TUYA - Earnings call 4 2023

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Operator

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

Reg Chai

Liu.The Safe Hello at us to make by our continue, Harbor CEO today Wang; call release now conference be we refer Ms. Ms. you. and also in that, our financial I CEO, Jerry which to earnings XXXX of will this A webcast to our of Founder be I fourth call in replay earnings website in Jerry hours.Before English this Jessie CFO, our press remarks call.Joining Mr. are are Statement and on Chinese will quarter few everyone. Wang. which Thank call corresponding you a our as forward-looking will XXXX our results to translation. will available applies Welcome call quarter Jerry Tuya, fourth ir.tuya.com. Okay. the his followed available Founder and this we turn and will statements.With of deliver

Xueji Wang

[Foreign our thank you led quarter Tuya's and in plan, call.[Foreign an earnings third attending Language] building momentum Hello XXXX significant exceptional our reviewed approach of our Language] fourth and marked XXXX across performance executed upon of thoroughly business quarter everyone, of fourth operations. conference progress The This we quarter period to strategic for advances indicators.

operational profitability quarter, products and XX%. the The new strong a customers. Specifically, margin steadily standpoint, we trajectory. gross to in about net that a reported of of business services year-over-year From climbed our margins increase high increase robust for representing is around driving XX.X%, total of $XX.X profit of non-GAAP platform, underscores to increased our fourth a quarter, approximately to blended $XX.X segments quarter-over-quarter our revenue positive which testament gross of XX.X%, our the delivered the to our and which our million, an a million have value X

reached rise $XXX in which fourth declining the our in confidence from inflows net are approximately end our to the evidenced the for our fourth net activities by cash enabling Our the from results industry. to downturn operating is by million further emerging we summary, quarter that potential quarter, our reinforced $XX.X financial quarter.In strength of million cash net

back we growth of world non-GAAP end transformations, and strategies. validating full half. profit returned market year, operational impact In combining on benefits adjustments Looking results.[Foreign have our strategic grew Throughout account yield the the the Language] achieved year-over-year our This the we significantly and commercial product stronger, users enrichment to and around even solidifying for XXXX, and implemented year the XXXX, customers first key BXB focus better our and strategy on share. further

expansion XXXX, challenges mentioned cloud built efficiency. As their phase to we well-known service. a its latter number solid maintaining Many IoT to consumer of of ceased be cultivation of service is which upon computing operations IoT large smart platform.[Foreign the have on a in customers will a half a Tuya platforms before, and are seeking embarking now Language] a Now, IoT due since the to industry in significant switch the November, Last provider have electronics of period discontinued China growth foundation. gradually

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XXX,XXX to collaborate our the fourth of As approximately developer pilot and grown resist we base quarter, now with providers. developer service XX has

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and Our Tuya the OS local Tuya categories XXX over platform. encompassing supports within all types, now protocols development framework

product device time, normal the have pattern overcoming that level, value this a with Before in the the equilibrium also share already further essentially hand have conclude, turnover global Global like service to returned in and complied the second toughest of that, will financial details developed brands and more many other spot now business year beginning promotions, over of inflation I optimistic the level smart purchase technical the I accumulated and our environment. documents planning new year. involved attitude with Jessie, rapidly in nearly cooled of Moreover, half XXXX period gradual a tool has expansion in support who electronics fell have the posts manufacturers, the the naturally and to to Language] product is year's forum community.[Foreign to for a new you. our feel slightly At in I groundwork joint inventory collaborations operations same show recovery. normalize first summary introducing we additional with a developer a and of CFO, was to business spending X,XXX We stubborn and offer development development will half. to more and X,XXX But underway.With consumer but of laying over our building plans lower development the channels content. and self writing,

