Tuya Inc. (NYSE:TUYA) Q4 2024 Earnings Call February 26, 2025 8:00 AM ET Company Participants Reg Chai - Investor Relations Jerry Wang - Founder and Chief Executive Officer Alex Yang - Co-Founder and Chief Financial Officer Conference Call Participants Timothy Chow - Goldman Sachs John Roy - WTR Brenda Zhao - CICC Research. Yang Liu - Morgan Stanley Operator Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc. Fourth Quarter 2024 Earnings Conference Call. ...

Core Viewpoint - Tuya Inc. achieved significant financial milestones in 2024, including quarterly and full-year profitability on both GAAP and non-GAAP bases, driven by strong revenue growth across all segments and improved operational efficiency [5][21][30]. Financial Highlights Fourth Quarter 2024 - Total revenue increased by 27.4% year-over-year to $82.1 million, up from $64.4 million in Q4 2023 [6][7]. - IoT platform-as-a-service (PaaS) revenue rose by 25.7% to $59.3 million [15]. - Software-as-a-service (SaaS) and others revenue grew by 21.1% to $11.5 million [15]. - Smart solution revenue surged by 45.5% to $11.3 million [15]. - Overall gross margin improved to 47.8%, up from 47.3% in Q4 2023 [9]. - Non-GAAP operating margin reached 10.3%, a significant improvement from negative 0.4% in Q4 2023 [12]. - Net profit was $9.8 million, compared to a net loss of $10.8 million in the same period last year [13][14]. Full Year 2024 - Total revenue for the year was $298.6 million, reflecting a year-over-year growth of approximately 29.8% [21]. - IoT PaaS revenue increased by 29.4% to $217.1 million [26]. - SaaS and others revenue rose by 10.6% to $39.6 million [26]. - Smart solution revenue increased by 58.3% to $42.0 million [26]. - Gross margin for the year improved to 47.4%, up from 46.4% in 2023 [23]. - The company reported a net profit of $5.0 million for the year, marking its first fiscal year of net profitability on a GAAP basis [30]. Operational Efficiency - Operating expenses decreased by 11.0% to $189.1 million for the year, reflecting the company's focus on cost management [25]. - Research and development expenses were $95.0 million, down 7.1% from the previous year [27]. - Sales and marketing expenses decreased by 8.3% to $37.1 million [27]. - General and administrative expenses fell by 15.4% to $68.3 million [27]. Cash Flow and Liquidity - Net cash generated from operating activities was $80.4 million for the year, up 120.5% from $36.4 million in 2023 [35]. - As of December 31, 2024, total cash and cash equivalents were $1,016.7 million, compared to $984.3 million at the end of 2023 [34]. Dividend Declaration - The Board declared a dividend of $0.0608 per ordinary share, amounting to approximately $37 million, payable on or around April 9, 2025 [38][40].

Core Insights - The company reported a net loss of $10,816 thousand for the three months ended December 31, 2023, compared to a profit of $9,785 thousand for the same period in 2024, indicating a significant turnaround in financial performance [3] - Non-GAAP net profit for the three months ended December 31, 2023, was $12,555 thousand, which increased to $22,068 thousand in 2024, reflecting a strong growth trajectory [4] - The non-GAAP net margin improved from 19.5% in 2023 to 26.9% in 2024, showcasing enhanced operational efficiency [4] Financial Performance - The net margin for the three months ended December 31, 2023, was -16.8%, while it improved to 11.9% in 2024 [3] - For the year ended December 31, 2023, the company experienced a net loss of $60,315 thousand, which turned into a profit of $4,997 thousand in 2024 [3] - The weighted average number of ordinary shares used for computing non-GAAP net profit per share increased from 557,103,923 in 2023 to 587,987,654 in 2024 for basic shares [5] Shareholder Metrics - Non-GAAP net profit per share attributable to ordinary shareholders was $0.02 for basic shares in 2023, increasing to $0.04 in 2024, and for diluted shares, it remained at $0.02 in 2023 and increased to $0.04 in 2024 [7] - For the year ended December 31, 2023, the non-GAAP net profit per share was $0.04 for basic shares and $0.03 for diluted shares, which rose to $0.13 for both categories in 2024 [7]

