on the customer side. The first one is that for the past three years, we have more and more customers and use cases come from non consumer fields, no matter it's commercial one, industrial one and that type of things. And also, in the company, we have new business lines just focused on that part.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So that will be one thing. That will be total extension and some new type of customers from that part, including the telecom carriers. So we got and we'll continue to have new telecom carrier partners coming in. So that would be one thing. And the second thing is that exceeding from the device based stuff, in the near futures, we believe there will be more and more spatial solutions we needed.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And the spatial solution provider usually be a different type of company too. And for that, no matter is for the like the property manager, warehouse manager, logistics. So those kind of manage some type of space, the house, the building, the warehousing or some asset too. So those type of solutions, before AI technology happens, they don't have a comprehensive write up solution to carry the pinpoint. And while the spatial models and spatial solutions we design can meet that, so that can help us to open another door to.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So that will be two, what we call it, the new grassland for us. That's it.

Operator

Thank you. Kai, do you have any follow-up questions?

Kai Xiao
Analyst at China International Capital Corporation (CICC)

That's all. Thank you.

Operator

Thank you. Our next question comes from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Thank you for the opportunity to ask questions. I have two questions here. The first one is on the outlook of the revenue structure because we observed in the past few quarters that IoT SaaS and other growth recovered meaningfully. And while the smart device distribution growth has been relatively volatile, So this kind of change, mix change is very critical to the overall gross margin. So I would like to hear your view in terms of the three business lines relative growth rates going forward and whether it will have meaningful impact on your blended gross margin?

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

That is my first question. And my second question is regarding what's your view on the computation in the AIU for the IoT solution provider. Do you see more hyperscalers who would like to develop IoT hardware themselves or you think it is still or is it a booming market with a lot of smaller product development companies in the market as a JLR can continue to add a lot of value to those customers? Thank you.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. So the question, I think that our three business models, because they come in with a two to three different approach to the customers. So I mean overall, the margin level of each of the business models will be kind of stable. So for the PaaS, we think we believe that so the overall margin for PaaS will remain at around 45%. We think that will be reasonable or slightly over 45%.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And for the SaaS, because it's software based, I think that over 70% will be remained. And on the solution side, because we'll follow the hardware game rules, So while you have you scale the volumes, while the customer scale the volume too and sometimes you have to subsidize some of the profit to the customer. So we believe that on the solution side, maybe by we scale it into we double that or we scale that in a bigger base that maybe the margin of solutions will slightly decline a little bit, but not that much. We think that we'll continue to maintain the solutions margins over 2021. So that will be overall the margin or the nature of the margins underneath each of the business models.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

And put that together, and what we find is that, so the path will continue to provide a stable growing base for the entire Twilio business because that will be essentially everything that the customer need to purchase. And SaaS, like I mentioned earlier to John's question, so we think that the SaaS will be more long term growing curve for that. So we're not improving. So it continues to enlarge the device base and the customer base and we deploy those services on top

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

of

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

that and convert more of them to pay the recurring revenue. That will be a long term journey, but remaining similar growth with the past. Maybe that will be our expected to. And solution, because solution come from my past customers, they're calling out for a solution rather than the development toolkit from the past line. So solution is that we convert to more and more customers' demands directly from a past base.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So for that part, the solution might grow faster. And while solution become larger pie of my total revenue, so my general gross margin rate gross margin, but GPM, we believe that in the long term will slightly decrease a little bit. But do you think that will be reasonable? I mean, the margin would because I have a bigger pie of the solution side, it will come with a lower margin compared with the other two business models. So for that part, we think that will be good, but that's not a problem for us.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

I believe that the key to evaluate the gross margin is that we need to break down each of the business model and tell the value of that, whether that values reflect to the right margins at that business models and I need to compare that business model to the industrial level. So the SaaS is compared to other SaaS company or other SaaS peer and the path is farther faster. So yes, that's the point I have to try to make. So it's very stable business model and structure will start change slightly.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Thank you. How about the second question? What is the outlook for the competitive landscape in AIU for the IoT?

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

Yes. I

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

think that I think I really covered part of the question, right? I think that right now, the good part for AI is that right now, it's a very positive and active momentum for the market, not for capital market, but I mean, it's for the hardware industry. And so we have a lot of movers as either designers or manufacturers or solution providers. And so right now, we process three, like I mentioned, is either the video, audio interactive and or the decision making, analytic one and the toy. But we believe that will be thousands of at least thousands of more vertical use cases we're coming from.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So it's very early stage and this year is that we got so many players on the field try different type of ideas. So what we need to do is that we offer them a toolkit to easily turn their ideas into two. I think that will be the unique value that Twilio provide. And also that's why we have such a successful developer ecosystem. So to let them get away from to everything in house, we offer them a shortcut to testify their ideas.

Yi Yang
Yi Yang
Co-founder, COO, CFO & Director at Tuya

So I believe that this year will be kind of very starting line for the AI device that you can find millions of new devices out there. A lot of people try in and some will prove work it out and starting to scale that, maybe some not. They will redesign that. So yes, I think that will be the momentum we're looking forward to see. And so what we do is that just like I mentioned, we continue to lower the barrier for anyone to get in.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Thank

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

you.

Operator

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

Reg Chai
Reg Chai
Investor Relations Director at Tuya

Okay. So thank you again for joining our call tonight and this morning. If you have any further questions, please feel free to contact us or request through our website. We look forward to speaking with everyone in our next earnings call. So have a good day.

Reg Chai
Reg Chai
Investor Relations Director at Tuya

Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Executives
    • Reg Chai
      Reg Chai
      Investor Relations Director
    • Yi Yang
      Yi Yang
      Co-founder, COO, CFO & Director
Analysts
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Key Takeaways

  • In 2024 Tuya delivered nearly 30% year-over-year revenue growth, achieved its first quarterly and annual non-GAAP operating profit, reported its first annual GAAP net profit, and ended Q4 with over $1 billion in net cash.
  • Tuya deepened its AIoT strategy by launching proprietary spatial large language models and an AI agent platform, aiming to AI-enable all devices by default and focusing on audio/video interactions, energy optimization and spatial intelligence.
  • The company’s integrated software-plus-hardware model boosted smart solution revenue by ≈58% year-over-year, while Q4 PaaS revenue grew 25.7% and SaaS and other services rose 21.1%, with gross margin stable at ≈47%.
  • Tuya’s global developer ecosystem now includes 1.32 million registered developers and over 1.07 million device SKUs across 3,000 categories, supported by a 97% retention rate among top customers and a >122% revenue dollar net expansion rate for five consecutive quarters.
  • For 2025 Tuya plans to expand international AIoT penetration via ongoing TuyaOS and open-source initiatives, deepen key account engagements with smart solutions, and integrate AI capabilities across all device categories to sustain growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Tuya Q4 2024
00:00 / 00:00

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