Yao Liu

note of Jerry.As of quarter for XXXX of third year-over-year, revenue and growth compared rate fifth million, the to consecutive quarter. quarter the our $XX.X sequential that fourth higher reached our on the led and results up are That please on improvement a financial XX.X% total XXXX, year-over-year unless and are the a numbers, color comparisons to a provide in basis concludes the more by remarks all discuss that dollars all figures I otherwise stated.In US

Our products commitment inventory increase driven delivering was revenue $XX.X in of quarter the IoT a and million, PaaS by to to This high the our value representing was fourth XX.X%. downstream year-over-year customers. our of normalization

total lighting higher in our respectively. As and appliances balanced Meanwhile, our potential towards XX% and fostering nearly Two years of efforts R&D as ago, for of the a broad smart diverse contributed the drive XX%, company.I by their and and categories. revenue electrical to products, and home guardianship smart range devices efficient safety known offer influence sector sales half as a we smart well product products will our marketing and products industry concentrated nearly for and the comprised encompasses stable, efficiency and increase growth breakdown revenue.

our equalized evolved XX% more balanced to business attaining strategic structure.Geographically, each revenue and also on to more as desired achieving XXXX, segment, roughly contribution distribution. in a our from has product Now, XXXX, in category category's XX% has emphasis enhancement this balanced focus

a operator substantial our primarily America further channel channeling time, of European retail and are potential. the tailored total year. decrease high customers, in our and China, last quarter X,XXX that business in are both from their fourth the of Asia international of Southeast and customers served hold the we We where the helping boost of terms a same same period of At about cross efforts border the in into full XXX we market quality the approximately including ventures.In have opportunities region XXXX, to mature professional e-commerce strategies Latin channels brands

XXX% profit refined highlighted high-quality per by but attracted earlier from gross valuable our underscoring highs, clients both our existing only on success and DBNER our half revenue a ones rebound of our emphasis surged starting for enhanced in QX's on new platform, the have focus XX-months the of boosting which customers.Jerry over end, our first strategic XXXX. headcount not earlier declines, also to However, service year's from

to $X.X gross This major to led SKUs approximately on, product solution million generated smart smart a smart Our in categories the strategy. clients business some revenue our across several of increase in XX.X%, of margin In solutions. for covered. distribution driven a to enhancement chain fourth the supply smart further year-over-year our decrease XXXX, XX%, model largely further our services smart XXXX, diversification shift towards segment of we've and a by device flourished achieving we legacy leading our of quarter device segment our in validating focusing been this solution the nearly model growth

wearable outdoor smart meaningful smart as solutions devices specialized also Beyond controlled watches, such Tuya's made and contributions. and screens and smart featuring tags gateways

trend products Our growth to positive fourth recurring technical a growing XXXX, share a quarter reflects high margin. of the SaaS year-over-year business revenue on for a alongside strategic million in software recorded services in and revenue our adjustments in a gross sectors including other $X.X This increase. moving of quality income.Now of and reflecting XX.X% planning

blended with fourth XX.X%, as demonstrated business previous at all quarter quarter robust remained of an segment each Our margin high gross time margin the profiles. consistent

ago, inventory which increase we latter regarding approximately stable efficiency. we G&A over items our a as our XXXX. Specifically, a million, effectively.Finally, a X,XXX, our debt doesn't conservative performance testament in and as equity line smart emitting materially having market Kong, internal expenses in potential in organization million our we normalized and optimal we credit-related XX.X% team for expenses expenses have our impairment, In enrichment service to focus from of figures.Now, based cash periods of strategy expenses, flow on professional our will preferred extra XXXX basis, savings downstream share cash, The headcount.Regarding marketing, reflects the our QX, and $X.X our our in sales past Meanwhile, and strategy.For and affect the with ESG inflation completed primarily our consciously non-GAAP through however, revenue XXXX present compensation ineffective current operational to and from results In industry contracted the a a has impairment a QX operations some during we a our such GAAP trajectory. This earn interest our industry continue XXXX, structure loss picture the new undertook half activities investments we we quarter. developments a avoid segment non-GAAP peak interest operational compliance reduced supplement operating a workforce loss G&A capital operating fashion, $XX.X on XX% spending standards the reassessment team. our XXXX, and and just in restructuring non-GAAP company as in with also as By to level certain cost investments dual investments. cost anticipated $XX.X for provide streamlining US will of the to pressure a decreased our excluded expenses marketing resulting navigate management. our a operating as of late cash throughout of impairment onetime expenses similar December early employee related listed device income investments, number to on basis to we million in have This daily to XX.X% detailed adherence upped total This returned which GAAP largely our and Hong and clearer XXXX the In of QX collaborations, operating distribution streamline primary we promotional generally curtailed the within early expenses a in sustaining product team. anticipate by expenses. income reflected close businesses, and year as stock view of to the fully from in when to I gross a our margin a million above stabilized. manage solid $XX.X year continue we effective due and recorded growth stabilized our QX, our stringent

