Thank you. Hello, everyone. Welcome to our first quarter 2025 earnings call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang; and our Co-Founder and CFO, Mr. Alex Yang. The first quarter 2025 financial results and webcast of this conference call are available at ir.tuya.com. A replay of this call will also be available on our IR website in a few hours. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. With that, I will now turn the call to our Founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by the corresponding English translation. Jerry, please.

Hello, everyone. Thank you for joining Tuya's earnings call for the first quarter of 2025. This quarter, building on a strong baseline from Q1 last year, we achieved approximately 21% year-over-year revenue growth while maintaining a solid gross margin. Our stable team structure and effective management enabled strong operating leverage, coupled with a continued decrease in historical share-based compensation expenses, resulting in a record GAAP net profit during what is typically an offseason, with a net profit margin of around 15%, marking a significant improvement. Since the start of the year, the micro environment has been volatile, from rapid advancements in AI technology to trade fluctuations amid geopolitical pressures. The smart consumer electronics sector and its supply chains have faced considerable challenges. Some of these challenges we can manage through internal adjustments, while others will require a response from the entire industry. In this context, it is even more crucial for us to remain strategically focused and leverage our unique value to navigate uncertainties and adapt to new conditions. Following the launch of our Tuya AI agent development platform last year, we continued to enhance our AI capabilities from the cloud to the device in Q1, covering a broad range of AI agents and smart solutions. On April 23, we held our first Global Developer Conference of 2025, introducing our AIoT development engines and a variety of AI hardware solutions to assist global developers and partners in bringing AI-powered products to market. The conference welcomed over 2700 attendees, with enthusiastic participation from customers across Europe, Latin America, South Africa, and Asia Pacific. We strongly believe that Tuya’s unique platform model not only enables deep integration of AI and smart hardware but also promotes ongoing improvements in the adoption of intelligence across the industry. Operationally, we will sustain an efficient organization—our execution will ensure a favorable environment for R&D and technology development amidst external uncertainties, and we will maintain disciplined cost management to maximize operating profits and returns for our shareholders. Now, I'll turn it over to Tuya's Co-Founder and CFO, Alex Yang, who will present the financial results and business highlights.

