Tuya Q1 2025 Earnings Call Transcript

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May 20, 2025
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Executive

Thank you. Hello, everyone. Welcome to our first quarter twenty twenty five earnings call. Joining us today are Founder and CEO of TUYA, Mr. Jerry Wang and our Co Founder and CFO, Ms. Edward Yang. The first quarter twenty twenty five 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. With that, I will now turn the call to our Founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by corresponding English translation. Jerry, please.

Moderator

Hello, everyone. Thank you for joining 2YAS earnings call for the first quarter of twenty twenty five. This quarter, building in a high growth base from Q1 of the year, we achieved approximately 21% year over year revenue growth, while maintaining a solid gross margin. Our stable team structure and organizational management supported a strong operating leverage, coupled with the continued declining historical share based compensation expenses, which achieved a record GAAP net profit in what is traditionally an off season with a net profit margin of around 15%, a significant improvement. Since the beginning of the year, the macro environment has been like a roller coaster.

Moderator

From the rapid advancement of AI technology, the trade fluctuations under geopolitical pressures, the smart consumer electronics sector and its upstream and downstream supply chains have faced immense challenges. Some of these we can manage through internal adjustments, while others require an industrial wide response. In terms of context, it's even more critical for us to stay core strategically and leverage our unique value to navigate uncertainties and embrace new landscape. Following the launch of our Tua AI agent development platform last year, we continued to expand our AI capabilities from cloud to device in Q1, covering a wide range of AI agents and smart solutions. On April 23, we hosted our first Global Developer Conference of twenty twenty five, unveiling four AIoT development engines and a series of AI hardware solutions to support global developers and partners in commercializing air powered products.

Moderator

The conference attracted over 2,700 on-site attendees, including enthusiastic participations from customers across Europe, Latin America, South Africa and Asia Pacific. We firmly believe that 2A's unique platform model not only facilitates the deep integration of AI and smart hardware, but also drives continuous improvement in industrial wide intelligence adoption. Operationally, we will maintain efficient organizational execution, safeguard a favorable environment for R and D and technology development amid external uncertainties and remain disciplined in managing costs to maximize operating profits and shareholder returns. Now I will turn it over to Xueersi Co Founder and CFO, Alex Yang, who will walk you through the financial results and business highlights.

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

Hello, everyone.

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

This is Alex. Please note that all the figures I mentioned below is in U. S. Dollars and all the compensation year over year based. And in Q1 of twenty twenty five, we deliver approximately 74,700,000.0 US dollars revenue and representing a year over year growth of about 21.1%.

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

The past revenue grows by roughly 70.9% with strong performance across major categories, led by home appliances and followed by security censoring and electrical and lighting products. SaaS and others generated about US10 million dollars revenue, growing approximately 15.5% year over year, primarily driven by the steady growth of in device related SaaS rep value added services. Smart solution revenue reaches approximately 11,000,000 US dollars with a year over year increase about 47.1% with excellent growth in smart video products, central control, innovative appliances, and professional lighting solutions. From our regional revenue source perspective, Europe accounted for about one third of the total revenue. And then come after that is Asia Asia Pacific, excluding China, and then China and Latin America and Latin America.

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

Each of them contributing around 15%. And then with many regions such as The Pacific and the video is contributing in a combined of five percent, maintaining our diversified revenue structures in regional basis. It is worth to mention that since we empower and serve the smart hardware sector, our revenue also reflects unique pattern and the sincerity of the hardware industry, especially on the international manufacturing, representing the result of the business actions and strategies from the past several quarters or even number. In Q1, blended gross margin stood about 48.5%, with all three revenue lines maintained steady margins. Specifically, this quarter's past gross margin rose to 48.4%, primarily due to structural improvements driven by product mix change.

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

Smart solution and SaaS had gross gross margin of 25.774.4%, continuing to demonstrate the value proposition related through software and technology. In the meantime, our net operation expenses for this quarter were US37.7 million dollars a nearly 18 decrease from the same period last year, primarily benefiting from a substantial reduction in share based compensation expenses, a trend that is expected to continue. Excluding equity incentive and other non operational business factors, our non GAAP net operation expenses were US29.4 million dollars down 2% year over year. The vast majority of our operation expenses are related to products development and technical terms, technical teams. Thanks to the groundworks led during our transformation since 2023.

