Tuya Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 20, 2025

Key Takeaways

  • In Q1 2025, revenue rose 21.1% year-over-year to US$74.7 million, and the company achieved a record GAAP net profit margin of approximately 15% in an off-season quarter.
  • The blended gross margin remained strong at 48.5%, while net operating expenses fell 18% year-over-year to US$37.7 million, contributing to a 25.8% non-GAAP net profit margin.
  • Tuya expanded its AIoT platform by launching four development engines and hardware solutions, and its Global Developer Conference drew over 2,700 attendees, highlighting growing ecosystem engagement.
  • Ongoing geopolitical and tariff uncertainties have prompted customers to pause or delay orders, introducing potential near-term demand volatility.
  • The company maintains a diversified revenue mix, with Europe accounting for one-third of sales and Asia Pacific (ex-China), China and Latin America each contributing about 15%.
AI Generated. May Contain Errors.
Earnings Conference Call
Tuya Q1 2025
00:00 / 00:00

Transcript Sections

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Reg Chai
Reg Chai
Head of Investor Relations at Tuya Inc.

Thank you. Hello everyone. Welcome to our first quarter 2025 earnings call. Joining us today are Founder and CEO of Tuya, Jerry Wang, and our Co-founder and CFO, Alex Yang. The first quarter 2025 financial results and the webcast of this conference call are available at ia.tuya.com. A replay of this call will also be available on our websites 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, Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by corresponding English translation. Jerry, please.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

大家好，感谢大家参加图亚2025年第一季度业绩亮会议。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

Hello everyone. Thank you for joining Tuya's earnings call for the first quarter of 2025.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

本季度，我们在去年Q1增长的高基数的基础上，实现了约21%的收入同比增长，且毛利率保持稳健。同时，稳定的团队结构和组织管理模式支撑了良好的经营杠杆。叠加历史股权激励会计费用包袱的持续减少，使我们在传统淡季取得了创纪录的GAAP净利润，净利率达到了约15%，展现出显著的进步。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

This quarter, building on a high growth base from Q1 last 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, we achieved a record GAAP net profit in what is traditionally an off season, with a net profit margin of around 15%, a significant improvement.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

三年以来，从AI科技的加速演进到地缘政治影响下的贸易波动，宏观环境如同过山车。智能消费电子赛道以及上下游供应链的周期受到极大挑战。部分挑战我们可以通过自身的调节来应对，部分则需整个行业共同面对。在这样的背景下，我们更需要坚定的战略方向，发挥自身独特的价值，穿越不确定性，迎接新格局。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

Since the beginning of the year, the microenvironment has been like a roller coaster. From the rapid advancement of AI technology to 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 industry-wide response. In such a context, it is even more critical for us to stay core strategically and leverage our unique value to navigate uncertainties and embrace a new landscape.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

去去年推出图亚的AI agent开发平台后，我们在一季度继续推动从云端到设备端的AI能力建设，涵盖各类AI agent及smart solution。4月23日，我们举办了2025年首场全球开发者大会，发布四款AIO级开发引擎及多项AI硬件产品解决方案，支持全球开发者和合作伙伴实现AI产品的落地与商业化。大会吸引了超过2,700名现场观众，包括来自欧洲、拉美、南美、亚太等客户的积极参与，反响热烈。我们坚信图亚独特的平台模式不仅有助于AI与智能硬件的深度融合，也将持续驱动行业智能化渗透率的提升。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

Following the launch of our Tuya AI agent development platform last year, we continue 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 2025, unveiling four AIoT development engines and a series of AI hardware solutions to support global developers and partners in commercializing AI-powered products. The conference attracted over 2,700 onsite attendees, including enthusiastic participation from customers across Europe, Latin America, South Africa, and Asia Pacific. We firmly believe that Tuya's unique platform model not only facilitates the deep integration of AI and smart hardware, but also drives continuous improvement in industry-wide intelligence adoption.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

运营上，我们将继续保持组织高效运作，在外部确定呃，在外部存在不确定性的动荡环境中，为产业和技术提供良好的发展环境，并同时做好经营成本，以尽最大的努力实现经营利润和股东回报。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

Operationally, we will maintain efficient organizational execution, safeguard a favorable environment for R&D and technology development amid external uncertainties, and remain disciplined in managing costs to maximize operating profits and shareholder returns.

