TUYA-W (02391) Q2 2026 Earnings Call Transcript

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question and answer sessions. Please be informed that today's conference is being recorded. And 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 second quarter 2026 earnings conference call. Joining us today is our founder and CEO, Mr. Jerry Wong, and our co-founder and CFO, Mr. Alex Young. Our results and webcasts 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'd like to refer you to our Safe Harbor Statement in our Earning 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, please.

The second quarter of 2026 regenerated total revenue of approximately 92.9 million in the smartphone and robot product segment is also increased by double digits. Our total revenue of about 67.9 million U.S. dollars a year-over-year increased of 16.9%, Serving as the important growth drivers for the end of the second quarter, the number of past premium customers for the training 12 months reached 318, contributing approximately 89.5% of the past revenue, with a core customer base remaining stable. The AI application and other segments generated revenue of about US$11.5 million, a year-over-year increased of 3.9%, primarily driven by growth in cloud-based service revenue, such as video cloud storage. We continue to advance to value-added services including video and AI-driven energy saving capabilities, while gradually strengthening our renew and recurring service capability. Smart home and worldwide products revenue was about 13.5 million U.S. dollars, a year-over-year increase of 23.2%, primarily driven by growing customer demand from smart security, energy, and other differentiated smart products. We will continue to increase the contribution of high-value-added products and strengthen their integration with the software and value-added services. Specific driver of past growth, home appliances, smart door locks, electronics, and energy products and AI companion product solutions performed relatively well during the quarter. Growth in the home appliances segments was mainly driven by customers' rollout of the smart-enabled models, the extension of their geographic reach, a higher contribution from smart enable products and the migration of short-term oversee brand product projects from our customers legacy solutions in smart door locks was primarily driven by increased adoption of audio video and no power Wi-Fi solutions in categories such as traditional lighting and IP cameras has been relatively slow reflecting continued emergency in performance across products treatment volumes of the devices powered by our solutions continue to expand. During the 15th shopping festival in China, Fuzuzu built on two-year solutions in the AI toy categories on Timo, while a number of other ecosystem products also deliver strong ranking and sales performance across major e-commerce platforms. This provided early validation of both consumer acceptance and the commercialization potential of the new form of AI device. Beyond basic voice interactions, we have building out capabilities in multi-model perception, personnel and memory, content services, and user engagement, helping customers accelerate the development and mass production of the AI native consumer hardware. In the energy sector, solutions including EV chargers, smart power distribution, and solid growth. We are expanding our AI energy capabilities from electricity, consumption, analytics, abnormal dynamic electricity tariff management, and user-authorized automated device coordination. Within the smartphone ecosystem, customers' adaptions of matter-based solutions continue to increase across categories such as electronic products, lighting, and climate control. In parallel, multi-protocol interoperability and third-party ecosystem, the gross margin for this quarter was 46.3%. By segment, gross margin for past was, gross margin for AI adaption and others were 72%, and gross margin for smart home and robot products was 21.9%. Gross margin fluctuations were mainly driven by the volatility in upstream semiconductors caused and changes in business mix in line of the expectation. Despite this, gross profit increased by 11.1% year-over-year to approximately 43% on expenses. the expense management while continuing to invest on AIR&D and platform capability. Gap operating expenses for this quarter were approximately $33.7 million, down 10.4% year-over-year, primarily due to the lower share-based compensation expenses. In terms of profitability, we recorded the gap profit from operating of approximately 9.3 million U.S. dollars with a GAAP operating margin of 10%. Non-GAAP profit from operating is approximately 9.6 million U.S. dollars, a year-over-year increase by 11.7%. While non-GAAP operating margin remained in the double-digit at 10.3%, while delivering revenue growth, we maintain relatively stable core operating profitability. Net profit for the quarter was approximately $18.6 million, while non-GAAP net profit was approximately $18.9 million. The year-over-year decline in non-GAAP net profit was primarily due to the lower financial financial income and foreign exchange losses, while core operating profit continued to grow. On cash flow side, net cash generated from the operating activities was $6.2 million during the quarter and remained positive. At the end of the second quarter, the company's total liquid excess, including cash and cash increment, time deposit, and treasury securities amounted to approximately 976 million U.S. Continually to provide ample resources to support the development of AI capability, global business expansion, and our ability to navigate external uncertainties and a long-term strategy investment. Next, I will briefly walk you through our progress in the AI developer ecosystem. At the end of the second quarter of 2026, the number of registrers launched in the second quarter, TORI Co-Builder served as an AI developer gateway to the TORI developer platform, applying backcoding to AI hardware development. By describing their requirements in natural language, developers can complete product definition, AI agents, and workflow development in one place, and then proceed directly to the device flashing and debugging. This covers the core development process from product concept to physical devices validation and helps shorten the AI hardware development cycles. In just over a month since launch, 2A Co-Builder's AI-powered panel generation capabilities has expanded to cover 30 product categories. ...time for a single panel reduced to approximately 190 seconds only. Progress demonstrates that we are advancing our developer tools beyond development assistance towards end-to-end delivery capability, spanning product definition. automation, software generation, and deployment on physical devices. As an application layer, we continue to enhance P2S device task execution capabilities, control reliability, and response efficiency, while exploring subscription-based and value-added services across scenarios such as AI-driven energy saving and video understanding. Certain scenarios have already begun to generate early payment and renewals. We will continue to focus on high-frequency use cases and long-term use value. From a broader perspective, AI capabilities are gradually expanding beyond single model integrations and in compact device sensoring. Contextual understanding and device-side execution will continue to leverage the strength of our platform, device ecosystem, and global developer base to translate AI capability into a scalable commercial value across the border range of the real world scenario. In summary, our revenue growth accelerated in the second quarter of 2026, with the past business continuing to serve as a primary growth engine. Meanwhile, our AI capabilities are being commercialized in parallel across multiple impacts, smart products, and AI applications. Despite the impact from semiconductor supply chain price fluctuation and business mix change, we maintain stable operating profitability and enable financial resources. Looking ahead, we'll remain focused on AI-native API scenarios and developer platform capability and continue to advance the transformation of AI technologies from two-level capabilities into tangible and scalable commercial value. Thank you, all operators. Right now we can begin the Q&A.