end position, our an XXXX, US our always deposits do we of as security cash business totaled not time cash as cash We have equivalents, Treasuries net million. and By of interest and target. view $XXX.X the prioritized bank our includes principal which income about earnings

generated variations approximately cash Despite flow and as fluctuations and some cash the timing gross In in due practices performance topline in sustaining are $XX.X ahead, now in optimizing take we expenses. you. QX. to the XXXX.Looking the such deliver to accounting addition, we driving positive clear to million operating operating are financial bonuses, Operator, annual strong for strong flow seasonal trend of strong year was cash and we We're overarching we recorded ability ready XXXX.With questions. in growth, flow in Thank confident our that, margins to committed as

Operator

[Operator you. Thank Instructions].

a you. Liu English of please asking state questions our the when everyone translate question, them Stanley. We then Morgan Yang into first your have of in immediately for Chinese the on first convenience from question Additionally, Thank call. now

Yang Liu

[Foreign Language] my question into would English. I translate

about to change solution. communication outlook. about the The management XXXX Is due in that outlook the XX.X% due gross not. balance future.And on like is related is future to ask third norm the last would to new the because ask is second And or seasonality because key mixed that impairment I smart one impairment some quarter quarter for for would XXXX loss regarding is based item to to growth the the is margin What also revenue item. question on a fourth or the sheet I year. that gross customers.And increased in sequentially whether margin represent like happened second question first the clean that expectation with

Yao Liu

about question XXXX first the forward so Okay, come the let's to looking.

a quarter's maintained and the discretionary smart spending and customers, our of perception global perspective, which such our is downstream QX are of growth the the America last moderate America. year. end shown users' Latin constant communication from growth our discussion similar Among to XXXX on expectation based than stronger with momentum this this, Asia Southeast regions device and Europe to beginning as from have So

In of to weak due end discretionary nature. pressures categories smart lack highly since its terms relatively spending categories, consumer January, of lighting the been has of inflationary effect and

segments have breakers, which have appliances controls, growth, products, the appliance smarter addition many focus can involves and benefit appliances. with in temperature robotic usage the among is cost so to energy to remained robust vacuum its capabilities like consumers users And the also energy main categories demand And are as recovered due most last end, saving cleaners relatively categories which segment product like years heaters characteristics. those global bring the for which high electrical the emotional inflation of usage in to such than focused family and savings growth on. smart good products. of smart a pet turbulent it currently remains cases Safety global needs expansion also and better new lighting down through continued meets it in because switches, segment growth periods shows typical needs those cycles of the a products However, momentum the few of in consumers a in to to our have for It and products strategy emphasize for growth that satisfies and trajectory. show strong resistance pressure. because sensing products and at Other recovery fundamental safety steady have related protection and

level began customers, strategies inventory normalization the adding level. last five pretty channels of expect also QX, for the Currently, layout good just the major of based by all channels year, total to at QX downstream so end demand discussed.Regarding focus and for a the are in have downstream brand the assessment activities healthy inventory together which investment four quite all, above our logic is retail we above So the on and months we remain in products and the a OEMs. restocking seen I the

promotions strategies, with achieved revenue planning restocking. for So the growth, in replenishment more categories coupled our with year-over-year feel market and and majorly efforts XX% QX downstream both benefited QX the downstream our in so enterprises from we destocking the have normalized and the completed is customers joint than it categories, and

the outlook their XXXX in and OEM's and for severe the business their channels no are turnover business currently, retail as brand and longer smart optimistic So generally is about as operating before.

