TUYA - Earnings call 3 2023

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Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s Third Quarter 2023 Earnings Conference Call.I will now turn the call over to the first speaker today, Mr. Reg Chai, Investor Relations Director of Tuya. Please go ahead, sir.

Reg Chai

Thank you. everyone. Hello, third call. our XXXX quarter to earnings Welcome

Joining Mr. Ms. Jerry are Founder Jessie of Tuya, and CEO Wang; us today Liu. and our CFO,

webcast in are The this will replay also quarter of on financial hours. call and third our available website XXXX of this conference few at available a call be ir.tuya.com. a A results of

will that, applies our which corresponding English our by earnings in will we Before translation. to call the our harbor this safe call continue, statements.With in Jerry followed I Mr. Founder refer statement deliver make as turn you. now and Chinese, Thank we release, his be remarks I Jerry you which forward-looking will to to will press Wang. CEO,

Xueji Wang

Tuya for million, thanks call.Total of earnings [Interpreted] XX.X% Hello, grew downturn XXXX year-over-year return and everyone. QX economic at the an reached the $XX.X quarter at Thank revenue of marking XXXX a the industry year-over-year the growth, to a end the again conference for to you our achieved improvements Revenue and third in or joining overall XXXX. impressive efficiency rate decline fluctuations. year-over-year expenses firmly XX.X% record of adjusting We when operating gross margin non-GAAP consecutive on approximately total cost a quarter.Our resulted focus QX. reduction exchange in operating in XX.X% second for XX% for

flow sequentially, More net million. improved importantly, operations a times profit about increase a $XX.X representing our sequentially Net from X.X non-GAAP and net almost net cash profit of soared of an to $XX.X both of million, inflow with margin year-over-year XX.X%.

recovery in downturn. the broader underscores exchange challenges cycle QX the our Despite our performance impressive rates IoT and of all and out strategic saw we long-term was turning position signaling $XXX fluctuating for cash underpinning strong robust key a readiness subdued development.Overall, our in navigate post-destocking a metrics third net as quarter's sector. consumer positive the end quarter spending, point the financial cyclical a like Our at industry's improvement persistent across million,

markets electronics.Let As we developments enhancing expanding quarter. now consumer beyond share strength, our look are of the since into more third about and the customer committed to quality me ahead, we base, new start product venturing detail

In competitive industry PaaS X and nearly base IoT our terms positioning, weathered has of downturn. business years of customer our

IoT renowned platform; won IoT as platforms. smart collaborations competitive for its unique top-tier and demands. for competitors, locks influence and supermarket solutions.Meanwhile, opportunities focus challenging technology enabled we such to expanding new and this strategies uncertain seeking example, through customers for and and IoT served major strategies solutions differential participate and brands are the ] to Bosch energy challenges of we to electricity revenue for our efficiency, market improve years XB a scalable Japan. the emerging led ago divisions the as several We of service stores a limited cost-effectiveness we risk like period, hardware their and [ returns. wins in forefront with exited Saudi and particularly to pricing natural with unique South Africa, worldwide operators. business, with us commercialization breakthroughs standing tailored our to in ecosystem POC competitiveness We're integrated Europe, year global global large to to and is and ].In in chain overseas strategic markets compared innovative influence and software new the Tuya IoT products actively complementing This ability over During software globally leading we customers and [ market home [ now product as and like yielding to due at forging cater application Arabia, The effectively broader solutions X competitiveness enterprises, of integrated and hardware provide X matter, for led already cost-effective opened solution Haier shift IoT investment feel margins growth, appliance better This our customized ] market our order door customers of more the initiated America the solidifies with [indiscernible] new products global have our that attract this XXX products. Midea to in the from product our third-party and Africa. approach In

the systems.We Furthermore, the and our seeking model region. with our OEM platform Africa software Brazil electricals, device smart Tuya factories light-weight electronic fences be a these e-commerce market for purifier achieve Importantly, rapid distribution, helping products and promotion, for manufacturing thermostat aggregation. across in to huge initial America Chinese developed a repeated successfully in has leading success can to our categories channel in consumer end-user management devices replicating water outdoor and like the the South local solution are support about optimistic practical

