Tuya Inc. (TUYA) Q4 2025 Earnings Call Transcript

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. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be informed that today's conference is being recorded. I now turn the call over to your first speaker today, Ms. Regina Wang, Investor Relations Associate Director of Tuya. Please go ahead.

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 CEO, Mr. Alex Young, the first quarter and fiscal year 2025 financial results and webcast of the conference call are available at IR.tua.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.

Hello everyone, thank you for joining Tuiya's Earnings Core for the first quarter 2025. In 2025, against a complex and evolving external environment, We maintained stability across our platform business, delivered 30-year revenue growth, and achieved a notable improvement in GAAP profitability. At the same time, we made solid progress in building a more systematic AI capability framework.

2025年,公司全年收入3.2亿美金,同比增长约7.8%,引力能力和现金流质量持续优化.

For full year 2025, we generated total revenue of US$320 million, representing a year-over-year increase of approximately 7.8%. Profitability and cash flow quality continued to improve. This result reflects the resilience and stability of our core platform business, as well as our ongoing process in prioritizing resource allocation and execution discipline. In the strategic front, we continue to incubate new AI plus IoT application scenarios and accurate the systematic integration of AI capabilities across our platform and the device ecosystem. AI is evolving from a mere overlay of discrete features into fully deployable operational Our AI strategy, we introduced the AI-powered Smart Life Assistant, Hei Tuya at CES. Through a more intuitive and tangible entry point, integrating AI agents with hardware devices, we aim to help users enjoy a more comfortable and effortless home experience, accelerating the real-world adoption of AI capabilities across a broader range of everyday scenarios. 变得更加的明确 AI正在从能力叠加阶段进入与设备生态与 与行业场景深入融合的阶段 其价值更多体现在应用成熟度

收入结构改善以及效率结构提升上 我们认为随着 AI从对话工具走向参与真实实际行的自身体 行业对底层 系统稳定性 实时性和可眼镜性需求正在显著的提升 AI Our understanding of the integration pathway between AI and smart products is becoming increasingly clear.

AI is progressing beyond the stage of capability overlay and entering a phase of deep integration with device form factors and the industry specific scenarios its value is increasingly reflected in application maturity improved revenue structures and the enhanced operational efficiency we believe that as AI evolved from from a conversational tour into an into intelligent agents capable of engaging in rover operations industry expectations for underlying system stability real-time responsiveness and scalability are increasing significantly the impact of AI extends beyond enhancing product experiences it is also reshaping application architecture and the transforming modes of ecosystem collaboration. As AI applications continue to mature, their value will increasingly be reflected in their replicability and the capacity to scale effectively across real-world deployments.

3. 5. 6.

7. looking ahead we will continue to advance our strategy across three key priorities first we will further strengthen our AI native platform capabilities enable them to more effectively support millions of developers in creating a diverse range of next-generation AI devices and the applications. Second, we will accelerate the deployment and the scalable expansion of AI application service across key scenarios. Third, we will deepen our investment in developer ecosystem growth and enhance our support for developers, fostering a vibrant community Now let me turn the call over to our co-founder and CFO, Alex Yang, who will share more details about our financial performance and the business progress.

