Tuya Inc. (TUYA) Q1 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance, with significant revenue and profit growth, improved margins, and effective cost management. The strategic partnership with a top-tier toy group and AI integration plans are promising. Despite concerns about tariff impacts and vague AI monetization strategies, the overall sentiment is positive, supported by a strategic focus on AIoT and international market expansion. The commitment to shareholder returns and a dividend declaration further enhance positive sentiment. The absence of market cap data limits precise prediction, but the overall outlook is positive.

Key Financial Performance

Revenue Approximately $74.7 million, representing a year-over-year growth of about 21.1%. The revenue growth was driven by strong performance across major categories, particularly home appliances, security censoring, and electrical analyzing products.

SaaS Revenue About $10 million, growing approximately 15.5% year-over-year, primarily driven by steady growth in SaaS value-added services.

Smart Solution Revenue Approximately $11 million, with a year-over-year increase of about 47.1%, attributed to excellent growth in smart video products, central control, innovative appliances, and professional lighting solutions.

Blended Gross Margin Stood at about 48.5%, with all three revenue lines maintaining steady margins. The past gross margin rose to 48.4%, primarily due to structural improvements driven by product mix change.

Net Operating Expenses $37.7 million, nearly an 18% decrease from the same period last year, benefiting from a substantial reduction in share-based compensation expenses.

Non-GAAP Net Operating Expenses $29.4 million, down 2% year-over-year, with the majority related to product development and technical teams.

GAAP Net Profit Over $11 million, more than double that of last year’s full year, indicating strong operational performance.

Non-GAAP Net Profit $19.3 million, a nearly 60% year-over-year increase, with a non-GAAP net profit margin of 25.8%, providing strong support for future business operations and shareholder returns.

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Operating Highlights

AI Agent Development Platform: Launched the Tuya AI agent development platform, expanding AI capabilities from cloud to device.

AI Hardware Solutions: Unveiled a series of AI hardware solutions at the Global Developer Conference to support commercialization of AI-powered products.

AI Energy Assistance: Launched AI energy assistance features targeting Europe and Southeast Asia markets.

Smart Video Products: Advanced AI capabilities in smart screens and video devices for home safety and semi-commercial scenarios.

Regional Revenue Sources: Europe accounted for about one-third of total revenue, with Asia Pacific, China, and Latin America contributing around 15% each.

Market Expansion: Continued to expand AI capabilities and smart solutions in various global markets.

Revenue Growth: Achieved approximately $74.7 million in revenue, representing a year-over-year growth of about 21.1%.

Cost Management: Net operation expenses decreased by nearly 18% year-over-year due to reduced share-based compensation.

Gross Margin: Blended gross margin stood at about 48.5%, with structural improvements driving profitability.

AI Integration Strategy: Focus on integrating AI capabilities across hardware and software to enhance product offerings.

Ecosystem Collaboration: Partnered with Volcano engines to enhance AI agent capabilities and collaborated with retail and marginal industries for smart hardware development.

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Risk or Challenges

Geopolitical Pressures: The company faces trade fluctuations under geopolitical pressures, which can impact the smart consumer electronics sector and its supply chains.

Supply Chain Challenges: The smart consumer electronics sector and its upstream and downstream supply chains have faced immense challenges, some of which require an industry-wide response.

Economic Uncertainties: The micro environment has been described as a roller coaster, indicating significant economic uncertainties that could affect business operations.

AI Hardware Commercialization: The physical nature of hardware devices means that the commercialization of AI capabilities on devices is a gradual and long-term process, presenting challenges in timely market adaptation.

Seasonality of Hardware Industry: The revenue reflects the unique pattern and seasonality of the hardware industry, which can affect financial performance during off-seasons.

Investment in Development Ecosystem: The company is increasing investment in the development ecosystem, which may pose financial risks if the expected returns do not materialize.

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Guidance & Outlook

AI Development Initiatives: Tuya launched its AI agent development platform and expanded AI capabilities from cloud to device, focusing on large language model integration, hardware development, edge deployment, and open source ecosystems.

Global Developer Conference: Hosted the first Global Developer Conference of 2025, unveiling AIoT development engines and AI hardware solutions, attracting over 2700 attendees.

Ecosystem Collaborations: Partnered with Volcano engines under ByteDance to integrate Doubao large language model into Tuya AI agent development platform, enhancing AI capabilities.

Product Launches: Launched AI energy assistance and advanced AI capabilities in video products, targeting markets in Europe and Southeast Asia.

Revenue Growth: Achieved approximately $74.7 million in revenue for Q1 2025, representing a year-over-year growth of about 21.1%.

Net Profit Margin: Achieved a GAAP net profit of over $11 million in Q1, with a net profit margin of around 15%.

Future Outlook: Expect continued investment in AI capabilities and product development, with a focus on long-term growth and capturing industry trends.

ESG Rating Improvement: MSCI upgraded Tuya's 2025 ESG rating from single A to double A, reflecting progress in compliance and operational standards.

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Shareholder Return Plan

Shareholder Returns: Tuya is committed to maximizing operating profits and shareholder returns, with a focus on maintaining discipline in managing costs.

Net Profit: Tuya achieved over $11 million in GAAP net profit in Q1 2025, more than double that of last year’s full year, supporting future business operations and shareholder returns.

Non-GAAP Net Profit: Non-GAAP net profit reached $19.3 million, a nearly 60% year-over-year increase, with a non-GAAP net profit margin of 25.8%, providing strong support for shareholder returns.

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Key Q&A

Q:Could management share what kind of AIoT hardware is doing well in terms of shipment?

A:We found that there will be 2 major directions that show more interest: audio and video interactive experiences, such as bird feeders, and toys that use larger language models for education and entertainment. We signed a strategic partnership with a top-tier toy group in China to launch production soon.

Q:Could you share what the customers are doing in the past 2 months regarding the huge volatility in tariffs?

A:Customers have become more conservative and hesitant due to tariff uncertainties. They are waiting for clarity, and decisions are being made cautiously. The tariffs mainly affect finished goods, and we are indirectly connected as we provide key components and technology.

Q:How does management plan to monetize AI opportunities and what is the difference in pricing models between AIoT and traditional IoT PaaS services?

A:We are integrating AI capabilities into our existing business models, offering seamless transitions for customers. Pricing for AI-enabled PaaS will differ from traditional PaaS, and we aim to speed up market penetration with AI offerings.

Q:Could management share any color on the full year and second quarter outlook on revenue and profitability, specifically for the IoT PaaS segment?

A:The tariffs have caused a short-term bump in demand cycles, but we expect to return to normal once negotiations are settled. We are satisfied with our current PaaS margins and do not feel the need to push them higher.

Q:Could you share the progress of your cooperation with Singapore and Chery?

A:We are finalizing the deployment of a centralized energy management platform with Singapore's HDB, aiming to reduce power consumption in public apartments. We expect to start shipments by the end of Q3.

Q:Could you share the geography expansion of Tuya’s AI developers?

A:We are seeing demand from global markets, with strong interest from Europe, America, and Southeast Asia. The development of AI applications is diversified, with a focus on both hardware and software.

Q:How is AI being used internally to increase margins and decrease costs?

A:AI is being utilized across departments for marketing, operations, HR, and development, improving efficiency and potentially lowering operational costs.

Q:Review of Unclear Management Responses

A:Management's responses lacked clarity on the specific impacts of tariffs on their business and the long-term outlook for revenue and profitability in the IoT PaaS segment. Additionally, there was vague language regarding the exact nature of AI monetization strategies and the differentiation in pricing models.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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TUYA Report

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