We will now begin the question and answer session. To ask the question now, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. We will now take our first question from the line of Yang Liu of Morgan Stanley. Please ask your question, Yang. Your line is open.

Thanks for the opportunity and congratulations on the solid earnings. my question is about the future demand outlook based on your discussion with key customers in current environment or what is the growth or demand outlook going into the second half of 2026 if you can provide a little bit more breakdown by geographic that will be even better like what's the demand profile in U.S. or in Europe and ASEAN, et cetera. Thank you.

Okay. Thank you, Liu. So right now, we see that the end demand and within our expertise and the consumer side, they're looking forward to devices and solutions into the new. So this momentum continues. So what we see is that we have the accelerating type of rebounding. recovery will not come overnight so it's great if I put down into the Europe still on the demand side especially for all type of energy related the new AI we provide other to the solution or include improvement whether it's what we put the second quarter so right now we still kind of will and see the customers still there and the customers still and doing a lot of and the second one is that in China so some AI native categories starting It's like the AI Companion, so our first market, we start to break through, so that's why I pursue the sales rate in Timo, so we really see that it's based on a large…

Thank you.

Thank you. We will now take our next question from Timothy Zhao of Goldman Sachs. Please ask your question, Timothy. Your line is open.

Good morning, management. Thank you for taking my question, and congrats on the very solid results. My question is on your gross profit margin. I noticed that in the second quarter, the IoT path margin declined on a young year basis, although stabilized sequentially, while your smartphone and robotics products margin actually declined sequentially in a young year. Just wondering if you can share more color on what was the margin drivers behind, and what is your margin outlook for these two segments for the third quarter and rest of this year?

Okay, yeah. Yeah, so first of all, as everyone knows that the optimal global basis, and we are the last one to tell you. In Q2, what we're doing is that the major of the profit, we maintain the gross profit, but we don't stick to the gross market. But till now, that will really build a very good buffering on the inventory and cost down and future. And in the next two quarters or three, that will be able to work through a more stable mind major. We're looking forward to either to stabilize the gross margin and we figure out whatever, all the possibilities that by offering new capabilities, new technologies, that's pretty much that. but in the future anything happens so we don't right thank you thank you we will

now take our next question from Kai show of CI CC please ask your question Kai your line is open okay thank you management this is Kai I have two questions when to your computer you mentioned in the quarter so I wonder what the current adoption status of two-year co-builder and what the company's medium to do that are the major users have enough experiments how would be able to run to

wear their own agent to improve their own workflow to improve their own individual efficiencies i believe some of you did that too so co-builder will be kind of sure where how i mean how low the bar can reach and how easy to run in so we will now take our next

Next question from the line of Matt Ma of Jefferies. Please ask your question, Matt. Your line is open.

Hey, hello. Thank you for taking my question. I have a question on the AI application segment. So it seems like in Q2, the revenue growth has been decelerated from 17% in the first quarter. I'm just curious, what is the reason behind that? But I calculated it, it seems that Q2 growth is only 3%, and what can get this line back to a double-digit growth? And then also on the segment margin, on the Q1 call you pointed that a seasonal rebound in device usage from Q2 would help you to increase the margin for this segment. But it doesn't seem that have come through. Could you walk us through what could actually happen in this quarter or the coming quarters to help to the margin recovery for this segment? AI application.

Okay, AI application. So the first one is, thank you. So for AI to come from, so as you might know that, so one is B2B. and especially some of the project-based services we offer for the consumer, which are the users of the devices. So they activated my cloud-based one, B2C side. And on the B2C side, not only in large, but with scale.

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 the higher team of Tuya. 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.