Hello, everyone. This is Alex. Please note that all the figures mentioned below are in US dollars and all the comparisons are year-over-year based. In Q1 of 2025, we delivered approximately $74.7 million in revenue, representing a year-over-year growth of about 21.1%. The revenue grew by roughly 70.9% with strong performance across major categories led by home appliances, followed by security sensor and electrical analyzing products. SaaS and others generated about $10 million in revenue, growing approximately 15.5% year-over-year, primarily driven by the steady growth in SaaS value-added services. Smart solution revenue reached approximately $11 million with a year-over-year increase of about 47.1%, with excellent growth in smart video products, central control, innovative appliances, and professional lighting solutions. From a regional revenue source perspective, Europe accounted for about one-third of the total revenue. Asia Pacific, excluding China, followed, then China and Latin America, each contributing around 15%. Regions such as the Pacific and Midwest contributed a combined 5%, maintaining a diversified revenue structure. It is worth mentioning that since inception and serving the smart hardware sector, our revenue also reflects the unique pattern and seasonality of the hardware industry, especially as international manufacturers represent the results of business actions and strategies from several quarters or even longer. In Q1, blended gross margin stood at about 48.5% with all three revenue lines maintaining steady margins. Specifically, this quarter's gross margin rose to 48.4%, primarily due to structural improvements driven by product mix changes. Smart solution and SaaS had gross margins of 25.7% and 74.4%, continuing to demonstrate the value proposition related through software and technology. In the meantime, our net operating expenses for this quarter were $37.7 million, nearly an 18% decrease from the same period last year, benefiting from a substantial reduction in share-based compensation expenses, a trend we expect to continue. Excluding equity incentives and other non-operational business factors, our non-GAAP net operating expenses were $29.4 million, down 2% year-over-year. The vast majority of our operating expenses are related to product development and technical teams. Thanks to the groundwork during our AI transformation since 2023, we have completed foundational AI product development and our service system while maintaining good discipline in ongoing development. Those structural improvements directly drive the release of operating leverage, enabling us to achieve over $11 million in GAAP net profit in Q1, more than double that of last year’s full year. Non-GAAP net profit, which is $19.3 million, is a nearly 60% year-over-year increase with a non-GAAP net profit margin of 25.8%. These metrics provide strong support for the company's future business operation, capital expenditures, and shareholder returns. So that includes a brief overview of Q1 financial performance. Also, Q1 is a typical offseason for the industry we serve, so we really focused our efforts on exploring ideas and opportunities across our product lines. Next, I'll discuss some key moves that we made in our business over the past few months. As we anticipated at the beginning of this year, 2025 marks a structural transformation year for the entire industry embracing AI. AI is penetrating various industries at a decent speed, and for Tuya and the smart sector, this presents a clear window of strategic opportunity for the future. Although the physical nature of hardware devices means that the commercialization of AI capability on devices is a gradual and long-term process, technical and product reserves in software can take the lead, and that is precisely our strategy. First, we are committed to foundational and generalized AI capability needed in the smarter era to solve end-user problems and issues. This allows developers to select whatever they need based on their commercial goals and product designs, thereby promoting AI adoption. We focus on four core areas: large language model integration, hardware development, edge deployment, and open-source ecosystems. We released our four core engines at the end of the April developer conference globally, including Tuya AI agent development platform and Tuya AI Open. The Tuya AI agent development platform significantly reduces the technical threshold for developers to access any mainstream large language model and build various agent functions, such as semantic understanding and image recognition. Tuya AI Open provides a full process from high-performance edge AI modeling to smart deployment, greatly lowering the difficulty and time for AI hardware development. The Hedwig platform offers a controllable and secure edge AI computing environment for enterprise customers requiring localized deployment and data security. This entire system forms the technical foundation of our AI platform capabilities that provides a solid support for the large-scale implementation of AI products in the long term. At the same time, we're increasing investment in the development ecosystem around Tuya Open and the T5AI development board, establishing a content, tools, and community trial framework for developers. Since the developer conference, we have released eight open-source DIY projects such as open source desktop test, AI voice boxes, and AI robots, aimed at building a developer creativity incubation system. Our T5AI developer boards have started to be adopted through collaborations with multiple developer platforms and communities. Our AI developer community has grown by more than 10,000 new members. Next, we're also committed to identifying product-specific opportunities and driving customer product launches through our smart solution offerings, directly increasing our revenue and gross profit and achieving high-quality commercial conversions. For example, in the energy domain, we launched the AI energy assistant with features like strategy recommendations, power generation forecasting, load authentication, and energy consumption diagnostics, combined with supporting hardware such as all-in-one energy storage systems, circuit breakers, and energy data controllers. This forms a comprehensive integrated hardware-software solution primarily targeting the European and Southeast Asian markets. In video AI products, we continue to advance the AI capability of smart screens and video devices, focusing on models for detecting objects, vehicles, birds, and flames, combined with sound recognition and animal detections to build an integrated hardware and software general production solution that covers basic home safety and extends to semi-commercial scenarios like hotels and real estate. We are also actively promoting external ecosystem collaborations to amplify the enablement efforts of the AI platform. For example, in Q1, we partnered with Volcano Engines under ByteDance to integrate the Doubao large language model into the Tuya AI agent development platform, further enhancing the modeling, understanding, and interaction capabilities of our AI agents. Additionally, we collaborate commercially with leading players in retail and manufacturing to develop smart hardware such as AI wearables and home robots, advancing the application of AI in households. Collaboration with upstream and downstream partners will further enrich our capabilities and ecosystem scope, strengthening Tuya's strategies in the smart sector that create exemplary projects global developers and customers can reference and replicate. Although the AI hardware ecosystem, community, and product developments are still in the early stages, we believe that explorations in functionality, experience, and business models will open up space for Tuya and the entire industry in future business exchanges, laying the foundation for new engines of long-term growth. Above is our sharing on Tuya’s Q1 2025 financial performance and recent company developments. Although there have been partial improvements in the external environment recently, uncertainties remain. In response, we will continue to operate diligently and with a long-term approach to technique-driven and platform-enabled developments, laying a solid foundation on the AIoT track, continuously capturing industry trends and creating long-term value for Tuya. Finally, a piece of good news: MSCI recently updated our 2025 ESG rating from single A to double A, particularly in the field of security and compliance, achieving a full score of 10 points, thanks to our extensive compliance experience and frameworks. We believe that steadfast progress in business, operations, or emerging areas such as ESG will bring rewards and recognition. Thank you, operators. Right now, we can begin our Q&A section.

We will now take our first question from the line of Yang Liu from Morgan Stanley. Please go ahead with your question, Yang.

Let me translate my question. I have two questions here. The first one is regarding the AIoT development platform. Could management share what AIoT hardware is performing well in terms of shipment or if there are any examples of AI hardware that has demonstrated rapid performance? The second question is about customer behavior over the past two months, considering the significant fluctuations in tariffs. Could you provide insights on what customers have been doing recently?

Thank you, Liu. For the first question, what we see for the AI sector is that there are two major directions that show more interest. The first one is audio and video interactive experiences. One example is bird feeders, which we mentioned in the past quarter. The ability to recognize and interact with birds is increasingly popular. The second typical use case would be toys or any type of user cases for kids that utilize larger language models to interact with children, providing education, entertainment, and companionship. Recently, we signed a strategic partnership with a top-tier toy group in China, looking forward to launching production in the market soon. The AI agents based on new modeling are designed to not only analyze the status from energy generators but also from energy consumption devices, allowing the AI to make dynamic decisions that improve energy efficiency, whether through savings or reduced environmental impact. That would be the first question. Regarding your second question about tariffs, it has indeed become a major topic for the entire market, not just the United States. In the past couple of weeks since the new tariff discussions began, we've seen a direct reaction from customers becoming cautious and hesitant due to uncertainty. They are waiting for more clarity, especially with the current 90-day window between China and the U.S., which encourages careful decision-making. We’ve noticed a slowdown in proactive or aggressive decisions among customers, leading to a more conservative approach. However, the unique business model of Tuya means that we are somewhat insulated, as the tariffs primarily affect my brand and manufacturing customers, rather than us directly. We have adapted by localizing our manufacturing supply chains and following our customers’ needs. Therefore, while we are indirectly impacted, we continue to monitor the macroeconomic developments closely, particularly the demand impacts on the U.S. market and potential inflationary pressures.