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

We have completed we have completed the foundational AI product development and service system, while maintaining a good discipline in ongoing development. Those structural improvements directly drive the release of operating average, enabling us to achieve over US11 million dollars in GAAP net profit in Q1, more than double that of last year's full year. Non GAAP net profit reaches million dollars a nearly 60% year over year increase, with a non GAAP net profit margin of 25.8%. These metrics provide strong support of the company's future business operation, capital expenditures and shareholder returns. So that includes a brief overview of Q1 financial performance.

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

And also in Q1 is a typical off season for the industry we serve. So we usually focus our efforts on exploring ideas, opportunities across our product lines. And the next, I'll talk about some key moves that we made in our business over the past few months. As we anticipated at the beginning of this year, 2025 marks as a structural transformation year for the entire industry to embrace AI. So AI is penetrating penetrating various industries at precision precision speed.

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

And for two year and the smart sector, this present a clear window of strategic opportunity for the future. Although the physical nature of hardware devices means that the commercialization of AI capability on devices is gradually a long term process. Technical and production reserves in software can take the lead, And then that is precisely our strategy. So first, we are committed to from visualizing and generalizing the AI capability needed in the smart era to solve the end users problems and issues. This allows developers to select whatever they needed based on their commercial goals and product designs, thereby promoting the AI adoption.

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

So focus on four core areas. So large language model integration, hardware development, edge deployment, and open source ecosystems. We released our four core engines at April globally. The two year AI agent development platform and the two year dot ai to open and the Hedvig. So the two year AI agent development platform significantly reduced the technical threshold for developers to access any mainstream logic model and build various intelligence agents functions such as semantic understandings and image recognitions.

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

So that is for the agent development. Toyota AI, the second one, provides a full process to train from high performance edge AI modeling to smart cloud deployment, greatly lowering the difficulty and social time for AI hardware development. And to the open as our open source framework enables developers to perform differentiated development innovations, and integrate into to our ecosystem. The Hedwig platform offers a controllable and secure edge AI computing environment for enterprise customers requiring localize the deployment and data platforms and the compliance system. This entire system forms the technique from the issuance of our AI platform capabilities that provides a solid support for the largest scale implementation of AI products in the long term.

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

At the same time, we're increasing investment in the development ecosystem, developer ecosystem around Tuya OS, Tuya Open, and the T5 AI development boards. Initially, establishing a content plus tools plus community trial frameworks for the developers. Since the developer conference, we have released eight open source DIY projects, such as open source desktop tests, AI voice boxes, and AI robots. And at building a developer creativity incubation system. Our t five AI developer boards has started to be adapted throughout collaborations with multiple developer platforms and communities, and our AI developer communities has grown by more than 10,000 new members.

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

Next, we're also committed to edit identifying the product specific opportunities and driving customers' products launches through our smart solution offering, directly increasing our revenue and gross profit and achieving high quality commercial conversions. For example, in the energy domain, we launched the CONAL AI energy assistant with the features strategy with the features like the strategy recommendation, power generation forecasting, load identification, and energy consumption diagnostics. Combined with the supporting hardware such as all in one energy storage system, circuit breaker, and energy data controllers, It forms a comprehensive integrated hardware software solution, primarily tucking in the Europe and Southeast Asia market. In video with the AI products, we continue to advance the AI capability of smart screens and video devices, focusing on models for detecting objectives, vehicles, birds, and flames, combined with the sound recognitions and anomalous detections to build a integrated hardware and software general production solutions that covers basic home safety needed and extended to semi commercial scenarios like hotels and real estate. In the meantime, we're also actively promoting external ecosystem collaborations to amplify the enable efforts of the AI platform.

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

For example, in Q1, we partnered with Vocano engines under Bydance to integrate with dual biologic language model into AI agent development platform, further enhancing the multi modeling, understanding and interactions capabilities of our AI agents. In addition, we are collaborating commercially with leading players in retail and marginal infant industries to join development smart hardware such as AI wearables and a in home robots, advancing the application of AI in children and families and areas. Collaborations with upstream and downstream partners will further enrich our capabilities and ecosystem scope, strengthen two years strategies depth in a smart partner sector that creates explanatory projects that global developers and customers can refer and replicate. Although the AI hardware ecosystem, community, and product developments are still in the early stage, we believe that explorations in functionality, experience, and business models will open up space for TUYA and the entire industry's futures business expansions, laying the foundation of new engines of the long term growth. So there above is our sharing on TUYA's Q1 twenty twenty five financial performance and recent company developments.

