Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Please be informed that today's conference is being recorded. I'll now turn the call over to your first speaker today, Ms. Regina Wang.

Thank you, operator. Hello, everyone. Welcome to our fourth quarter and fiscal year 2025 earnings call. Joining us today are our Founder and CEO, Mr. Jerry Wang; and our Co-Founder and CFO, Mr. Alex Yang. The fourth quarter and fiscal year 2025 financial results and webcast of the 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 over to our Founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by a corresponding English translation. Jerry, please?

Hello, everyone. Thank you for joining Tuya's earnings call for the fourth quarter of 2025. In 2025, despite a complex and evolving external environment, we maintained stability across our platform business, achieved steady revenue growth for the year, and saw notable improvements in GAAP profitability. At the same time, we made significant progress in establishing a more systematic AI capability framework. For the full year 2025, we generated total revenue of USD 320 million, reflecting a year-over-year increase of around 7.8%. Profitability and cash flow quality continue to improve, which shows the resilience and stability of our core platform business along with our ongoing efforts in resource allocation and execution discipline. Strategically, we are advancing new AI plus IoT application scenarios and enhancing the integration of AI capabilities within our platform and device ecosystem. AI is transitioning from simply adding features to becoming fully deployable operational applications. As part of our AI strategy, we introduced the AI-powered smart life assistant, Hey Tuya CES. This initiative aims to provide users with a more pleasant and effortless home experience by integrating AI agents with hardware devices, thereby accelerating the adoption of AI capabilities in everyday situations. Our understanding of how to integrate AI with smart products is becoming clearer. AI is moving past just being a capability overlay and is now deeply integrating with device designs and specific industry scenarios. We see its value increasingly reflected in application maturity, improved revenue structures, and enhanced operational efficiency. As AI evolves into intelligent agents that can engage in real operations, the demands for system stability, real-time responsiveness, and scalability are growing significantly. The influence of AI goes beyond improving product experiences; it is also transforming application architecture and collaboration within ecosystems. As AI applications mature, their value will manifest in their ability to deploy and scale effectively in real-world settings. Looking ahead, we will focus on three key priorities. First, we will enhance our AI-native platform capabilities to better support millions of developers in creating a wide range of next-generation AI devices and applications. Second, we will speed up the deployment and scalable growth of AI application services in key scenarios. Third, we will increase our investment in developing the ecosystem and enhance our support for developers to drive innovation and commercial success. Now I will hand the call over to our Co-Founder and CFO, Alex Yang, who will provide more details about our financial performance and business progress.