Hello everyone, this is Alex. I will now provide more details on our fourth quarter's and four years' results. Please note that all the fingers are in US dollars, and all the comparisons are year over year, unless it's stated otherwise. So in the fourth quarter of 2025, we generated total revenue of approximately 48.5 million US dollars, representing a year over year increase of 3%. Against a backdrop of continuous conscious industry demand and more conservative customer procurement cycles, We achieved our 10th quarter of annual yield growth. In the fourth quarter, our blended growth 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 23.5 million U.S. dollars, making the 11th consecutive quarters of positive operating cash flow. Gross margin remains 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 four-year perspective, our stable growth in 2025 became even more pronounced. Our four-year revenue reached over $322 million, representing a year-over-year increase of 7.8%. Margin of the four-year improved to 48.8% from 2024. fall. Non-GAAP operating margin reached to 10.5%, an increase of 2.9 percentage points year over year, while non-GAAP net margin rose to 24.9%. Four-year non-GAAP net income reached to a record high of 80.1 million US dollars of approximately 4.7 million US dollars compared with 2024. Among our segments, so the past business deliver stable performance generating revenue of over 230 million US dollars representing a year-over-year increase of 6.5%. Against the backdrop of extended customer budget cycles, we maintain stable growth in our core business by optimizing our customer mix and enhancing our product capabilities by empowering my customers to provide more competitive applications. At the end of 2025, the number of past premium customers reached to 291, continuing to contribute a structurally stable revenue to the past business, such as diversified structures without reliance on any single customer group has further strengthened our resilience in a vital operating. The SAS and others business generate a full-year revenue of 44.8 million US dollars, representing a year-over-year increase of 13.4% Of this total, recurring services revenues grows by 37% year-over-year, emerging as a key growth driver of the SAS. So we're looking forward to enlarge this segment by this recurring model. On a four-year basis, the revenue growth from the SaaS and other business outpaces the companies of all revenue growth. This strong performance highlights the continued expansion of cloud software revenues and enabled softwares and reflects the gradual realization of the lifecycle value from the platform software capabilities the installation base of the device expense. Our smart solution business generates four-year revenue of 45.7 million US dollars, making an 8.9% year-over-year increase. In this segment, we observe that AI capabilities are stimulating demand in certain new product categories, while also enhancing the overall pricing powers of our product. At the end of the 2025, our total cash and cash equipment amounted to over one, that will be $1,000 US dollars, together with the time deposit and the treasury securities record as a short-term and long-term investments. This net cash providing ample flexibility to support AI capability development, ecosystem expansion and potential capital allocations initiatives. Four-year profitability was primarily driven by three factors, the continuous sustainability of our core platform business. Second, the initial revenue contribution from AI related products and applications. Third, disciplined experience management and the realization of operating leverage. On the AI ecosystem side for the developers, so within our developer ecosystem we continues to advance the open source capabilities of Tuya Open and further development our AI agent platform. So by the end of 2025, the number of registered AI plus IoT developers exceed 1.8 million, representing a 37% year-by-year increase. The cumulative number of AI agents on the Tuya platform which as the application deployment enable AI capabilities are being integrated across a variety of end-user products. Gradually establishing overseas development events centered on hands-on AI hardware applications. So including the first hexons held in Silicon Valley, this event attracted over 300 developers and which about 90% of them are from overseas. All participating projects were built and demonstrated on the real hardware using Tuya T5 AI development boards in the journeys from concept to a functional prototype within only 48 hours. This enabled AI capabilities to be able to operate directly on physical devices. So those projects span multiple scenarios including AI companion wearables and desktop AI terminals as well as applications in education and security so some of those products have already entered the subsequent incubation stage and attractive commercial interest beyond customer vision products and ecosystem development we have roughly applied AI internally to enhance the development efficiency so for instance like the in short-term front-end development process nearly 40% of the codes is generated with AI assistance. This has significantly shortened our R&D integration cycles and reduced the cost of the repetitive efficiency gains, enabled us to maintain the pace of the products and the solution iterations while controlling the headcounts. So building on this foundation, we plan to launch the AI development tools for the developers within these years and through the AI coding services, web coding, we aim to further lower the barriers for AI hardware development and boost to your developer efficiencies by enabling more low-code and no-code developers to participate in the AI hardware industry and application ecosystem. So this initiative will help expand the developer base while accelerating the commercialization of AI applications. So with the maturation of the physical AI technology, the opportunity for deep integration between AI and physical world has arrived. Our launch of HeyTuya is to build on this site. Without waiting for the large scale of deployment of like enabled embodied robots, HeyTuya leveraged hundreds of millions of the existing powered by Tuya smart devices worldwide to enable AI to fully perceive and proactively interact with the real world. It draws on understanding and reasoning on large models while seamlessly interacting with smart devices that help manage daily tasks. So this represents a new form of integrated situational AI that makes the benefits of AI tangible and immediately accessible rather than these 10 flows. In summary, the 2025 showcases the company's continuous progress across its business structures, profitability models, and competitivity frameworks on the technical side. So throughout 2025, 2EI's physical AI technology was validated for feasibility in smart devices, giving rise to a wide range of AI hardware forms, leveraging our developer community's hardware ecosystem and global delivery capabilities. So we are well positioned to a continuous advance in AI deployment and transforming it into a sustainable, long-term competitive advantage. Looking ahead, we will continue to focus our efforts in this direction. We We will further level AI capabilities to enable more efficient AI applications of AI across diverse device and industry scenarios. By lowering the technology barriers, we aim to help new players bridge the technology gap and accelerate this adaption of AI innovations in the hardware industry. Meanwhile, throughout Heituya, our next-generation AI assistant will establish a new standard for interactive experience in smart devices through AI, accelerating a mass market penetration of smart products, will maintain cost discipline, consistently improving our profitability quality and long-term competitiveness. Thank you, operator. Right now, we can begin the Q&A section.