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

Although there has been partially improvements in the extensional environment recently, uncertainties remains. In response, we will continue to operate diligently and to long term approach of the technique driven and the platform enabled developments, laying a solid foundation on the AIoT track, continuously capturing industry certainty trends and creating long term value for Tuya. Finally, a piece of good news. So MSCI recently upgraded updated our twenty twenty five ESG rating from single a into double a. In particularly, in the field of a secure and compliances to achieve a full score of 10 points.

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

Thanks to its extensively compliance experience and through our framework. We believe that whether in business operations or emerging areas such as ESG, steady fast progress will bring rewards and recognitions. Thank you all, operators. And right now, we can begin our Q and A section.

Operator

Thank you. We will now begin the question and answer session. We will now take our first question from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Let me translate my question. I have two questions here. The first one is regarding the AIoT development. To have a development platform, could management share what kind of AIoT hardware is doing well in term of the shipment? Or is there any signpost that we observed?

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

What kind of AI hardware can outperform relative fast? The second question is regarding the customer's behavior in the past one or two months, given the huge volatility in tariffs. Could management share what the customer is doing in the past two months? Thank you.

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

Yeah, so thank you, Dil. So for the first questions, when we see here for the AI sectors, we found that there will be two major directions that you're more interested. The first one is that the audio and the video interaction, interacted experiences. So one example is the butter feeders. We mentioned that in the I think that in the past quarter.

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

So to be able to help people to recognize the white lives and to interact with it, and that'll be one thing. And the second one second typical use cases would be like the toys or the the any type of use case for kids that use the large language models and capabilities that you can have a new way to interact with the kids, show as education, as entertainment, and as a company as well. So that would be that would be the one. And so recently, update about the the kids is that in China, we already signed a strategic partnership with to which we the top tier and the toy group in China. And we're looking for to help them to launch the production into the market pretty soon pretty soon.

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

And so that'd be one thing. So all any type of audio video in new interactive experience based on natural language model. And the second is on the data based company dynamic decision making. So one typical use cases will be the energy management system for our core now. And to fill through that, the AI agents based on the new modeling will be able to continue is to not only collect and analysis that all those datas from the either the energy generators, but also from the energy consumptive consumption devices, but also in the same time that the agent will be able to come out different type of strategy and turn that into the specific actions and continue to reanalysis the new strategy and improve that.

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

So that can help to do a lot to improve the energy efficiency, no matter it's saving the total consumption, be more greener, or saving the energy bill directly. So that will be the two very typical trends that we we found that to show more interest and have more short term interactions coming from directly from the customers and to the market as well. So that'll be the first question. And the second one, yes, the tariff become a major topics for the entire market, not only United States. And so in the past couple of you know, in the past four or five weeks right after the new tariff topic races, I think the the very direct reaction from the customer is that every people on the international training training pipeline become more con conservative and hesitated.

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

Yeah. Because nobody knows that what comes out. So right now, it's that people are waiting for some certainty. And, yeah, even now we have like ninety days of certainty between China and US. So people is trying to do some really careful decisions based on the ninety days terms.

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

But I think the longer term says that we need to waiting for the final answers between the national negotiations. That'd be one thing. But I have to mention that for the short time, every people are slowing down or become more conscious about any proactive or aggressive decisions. But to the unique business model and a better proposition for two years is that the first one, the tariff are not directly acted on us because what we deliver will be a portion or key component and technology, especially the software of the finished finished goods. So the tariffs are more directly related to my customers, either my brand customers or my manufacturer customers.

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

So that'll be one thing. So we are, like, the indirectly indirectly connected. And the second one is that and so for us in the past couple of years, what we have been doing is we just follow the flow that if there's the trend that the entire global economy are relocalizing the manufacturing supply chain, we just follow the customers to do that. So not have to be stick to one or some specific manufacturers in specific locations. So right now, the manufacturers will be short already hover over the countries out there.

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

That'll be the second one. And the third one is that, so the tablets are majorly focused on the finished goods. And the is only portion portion of the cost of that goods. So so that'll be that one. But for the tariffs were more for us that will pay more attention on the macro impact.

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

So starting from the buying forces demand impact on The US market, So whether that'll bring into the retail price raising and to lower the buying forces for the end user of the American pedals. And also that whether that kind of single nation economy impact are gonna be bringing a wider, much national that the macro economy slowing down or recessions. So I think that'll be the more long term.

