涂鸦智能(02391) - 2024 - 中期财报

Company Information Executive Summary The company achieved strong financial and operational growth in H1 2024, with total revenue up 29.1% to $134.9 million, improved gross margin to 47.9%, first-time non-GAAP operating profit, and a significant increase in IoT PaaS DBNER to 127% Financial Highlights For the six months ended June 30, 2024, the company significantly improved its financial performance, with total revenue growing 29.1% to $134.9 million, overall gross margin increasing to 47.9%, substantial narrowing of losses, non-GAAP profitability, and operating cash flow reaching $26.3 million Key Financial Indicators for H1 2024 | Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $134.9 million USD | $104.5 million USD | +29.1% | | IoT PaaS Revenue | $99.9 million USD | $74.7 million USD | +33.7% | | SaaS and Other Revenue | $18.2 million USD | $17.8 million USD | +2.1% | | Overall Gross Margin | 47.9% | 45.6% | +2.3 percentage points | | IoT PaaS Gross Margin | 47.1% | 42.5% | +4.6 percentage points | | Net Profit Margin | -0.3% | -42.7% | +42.4 percentage points | | Non-GAAP Net Profit Margin | 24.5% | -2.1% | +26.6 percentage points | | Net Cash Generated from Operating Activities | $26.3 million USD | -$11.4 million USD | +331.1% | - As of June 30, 2024, the company held a robust financial position with total cash, cash equivalents, and short/long-term investments amounting to $1,000.1 million[6] Operational Highlights As of June 30, 2024, the company's operational strategy focused on large clients, increasing premium IoT PaaS clients to 280, contributing 85.1% of PaaS revenue, while the IoT PaaS DBNER significantly rose from 58% to 127%, and registered developers grew by 20.1% Key Operational Indicators for H1 2024 | Indicator | As of June 30, 2024 | As of June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Premium IoT PaaS Clients | 280 units | 251 units | +29 units | | Premium Client PaaS Revenue Contribution | 85.1% | 81.1% | +4.0 percentage points | | IoT PaaS DBNER | 127% | 58% | +69 percentage points | | Registered Developers | >1,192,000 units | (As of 2023/12/31) ~993,000 units | +20.1% (vs. end of 2023) | - Although the total number of IoT PaaS clients slightly decreased from 2,900 to 2,700, the growth in premium clients and their increased revenue contribution indicate the success of the company's large client strategy[7] Management Discussion and Analysis This section details the company's H1 2024 financial performance, highlighting revenue growth driven by strong demand in IoT PaaS and smart solutions, improved gross margins from product optimization, significantly reduced operating expenses leading to narrowed losses and non-GAAP operating profit, and a healthy cash flow position with no interest-bearing debt Financial Performance Analysis In H1 2024, total revenue grew 29.1% to $134.9 million, with IoT PaaS and smart solutions showing strong growth, overall gross margin improved to 47.9% due to PaaS, operating expenses decreased by 18.0%, and operating loss significantly narrowed to $26.7 million, achieving non-GAAP operating profit of $6.8 million Revenue and Gross Margin by Business Segment | Business Segment | H1 2024 Revenue (million USD) | YoY Growth | H1 2024 Gross Margin | YoY Change | | :--- | :--- | :--- | :--- | :--- | | IoT PaaS | 99.9 | +33.7% | 47.1% | +4.6pp | | SaaS and Other | 18.2 | +2.1% | 71.6% | -2.7pp | | Smart Solutions | 16.8 | +41.1% | 27.5% | +5.4pp | Operating Expense Changes | Expense Item | H1 2024 (million USD) | H1 2023 (million USD) | YoY Change | | :--- | :--- | :--- | :--- | | Research and Development Expenses | 46.5 | 54.5 | -14.8% | | Sales and Marketing Expenses | 18.4 | 20.1 | -8.5% | | General and Administrative Expenses | 32.3 | 41.1 | -21.3% | | Total Operating Expenses | 91.4 | 111.4 | -18.0% | - Net loss significantly narrowed by 99.1% from $44.6 million in the prior year period to $0.4 million, primarily due to operational improvements and $25.3 million in interest income, while non-GAAP net profit reached $33.1 million[13] Liquidity and Capital Resources The company maintains a robust financial position with total cash, cash equivalents, and investments reaching $1,000.1 million as of June 30, 2024, significantly improved operating cash flow of $26.3 million, no interest-bearing bank borrowings or asset pledges, and strategic investments in treasury bonds for capital preservation and appreciation - As of June 30, 2024, total cash and cash equivalents, along with time deposits and treasury bonds classified as short-term and long-term investments, amounted to $1,000.1 