As more everyone be starting positive. to such,

attention et also participation restocking professional the we QX, business. have East, to it and an regions, But want XXXX, downstream such greatly found QX, Latin Saudi, in the addition, professional channel In to efforts efforts the all the QX, increased have bring new that's just operators and as cetera many investors that attention various Middle of has like the normalized. America, telecom significantly we in to in the in restocking it opportunities, probably the smart coming because from end benefited Brazil,

the about as question margin. but optimistic the are temporary as second strong which be may it we about XXXX, effect.And not has growth QX, of So the QX, restocking the gross for

continuous in XXXX, our a growth It few delivered come have of to has margin. So, effects. gross we

steady the the gross First, our IoT in strategy of PaaS margin a product business continuous change and growth structure has the reflects our beneficial in direction. and that

gross margin mix As solutions. a revenue ecosystem, has categories a and company and the broad built business results PaaS from a IoT that of of IoT substantially

have added value business. And a IoT segment, For margins. IoT or and margin contribution differ, margin. to vacuum been from price. of margin Bluetooth, switches, or with growth consumers we of also bluetooth price sensitivity stable continue products, of thus XX% different both committed and different XGs gross bases, value as forward both different WiFi, towards enjoy the we the to good gross revenue of delivered terms gross solutions SaaS look the Similarly, cost higher aspects. of solutions capabilities margin cleaners, categories and We NB-IoT, maintaining prices smart enjoys depth gross allowing considering pricing smartification, and have service to which we as also such cloud a smart reducing percentage their of a products, PaaS the PaaS basic protocol complexity such Therefore, consumer's manage their to and in for affordable vary.However, headsets always IoT

a similar QX smart device as percentage hardware in service and the smart majorly the which business contributing XX% XXXX contribute now achieved product, from business and Tuya product expect software in of solution downstream value SaaS finished to Basically business We the an distribution one now QX. That margin deliver customers. business. gross and a for integrated business added as

gross increase contribution the two in segment XXXX We remain in revenue grow will than as of expect higher margin their this the XXXX it and of the stable segments. relatively business portion at a speed other this will

overall, is we the to forward So in overall regarding XXXX.So question look stable margin versus third a credit loss. maintaining the gross XXXX

between amount customers. So strategic in [XXXX] in some or in primarily potential XX It and our of total, suppliers, investments, It's our early companies our and could approximately XXXX, about we strategic of modest total. around potential made downstream a partners. customers $XX million around upstream suppliers, be

several severe the electronics to two impairments them in entire this strict of didn't XXXX, investment downstream and so leading due of perform well XXXX practices. consumer to an So in industry, accounting

the in the So policy have based loss was credit issued ECL XXXX, sorry, accounting according of policies. made to the we the rules loss, latest accounting credit on expected

credit the XXXX, in around $XX.X loss total, was in So total million.