Hello, everyone. This is Alex. I will now provide more details on our fourth quarter and full year results. Please note that all the figures are in U.S. dollars and all the comparisons are year-over-year unless stated otherwise. So in the fourth quarter of 2025, we generated total revenue of approximately USD 84.5 million, representing a year-over-year increase of 3%, against the backdrop of continuous industry demand and a more conservative customer procurement cycle. We achieved our tenth consecutive quarter of year-over-year growth. In the fourth quarter, our blended gross margin was 47.6%, while non-GAAP operating margin improved to 11.1% compared with 10.3% in the same period last year. Non-GAAP net margin reached 24.4%. Net operating cash flow totaled USD 23.5 million, making the eleventh consecutive quarter of positive operating cash flow. Gross margin remained stable underscoring the company's pricing power driven by the product value and technology capabilities as well as the strong competitive positioning of our platform-based business model in a dynamic market environment. From a full year perspective, our stable growth in 2025 became even more pronounced. Our full year revenue reached over USD 322 million, representing a year-over-year increase of 7.8%. Blended gross margin of the full year improved to 48.2%, up 0.8 percentage points from 2024. Non-GAAP operating margin reached 10.5%, an increase of 2.9 percentage points year-over-year, while non-GAAP net margin rose to 24.9%. Full year non-GAAP net income reached a record high of USD 80.1 million, up approximately USD 4.7 million compared with 2024. Among our segments, the PaaS business delivered stable performance, generating revenue of over USD 230 million, representing a year-over-year increase of 6.5%, against the backdrop of extended customer margin cycles. We maintained stable growth in our core business by optimizing our customer mix and enhancing our product capabilities. At the end of 2025, the number of PaaS premium customers reached 291, continuing to contribute structurally stable revenue to the PaaS business. Such a diversified structure without reliance on any single customer group has further strengthened our resilience in a vital operating environment. The SaaS and other businesses generated full year revenue of USD 44.8 million, representing a year-over-year increase of 13.4%. Of this total, recurring services revenues rose by 37% year-over-year, emerging as a key growth driver of the SaaS. We look forward to enlarging this segment faster with this recurring model. On a full year basis, the revenue growth from the SaaS and other businesses outpaced the company's overall revenue growth. This strong performance highlights the continued expansion of cloud software revenues, especially for AI-enabled software and reflects the gradual realization of the life cycle value from the platform software capabilities as the installation base of the device expands. Our Smart Solutions business generated full year revenue of USD 45.7 million, making an 8.9% year-over-year increase. In this segment, we observed that AI capabilities are stimulating demand in certain new product categories while also enhancing the overall pricing power of our product offerings. At the end of 2025, our total cash and cash equivalent amounted to over USD 1 billion, precisely USD 1,017 million, together with the term deposit and the treasury securities recorded as short-term and long-term investments. This net cash provides ample flexibility to support AI capability development, ecosystem expansion, and potential capital allocation initiatives. Full year profitability was primarily driven by three factors. First, the continued stability of our core platform business. Second, the initial revenue contribution from AI-related products and applications; third, disciplined expense management and the realization of operating leverage. Regarding the AI ecosystem side for developers, we continue to advance the open-source capabilities of Tuya open and further development of our AI agent platform. By the end of 2025, the number of registered AI plus IoT developers exceeded 1.8 million, representing a 37% year-over-year increase. The cumulative number of AI agents on the Tuya platform reached about 16,000, spanning a wide range of smart product categories. As the application deployment level increases, AI capabilities are gradually being integrated across various end-user products, establishing standardized pathways for AI applications. Recently, we hosted our overseas development events centered on hands-on AI hardware applications, including the first hackathon held in Silicon Valley. This event attracted over 300 developers, with about 90% of them coming from overseas. All participating projects were built and demonstrated on real hardware using the Tuya T5 AI development board. Completing the journey from concept to a functional prototype within only 48 hours enabled AI capabilities to operate directly on physical devices. These products span multiple scenarios, including AI companions, wearables, desktop AI terminals, as well as applications in education and security. Some of those products have already entered the subsequent incubation stage and attracted commercial interest. Beyond customer-facing products and ecosystem development, we have rapidly applied AI internally to enhance development efficiency. For instance, in the short-term front-end development process, nearly 40% of the code is generated with AI systems. This has significantly shortened our R&D integration cycles and reduced the cost of repetitive development. These efficiency gains enable us to maintain the pace of product and solution integrations while controlling headcount growth. Building on this foundation, we plan to launch AI development tools for developers within this year. Through AI coding services and web coding, we aim to further lower the barriers for AI hardware development and boost our developer efficiencies by enabling more low-code and no-code developers to participate in the AI hardware and industry application ecosystem. This initiative will help expand the developer base while accelerating the commercialization of AI applications. Finally, with the maturation of physical AI technology, the opportunity for deep integration between AI and the physical world has arrived. Our launch of Hey Tuya builds on this fact without waiting for the large-scale deployment of likable, embodied robots. Hey Tuya leverages hundreds of millions of existing powered by Tuya smart devices worldwide to enable AI to perceive and proactively interact with the real world today. It draws on understanding and reasoning large models while seamlessly interacting with the smart devices to help manage daily tasks. This represents a new form of integrated situational AI that is making the benefits of AI tangible and immediately accessible rather than distant products. In summary, 2025 showcases the company's continuous progress across its business structures, profitability models, and competitive frameworks on the technical side. Throughout 2025, Tuya's physical AI technology was validated for visibility in smart devices, giving rise to a wide range of hardware forms. We leverage our accumulated strength across our developer communities, hardware ecosystem, and global delivery capabilities. We are well-positioned to continue advancing AI deployment and transforming it into a sustainable, long-term competitive advantage. Looking ahead, we will focus our efforts on this direction. First, we will further capitalize on the platform-level AI capabilities to enable more efficient applications of AI across diverse devices and industry scenarios. By lowering the technology barriers, we aim to help new players bridge the technology gap and accelerate the adoption of AI innovations in the hardware industry. Meanwhile, through Hey Tuya, our next-generation AI assistant, we will establish a new standard for the interactive experience in smart devices, accelerating mass market penetration of smart products. Finally, we will maintain cost discipline, consistently improving our profitability quality and long-term competitiveness.

Thank you, operator. Right now, we can begin the Q&A session.