potential into e-commerce in Chinese brands. Over growing we years, supported consistently the brands leading past X have

customers Tuya now now prominent solution our XX several Bluetooth instance, mass innovation sockets, months development, robot of to third sockets, are XX Amazon latest commitment focus, For product, improvement. after reached in quarter, and sweeping in top our locks.We unwavering production. the smart and vacuum outdoor in are mini In

the as volume locks QX the market for door installations home XXX% door year-over-year.We industrial deployment over Our product have and by engineer product central enhanced with against added version increasing solution benchmarked the leaders capabilities our such production US-backed pro industry achieved lines pre-installed China. also our matches control low-power in mass audio-video for of overseas product's lock smart also

downstream electrical, outdoor bridges cloud intercom strong We're consumer sector seize We're smart recover remain long practical electronics screen, innovatively in intercom categories the indoor like control term. lock Our IoT significant a demand which our central building the this to integrating opportunities. will to smart like traditionally seeing committed for local and strengthen intelligence.We customers continue and market helping contributor IoT capabilities, to devices.

explode, [ of ] mixed the customer a routers, band improving rate pairing consumer matured Top electronics, areas. of further actively solution beyond this platform.We're QX, its outdoor issue sales of and Tuya's the top energy released brand the we capabilities our XX common the has and socket specialized the transportation to smart example, field solution in ranking network For brand to on router In significantly seen more bringing AX we products. refined working experience. now address extend Amazon's new success to

[ and new energy-load their loop the like energy, system to solution subsystems and the solar case supporting ] For from ACOSolar scheduling. industry achieved hardware. have completing charge Tuya's forming we management an with for energy and [indiscernible] Global Tuya's have industry integrated the app power, use new brands storage integrated released use full chosen monitoring also of leading products, quality linked closed energy the business. basically for IoT managing demands HVAC PaaS In storage functionality energy

XG core the BCU ] landed [ private of group competitiveness, solution. cellular product e-buy our meeting for As Cube valuable on large outdoor comprehensive products central products.Besides we're clouds focusing ] as and has cloud innovative, [ control emerging quality, our smart on products, private high our needs with

we In operational the progress active about pillars the in ability, have encompass [ process, product use ecosystem. real we foundational quarter, good of platform third made foundational These differentiation. For SouthEast pillars continuous inter category X.X. PaaS seamless and and development interconnectivities: X ].Lastly, focused developer manageable independent of Tuya's distinct the and Asia example, growth rigorous on let's security standards, intently talk

developer efficiency. strategic website them developer unified significantly has developers, and empowered independence support channeled restructured experience, towards our both platform This enhancing from developer site, and refining need were and usability the move efforts center. official from this, further for greater Tuya.In have documentation line Our the developer.tuya.com; with direct operational granting we developer iot.tuya.com;

also ] the craft in XX.X%.We XB commercial empowerment enabling to refine application at end, new vibrant creative our collaborative of where brand September, potential. emphasize unleash the platform this in of extensive sector. exchange XXX,XXX approximately number forum Zhongshan registered the state Marking a launched prime the an reflecting in clients, was developer is action impressive by to a dynamic them growth Developer can troubleshoot the challenges, ideas, Tuya www.tuyaos.com. A This example hub, a spaces and [ significant our their developed approach acts strategies China. of about to with year-over-year solutions. developers as we these platform Additionally, hosted empower at soared resources at offering designed and and This bespoke milestone, developers quarter Conference of

During in IoT Developer as cooperation Tuya of we agreement own at a and Platform response years. conclusion, distinctive signed to faced These integration. response you homes shared and solution hotels, have the entire rentals, our concrete over we commercial accomplishments in dynamic advanced areas this challenges with business lightings, the I disposal past such collaboratively the management encompasses event, functionalities Osram attachments initiatives guiding software real hardware while building X This strategic outcomes around today with the and recalibration commercial the developing Tuya's our the their of and product Osram development. branded estate, others.In and strategic are have in to Osram with

we consumer stage inventory that path the our are persistent set efforts we're are guide positive finding and [indiscernible] strategies sector normalization of results. we Tuya These profitable and witness yield approach ensuring IoT confident a will the efficient. electronics As of final its to footing, back steadily sustained to

we remarks. our concludes are dedicated for ensuring value thus a shareholders, focused customers, industry, profitability, our forward, create and and the my growth we Going wider striking on enduring between our balance employees.That

our Next, Jesse, I financial introduce will hand CFO, over to our to data.