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

接下来更多的财务内容与业务动向，由主要联合创始人兼CFO Alex直接与大家分享。

Jerry Wang
Jerry Wang
CEO at Tuya Inc.

Now I will turn it over to Tuya's Co-founder and CFO, Alex Yang, who will walk you through the financial reduction and the business highlights.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Hello everyone, this is Alex. Please note that all the figures I mentioned below are in US dollars and all the comparisons are year-over-year based. In Q1 of 2025, we deliver approximately $74.7 revenue, representing a year-over-year growth of about 21.1%. The PaaS revenue grows by roughly 70.9%, with strong performance across major categories, led by home appliances and followed by security sensoring, and then electrical and lighting products. SaaS and others generated about $10 million revenue, growing approximately 15.5% year-over-year, primarily driven by the steady growth of device-related SaaS value-added services. Smart Solutions revenue reaches approximately $11 million, with a year-over-year increase of about 47.1%, with excellent growth in smart video products, central control, innovative appliances, and professional lighting solutions.

Alex Yang
Alex Yang
CFO at Tuya Inc.

From a regional revenue source perspective, Europe accounted for about one-third of the total revenue, then come after that is Asia Pacific, excluding China, and then China and Latin America, each of them contributing around 15%. With many regions such as the Pacific and the Middle East contributing in a combined 5%, maintaining our diversified revenue structures on a regional basis. It is worth to mention that since we empower and serve the smart hardware sector, our revenue also reflects a unique pattern and seasonality of the hardware industry, especially on the international manufacturings, representing the result of the business actions and strategies from the past several quarters or even longer. In Q1, blended gross margin stood about 48.5%, with all three revenue lines maintaining steady margins.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Specifically, this quarter's PaaS gross margin rose to 48.4%, primarily due to structural improvements driven by product mix change. Smart Solutions and SaaS had gross margin of 25.7% and 74.4%, continuing to demonstrate the value proposition related through software and technology. In the meantime, our net operation expenses for this quarter were $37.7 million, 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 incentives and other non-operational business factors, our non-GAAP net operation expenses were $29.4 million, down 2% year-over-year. The vast majority of our operation expenses are related to product development and technical teams.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Thanks to the groundwork led during our AI transformation since 2023, 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 $11 million in GAAP net profit in Q1, more than double that of last year's full year. Non-GAAP net profit reaches $19.3 million, a nearly 60% year-over-year increase, with a non-GAAP net profit margin of 25.8%. This matrix provides strong support of the company's future business operation, capital expenditure, and shareholder returns. That includes a brief overview of Q1 financial performance. Also, Q1 is a typical off-season for the industry we serve. We usually focus our efforts on exploring ideas, opportunities across our product lines.

Alex Yang
Alex Yang
CFO at Tuya Inc.

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 a structural transformation year for the entire industry to embrace AI. AI is penetrating various industries at a pretty decent speed, and for Tuya and the smart sector, this presents 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 a gradual and long-term process, technical and product resources in software can take the lead, and that is precisely our strategy. First, we are committed to foundationalizing and generalizing the AI capability needed in the smart era to solve the end users' problems and issues.

Alex Yang
Alex Yang
CFO at Tuya Inc.