So it as credit loss. the accounting principle, loss in but actually equity investment it's was based the on rule, named

around XXXX to down. currently value XXXX. strategic our we loss balance that much our investment So impairment pretty based million is we believe believe still we remain the credit on sheet And on from $XX

credit much any happened we XXXX. future, impairment the So if less what in in will than be have if loss,

these operation actually on those all operating investment add X difficulties companies the we that credit although on largely almost X, we impairments the all might improved if companies back again, the So down experience due And in they're still this operating, the and next their are but they're still, the years, majorly few loss. made cycle. is have to industry

three go answer the Liu next the the questions.Operator, Yang to for can that's question. to question you So

Operator

next comes question Sachs. Goldman Our Timothy of Zhao from

Timothy Zhao

have outlook. questions Language]. [Foreign X XXXX is I here. the regarding One revenue

outlook. already think lot mentioned quite past I revenue the a about you

is I on your just or wondering control, given what think OpEx if I key and will a hack-on wondering what and progress. here part look year is OpEx outlook the of your net I'm secondly, their plan your very you. XXXX Thank customers is margin margin, how wrap-up impact the What for is and good any. like in think SaaS XXXX.And that revenue on just plan specifically XXXX OP

Yao Liu

So about segment. SaaS value the services first, added

So structure in sectors and our which the momentum. are quality within revenue reflecting other maintains revenue good still revenue software services adjustments high

revenue gross for for So, as our high first, which principle margin storage with SaaS a cloud year-over-year services, in five such have growth achieved pretty quarters. example, recurring consecutive a is revenue cloud software

clients over While have already helped using cloud enterprise also has cloud technology Philips consumer increased smart has products customers payment secure of increased steadily number Cube also XX industry of Asia, our better nearly giants storage a well-known Australia in existing major clients globally.Secondly, dozen to them private our strategic large expansion large of or like several such as or telecom new in Asia-Pacific the channels Southeast serving needs projects. us

will with PR or projects have products, share although of everyone consent significant we whose in as community nearly hotels. clients estate XX% challenges still deployments.Thirdly, community our several steadily to are approach project other we year-over-year completion we when as pressures terms and more the progressing in real industry the have client's the achieved for industry SaaS We solutions, growth sectors smart such the in domestic China XXXX, posing faced we SaaS in and annual in

our Additionally, clients acquisitions some in like Cube industry for serving customers. for SaaS leading Cube products good generated win-win of benchmark several Asia the typical products projects us and with Southeast estate real and such Thailand as in synergy as regions cases have customers group

service and services technology structure value one-time value and hand, customized added development undergoing segment, still our in SaaS added like other some services other the are On adjustment. OEM App

value rather than increase related revenue while segment retained this number be trying lever level specific will the benefits of to and strategies the source projects. and clients at projects a for this kept the successfully have we service a and of of the future, main enhance So average at In to non-expanding the customer limited client's the order for company.

So upcoming in in technical still comprises face mix it revenue summary, a services overall and and software since may few the of diverse fluctuations others products, SaaS quarters.

quality high core steadily about increasing.For recurring proportion customers. is of income the second our the big our question continuously and However,

customers, fees revenue an operations also of also high-quality So Also including the us and on The years. private the in years. coming direction software, for for the PaaS for bring iterations revenue added accounts subsequent strategic ongoing business. our opportunities can cloud Cube, SaaS for and and the opportunity of and services bring smart the key multi-dimensional X accounts the us, revenue is can key revenue development value important key last solution business they revenue in recurring IoT from

of market have down accounts high and to economic also high key share cycles. advantages scale resistance large the Additionally,

So we covering America cases that Latin to Southeast also have already shared us allowed in have customer some and Europe. Asia, disclose

We account some we in the key currently yet. but are also promising to unable names markets like Middle [disclose] emerging cases have East,

course, this already tough acquiring question the XX efforts each profits. the or accounts.Regarding third efforts. key accounts best a quality continue, to quarter the the key expenses on battle. will marketing key resources the is we And strategy fewer our high will customers result about a Securing Of or our sales and is continue entire company significant of technology focus and

size. the Essentially completed the this size on model. adjustments part business our a of expenses a related XX% So employees based especially our have relatively non-GAAP about team expenses operating have of as the future the employees. total basis, are to of light-asset clear net to salaries already and trend Therefore, a of of we benefit our cost expenses of structure. number On we

of promotional expect activities So accounted expenses daily The to as in and costs et cloud maintain current including rent size the marketing cover the we professional XX% remaining XXXX. activities cetera. activities, travel expenses, team

expenses of expense invested expenses preserving reduction growth the expense to mainly the factors relatively marketing number are accordance aside to remain Overall, revenue, for this the increases, stable. basic also moderately the headcounts. So rest considering and linked which space leading total year's of from be expenses with the technical in operating we some expect of and will

margins revenue profit our So to also scale. link

on can size.So, will you we based continue move to on revenue the focus current So Operator, questions. growing team next to