Thank you. We will now begin the question and answer session. To ask a question now, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our first question. We will now take our first question from the line of Yang Liu from Morgan Stanley. Please ask your question. Yang, your line is open.

Thanks for the opportunity to ask question and congratulations on the solid result I have two questions you know the first one is regarding the recent tax rate change at the US side whether that will have any impact to our business outlook going forward and my second question is regarding the recent upstream memory and other chipset to supply constraint, and whether it will impact two-year business. Let me translate my question to Chinese. There's a lot of pressure on the market, but I don't know if it's going to affect the future of the company's business. Thank you.

Thank you, Mr. Liu. So the first question is, yes, let's consider the positive indicators about the tariff reductions recently. But the demand didn't immediately yet. but we really see that the customer's confidence levels about a better environment to do the business, especially global manufacturing, trading improved. More positive and more confidence that the macro economy will become more stable and better this year. But the demand and order didn't show up immediately. Two reasons. The first one is that still people will consider the global situation will be more dynamic so and those type of reason to reductions maybe will not be a sustainable level so in the near futures maybe in March that maybe new executive order will come up so the will just like the reset to the tune of the tariffs level in maybe into the fixing 15% or a little bit higher so that's the first one dynamic so people rather not overreact and the second one is that this kind of a new is is happening during the Chinese New Year. So till now, most of the manufacturers just started back to work today. I mean, today, literally today. So many of the manufacturers didn't start to offer new price and try to make new orders. So we'll see. But anyhow, it will be a very positive and directions we're looking forward to. And while overall cost eventually will bring down it somehow and so the the customers will be able to have more confidence to enlarge the demand. The second one is yes since last Q4 we're really starting to notice that the shortage of the production capacity of the semiconductor side and the first one is that the shortage will not impact us because consider as a significant buyers in this sector so many of our I mean all suppliers will ensure that we will get a fulfillment of our orders no matter what. That's the first one. In the same time that since last Q4, we're really trying to prepare, how can I say, quite good inventory levels to go in again those kind of dynamics in the supply cycles. So that's the first one. So shortage is not a problem for us. And about the cost rates, we continue to closing on that right now with that we didn't meet that immediately increase like I mentioned that because of the buying forces but if this kind of intensity is trying to increase you know without a limit we're not sure so we'll keep closing on that but anyhow because of the special value position position that the company be doing so far so that kind of increase on the supply side will not impact our demand or significantly on our gross margin side but we'll keep closing on that seems that it will be lasting to be for another one or

two quarters thank you thank you Alex thank you we will now take our next question from the line of Timothy Zhao from Goldman Sachs please ask your question. Your line is open.