Core Viewpoint - Tuya Smart is integrating its AIoT platform with advanced AI models like DeepSeek to enhance smart devices, transforming them into "active intelligence" and unlocking the potential of AI applications in various sectors, particularly in pet care [1][2]. Group 1: AI Integration and Market Potential - The integration of Tuya's AIoT platform with DeepSeek's AI capabilities is expected to significantly impact the pet care industry, driving innovations and accelerating the adoption of AI-driven solutions [3][7]. - The global pet economy is projected to grow over 45% in the next six years, with revenues expected to exceed $500 billion by 2030, indicating a substantial market opportunity for AI-driven pet products [4]. Group 2: Challenges in Current Smart Pet Products - Despite the growth in the pet economy, the market for smart pet products suffers from functional homogeneity, with many devices offering only basic monitoring features, leading to low user satisfaction in critical areas like health management and behavioral analysis [5][6]. Group 3: Transformative Innovations in Pet Care - The collaboration between Tuya and DeepSeek aims to shift from "single-device networking" to a fully interconnected ecosystem, enhancing the interaction between pets and owners through proactive care solutions [7][11]. - Future innovations include advanced AI hardware capable of detecting emotional cues in pets, such as a brainwave translation collar that interprets a pet's emotional state and provides personalized care recommendations [12][13]. Group 4: Vision for Future Pet Technology - Proposed innovations like the Dream Projector and AI Gene Feeder aim to redefine pet care by addressing emotional well-being and optimizing nutrition based on genetic profiles, respectively [14][15]. - The Odor Socializer is designed to enhance social interactions for urban pets, allowing them to engage with virtual companions and identify playmates nearby, thus enriching their lives [16]. Group 5: Industry Implications - By embedding DeepSeek's AI into the pet industry, Tuya is positioning the sector as a dynamic proving ground for AI technology, creating opportunities for developers and raising consumer expectations for intelligent pet care [17].

Core Viewpoint - Tuya Inc. is set to report its fourth quarter 2024 unaudited financial results on February 26, 2025, before market opening [1] Financial Results Announcement - The financial results will be discussed in a conference call scheduled for 08:00 A.M. Eastern Time on February 26, 2025 [2] - Participants must complete an online registration process to receive dial-in information and a unique PIN for the call [2][3] Company Overview - Tuya Inc. is a leading global cloud platform service provider focused on building a smart solutions developer ecosystem [4] - The company offers a purpose-built cloud developer platform with capabilities in cloud and generative AI, providing a full suite of services including PaaS and SaaS [4] - Tuya has activated a global developer community that includes brands, OEMs, AI agents, system integrators, and independent software vendors, promoting a smart solutions ecosystem based on principles of green and low-carbon, security, high efficiency, agility, and openness [4]

Core Insights - Tuya Smart has integrated Mistral AI's Le Chat model into its Cloud Developer Platform, marking a significant step in AI hardware innovation and commercialization in Europe [1][10] - Mistral AI's Le Chat has gained popularity in France, indicating a breakthrough for European technology in the global AI landscape [2][3] - The European AI hardware market is experiencing rapid growth, with a year-over-year increase of 217% in 2024, highlighting the demand for AI hardware solutions [7] Company Developments - Tuya Smart is committed to expanding its presence in Europe by forming partnerships with leading brands like Schneider and Danfoss, aiming to create a smart hardware ecosystem [4] - The integration of Mistral AI allows Tuya to ensure compliance with stringent European data security regulations, addressing consumer concerns about data privacy [6][10] - Tuya's Cloud Developer Platform has attracted over 1.26 million developers and supports more than 2,800 smart product categories, showcasing its extensive ecosystem [8] Industry Trends - Data security and AI hardware innovation are identified as core demands driving the European AI market [5] - The European Commission's findings indicate that 73% of consumers reject AI applications involving cross-border data transmission, emphasizing the importance of localized data solutions [6] - The integration of various global AI models into Tuya's platform provides developers with flexibility and lowers barriers to AI hardware development [9]