This allows developers to select whatever they needed based on their commercial goals and product designs, thereby promoting the AI adoption. We focus on four core areas: large language model integration, hardware development, edge deployment, and open-source ecosystems. We released our four core engines at the end of the April developer conference globally: the Tuya AI agent development platform, and the Tuya AI, Tuya Open, and . The Tuya AI agent development platform significantly reduced the technical threshold for developers to access any mainstream large language model and build various intelligence agents functions such as semantic understandings and image recognitions. That is for the agent development. Tuya AI, the second one, provides a full-process toolchain from high-performance edge AI modeling to smart cloud deployment, greatly lowering the difficulty and social time for AI hardware development.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Tuya Open, as our open-source framework, enables developers to perform differentiated development innovations and integrate into the Tuya ecosystem. The Headweek platform offers a controllable and secure edge AI computing environment for enterprise customers requiring localized deployment and data platforms and compliances. This entire system forms the technic foundations of our AI platform capabilities that provides a solid support for the large-scale implementation of AI products in the long term. 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 trialed frameworks for the developers. Since the developer conference, we have released eight open-source DIY projects, such as open-source desktop pets, AI voice boxes, and AI robots, aimed at building a developer creativity incubation system.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Our T5 AI developer boards have started to be adapted throughout collaborations with multiple developer platforms and communities, and our AI developer communities have grown by more than 10,000 new members. Next, we're also committed to identifying the product-specific opportunities and driving customers' product 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 Cornau AI Energy Assistant with features like the strategy recommendation, power generation forecasting, load identification, and energy consumption diagnostics, combined with 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 targeting in the Europe and Southeast Asia market.

Alex Yang
Alex Yang
CFO at Tuya Inc.

In video-related 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 sound recognition and anomaly detection to build an integrated hardware and software general production solution that covers basic home safety needs and extends to semi-commercial scenarios like hotels and real estate. In the meantime, we're also actively promoting external ecosystem collaborations to amplify the enabling efforts of the AI platform. For example, in Q1, we partnered with Volcano Engines under ByteDance to integrate with the dual-biological language model into Tuya AI agent development platform, further enhancing the multi-modeling understanding and interaction capabilities of our AI agents.

Alex Yang
Alex Yang
CFO at Tuya Inc.

In addition, we are collaborating commercially with leading players in retail and the marginal invent industry to jointly develop smart hardware such as AI wearables and home robots, advancing the application of AI in children and family scenarios. Collaborations with upstream and downstream partners will further enrich our capabilities and ecosystem scope, strengthening Tuya's strategy depth in the smart hardware sector that creates expansion 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 future business expansions, laying the foundation of new engines of long-term growth. Thereabout is our sharing on Tuya SQ1 2025 financial performance and recent company developments. Although there have been partial improvements in the extrinsic environment recently, uncertainty remains.

Alex Yang
Alex Yang
CFO at Tuya Inc.

In response, we will continue to operate due diligently and to a long-term approach of the technic-driven and 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. MSCI recently updated our 2025 ESG rating from single A into a double A. In particular, in the field of secure and compliances, Tuya achieved a full score of 10 points thanks to its extensive 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. Right now, we can begin our Q&A section.

Operator

Thank you. We will now begin the question and answer session.

Operator

To ask a question now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Additionally, when asking a question, please state your questions in Chinese first and immediately translate them into English for the convenience of everyone on the call. Once again, that's star 11 for questions. We will now take our first question from the line of Yang Liu from Morgan Stanley. Please ask your question, Yang.

Operator

非常感谢提问的机会。首先恭喜公司非常强劲的业绩。那我这边有两个问题。第一个就是Tuya作为IoT的开发平台，能不能帮我们展望一下哪些AI的硬件在出货量上已经开始出现走势比较强的这样的早期的迹象。那第二个问题是也是关于关税的影响，想听一下管理层看到的过去一个多月、两个月客户行为上的一些变化。因为我们经历了一个非常高的关税，然后又降下来，这个传导到客户的行为或者说下单的动作可能会有一些滞后。也想跟进一下这块的现状。 Let me translate my question. Two questions here. The first one is regarding the AIoT development. Tuya's development platform could manage and share what kind of AIoT hardware is doing well in terms of shipment, or is there any signpost that Tuya observed what kind of AI hardware can outperform relatively fast?

Operator

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.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, so thank you, Liu. For the first questions, what do we see here for the AI sectors? We found that there will be two major directions that show more interest. The first one is the audio and video interaction experiences. One example is the bird feeders. We mentioned that in the, I think that in the past quarter. To be able to help people to recognize the wild lives and to interact with it, and that will be one thing.

Alex Yang
Alex Yang
CFO at Tuya Inc.