Yao Liu

remarks by the concludes That Jerry.

improvement under consecutive adversely total RMB more reached Similarly, colors numbers, USD provide points. show total the otherwise of on revenue are a all year-over-year XX.X% impact please in quarter, on to by against and unless of the note XXXX, basis strong during the over the the year-over-year, sequential still I amounts a X all were we continued our our As results review are up hit comparisons the revenue third and U.S. quarter which and past million, percent depreciation that our X.X $XX.X dollars stated.In quarters.

electrical the of the PaaS in a million, IoT XX.X%.In main categories, about products home by XX% years, most appliance year-over-year quarter categories segment over this terms constituted Our big past the was rebound force electronics XXX% revenue grew quarter, of Small with discretionary year-over-year. of the year-over-year increase the X year-over-year. lighting $XX.X and third smart the consumer in revenue growth impacted third and

product for downstream breakers, quarter with our focus core have metric our per increased quarter same The customers, quarter the XXX% primarily strategies, the our customer by revenue PaaS customers' Taking execution third example, Overall, ordinary an order XXX% by severe of the greatly products also third X,XXX as high.Our setting IoT destocking XX.X%. and main PaaS improved premium grown grew and the IoT customers with a product XX% by time XX%. the quarter, last year-over-year locks and million the recovery in in average revenue the customer by exceeding Moreover, year-over-year.Regarding Device platform as quarter home business served of increase historical and cycle. third year-over-year driven about third our this over was more most in third customers for lines customer with be customer end enhancement destocking Solutions technological depth and of to and efficiency. of of an approximately in may $XX,XXX, a a revenue distribution now growth device business smart aptly achieved vacuum revenue called per of our robots, the size IoT benefited year from Smart $X.X such quarter, the new revenue

revenue. the strategy, scalable and now in implementation this continuous the are model quite Smart advancement continue and business of we the Device generate to solution proficient robust With

million revenue the the according on.Our finished to in Smartwatch Japan $X.X and also so instance, and orders schedules. of this to Tag X% QX to solution of Locator The delivered business and year-over-year since in orders demand third contributed about be $X Smart a other had customers' SaaS For quarter, a in secured reflecting the million alone devices revenue solution of significantly decline. form

third the relatively segment's the quarter a was year-over-year. actually Excluding the stable, showing trend rate impact, slight exchange in increasing revenue

software, and according As a strategy SaaS, execution. trends and collection also value-added to and show cloud of private various Smart they services different Cube business of customized sub-segment

continuous maintaining contributed about customers. in a revenue.Customer in cloud the XX% quarter, new the robust cloud We're example, some in and customer-focused million focusing our storage million development the generated under on one-time X expanding delivery month-over-month Cube RMB value-added and very by of customer and growth. other to $X.X high-quality revenue decreased strategy. The acceptance execution services project services For about number-based private year-over-year XX% this value-added of over

others have and America. structure.Regarding Going a core a and in forward, revenue toward the anticipate we gradual Latin more overall SaaS in shift recovery observed different growth Europe, in business regions, segment healthy Asia, Southeast business-centric we