Core Insights - Tuya Smart has fully integrated its smart ecosystem with Google Home APIs, enhancing compatibility and user experience in smart devices [1][3][4] - The Google Home APIs, unveiled at Google I/O 2024, facilitate the development and integration of smart home devices, allowing developers to create products that work seamlessly with Google Home [2][5] - This partnership reinforces Tuya's commitment to an open and neutral ecosystem, positioning it as a leader in the smart home market [3][6] Integration Features - The integration ensures full compatibility of Google Home with all Tuya-enabled hardware, enabling users to create diverse intelligent scenarios [4] - A notable feature is the cloud-to-cloud integration, allowing users to manage multiple devices without additional network configurations, enhancing convenience [5] - Users can control Tuya-enabled devices through both the Tuya app and Google Home app, providing a unified experience [5] Strategic Implications - The partnership exemplifies the success of Tuya's open ecosystem strategy and creates new opportunities for manufacturers globally [6] - Tuya plans to continue collaborating with global partners like Google to develop innovative smart products and solutions [6]

Core Insights - Tuya Smart has partnered with Chery to create a smart cockpit and enhance the integration of automotive and home ecosystems, aiming to provide consumers with improved convenience and comfort in both travel and living spaces [1][5]. Company Overview - Chery, a leading automaker, achieved over RMB 480 billion in revenue in 2024, marking a year-over-year increase of over 50%, and sold more than 2.6 million vehicles, making it the top car exporter [2]. - As a Fortune Global 500 company, Chery is focused on expansion and innovation, particularly in the context of AIoT and the integration of smart environments [3]. Partnership Details - The partnership was formalized during Chery's Ecosystem Partner Conference, where both companies emphasized the importance of car-home connectivity [5]. - Tuya's expertise in smart home solutions will support Chery in creating an interoperable smart home system that allows seamless communication between vehicles and home devices [4][6]. Product Integration and User Experience - Tuya's product integration capabilities will enable Chery to adapt to various lifestyle scenarios, allowing drivers to control home devices via a Tuya-enabled app on their car's infotainment system [6]. - The collaboration will also extend to smart living scenarios in real estate, communities, and hospitality, enhancing the overall smart living experience [7]. Strategic Vision - Chery and Tuya aim to redefine the car-home connectivity landscape and drive the intelligent transformation of everyday scenarios, setting new standards for smart living [8].

Core Insights - Tuya Smart has launched a new smart door lock solution that integrates with Apple Wallet and supports the Matter protocol, allowing users to unlock their homes using their iPhone or Apple Watch [1][2] Product Features - The smart door lock supports multiple unlocking methods, including NFC access, palm vein recognition, password entry, and app-based unlocking, providing versatility for users [3] - Users can add their home key to Apple Wallet after initial setup, which involves putting the device into pairing mode and scanning a Matter QR code [5] Security and Privacy - The home key feature in Apple Wallet utilizes the privacy and security features of iPhone and Apple Watch, ensuring that data is encrypted and protected against tampering [2] - Apple does not have access to information regarding when and where users utilize their home key [2] Strategic Positioning - Tuya is committed to advancing the global implementation of Matter-enabled smart devices, with over 200 Matter certifications across five major categories, showcasing its capabilities in the smart home sector [4]

Company Analysis - Tuya (TUYA) is currently trading with a P/E ratio of 12.49, significantly lower than its industry average of 35.35 [2] - Over the last 12 months, TUYA's Forward P/E has ranged from 10.83 to 46, with a median of 19.44 [2] - TUYA has a P/S ratio of 2.87, which is below its industry average P/S of 3.95 [4] - TUYA is considered one of the market's strongest value stocks due to its undervaluation and strong earnings outlook [6] Industry Analysis - The industry average P/E ratio is 35.35, indicating a higher valuation compared to TUYA's P/E of 12.49 [2] - The industry average P/S ratio is 3.95, which is higher than TUYA's P/S ratio of 2.87 [4] Investment Strategy - Value investing focuses on identifying undervalued companies using fundamental analysis and traditional valuation metrics [3] - The P/S ratio is a popular metric among value investors as sales are harder to manipulate on an income statement [4] - Stocks with high Zacks Rank and "A" grades in the Value category are considered strong value stocks [5]