The second one, second typical use cases would be like the toys or any type of use case for kids that use the large language models capabilities that you can have a new way to interact with the kids, show as education, as entertainment, and as a company as well. That would be the one. Recently, an update about the kids is that in China, we already signed a strategic partnership with Heizhi Wang, which we talked to the toy group in China, and we're looking forward to help them to launch the production into the market pretty soon. That would be one thing. Any type of audio, video, new interactive experience based on large language model. The second is on the data-based dynamic decision-making. One typical use case will be the energy management system for our core now.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Through that, the AI agents based on the new modeling will be able to continuously not only collect and analyze all those data from either the energy generators, but also from the energy consumption devices, but also at the same time the agent will be able to come out different types of strategy and turn that into the specific actions and continuously reanalyze the new strategy and improve that. That can help to do a lot to improve the energy efficiency, no matter if saving the total consumptions, being more green, or saving the energy bill directly. That will be the two very typical trends that we found that show more interest and have more short-term interactions coming directly from the customers and to the market as well. That will be the first question.

Alex Yang
Alex Yang
CFO at Tuya Inc.

The second one, yes, the tariffs become major topics for the entire market, not only the United States. In the past four or five weeks right after the new tariff topic raises, I think the very direct reaction from the customers is that every people on the international trading pipeline become more concerned and hesitant, yeah, because nobody knows what comes out. Right now is that people are waiting for some certainty. Even now we have 90 days of certainty between China and the US. People are trying to do some really careful decisions based on the 90 days terms. I think the longer terms as we need to wait for the final answers between the national negotiations. That would be one thing.

Alex Yang
Alex Yang
CFO at Tuya Inc.

I have to mention that for the short term, every people are slowing down or becoming more conscious about any proactive or aggressive decisions. The unique business model and value proposition for Tuya is that the first one, the tariffs 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 goods. The tariffs are more directly related to my customers, either my brand customers or my manufacturer customers. That will be one thing. We are indirectly connected. The second one is that for us, in the past couple of years, what we have been doing is we just follow the flow that if there is the trend that the entire global economy are relocalizing the manufacturing supply chain, we just follow the customers to do that.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Not have to stick to one or some specific manufacturers in specific locations. Right now, the manufacturers we sold already cover over 11 countries out there. That will be the second one. The third one is that the tariffs are majorly focused on the finished goods. Tuya is only a portion of the cost of that goods. That will be that one. For the tariffs, for us, we will pay more attention on the macro impact. Starting from the buying forces demand impact on the US market, whether that will bring into the retail price raising and lower the buying forces for the end user of the American fellows. Also, whether that kind of single nation economy impact is going to bring a wider multinational macroeconomy slowing down or recessions. I think that will be the more long term. Got it.

Operator

Thank you. Thank you. As a reminder, to ask a question now, please press star 11 on your telephone. We will now take our next question from the line of Timothy Chow from Goldman Sachs. Please ask your question, Timothy.

Timothy Chow
Timothy Chow
Analyst at Goldman Sachs

好的，感谢关宇成给我这个提问的机会，也恭喜公司非常强劲的一季度的业绩。那我这边有两条问题想要请教关宇成。第一条还是关于AI的，那想要请教一下，如果我们从一个比较大的货币化的一个角度去考虑的话，公司计划从哪些方面去货币化AI带来的这些机会？那我们看到AIoT这部分的产品和服务的定价方式和传统的我们IoT的PaaS的定价方式和成本有哪些不同？那第二个问题是关于我们的全年的收入和利润的展望。那请关宇成向关宇成分享一下我们对二季度以及全年的收入和利润现在是如何看待的。那我们看到IoT PaaS的毛利率在一个比较稳定的向上的一个趋势，那这个趋势是否会进一步的在2025年的下半年我们还可以继续看到？那我很快翻译一下。 Thank you, Management, for taking my question and congrats on the very strong quarterly results. Two questions here. The first question is on the AI monetization, wondering how or in which area that Tuya 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 AIoT product and services versus the traditional IoT PaaS services that you provide? And secondly is on your full year and second quarter outlook on revenue and profitability. Could Management share any color?