Yang Liu
Yang Liu
Executive Director at Morgan Stanley

Got it. Thank you.

Operator

Thank you. We will now take our next question from the line of Timothy Chou from Goldman Sachs. Please ask your question, Timothy.

Timothy Chow
Timothy Chow
Executive Director at Goldman Sachs

Thank you management for taking my question and congrats on the very strong quarterly results. Two questions here. The first question is on the amortization. Wondering how in which area that we would like to plan to monetize the opportunities bring by AI? And what is the difference in terms of the pricing model and cost between the new IoT product services versus the traditional IoT PaaS services that you provide?

Timothy Chow
Timothy Chow
Executive Director at Goldman Sachs

And secondly is on your full year and second quarter outlook on revenue and profitability. Could management share any color? And specifically on the IoT PaaS segment, we have seen very steady upward trend in gross margin of this segment. Could management provide an outlook for this segment as well? Thank you.

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

Yes, thank you. I think that for the first question, it's a good one. That's all my customers been asking at the end of last year. So what we are offering for the AI capabilities to the customers, that we seamlessly integrate the AI capability into my existing three business model. So I still offer that as a patch, fast or the solution.

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

So for the customers will be very, very friendly that they don't would they don't have to be educated for a new type of business model and how can mix that with their existing one. So it's like a seamless transition. And for the AI income that even I offer as a maybe it's AI empowered new patch or AI new SaaS that we will consider some of the repricing. Some example is that recently we offer for the audio interactive AI based on the LAMs that show the the patch pricing will be different than the regular my regular patch in the same categories. So that'll be one.

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

So we can look in for that either we we use the seamless AI offering to speed up the penetrating of the entire smart devices penetration in the global market, or we use that to repricing some of the offerings. So that'd be that'd be one thing. And and so also that will be very easy to continue to enlarge our partnership with upstream providers because right now the major, like, larger language model are providing through the major cloud guy. So this is same way, like, how we cooperate with them on the cloud infrastructures. Right now, we cooperate with them in the same model with a larger language model.

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

So that'd the first answer for the first question. And on the second one, yes, that's combined with the with the tariff. It's Even we don't do the we don't involve in the international supply chain or training business directly, but we very deeply integrated into that part. We are a core part of that. So the the the tariffs indeed bring the short term bumping about the about the demand cycle.

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

So I can describe that very typically in the major weeks of April that for the orders kind of order shipments to United States. And a lot of people, almost most people put a pause button on that and wait and see until the the two countries make agreement. So we're seeing that this will this will pass topics globally, majorly from China US, but also site impact into the Southeast Asia and the maximum and a partial to Europe, Brazil. So that type of tariff topics will bring a bump in ride. And in the short term, maybe in a quarter or two, It depends on how soon that we can make agreement and provide the certainty for the commercial, for the commerce world, right?

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

All the businessmen are waiting to see that how, what type of price that they can pay extra and how they can observe that. So for the short term, there will be a bumpy. But it's not the first time we experienced that. So this kind of new tariff terms challenge of breathing strength to take place since '29 2018. So but this seems like the harsher bumpy point.

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

So for the short term, there's still uncertainty for that. And even US market only covers less than 20% of our business. But, yeah, that's still 20%. So that's uncertainty, and it's the same for us and my customers. We just wait and see, and every people are trying to took a more careful actions and decisions, like, every single day or week.

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

Yeah. So that's that's what you see. Then challenge exist. And but for the long term that the we believe that in a year or next year, that's until I mean, right after the negotiations being settled and the entire demand and the penetrations will provide into the normal model. And all the buying cycles and GTMs will get into the normal cycles again.

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

So that would be what we see for the the short term. And for the past margin, I think that the the past historical records already proven that we take the high value propositions of an entire industrial cycle. And we're good with it and we're satisfied with that. So for us is that we don't have the strong or we don't think it will be very necessary. We have to continue to the margin into a higher cycle, because we'll really be in the highest better proposition in the entire world, including my suppliers and my customers.

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

We're ready to take a very high position for that. So we think that the key part is that to maintain the position, but also in the same time be able to motivate either my suppliers or my customers to continue to invest on these sectors. I think that will be more important for us, because their activity will ensure that we're continuous to improve the penetrations, continuous to find more innovations to turn that into reality and bring that into market. So for the past, we think that it will be fine for us just to maintain at the right range. And for us, like how we do that in the past two or three years.