million, which the company deems sufficient to meet its liquidity and working capital needs[15][17] - During the reporting period, the company acquired treasury bonds with a book value of $123.2 million under shareholder authorization, representing approximately 11.3% of total assets, generating approximately $2.9 million in investment income[20] - As of June 30, 2024, the company had no interest-bearing bank borrowings, asset pledges, or capital expenditure commitments, indicating a healthy financial structure[17][18][21] Risk Management The company's primary risk exposures are foreign exchange and interest rate risks; fluctuations in RMB to USD exchange rates impact reported earnings as most revenues and expenses are RMB-denominated, with no current hedging, while interest rate risk from idle cash is not considered material - The company's primary foreign exchange risk arises from conversion differences between RMB-denominated business activities and USD as the reporting currency, with no hedging instruments currently held[22] - Interest rate risk is primarily associated with interest income from interest-bearing bank deposits, and the company does not anticipate significant risk from interest rate changes[23] Employees and Remuneration Policy As of June 30, 2024, the group had 1,450 salaried employees, with research and development personnel comprising the majority at 1,041, supported by competitive compensation, benefits, and a systematic recruitment and training system Number of Employees by Function (as of June 30, 2024) | Function | Number of Employees | | :--- | :--- | | Research and Development | 1,041 | | Sales and Marketing | 302 | | General and Administrative and Others | 107 | | Total | 1,450 | Business Review and Outlook In H1 2024, Tuya Smart achieved a historic breakthrough with its first quarterly non-GAAP operating profit and declared its first special dividend, driven by strong IoT PaaS growth and successful smart solutions transformation, while fully embracing generative AI to enhance products and developer platforms, expressing confidence in future innovation despite macroeconomic uncertainties Business Review for the Reporting Period In Q2 2024, the company achieved its first quarterly non-GAAP operating profit and declared a special cash dividend of approximately $33 million, marking a new phase of sustainable development, with IoT PaaS growing 33.7% and smart solutions 41.1%, while deepening global partnerships and enhancing smart solutions' revenue and gross margin through high-value software integration - The company achieved its first-ever quarterly operating profit on a non-GAAP basis in Q2 2024, with an operating profit of approximately $7.4 million[25] - The company announced its first cash dividend of approximately $33 million, roughly equivalent to its non-GAAP net profit for H1 2024, demonstrating confidence in future cash flows[25] - The company expanded global collaborations, including a partnership with France's AX Tech Group to explore the energy-saving market, and collaborations with major telecom and internet service providers in Latin America and Asia-Pacific[26] - The smart device distribution segment was officially renamed 'Smart Solutions,' offering high-value products by integrating generative AI, operating systems, and cloud software, with this business's revenue growing 41.1% year-over-year and a gross margin of 27.5%[27] Full Embrace of Generative AI Since early 2023, the company has fully embraced generative AI, deepening its application in device and edge AI in H1 2024 by integrating GenAI into products like smart light strips and pet cameras to enhance user experience and market competitiveness, and into smart scene configuration and developer platforms to lower user barriers and improve developer efficiency - The company leverages generative AI to enhance product intelligence, for instance, smart light strips can interpret user emotions to adjust lighting, and pet cameras can intelligently capture and generate videos[28] - The company plans to launch more generative AI-driven products in H2 2024 to enrich its solutions[28] Outlook Looking ahead, with macroeconomic stability and normalized downstream inventory, the industry shows positive momentum; the company is confident in its business prospects, committed to product iteration, expanding premium clientele, and investing in innovation, while acknowledging challenges from changing consumer spending patterns and geopolitical uncertainties - The company maintains an optimistic outlook on future business prospects, primarily based on a stable macroeconomic