We will now take our first question from the line of Yang Liu from Morgan Stanley.

Congratulations on the solid results. I have two questions. The first one is regarding the recent tax rate change on the U.S. side, whether that will have any impact on our business outlook going forward. And my second question is regarding the recent upstream memory and other chipset supply constraints and whether it will impact Tuya's business? Let me translate my question to Chinese.

Yes. Thank you, Mr. Liu. So the first question is, yes, that's considered a positive indicator regarding tariff reductions recently. But the demand hasn't reacted immediately yet. However, we see that customer confidence levels about a better environment to do business, especially in global manufacturing trading, should improve. People have more positive confidence that the macro economy will become more stable and better this year. But the demand and order haven't shown up immediately for two reasons. The first one is that people still consider the global situation to be dynamic. And those types of reductions may not be sustainable levels. In the near future, maybe in March, a new executive order may come up that could reset the tone of the tax level to around 15% or a little higher. So that's the first dynamic reason. People prefer not to overreact. The second reason is that this kind of news happened during the Chinese New Year. Until now, many manufacturers have just started to resume work today. So many manufacturers haven't started to offer new prices and haven't tried to take new orders yet. We will see. But anyhow, we are very positive and looking forward to improvements. Overall, costs should eventually come down somehow, allowing customers to have more confidence to increase demand. That's the first question. Regarding the second, yes, since last Q4, we've started to notice a shortage of production capacity on the semiconductor side. The first point is that this shortage will not impact us because we're considered significant buyers in these sectors. All our suppliers will ensure that we get fulfillment of our orders, no matter what. That's the first point. At the same time, since last Q4, we've been preparing good inventory levels to mitigate the dynamics in the supply cycles. So that's the first point. The shortage is not a problem for us. Regarding the cost increase, we continue to keep a close eye on that. Right now, we haven't encountered an immediate increase, as I mentioned, because of the procurement process. However, if this kind of intensity starts to increase without limit, we are not sure how that will evolve. We will keep a close watch on it. However, due to the special value proposition that the company provides, this supply-side increase will not significantly impact our demand or gross margin. But we will maintain vigilance on that. It seems that it will remain manageable for another one or two quarters. Thank you.

We will now take our next question from the line of Timothy Zhao from Goldman Sachs.

Great. Congrats on the very solid results. I also have two questions here. One is a broader question about the company's position in the Agentic AI world. Given we have seen continued progress in the Agentic AI capabilities, how should we think about the value proposition to the customers in your PaaS and SaaS business? And will the AI technology advance actually enhance the self-development capabilities of your customers? How should we view the long-term relationship between Tuya and your customers? You mentioned that in the SaaS business, the recurring revenue actually increased quite dramatically last year; I’m wondering if you can elaborate on that. The second question is that in your remarks, you talked about wanting to accelerate the AI deployment in key application scenarios going forward. Just wondering if you could further elaborate on this and what scenarios you find more promising.

Thank you, Timothy. These are great questions. So first, regarding the macro side, we are happy to see that more customers are starting to think about how they can create their own differentiation and build their own capabilities in R&D. We are pleased to witness this change. In past years, we have enabled manufacturing players to embrace smart technology, starting with IoT. If they cannot do it but want it, we have to provide solutions. Throughout the company's history, we have offered two things. First, if they do not have the capacity right now, we will offer them an off-the-shelf turnkey solution. If they do have some capability, we will educate them and provide infrastructure to allow them to create the extra values they wish. This is the ecosystem we aim to establish; it is not just about selling products. We are happy to see that we already have a significant number of customers with in-house capabilities to create their own differentiation and drive their own innovations. We continue to enable our customers to build innovations at the device level and create an application network. AI changes nothing, and we'll keep doing the same thing. In 2025, we showcase that for some new players who may not know much, only having ideas about implementing AI, we will offer turnkey solutions so they can grab and go. At the same time, we will continue to have deep and active conversations with their engineering teams on how they can effectively implement AI technology both now and in the future. We want to be an enabler for their efficiencies without overwhelming onboarding. The core aspect we find exciting is that years ago, we had to convince people about the promise of smart devices as business opportunities. Now, with AI, everyone sees the potential, and the key is ensuring that we can help them accelerate their journey efficiently and competitively, particularly focusing on user experience. The second question regarding SaaS recurring revenues—the key driver is that we continue to deploy a significant scale of devices regardless of recurring services. This means we maintain a large base of devices. Coupled with AI, we can offer additional value on existing devices already deployed in households. In 2025, we continue to introduce new services on these same hardware units. We are confident that it will yield positive results. The growth in our SaaS segment will likely be one of the fastest growing areas we expect in the mid-term due to these recurring services. We started introducing new recurring models early with AI initial products to ensure growth. Regarding AI applications, I mentioned this in our earlier overview. Focus areas we see significant potential in now include multimodel applications, such as interaction analysis involving video and audio, along with companion toys and security systems. These products will have a strong foundational base. With AI, devices will enable smoother interactions and better video/audio perception, enhancing security through reduced false alarms. For the companion side, we aim to provide educational interactions through language comprehension, emotional understanding, and targeted feedback to customers. That covers one segment. The second is focused on data analytics and decision-making, particularly energy management use cases. With full cycle deployment of devices for the energy ecosystem, we can monitor electricity flow and usage, enabling AI to optimize decisions, e.g., how to manage dishwashers, battery banks, AC, and heating systems in a cost-efficient manner. We aim to provide clear insights into TCO and overall device life-cycle value directly corresponding to payment for services as well. So, this area will yield significant potential.