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

So we'll satisfy with that. We don't have to ensure we can push to the next level.

Timothy Chow
Timothy Chow
Executive Director at Goldman Sachs

Thank you. That's very helpful.

Operator

Thank you. We will now take our next question from Kai Hsiao from CICC. Please ask your question, Kai.

Kai Xiao
Analyst at China International Capital Corporation (CICC)

So thanks management and congratulations for the strong quarter. I have two questions. First, could you share your the progress of your cooperation with Singapore and Chile? And any similar projects can we expect in the coming quarters? And second one is, could you share the geography extension of two of AI developers?

Kai Xiao
Analyst at China International Capital Corporation (CICC)

And is is there any difference on the development of AI applications between domestic markets and overseas markets? Thank you.

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

Yeah. So thank you for the questions. So the first one is talking about the Singapore use cases. I would like to put it into wider coverage. So Singapore use case will be a typical progress we'd like to take in places for the commercial and or industrial AIoT solutions.

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

So the partnership we had or the contract we signed with the Singapore government is from the HDB, so it's Singapore Home Development Bureau. And they're managing over 1,400,000 Singapore public apartments. So majority of Singapore citizens living in a government provided rental apartments, and it's actually managing that. And what we're offering is that it's a centralized energy management platform that help them to able not only censoring the different consumptions in the apart in each of the apartments, that's why contribute a significant consumption of the total Singapore nation powers. And but also we offer them some controller.

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

So to help them to identify how each of the households been using the power through what type of devices, by what purpose, and then through some AI enabled modeling and and the control actions to reduce that. And as to our over one and a half years POC with HDB before we signed the contract, that there will be significant reductions about total consumption of the powers, which can help the Singapore government to reach they want to be a pioneer of ESG nation or smart nation. So that'd be one. And the the SGB's plan is that we'll we're really we're finalizing the deployment, implementation of the entire platforms, and they will really start to produce the first shipment for of the devices. It's energy hub in the home in the home.

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

And so the first implementation about the software platform and the hardware into the first part of the household, which took in place is around end of the q three. And their plan is to be able to finish the phase one entire penetration of the homes in three years. Yeah. So that'll be one one start. And we are very excited about it because that will be show that not only providing our DIY devices to penetrating homes improvement through those kind of decentralized devices, but we should be able to provide a centralized solutions through the right channels like HDBs to help entire regional end users to improve their lives.

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

Yeah. So that'd one. And also we should we found that use Singapore as a as a perfect use case spot, we can we'll be able to duplicate that and to influence that the Southeast, other Southeast Asian countries, like the rent apartments, like what we call spatial management solutions, and already show a good potential of growth in Southeast Asia. So that's one thing. And not only for the apartment management, but also we're really penetrate quite well in some of the telecoms players in that area too.

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

Yeah. So that'd be one thing. And also in the same time, two weeks later, we will open our new Singapore offices and by providing more local resources to supporting our customers, penetrations, implementations, but then also in the same time to search for all business opportunities in that area and expand into global market. Yeah. So that would be the answers for the for the Singapore parts.

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

And yeah. So so that's into that. And then for the hi, man. Could you repeat the question? So the second one is about returns. Right? The shareholders returns. Right?

Kai Xiao
Analyst at China International Capital Corporation (CICC)

The expansion of AI developers and different AI

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

developers, what we hear is that I think it's just started. I think right after the deep sea expansion in January. And so the first one is that we found majority of my customers and developers are reaching out to back to us to asking about all the AI capability offering. Because in the past, on the recognition side is that they know AI is there and a lot of news about AI, but they don't really think that the AI offering will be connected to their existing business. Either it's more expensive, too expensive, unaffordable, or it will be too difficult.

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

So I think that right after the deep six exposure, both in America and in China market, every person aware that they can bring AI into the physical use cases. And then I think that the first one is that we got so many calls. And and then we use that time windows to launch either launch our new platform, the AI agent development platform, but also to hold our to to to launch that as our developer conference. So that bring a very positive and very active feedback. And so right now, the AI developer penetration is that we're to educate those customers who cause and by telling them what capabilities out of there in the platform and how they can develop upon those capability to turn that into the real devices use cases.

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

It's more like an educating period. And right now, will see that the demand come from the global market. So majority of my major or key customers, either from Europe, from America, from Latin America and Southeast Asia. So they are those major those customers have very strong retail channels who have very strong brands who can do quite well about the end users' education and marketing. So those customers will be the major cost, and on the demanding side.