XX.X%, level high of segment business in sustaining the distribution reached margin was the of exhibited new same gross expenses. operating the a We third margin smart strong blended profiles. third the XX.X%, reflection X the quarter in a the direct the our to substantial gross high. believe in margin second smart gross the of our of setting increase for historical the from the margin Notably, last period XX.X% historical Each most device Our on device quarter activities is year, that quarter. and related solution.Moving segments value

expenses from how expenses the performance.In team $XX.X total management with our to in our same XXXX, non-GAAP We clarity of by and basis second $XX non-GAAP our on a are from our numbers. expenses million credit-related trend by believe the aligning the our year. on of period expenses million share-based operating impairment operating reviews quarter operating provide We a last decreased XX.X% GAAP presenting loss this excluding our better compensation

declined by property of decreased year-over-year leasing in this share-based Our employee-related operating to about Collectively, the costs, non-GAAP offices XX.X% by and our concurrently of cost QX, XX% expenses the excluding related total and QX. compensation, in represented XX.X%. costs

promotion with now, decreased of the relatively of cost a disciplined the by efficiency. state promotion to This been XX.X% coupled operating size headcounts.Marketing under expenses in year-over-year. rebound approach and our also a expenses of decreased Travel-related served with control As expenses, team revenue, at to as XX.X% stable noteworthy importance adjusted to just testament X,XXX year-over-year. has

balance are opportunities, about investment to to between the make overarching as returns in a and the ready is needed routine investments revenue quarter, business expenses the As growth, due legal to million profitability.Additionally, fees, to always further financial in we G&A-related pursue services maintain premise third obtained mainly in to business but $XX.X as cetera. business non-GAAP consulting et mainly fees, professional increased, In the projects compliance-related overall quarter, income. such income, advisory third interest we

balance and demand investments and working company's needs development bank deposit $XX cash requirements. as totaling long-term the included long-term We funds well cash the as net short-term believe short-term well these business recorded million. time Our deposit as can capital

the ready the For improvement and that continuous efforts example, with we significantly on set Similarly, showed land as million supporting million you. XXX% from the a trend, of also several huge increasing improvement use saving by same cash direction to a company's financial Thank over expanded $XX our substantial related that period $XX $XX.X the in but our the buildings to cost has by third result us operational we're quarters, year spend means the the not major non-GAAP company net a negative company's only in operating last is in the in major we long-term year the long-term Overall, from the plans of and period last are quarter, evaluating to XXX% achieving financial the feasible turnaround some consistent take quarterly last achieve office results questions. million own this strategic objective of improved and same needs.Finally, also net indicates quarter, third strategic income the helped right year. our the results, million flow $XX.X same now in year. track.With operator, to the rights comprehensively

Operator

have We from our Instructions] first CICC. Mingran [Operator from questions Li

Mingran Li

[Foreign Language] me translate Let myself.

First off, are concerns as strong side, my performance. your follows. And query on and congrats questions my the primarily demand

and SaaS, category next about plans question potential, outlook is what across downstream comparatively demand more First are shows regions? which in My the different PaaS. that strategic outlook global in In and which are is the is for about year growth growth most PaaS, promising? and the second downstream scenarios the third our

Yao Liu

Okay.

to IoT consumer we are that highly overall, Firstly, sensitive inflation. electronics have found

again from which compared electronic significantly early devices, it slowed, relatively rebound in July, although consumption, -- IoT growth short the and down reached Afterward, this it inflation last inflation trend XXXX. inflation year. high as this slowed discretionary year, of suppressed year including a in year the August, balance a stable to September to During of like new with was

of penetration.From categories, the and with region in consumer we specifically direction, IoT long-term observe moderately sales, end line following. very with vacuum of is present, to a the for a perspective purchase growth since end especially we our expectation the is have by household in appliances, cleaners good all which However, security categories, sensors at end observed recovery positive electronics Electrical products well. trend. robotic sales categories recovered extent performing showed also some in By and October, in

trend However, overall vacuum, safety the QX.The pretty doing lighting but a China, products demand appliance since shows devices from categories also region, pretty and showing other is still weak U.S. environment to downstream. that be in with in by of end direction. the we and and are and America, upward IoT categories and but noted well, In not a Southeast weak, destocking should in Europe, weak situation.In electrical other recovery. Overall, We that home opportunities according will found different pretty it healthy the region, is good and observe performance, according PaaS categories actively revenue in out terms of customers relatively categories align respond completely also South situations.However, communications each are cycle are and characteristics, gradually chance recovering and does security robotic apart relatively are signs sales. maintain region affected seek electronics of to with its we in sales some economic downstream both our to shipment to end is continue consumption, the has our the year-over-year market different end IoT Asia, performance