environment, normalized downstream inventory, and growing demand for consumer electronics products[29] - The company will continue to focus on product iteration, enhancing software and hardware capabilities, expanding its premium customer base, investing in innovation, and optimizing operational efficiency[29] Corporate Governance This section outlines the company's corporate governance structure, including its Weighted Voting Rights (WVR) framework granting founders Mr. Wang Xueji and Mr. Chen Liaohan greater voting power, compliance with most Corporate Governance Code provisions despite the Chairman and CEO roles being combined, and the establishment of audit, remuneration, nomination, and corporate governance committees to ensure balanced power and effective oversight Weighted Voting Rights (WVR) The company employs a Weighted Voting Rights structure where Class A ordinary shares have one vote and Class B ordinary shares have ten votes, enabling WVR beneficiaries Mr. Wang Xueji and Mr. Chen Liaohan to exercise voting control without majority economic interest, ensuring long-term vision stability, with both beneficiaries collectively controlling approximately 64.91% of voting rights as of the latest practicable date - The company's share capital is divided into A (one vote per share) and B (ten votes per share) ordinary shares, with B shares held by Weighted Voting Rights beneficiaries Mr. Wang Xueji and Mr. Chen Liaohan[31] - As of the latest practicable date, Mr. Wang and Mr. Chen collectively controlled approximately 64.91% of the effective voting rights[32] Compliance with Corporate Governance Code During the reporting period, the company complied with all Corporate Governance Code provisions, with the sole deviation being the combined roles of Chairman and CEO held by Mr. Wang Xueji, which the Board believes facilitates effective strategy execution and information flow, with power balance maintained through independent non-executive directors and collective board decision-making - The company deviated from the Corporate Governance Code's provision requiring separation of Chairman and CEO roles, with founder Mr. Wang Xueji concurrently serving as Co-Chairman and CEO[35] - The Board believes this arrangement does not compromise the balance of power, as all significant decisions are made after collective discussion by the Board, including four independent non-executive directors[35] Board Committees The Board has established four committees—Audit, Remuneration, Nomination, and Corporate Governance—to oversee specific matters, each comprising multiple directors, with independent non-executive directors playing key roles and serving as chairpersons to ensure independence and professionalism, and the Audit Committee having reviewed the current financial statements - The Audit Committee comprises three independent non-executive directors, chaired by Mr. Huang Xuande, and is responsible for overseeing financial reporting and internal controls[38] - The Remuneration Committee consists of Mr. Wang and two independent non-executive directors, chaired by Mr. Qiu Changheng, and is responsible for reviewing remuneration policies[39] - The Nomination Committee comprises Mr. Chen and two independent non-executive directors, chaired by Mr. Qiu Changheng, and is responsible for director nominations and board composition[41] - The Corporate Governance Committee consists of two independent non-executive directors, chaired by Mr. Qiu Changheng, and is responsible for overseeing the implementation of corporate governance principles, particularly safeguards related to the Weighted Voting Rights structure[42] Other Information This section provides supplementary information on director and major shareholder holdings, share incentive plans, dividend policy, share repurchases, use of proceeds, and significant litigation, noting stable holdings by core management and major shareholders, the adoption of a new share plan in 2024, the declaration of a special dividend, minor share repurchases, planned use of global offering proceeds, and an ongoing securities class action lawsuit in the US Directors' and Major Shareholders' Interests As of June 30, 2024, company founders Mr. Wang Xueji and Mr. Chen Liaohan are controlling shareholders, holding significant Class A and B ordinary shares through their controlled entities and trusts, with other major shareholders including New Enterprise Associates and Tencent, indicating a clear ownership structure and strong alignment of core management interests with the company - Founders Mr. Wang Xueji and Mr. Chen Liaohan hold 61.79% and 38.21% respectively