Got it, thank you.

We will now take the next question from Timothy Chow at Goldman Sachs. Please go ahead, Timothy.

Thank you for taking my question and congratulations on the strong quarterly results. I have two questions. First, regarding AI monetization, how do you plan to capitalize on opportunities provided by AI and how does the pricing model for your new AIoT product services differ from your traditional IoT PaaS services? Secondly, could you provide your outlook for revenue and profitability for the full year and the second quarter? Specifically, for the IoT PaaS segment, we've noticed a consistent increase in gross margin. Can you share your outlook for this segment as well?

Thank you, Timothy. For the first question, AI monetization is a topic many customers have been asking about. Our offering integrates AI capabilities into our existing business models while still providing them as PaaS and SaaS solutions. This seamless transition allows customers to incorporate AI into their businesses without needing to adapt to a new model. We've experimented with the pricing of our AI offerings; for example, we recently inquired about the PaaS pricing for our audio interactive AI based on large language models offering that differs from our traditional PaaS categories. It’s important for us to either use the seamless AI offerings to accelerate the penetration of smart devices in the global market or to adjust pricing for some of our offerings to entice more customers. As for the second question regarding the outlook, although we are not directly involved in international supply chains for trading, the tariffs have caused a short-term pause among customers as they assess their strategies. Users in the China-U.S. context want to see certainty before reverting to normal trading modes. Long term, once agreements are reached and uncertainty decreases, we anticipate returning to regular demand cycles. Regarding the PaaS margins, our historical records suggest we hold a strong value proposition within the entire supply chain, and we are satisfied with the current performance without feeling the need to push margins dramatically higher. Our aim is to maintain our position while motivating investments from our suppliers and customers to spur innovation.

Thank you, that’s very helpful.

We will now take our next question from Kai Xiao from CICC. Please ask your question, Kai.

Thank you very much and congratulations on the strong quarter. I have two questions. First, could you share your progress on cooperation with Singapore and Chery and what similar projects we can expect in the coming quarters? Secondly, could you share the geographical expansion of Tuya’s AI developers? Is there any difference in the development of AI applications between domestic and overseas markets?

Thank you for the questions. Regarding the partnership in Singapore, it is a typical commercial and industrial IoT solutions progress. We signed a contract with the Singapore Home Development Bureau (HDB), managing over 1.4 million public apartments. We're offering a centralized energy management platform that assists in monitoring energy consumption across various households that significantly contributes to Singapore’s electrical usage. Our proof of concept (POC) with HDB has shown substantial reductions in power usage, and we're finalizing the deployment and implementation of our entire platform with the first shipments of devices expected by the end of Q3. The aim is for a full penetration of homes within three years. This program can serve as an influential model for expansion in other Southeast Asian countries. Regarding the expansion of AI developers, we're in the early stages of growing our developer base after the DeepSeek launch earlier this year. Many customer inquiries about our AI capabilities reflect a newfound interest in integrating AI into their existing operations. We are focusing on educating these customers about the opportunities in our platform. The demand comes from globally diverse markets, with significant growth from Europe, America, and Southeast Asia. Technical developers are mainly following device manufacturing, with a notable portion from mainland China, as well as from Korea, Turkey, and Southeast Asia. On the software side, demand is more diversified, linking to mobile internet and cloud-based developers across different regions.

Thank you.

We will now take our next question from the line of John Roy from Water Tower Research. Please ask your question, John.

I have a slightly different question. I was wondering if you could give us any insight into how you're using AI internally for processes, documents, code development, etc. and if that can enhance margins and decrease costs going forward?

Thank you, John. Each department within our company is leveraging different AI tools. For example, our marketing team relies heavily on AI-generated content, reducing the need for labor-intensive design work. Our operational team is utilizing AI for online training webinars, and much of the content is AI-generated. AI has also improved our marketing efforts significantly, including our TikTok live events aimed at end-users. On the legal and HR sides, AI helps in recruiting processes, reviewing resumes based on identified keywords, and ensuring compliance in agreements. In development, we're utilizing various AI toolkits for project management and for coding, debugging, and maintaining our cloud infrastructure through automated approaches. We aim to enhance efficiency and reduce operational costs internally while increasing customer income through improved operational leverage.

Thank you so much and congratulations on the quarter.

Thank you for that. We’re excited about the long-term future because this is only the very starting point for AI penetration into the physical world, very, very early. We're very excited about that.

There are no additional questions at this time. I'll now hand back to the management team for closing remarks.

Okay, thank you everyone. Thank you, operator, and thanks to all of you for participating in today’s call. See you next quarter and have a nice day. Bye.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect your lines.