Operator

of Mingran comes question last Our from Li CICC.

Mingran Li

[Foreign Language].

rate Reserve in wait cut. I previous demand follow-up the have for have or already has XXXX, have to about outlook covered plus much X longer the As Federal we quick discussions

how question.And you SaaS the expectations the smart this of X over could more the years. observations. PaaS, X for plans future and does your change the priorities based demand next distribution investment influence elaborate strategic That's recent first and device development, on So to for on

Yao Liu

first to let's question. the So come first

releasing cuts So for are beneficial themselves promote spending. capital consumer interest to rate

that inflation will certain considering suppress interest rebounds inflation the currently is could such market Furthermore, gasoline cut and discretionary a extent. the as present, the expected. still a quickly rate if electronic that feels However, is slower pace the to devices originally consumer prices rise consumption than recut, food of spending which after

think of So still to inflation comes problem extent itself. we back the the

like So quickly we feel customers sensitive itself. the the or are brands our rate, inflation to interest more react that retail channels less to

seizing middle during early, company's cloud players software market spontaneously consumption technology discretionary mentioned and then and to cloud-agnostic at inflation in continue by stages, opportunity the market performance.For at rate we Tuya, IoT is from for into as before, if the strategy share influence to the growth tremendous downstream first and XXXX. nearly penetration market has the for development neutral are prices unique business X estimate likely and a XXXX point the second from scalable X if and significant rapid current with positioning, in maintain long-term a products, and IoT we So reaching stage captured its the equilibrium demand divide and new level, we current question, the

current for Therefore, assisting Now, of our products revenue, X enhancing experience continue as company's rate earlier TAM devices further and long-term Therefore, penetration revenue enters requires customers phase usage. an while cycles of in past aspects unlocked. remarks, in increase the penetration smart enormous the from IoT after and years, CEO, penetration smart from our price two the following main industry the drive to XX over Jerry's be our growth second downturn smart and offering. further efficient each the the smartification promoting major to potential is devices quantity direction of both and as rate to to In various of tackling further to composed of in to Smart to next centering the in clients. high on returning focus adoption PaaS and of we the a complement forward other efficient comprehensive this manner revenue widespread anticipated revolve this need is the type for X, accounts, development of around looking to approach, will SaaS key expand present, value Under of with years are the creating through expectations.So software and IoT collaborative great developers will and Solutions with products. solutions X meet higher our increase to issue fragmentation,

And customers. together For to to America, as key our join SaaS acquiring can customers' it. Cube needs. own help of is enhance further the millions it by Asia-Pacific such operator in will we once our And chunk supported Cube solutions technology for customers force offering their will to a pre the like of IoT serve from them serve example, good Smart recurring for revenue use which families usually and and overseas, local group deliver overseas, their to generate Solution IoT we telecom Latin to retail brand groups Solution Smart to adopted will smart services PaaS they to region, which split their

lot industry clients mix corporations needed.So call they call. For as Thank for the multinational our products concludes match types times you all that can industry today. a of joining of with or X needs,

If day. through in any to website. with or forward us speaking a We earning call. contact next feel everyone request you further have free Have look IR to good please our our questions,

Operator

This conference. you Thank concludes joining. today's for

your now disconnect may You line.

Tuya (TUYA) 28 Feb 242023 Q4 Earnings call transcript