of the company's Class B ordinary shares, constituting the controlling shareholders and Weighted Voting Rights beneficiaries[44] - Among institutional investors, New Enterprise Associates holds approximately 21.76% of Class A ordinary shares, and Tencent holds approximately 11.56% of Class A ordinary shares[50] Share Plans On June 20, 2024, the company adopted a new '2024 Share Plan' and terminated the '2015 Share Incentive Plan,' aiming to better incentivize and retain talent in compliance with updated listing rules, while during the reporting period, a small number of restricted share units were granted and some share options exercised or lapsed under the old plan - The company adopted a new '2024 Share Plan' on June 20, 2024, and terminated the '2015 Share Incentive Plan,' with all new awards thereafter to be granted under the new plan[53][56] - The total limit for the 2024 Share Plan is 57,459,259 Class A ordinary shares, representing approximately 10% of the total issued shares on the adoption date[64] - As of June 30, 2024, under the 2015 Plan, there were 51,037,005 unexercised share options and 7,261,875 unvested restricted share units outstanding[58][59][61] Dividends On August 26, 2024, the Board approved the declaration and distribution of a special dividend of $0.0589 per ordinary share (or ADS), totaling approximately $33 million, marking the company's first dividend, funded by surplus cash - The company declared a special dividend of $0.0589 per share, totaling approximately $33 million, to be paid from surplus cash[69] Purchases, Sales or Redemptions of the Company's Listed Securities During the reporting period, the company repurchased 223,773 American Depositary Shares from the open market for a total consideration of $0.4 million, holding no treasury shares as of the reporting date - During the reporting period, the company repurchased 223,773 American Depositary Shares for a total consideration of $0.4 million[70] Use of Proceeds from Global Offering The company's net proceeds of approximately HK$70 million from its July 2022 Hong Kong listing are being steadily utilized as planned in the prospectus, primarily for enhancing IoT technology, expanding product offerings, marketing, and strategic investments, with approximately HK$41.8 million remaining unused as of June 30, 2024 Use of Proceeds from Global Offering (million HKD) | Planned Use | Planned Amount | Unused as of 2024/6/30 | Expected Time of Use | | :--- | :--- | :--- | :--- | | Enhancing IoT Technology and Infrastructure | 21.0 | 12.6 | Next three and a half years | | Expanding and Enhancing Product Offerings | 21.0 | 12.6 | Next three and a half years | | Marketing and Branding Activities | 10.5 | 6.2 | Next three and a half years | | Strategic Partnerships, Investments, and Acquisitions | 10.5 | 6.2 | Next three and a half years | | General Corporate Purposes and Working Capital | 7.0 | 4.2 | Next three and a half years | | Total | 70.0 | 41.8 | | Significant Litigation The company is currently addressing a securities class action lawsuit filed in the US in August 2022, alleging materially misleading statements in its US listing registration statement, which remains ongoing with no estimable potential loss, and no other significant litigation or arbitration - The company and certain of its executives are named as defendants in a securities class action lawsuit in the US related to the company's 2021 US listing[76] - As of the reporting date, the lawsuit remains ongoing, and the company cannot estimate potential losses nor has it accrued significant liabilities in connection therewith[76] Use of Non-GAAP Financial Measures The company uses Non-GAAP financial measures as supplementary metrics to assess operating performance, primarily excluding the impact of share-based compensation, credit-related impairment of long-term investments, and litigation expenses, with detailed reconciliations to the most comparable US GAAP measures provided in the report Reconciliation of Operating Loss to Non-GAAP Operating Profit (thousand USD) | Item | For the Six Months Ended June 30, 2024 | | :--- | :--- | | Operating Loss (GAAP) | (26,711) | | Add: Share-based compensation | 31,223 | | Add: Credit-related impairment of long-term investments | 189 | | Add: Litigation expenses | 2,100 | | Non-GAAP Operating Profit | 6,801 | Reconciliation of Net Loss to Non-GAAP Net Profit (thousand USD) | Item | For the Six Months Ended June 30, 2024 | | :--- | :--- | | Net Loss (GAAP) | (415) | | Add: Share-based compensation | 31,223 | | Add: Credit-related impairment of long-term investments | 189 | | Add: Litigation