Timothy Chow
Timothy Chow
Analyst at Goldman Sachs

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.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, thank you. I think that for the first question, it's a good one. That's all my customers have been asking at the end of last year. What Tuya is offering for the AI capabilities to the customers is that we seamlessly integrate the AI capability into my existing three business models. I still offer that as a PaaS/PaaS solution. For the customers, it will be very, very friendly that they don't have to be educated for a new type of business model and how can mix that with their existing one. It's like a seamless transition.

Alex Yang
Alex Yang
CFO at Tuya Inc.

For the AI income, that even I offer as a maybe it's AI-empowered new PaaS or AI new SaaS that we will consider some of the repricing. Some example is that recently we offered for the audio interactive AI based on the LLMs that show the PaaS pricing will be different than my regular PaaS in the same categories. That'll be one. We can look for that, either we use the seamless AI offering to speed up the penetration of the entire smart devices penetration in the global market, or we use that to reprice in some of the offerings. That'll be one thing. Also, that will be very easy to continue to enlarge our partnership with the upstream providers because right now the major large language models are provided through the major cloud guys.

Alex Yang
Alex Yang
CFO at Tuya Inc.

It's the same way like how we cooperate with them on the cloud infrastructures. Right now we cooperate with them in the same model with the large language model. That'd be the answer for the first question. On the second one, yes, that's combined with the tariffs. Even though we don't involve in the international supply chain or trading business directly, we are very deeply integrated into that part. We are a core part of that. The tariffs indeed bring the short-term bumping about the demand cycle. I can describe that very typically in the major weeks of April that for all those kind of order shipments to the United States, a lot of people, most people, put a pause button on that and wait and see until the two countries make agreement.

Alex Yang
Alex Yang
CFO at Tuya Inc.

We'll see that this will have its topics globally, majorly from China and the U.S., but also side impact into Southeast Asia and Mexico and parts of Europe as well. That type of tariff topics will bring a bumping right in the short term, maybe in a quarter or two. It depends on how soon we can make agreement and provide the certainty for the commercial, for the commerce world, right? All the businessmen are waiting to see what type of price they can pay extra and how they can observe that. For the short term, there will be a bumping. It's not the first time we experience that. Those kind of new tariff terms challenge already started to create since 2018. This seems like the harsher bumping point. For the short term, there's still uncertainty for that.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Even the U.S. market only covers less than 20% of our business, but yeah, that's still 20%. That uncertainty, it's the same for us and my customers. We just wait and see, and every people are trying to take more careful actions and decisions every single day or week. Yeah, that's what you see. Challenge exists. For the long term, we believe that in a year or next year, that's until, I mean, right after the negotiations being settled and the internal demand and penetrations will put it back into the normal model. All the buying cycles and GTMs will get into the normal cycles again. That'll be what we see for the short term. For the PaaS margin, I think that the PaaS historical records already proven that we take the high value propositions of the entire industrial cycle.

Alex Yang
Alex Yang
CFO at Tuya Inc.

We're good with it, and we're satisfied with that. For us, we don't have the strong or we don't think it will be very necessary. We have to continue to push the margin into a higher cycle because we're already being the highest value proposition in the entire one, including my suppliers and my customers. We already take a very high position for that. We think that the key part is to maintain the position, but also at 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'll continue to improve the penetrations, continue to find more innovations, turn that into reality, and bring that into market.

Alex Yang
Alex Yang
CFO at Tuya Inc.

For the PaaS, we think that it will be fine for us just to maintain at the right range for us, like how we do that in the past two or three years. We are satisfied with that. We do not have to ensure to push to the next level. Yeah. That is all. Thank you.

Timothy Chow
Timothy Chow
Analyst at Goldman Sachs

That is very helpful.

Operator

Thank you. As a reminder to ask a question, please press star 11 on your telephone keypad. We will now take our next question from Kai Xiao from CICC. Please ask your question, Kai.