Good morning, manager. Thank you for taking my question and congrats on the very solid results. I also have two questions here. One is, I think, a more broader question about the company's value proposition in the agentic AI world. Given we have seen continual progress in the agentic AI activities, how should we think about two years value proposition to the customers in your past and SaaS business and will the AI technology advance actually enhance the self-development capabilities of your customers and how should we think about the long-term relationship between Tuya and your customers and it's actually I think you mentioned that in the SaaS business the recurring revenue actually increased quite dramatically last year just wondering if you can further elaborate on that and second question is that also in your remarks you talk about going forward you want to accelerate the AI deployment of the key application scenarios. Just wondering if you can also further elaborate on this as well. For example, what scenarios that you see are more promising and just wondering if you can share more details. 大的进步和突破 我们应该怎么去考虑 涂鸦在PaaS和SaaS的 客户之间的 value proposition 会不会因为AI的 技术能力的进步导致了 我们的客户的自研能力 的提高或者是成本的降低 我们长期和客户的 关系现在有哪些额外的变化 更加细节的是 一个是您刚刚提到了我们的 SaaS业务里面的 recurring的收入其实是有比较

Thank you, Timothy. So, yeah, it's a long question. So the first one is that about the macro side, we are happy to see that the more customers starting to thinking on how they can create their own differentiations, how they can build their own capabilities in their own R&D side, because we're happy to see that otherwise we have to offer that. So I think that AI makes no difference for past 10 years, you know, experience is that that while we're starting to enable the manufacturing players to embrace the smart technology devices, starting with the IoT, it's the same stuff. If they cannot do that, but they want it, we have to offer it. So for all the time of the company's history, we continue to offer two things. The first thing is that if they don't have the capability right now, we offer them the off-the-shelf solution turnkey. And if they already have some capability, we continue to educate them to do that, and then we offer them infrastructures to allow them to do some extra values they want to create more freely. So I think that's what we call ecosystem we want to create. So it's not like they just keep selling. I'm happy to see that we already have a significant amount of the customers who already have their own kind of in-house capability to create their own affiliation and make their own innovations. We're happy to see that. So the same as that we continue to enable our customers to build their own device level, innovations, and application level. So I think AI makes no difference. We always continue to do the same thing, including 2025, the showcase is that for some new players, they don't know nothing about that, but they only have some ideas how they want to bring AI into their business. We create some turn case solution for them, they can grab and go. So in the same time, we'll continue to have the very deep and active conversations with their engineering team, okay, what they can take from now, and what they can build in the future, and how TOYA can enable them to do that more efficiently and faster without the overwhelming burden. So we continue to do that the same way. But what we think that makes us very excited about is that, you know, several years ago, you still need to convince all smart devices. You still need to tell them that this will be the future. But right now, you don't have to tell people that AI is the future. The key part is that they really have the concept in their mind and how you'll be able to help them to make that faster and more efficiently and more competitively. I mean, on the user experience side, I think that's the first one and so the second one is, I think the key driver for that is that we continue to a significant amount and scale of the devices overall with or without any type of recurring services out there, so which means that we will have a large base and in the same time come along with AI, so some what we call existing categories only come with IoT before and then we really see that combined with AI capability we will be able to add values on the same type of the devices and which already deployed on the household. So in 2025 we continue to offer some new services on the same type of the hardware and then we see that it should work out and even on the existing recurring services like some storage services by offering extra AI capability will make the services more valuable or more either continue to enlarge trying to offer more recurring services out there and we believe that will be a long term especially for some AI initial products which will mean that the new type of applications since they want those kind of new recurring models which started to come places from the beginning so I think that's the for the session returning we continue to grow that I think that would be the one of the first work fastest growing and segment in our middle term that for the recurring and the third one is for the applications I think that we really share some our overviews and again late last year so for the segment that AI will be able to provide more significant values we believe will be right now will be two the first one is that all the multi modeling applications including the video and audio interactions and interactions and the analysis so including like the companions, toy, security. So those type of products will really have a significant base and we have new players coming in. But coming on with AI, so either you make those device interactions more smoothly and also combined with the perceptions of the video and audios, the devices will be able to provide more things like the security sites that you will be able to protect the people's home without bringing any force on out. And like for the companion side, so you, or toy side, you really could be able to provide some educational level of the interactions by providing the right language, providing the right understanding, the right emotion, providing the right feedbacks, and providing the right type of knowledge to the target customers. So that will be the first one, multi-modeling applications, especially on audio and video interactions. And the second one is data analytics and decision-making. So a typical use case is for energy management. So come along with a full cycle device deployment for the energy life cycle, including the generation of energy, storage, consumptions, and metering. you'll be able to understand how the electricity be moving along I mean transit from the grid into the into each of the devices how people want to manage the flow and through the all the data you'll be able to know and then the AI will be able to one step ahead is not only providing you the data analytics and suggestions but the AI will be able to make the decisions that how you'll be able to control your dishwasher a different way how you'll be able to manage your battery bank different way, how you'll be able to manage the AC and heating system in a different way, combined with the different timing, combined with the generation of your solar panel, combined with what kind of battery you have in your home right now, and either to reduce the total cost directly. So that will be a typical showcase if the AI is not providing the two. AI will be able to provide the total values they can get for the life cycle of the usage of this type of devices, and they pay for the services as well. So the data analytics and decision-making will be another part. And beyond energy, we're looking for more scenarios in that segment as well.