expenses | 2,100 | | Non-GAAP Net Profit | 33,097 | Interim Financial Information Review Report PricewaterhouseCoopers, the company's independent auditor, has reviewed the interim financial information in accordance with International Standards on Review Engagements, concluding that nothing has come to their attention to suggest the interim financial information is not prepared in all material respects in accordance with US GAAP - Independent auditor PricewaterhouseCoopers reviewed the unaudited condensed consolidated financial statements for the six months ended June 30, 2024[82] - The review concluded that nothing significant came to their attention indicating the financial information was not prepared in accordance with US GAAP[83] Unaudited Condensed Consolidated Financial Statements and Notes This section includes the company's unaudited condensed consolidated balance sheets, statements of comprehensive loss, changes in shareholders' equity, and cash flows as of June 30, 2024, along with detailed notes explaining accounting policies, account specifics (e.g., revenue, investments, share-based payments), and reconciliation differences with IFRS, showing total assets of $1.09 billion, total liabilities of $89.78 million, and shareholders' equity of $1 billion Unaudited Condensed Consolidated Financial Statements As of June 30, 2024, financial statements show total assets increased to $1.09 billion, total liabilities decreased to $89.78 million, indicating a healthy balance sheet, while the statement of comprehensive loss shows net loss significantly narrowed to $0.415 million, and the cash flow statement reflects strong net cash inflow from operating activities of $116 million, with cash and cash equivalents reaching $615 million at period-end Condensed Consolidated Balance Sheets Summary (thousand USD) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | 1,089,650 | 1,066,400 | | Current Assets | 851,286 | 847,798 | | Non-current Assets | 238,364 | 218,602 | | Total Liabilities | 89,783 | 95,835 | | Current Liabilities | 84,938 | 87,534 | | Total Shareholders' Equity | 999,867 | 970,565 | Condensed Consolidated Statements of Comprehensive Loss Summary (thousand USD) | Item | For the Six Months Ended June 30, 2024 | For the Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Revenue | 134,941 | 104,489 | | Gross Profit | 64,677 | 47,669 | | Operating Loss | (26,711) | (63,713) | | Net Loss | (415) | (44,594) | Condensed Consolidated Statements of Cash Flows Summary (thousand USD) | Item | For the Six Months Ended June 30, 2024 | For the Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 26,319 | (11,387) | | Net Cash from Investing Activities | 90,085 | (22,335) | | Net Cash from Financing Activities | 150 | (2,067) | | Cash and Cash Equivalents at End of Period | 614,919 | 94,542 | Notes to Financial Statements The notes provide detailed explanations and supplementary information to the financial statements, including revenue recognition (Note 13) detailing segment revenues, share-based compensation (Note 16) disclosing equity incentive plan details and expense recognition, commitments and contingencies (Note 19) outlining contractual commitments and significant litigation, fair value measurements (Note 21) presenting financial asset hierarchy, and Note 24 offering a detailed reconciliation between US GAAP and IFRS, primarily differing in accounting for share-based compensation, operating leases, and long-term investments - Note 13 (Revenue): Details the amounts for the three major revenue streams: IoT PaaS, Smart Solutions, and SaaS and Others[127] - Note 16 (Share-based Compensation): As of June 30, 2024, unrecognized share-based compensation expenses related to share options and restricted share units were $38.8 million and $14.9 million, respectively[137][139] - Note 19 (Commitments and Contingencies): The company has non-cancelable contractual commitments related to third-party cloud infrastructure, with a remaining amount of $13.81 million[151] - Note 24 (US GAAP and IFRS Reconciliation): Key differences between the two accounting standards resulted in a net profit of $19.82 million for H1 2024 under IFRS, compared to a net loss of $0.415 million under US GAAP, primarily due to differing recognition methods for share-based compensation expenses[171][176] Definitions This section defines key terms used in the report, such as different share classes (Class A, Class B), company entities, share incentive plans, Weighted Voting Rights structure, and related beneficiaries, providing essential background information for understanding the report's content