We will now take our next question from Mingran Li from CICC.

Congrats on the strong results. My first question concerns the milestone. Given the recent geopolitical risk, how should we best assess the potential impact on Tuya's international operations? In this current environment, how do you perceive the recovery in demand across the overseas markets? For my second question, I would like to know about shareholder returns. Tuya holds a very healthy cash position, and your profitability continues to improve. Could management share if there are any specific plans or announcements for shareholder returns that might be moved forward to 2026?

Yes. Thank you for the questions. Firstly, I covered parts of this in response to Morgan Stanley’s tariff question. The global situation is indeed becoming more dynamic, and we are adjusting alongside our customers. We see positive indicators in this direction. Reductions of tariffs globally demonstrate the need for a better environment for commerce so that companies cannot cut each other off. End demand continues to increase because technology provides value for end users, driving greater utilization. This trend is irreversible. Coupled with increasing end demand, firms must innovate and find ways to fulfill this demand while navigating dynamic factors like tariffs and the global supply chain adjustments. We aim to provide technical support to help customers build meaningful applications and scale them effectively. We continue managing costs across our services globally, deploying services wherever our customers are involved in production. At this point, our customers have varied types of production centers across eleven countries worldwide, and we will support them in maintaining agility. This year, we anticipate recovery versus 2025, which was characterized by a cautious approach to decision-making due to uncertainties. Companies are now beginning to see sustainable improvements. Secondly, regarding shareholder returns, we prioritize returning value to shareholders as a long-term strategy. We have continually demonstrated our commitment over the past two years. We strive to maintain strong operational foundations characterized by net cash flow, profitability, revenue growth, and healthy revenue structures. As part of these efforts, we've announced a new round of dividends for shareholders. Typically, we provide one or two dividends per year, with amounts recurring based on net operating cash flow and profitability metrics.

Our next question comes from Matt Ma from Jefferies.

Congrats on solid results. My question pertains to the Smart Solutions segment. We noticed that the company showcased multiple AIoT products at CES last year. Which product categories does the company have higher confidence in regarding sales growth this year? When considering product category expansion, how should we approach this, and could we expect strong growth in the Smart Solutions segment in 2026?

Yes. Thanks for the question, Matt. Regarding promising categories, we have higher confidence in devices that can naturally leverage AI capabilities—such as those intended for video and audio interaction, security, entertainment, and appliances. These areas will provide significant value visible to end users through enhanced AI functionalities. Additionally, we seek to reach other segments while exploring innovative ideas that deeply integrate AI with existing device capabilities. We anticipate witnessing the emergence of new types of devices previously unseen, growing out of AI advancements. For Smart Solutions, the value proposition revolves around helping customers differentiate their offerings. For instance, consider the bird feeders I mentioned previously: customers in pet product spaces recognize user desires to interact with wildlife. Companies need technical solutions to fill these gaps but may find it overwhelming due to extensive investment and engineering challenges. Instead of waiting for Tuya to develop it as a platform-as-a-service offering, we will work closely with customers, providing comprehensive solutions that align with outstanding market opportunities. Smart Solutions are poised as premium products with targeted audiences willing to pay a premium price due to their high-value offerings. We aim to sustain margins above 20%, focusing our product roadmap on flagship models our customers request.

Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact Tuya's IR team. Goodbye and see you next quarter.

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