Thank you. Thank you for the detailed answers.

Thank you. We will now take our next question from Minran Lee from CICC. Please ask your question, Minran. Your line is open.

Thank you, management, for taking my question and contrast on the results.

My first question concerns the demand side. Given the recent geopolitical risk, how does management assess the potential impact on Tuiya's international operation? And looking at the current environment in this year, how do you perceive the recovery in demand across the overseas markets? And my second question, I would like to ask about the shareholder return. So we are holding a very healthy cash position, and your profitability continues to improve. Could management share if there are any more specific plans or considerations for shareholder returns as we move forward to 2026? Thank you very much. Thank you very much. and its ability is also in order to improve. So, in 2016, you have a question about the Q&A? Thank you.

Thank you for the questions. The first one is that a very hard part of that, from MS, the tariff questions. So the first one is that, yes, the global situation become more dynamic, right? We're starting to get used to that, coming on with our customers as well. So right now, we see that we get to be able to see more positive indicators in that direction, either reductions of the tariff on the global side, any type of pathways, but we really see that the commerce requires a better environment to do the business and people cannot cut each other off. So we really see that so the end demand continues to increase because the technology really provides value for the end users and they want it and they use that more and more often so that's what we see and this is inevitable I mean you can have a return on that so come along with the end demand increase and so all the people just figure out the way how they'll be able to fulfill the demand and go through navigate to all the dynamic including the reallocation of the supply chain globally etc so for artists that we just follow the flow is that we come along with the customers first one is to provide our offering, technical offering to help them to or their end users and be able to scale it, then be able to provide the right thing. In the same time that we continue closely to manage the cost to come along with a different allocation of our services on the global side. Right now we can deploy the services on whatever countries my customers are, we already did. And right now, my customers are really starting to build different type of production. They already have different type of production centers across 11 countries all over the world. So we just follow the flow and help them to achieve that more agency. So I think that's overall what we see for the global situation side. And so this year we will see that people looking forward to have the rebound versus 2025 because 2025 will be kind of the over-conscious situations and people don't know what will happen and things happening like every week and so people don't, people are not willing to do even a long term across a portal like the decisions. So they keep that decision very macro decisions. But this year people will see that the sustainability on the situation is starting to become better. So they try to rebound from the over-conscious. Yeah, so that's for the macro side. And second side for the return of the shareholders, as what we've been doing for the past two years we continue as a shareholders return as one of the prioritized targets for the company as well so continues to provide a very sustainable and strong foundations on the operation side including the net cash flow including the profitability including the growth of the revenue including the health of the revenue structures and the margin so the the return of the shareholders will become a non-term strategy as well so we just announced we'll have a new round of the dividend for the shareholders bill so coming on as a continue as a practice for us is that the one or one or two times a dividend a year so that will be what we do in for the shareholders returns and also in the same time that we the dividend will be more and reflect on our level of net trading cash flow and profitability.