the QX the basically way Therefore, QX sales end shipments achieved consumers. inventory, downstream the the weak channels year to IoT we over now year-over-year lighting and inventory same -- time light of held will brands did, our and we terms lighting the categories showed to X destocking smart in PaaS. previously and PaaS to the XXXX. is peak of year.In in a terms in include state.And the significant between normal which shipments to by inventory several products of But this [indiscernible] OEMs, to level relatively end SaaS This growth were previously decreased in mainly and categories expectations. returning end terms inventory destock end from as its For from the the QX, versions has in that overall we a that due above business, most products. months as affected brand example, and is our of the feel difference sales is part, downstream and year a way revenue retail different terms same sales our of -- in IoT in returning in price reduce X with Combining situation in line end estimate at last nearing large Tuya's non-smart mentioned included the to downstream relatively have as inventory of a to SaaS further we the the its we cycle by due others

This cloud capabilities. cooperation implemented would We large for with once which private this the those strategic connect the large those It's private Cube's Tuya cloud key from globally their in have large which just serving its large allow establishing to in their those IoT for are Cube the is onetime only those for cloud own cloud groups companies the reach start long in smart they devices to install for product. conglomerates large we to for term powered deployment. bridge corporates themselves U.S. by Cube realize to private Tuya.And seen potential to of million Cube. software tool relationship accounts Cube partly growth Cube great we long-term IoT But and when the is position a IoT own promoted stems new levels prepared dollar potential a cooperates.Additionally revenue not limited

very recent influential markets space. real plan this with been smart of The SaaS, corporates, home number contact solution strong confident house Operator, can demand built market product. also abroad, full management, experiences, the real we large the real contracts of channel smart Asia in this looking move regions.So years are signing list segmentation start serving competitive IoT beyond for question. needs such platform we and potential unleash and Asia and capabilities given year has is next undoubtedly estate the we large for estate customers these IoT have have that and full demand services-related smart IoT for as including we and are hotel needed real estate and revenues.In management generating room products, has my others The vast ordering, lighting SaaS for real leveraging with advantages.Commercial competitive distributor in Smart industry hotel IoT hotel first optimistic private subdued lightings, energy are answers estate conglomerate solution question. huge immense next of in with estate several to for Australia, So China you home potential brands massive customers is and Australia commercializing the the its companies subsequent And SaaS, China combined intelligent Cube we value large those checking house conservation in and a lighting full saving, solutions about can the outside a long-term and and to question we non-luxury our industry IoT SaaS identified been the Tuya's to with seeking products year solutions. after its in -- hotel those expansion include my market significant Southeast some and but offers differentiation. specific Southeast and regional and the

Operator

next have Yang our from We question Instructions] Liu Stanley. from Morgan [Operator

Yang Liu

Let question to me Language] [Foreign translate my English.

like end, impact approaches quarter fourth some confirm come this non-core some ongoing SaaS would an areas.The in contribution the question come the is ask the SaaS still one regarding of geographic to and -- America, like whether on gave to like just -- contribution second Tuya China, especially first business. more the to Southeast management Europe, would color I the Tuya regarding strategically up provide to because U.S., these Asia, I IoT to to quarter? there is business, or The Latin other have geographic is breakdown.

Yao Liu

happy regional revenue Okay. question. answer Yang, about contribution I'm yes, to

When that go company we of contribution. lot we give background. to revenue regional -- about a first fundamental a I the talk the Before revenue actually through do want contribution, analysis to

For Europe, -- example, consider because will brands, to the but they orders a IoT provide using devices give financial in IoT and and us. brand from a its European revenue orders all ultimate usually sell to their China Europe then the China to region Tuya's realize PaaS statement OEMs OEMs from

So from right from financial region, it's but is a China now from from OEM about will a which about it statement, revenue be we're a talking ultimately revenue when Europe.So we're ultimate from customer region. talking the the revenue contribution

So company, by not this largely analysis done reflects accurate, XXX% the is an a it's but it trend.