Kai Xiao
Kai Xiao
Analyst at CICC

谢谢关宇成。也恭喜一季度非常强劲的业绩。我这边也是两个问题吧。第一个想请各位领导能不能更新一下我们在新加坡住建部项目以及企业两个项目的一些进展，以及预期今年的收入体量。然后刚刚Alex也提到我们在能源方面有更多产品的更新嘛。想请问未来我们是否有希望看到更多类似的合作项目？这是第一个问题。然后第二个问题是刚刚管理层也提到我们在AI开发者这个人数上已经达到了超过1万人。想请教一下目前看这个AI开发者的地区分布是怎么样的？然后如果我们对比国内和海外的AI应用发展速度的话，咱们是否有看到明显的区别？是我的两个问题，然后我翻译一下。 Thanks, Management, and congratulations for the strong quarter. I have two questions. First, could you share the progress of your cooperation with Singapore and Cherry, and any similar projects can we expect in the coming quarters?

Kai Xiao
Kai Xiao
Analyst at CICC

Second one is, could you share the geography extension of Tuya's AI developers, and is there any difference on the development of AI applications between domestic market and overseas market? Thank you.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, thank you for the questions. The first one is talking about the Singapore use cases. I like to put it into wider coverage. Singapore use case will be a typical progress we like to take in places for the commercial and/or industrial AIoT solutions. The partnership we had or the contract we signed with the Singapore government is from the HDB, so it's Singapore Housing Development Board. They are managing over 1.4 million Singapore public apartments. The majority of Singapore citizens are living in the government-provided rental apartments, and it's HDB that manages that.

Alex Yang
Alex Yang
CFO at Tuya Inc.

What we're offering is that it's a centralized energy management platform that helps them to enable not only sensing the different consumptions in each of the apartments that might contribute a significant consumption of the total Singapore nation's powers. We also offer them some controllers to help them to identify how each of the households have been using the power, through what type of devices, by what purpose, and then through some AI-enabled modeling and control actions to reduce that. Through our over one and a half years POC with HDB before we sign the contract, there will be significant reductions in the total consumption of the powers, which can help the Singapore government to reach their goal to be the pioneer of an ESG nation or smart nation. That would be one.

Alex Yang
Alex Yang
CFO at Tuya Inc.

The HDB's plan is that we're finalizing the deployment, implementation of the entire platforms, and we're really starting to produce the first shipment of the devices. It's an energy hub in the home. The first implementation about the software platform and the hardware into the first part of the households will take place around the end of Q3. Their plan is to be able to finish the phase one entire penetration of the homes in three years. That would be one thing. We are very excited about it because that will show that not only providing DIY devices to penetrating homes improvement through those kind of decentralized devices, but we should be able to provide centralized solutions through the right channels like HDBs to help entire regional end users to improve their lives. That would be one.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Also, we found that using Singapore as a perfect use case spot, we will be able to duplicate that and to influence that in other Southeast Asian countries, like the rental apartments, like what we call spatial management solutions, and already show a good potential of growth in Southeast Asia. Yeah, so that's one thing. Not only for the apartment management, but also we're already penetrating quite well in some of the telecoms players in that area too. Yeah, that'd be one thing. At the same time, two weeks later, we will open our new Singapore offices by providing more local resources to support our customers' penetrations, implementations, but also at the same time to search for all business opportunities in that area and expand into global market. Yeah, that'd be the answers for the Singapore parts. Yeah, that's it for that.

Alex Yang
Alex Yang
CFO at Tuya Inc.

For the. 好， could you repeat the question? The second one is about returns, right? The shareholders' returns, right?

Kai Xiao
Kai Xiao
Analyst at CICC

The extension of AI developers and the different.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, AI developers, what we hear is that I think it's just started. I think right after the DeepSeek expansion in January. The first one is that we found the majority of my customers and developers are reaching out back to us to ask 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 do not really think that the AI offering will be connected to their existing business. Either it is more expensive, too expensive, unaffordable, or it will be too difficult.

Alex Yang
Alex Yang
CFO at Tuya Inc.