Very clear. Thank you.

Thank you. Our next question comes from Matt Ma from Jefferies. Please ask your question, Matt. Your line is open.

Hello. Good morning. Thank you for taking my question and congrats on the solid result. My question is regarding on the smart solution segment. We noticed that the company showcased multiple AIoT products at CES last year and which product categories does the company have higher confidence in sales growth in this year and when we are thinking about product category expansion what's our thought process and could we expect relatively strong growth in the smart solution segment in 2026. So my question is about smart solution this part of the business. We were in CES, we launched a lot of AIoT products. I want to say, in 2016, we have which kind of products we have more信心. And when we were thinking about build a smart solution for the product of a smart solution. What kind of experiment are we going through to? And how do we set this kind of system that we're going through in 2026? Is it possible to do a smaller speed for our business? Thank you.

Yeah. Thank you for the question, Matt. So the first one is that, I think, combined with the previous questions and answers, so for the more promising, called as promising maybe, I mean, we will have more confidence levels, categories that can achieve a higher growth, enabled by AI, so those categories will be those devices that can use more AI capabilities naturally, so including those kind of video and audio interactions, and safety stuff, and toy, what we call entertainment stuff, and appliances. So those energy and those will be those segments will find that the AI can use more. They can use more AI capabilities than ever and some of the capability will directly deliver as a value that becomes visible for the end users. And so that's the one. And so we have a more confidence level in that segment. In the same time, it continues to reach other segments and what will be the new innovative ideas that combine the AI deeply integrated with the existing device capabilities. We continue to search for that as well. And what we're looking for, we think that we're going to see in 2026 is that gradually you'll find more and more new that didn't exist before was starting to occur because of the AI. So that will be two, three new stuff. Same as a toy, nobody thinks that a companion will be releasing before 2025. So this type of new concept of applications, we're looking for to have more because we have more talents coming into the industry, we have more players come into the industry. The new ideas come across a different world will create a very, very interesting, even we don't know how should we call that, but we will find a more issue. And second one is Amazon Smart Solutions. So like I described, the better proposition of Smart Solutions is that if those types of, and those differentiators, typical use cases for that is like the bird feeders. I mentioned a couple of that. That's just a concept that might work. So the customers come from some of those, so that's just a customer and consumer or user insight and concept ideas. So if they want to do that, they have to cover all the technology gap. It will be kind of overwhelming for them, and not only because of the lack of capabilities of the engineering team, but also that investment can be huge. I mean for them, if they do that individually, and also in the same time that type of innovations need a deep intuition on the software and hardware development directly. So instead of waiting for Tuya to offering the pass, maybe that doesn't show up in our pass roadmap ever, so they say that how they can work closer with Tuya if we can make that Through that, we think that we buy in that concept and then we offer it as a solution because we can directly make that happen and then they can try out the concept. So that would be the typical situation for the smart solution is that we're looking for those differentiator or differentiated type of offering to the market that can help my customer outspend themselves in their own segment in different regions, in different categories in different vertical channels etc so we only focus on this so that you can see that for the smart solutions even on the hardware business we maintain as a 20% plus margin reason being is that we only choose those higher valued products with the differentiations and with a special technical offering and touch it as a very consumers that they're willing to pay higher so so that will be how we do so consider smart solution will be kind of the higher value segment type of the devices among all my passwords so this will continue to do so surely my our solutions will become the flagship model in the new year so we do we continue to work along with their product roadmap year-over-year, and the flagship types.

That's very helpful. Thank you.

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

Thank you, operator, and thank you all once again for joining us today. If you have any further questions, please feel free to contact 2SIR team. Goodbye, and see you next quarter.

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