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

And on the technical development side, so in two parts, the first part is that those ones who are focused on turning the AI or AI capability into the device. So it's more following the right penetration on the device development and manufacturing. So maybe a bigger portion come from Mainland China, but still we got multiple one from Korea, from Turkey, from Southeast Asia too. And so that's following that perfectly fit the penetration about the hardware manufacturing deployment. That's the first one.

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

And the second one is about software. So software, I would say that it's more diversified. And either it's through different type of software innovators through the NCP protocols and more come from mobile Internet developer ecosystem and also the cloud based developers and who come through the cloud infrastructures into us. Yes, so it's more diversified on a global basis. I think that's for the first quarter or including till now, it's still in the Phase one.

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

It's about the recognition of our capability, education about the developer kit, and then a lot of prototype POC and demonstration deployment.

Operator

Alright, thank you. We will now take our next question from the line of John Roy from Water Tower Research. Please ask your question, John.

John Roy
Managing Director at Water Tower Research LLC

Yeah. I have a slightly different question. I was wondering if you could give us any insight into how you're using AI internally, internal processes, documents, code development, etcetera. And if that can really possibly increase margins and decrease cost going forward. Thank you.

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

Yeah. Thank you, John. So I think that every single department within the country origin is trying to using different type of ad tools. I can take some some of examples. Right?

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

Like for marketing team, right now that majority of all the marketing resources we use are generated through AI. So we don't we don't require a lot of labor based designer to do that. And including our operation team to do all those kind of online training webinars, I think the majority I think a big portion of the webinar contents are generated through AI too. And also, we have our TikTok live view to the end users. The AI helps a lot too.

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

And that's the that marketing side. And including the the legal and human resources side, we're using AI to help us to either to do the research and review on the and the candidate's resume and with the with the key keywords that we identify, and also to help us to double check with all those standardized contracts come directly from the customer side to see that whether there's any modifications, etcetera. So use that to improve the efficiency about the internal processing of the either the HR and and legal process. So that'd be a one thing. And and another use case is about the development for sure.

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

That we're using AI toolkit, different UI kits to do the project management and analysis and and analyzing about the progress of the development and the the coding, double checking, debugging, pre setting, and maintenance of the cloud infrastructure. So what we call the auto patterning on the on the maintenance of the cloud services as well. Yeah. So that would be typical things. We believe that in the future, like we mentioned, not only providing the capability to help the customers to build more commercialized or more a higher ROI products.

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

But also in the same time that we continue to using AI internally to improve our operation efficiency. And so either lowering the cost of the operation or to increase the income to our customers to enhance our lab operating leverage. That'll be some basic.

John Roy
Managing Director at Water Tower Research LLC

Thank you so much, and congratulations on the quarter.

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

Thank you for that. We're excited about the long term future because this is the only very starting point for the AI penetration for the physical world. Very, very early. We're very excited about that.

Operator

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

Executive

Okay. Thank you, everyone. Thank you, operator, and thanks for all of you for participating on SafePort. So see you next week. See you next quarter, and have a nice day today. Bye. Goodbye.

Operator

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

Executives
    • Yi Yang
      Yi Yang
      Co-founder, COO, CFO & Director
Analysts
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Key Takeaways

  • In Q1, Tuya reported $74.7 million revenue (+21.1% YoY) and achieved a record GAAP net profit margin of ~15% (non-GAAP net profit margin 25.8%) thanks to strong operating leverage and declining share-based compensation.
  • Blended gross margin remained robust at 48.5%, with PaaS at 48.4% and SaaS/Smart Solutions delivering 74.4% and 25.7% respectively, reflecting product mix improvements.
  • Tuya expanded its AIoT offerings by unveiling four AI development engines and hardware solutions at its first 2025 Global Developer Conference, attracting over 2,700 attendees and advancing AI from cloud to device.
  • Smart Solutions revenue climbed 47.1% YoY to $11 million, while SaaS revenue grew 15.5% to $10 million, driven by strong demand in home appliances, security sensing, and professional lighting.
  • Operating expenses fell 18% YoY to $37.7 million (non-GAAP $29.4 million) as share-based compensation continued to decline, enabling greater cost discipline and higher operating profits.
AI Generated. May Contain Errors.
Earnings Conference Call
Tuya Q1 2025
00:00 / 00:00

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