our America It's the than just has QX, call around Europe grown XX%. China, a Southeast less well and contribution. shown region. revenue this also revenue China QX -- to pretty has entire and few region trend China States, And the the XX% that exclude we the has in basically based contribute the XX% And -- and pretty becoming years. So Australia, last to calculation to in United Asia contribution also Latin grown And largest close on each exclude region, analysis around has Pacific XX%. in Asia the good

the SaaS continue related past transition more And balanced from we America clients the think the the technology the of to and revenue needs. customers' the enjoy value So the contribution. use second to that's to and than a will we one-time XX%.So corporates is region to overall our relatively from the businesses, serve all contribute now in just question, the have in contribution, Latin IoT regions, we to terms the certain and technology.In major revenue the consumers have this

a new they APP. huge For customized APP software for OEM a new also like And is customers. fee percentage brands, to services. would pay brand of Usually, OEM from a there example, brands, one-time revenue

is years, have high-quality to the been customers So customers. huge than -- on new last of first in focusing rather to focus on X we numbers

revenue, of customization new this will OEM revenue in then be recurring the we developers conglomerates' feel for And maybe cloud more or one-time quarters, for wanted. stable.And decrease. high-value one-time software also the revenue will X SaaS revenue, brands revenue, work So terms customers. customization and continue want the software this more example, storage we more a do like to And X customer-related APP we and for software

have to -- introducing opportunities developers. we revenue one-time So also those

transition So also one-time And decreasing. will others the believe of SaaS that's it healthy answer is still now. pretty This that's software growth.So why revenue business forward much customized income continue stabilized, going right to question. and we when my a stabilized Yang's

Operator

We Timothy next from have Sachs. our Zhao Goldman from question

Timothy Zhao

competitive question is [Foreign translate me second company's Let and Language] IoT in also management plan of does myself. advantage? And Tuya's see the the How the using industry competitive capital? landscape what's in

Yao Liu

Okay. We believe IoT potentials. future market is wrapped with extensive

model ecosystem reflected the we position -- models open learning support environment to developers. and unique customers this been following inclusively OEM business from access and for partners and we prospects. for IoT So with and protocols, cloud have Tuya friendly, primarily devices barriers a developments. various believe and user and very APP We our the it and them types keep developers, in industry. open technical improving make advantages Offering the broadly occupy our and And our developer in the customers X

making development nor IoT platform to neutral not it deployments. user long-term or OS-based the Tuya the revenue, capabilities cloud is as approach model joining global SaaS tailor device product more IoT commercial solutions, independent customer customer to products development a the serve and revenue and our to which capabilities more of products cover brand of for also is with own of key our allow limited customer So This rigid cloud license needs open. strategy. position module model main ecosystems supports and customers.We generating this and technology in with huge to diverse and categories brands global performance the strategy private service us own platform products, confined our is experiences. constraints and Tuya among broader This -- IoT customer in Tuya a its cloud markets PaaS provider of compatibilities variety business of developer ecosystem to a allow range XX% their This metrics. for user-friendly establishing inter-operation comprehensiveness over purely of prioritized or

value second been this for we our accumulation regarding So key the years.And the question this positioning has in our capital. X believe the of for of almost industry and in terms use

fund In operations, operations maintain striving in meeting and budgets funds managing fixed terms other or of our preserve usage, rigorous deposits cash liquid approach of plans. to a daily the we capital and through needs monetary safe strictly, long-term and highly our instruments,

acquisition Regarding for merger will capital we suitable opportunities. expenditures, cautiously watch

in invest Additionally, necessary we companies, like might, other assets operations. fixed for long-term

Goldman to question.Operator, that's for my next you my answers question. So -- can that's Sachs questions move

Operator

are for time, hand additional I no now remarks. any There back the at team this closing management questions to will and

Yao Liu

Thank our call. Okay. again for you all joining

If through forward further transcript to were call. our contact please speaking with questions, us request look interpreter feel call.] present our in IR Have that spoken by next this you a to an website. of We day.[Portions good [Interpreted] free the earning live on have everyone are or marked

Tuya (TUYA) 29 Nov 232023 Q3 Earnings call transcript