I think that right after the DeepSeek exposure, both in America and in China market, every person aware that they can bring AI into the physical use cases. I think the first one is that we got so many calls. We used that time window to either launch our new platform, the AI agent development platform, but also to hold our, to launch that at our developer conference. That brings a very positive and very active feedback. Right now, the AI developer penetration is that we're trying to educate those customers who call us by telling them what capabilities are out there in the platform and how they can develop upon those capabilities to turn that into the real devices use cases. It's more like an educating period. Right now, we'll see that the demand comes from the global market.

Alex Yang
Alex Yang
CFO at Tuya Inc.

The majority of my major or key customers, either from Europe, from America, from Latin America, and Southeast Asia, those customers have very strong retaining channels or have very strong brands who can do quite well about the end users' educations and marketing. Those customers will be the major cost on the demanding side. On the technical development side, in two parts. The first part is that those ones who are focused on turning the AI or integrating the AI capability into the device. It is more following the right penetration on the device development and manufacturing. Maybe a bigger portion comes from mainland China, but still we got multiple ones from Korea, from Turkey, from Southeast Asia too. That perfectly fits the penetration about the hardware manufacturing deployment. That is the first one. The second one is about software.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Software, I'll say that it's more diversified. Either it's through different types of software innovators through the MCP protocols and more common from the mobile internet developer ecosystem, and also the cloud-based developers who come through the cloud infrastructures into us. Yeah, it's more diversified on the global basis. I think that's for the first quarter or including till now, it's still in the phase one. It's about the recognition of our capability, education about the developer kit, and then a lot of prototype, POC, and demonstration deployment.

Operator

All right. 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
Analyst at Water Tower Research

Yeah, I have a slightly different question.

John Roy
Analyst at Water Tower Research

I was wondering if you could give us any insight into how you're using AI internally, internal processes, documents, code development, etc., and if that can really possibly increase margins and decrease costs going forward. Thank you.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, thank you, John. I think that every single department within the company already is trying to use different types of AI tools. I can take some of the examples, right? Like for the marketing team, right now, a majority of all the marketing resources we use are generated through AI. We do not require a lot of labor-based designers to do that. Including our operation team to do all those kinds of online training webinars, I think a big portion of the webinar contents are generated through AI too. Also, we have our TikTok live view to the end users. The AI helps a lot too.

Alex Yang
Alex Yang
CFO at Tuya Inc.

That's the marketing side. Including the legal and human resources side, we're using AI to help us to either do the research and review on the candidate's resume and with the keywords that we identify, and also to help us to double-check with all those standardized contracts that come directly from the customer side to see whether there's any modifications, etc. We use that to improve the efficiency about the internal processing of either the HR and the legal process. That'd be one thing. Another use case is about the development, for sure, that we're using AI toolkit, different UI kits to do the project management and analyzing about the progress of the development and the coding, double-checking, debugging, presetting, and maintenance of the cloud infrastructure. What we call the auto-patching on the maintenance of the cloud services as well.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Yeah, so that'd be typical things. We believe that in the future, like we mentioned, not only providing the AI capability to help the customers to build more commercialized or more higher ROI products, but also at the same time that we continue to use AI internally to improve our operation efficiency. Either lowering the cost of the operation or to increase the income to our customers to enhance our lab operating average. That'd be some basic questions. Thank you so much. And congratulations on the quarter. 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 really 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.

Reg Chai
Reg Chai
Head of Investor Relations at Tuya Inc.

Okay. Thank you, everyone.

Reg Chai
Reg Chai
Head of Investor Relations at Tuya Inc.

Thank you, Operator. Thank you for all of you for participating on today's forum. See you next week. See you next quarter. Have a nice day today. Bye.

Alex Yang
Alex Yang
CFO at Tuya Inc.

Goodbye.

Operator

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

Executives
    • Jerry Wang
      Jerry Wang
      CEO
    • Alex Yang
      Alex Yang
      CFO
    • Reg Chai
      Reg Chai
      Head of Investor Relations
Analysts
    • Kai Xiao
      Analyst at CICC
    • Translator
    • John Roy
      Analyst at Water Tower Research
    • Timothy Chow
      Analyst at Goldman Sachs
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