Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tuya Inc (TUYA, Financial) achieved a 34% year-over-year revenue growth in the third quarter of 2024.
- The company maintained a high operating efficiency, achieving a non-GAAP operating margin of around 9%.
- The smart solutions segment saw over 100% year-over-year revenue growth, driven by strong market demand.
- Tuya Inc (TUYA) reported a non-GAAP net profit margin of around 25%, aided by substantial interest income.
- The company's dollar-based net expansion rate stood at a healthy 124%, indicating strong growth among existing customers.
Negative Points
- The company faces potential challenges from tariff increases in the US, which could impact customer behavior.
- There is uncertainty regarding the gross profit margin (GPM) stability due to changes in product mix.
- Despite strong financial performance, the company has not yet achieved annual profitability to support regular dividends.
- The AI monetization strategy is still in the pilot stage, with no immediate revenue contribution guidance.
- The overall gross margin may decline gradually due to the increasing proportion of smart solutions, which have lower margins compared to software.
Q & A Highlights
Q: Can you provide an outlook for the fourth quarter and any changes in customer behavior due to potential tariff increases in the US?
A: Yi Yang, Co-Founder and COO, mentioned that the fourth quarter is expected to be stable and regular, although visibility is limited due to a long vacation in China. Regarding tariffs, the company has adapted to geopolitical changes, with customers relocating supply chains. Demand remains steady as end-users continue to purchase products globally.
Q: What is the outlook for the IoT PaaS business and any differences in demand across vertical segments?
A: Yi Yang noted that 2024 is a rebounding year for IoT PaaS as companies recover from inventory issues. Customers are reinvesting and initiating multiple projects. Tuya is expanding product offerings and AI-based services, focusing on enterprise-level customer expansion, including telecom carriers and industrial solutions.
Q: Can you discuss the growth drivers and future outlook for the SaaS sector?
A: Yi Yang highlighted that the SaaS sector is identifying potential verticals where AIoT can provide value. Key areas include hospitality, energy management, and logistics. Tuya is developing standardized solutions with strategic customers and aims to replicate successful use cases.
Q: What are the updates on generative AI monetization and future plans?
A: Tuya is integrating AI capabilities with hardware, creating AI devices like smart bird feeders. They are also offering AI services on software levels, such as generating video content for pet devices. These initiatives are in pilot stages, with plans to commercialize AI applications by the end of 2024 or early 2025.
Q: How long do you expect the current revenue growth to continue, and are there plans to accelerate R&D investments?
A: Yi Yang believes IoT and AI will become fundamental technologies over the next 10-20 years, driving growth. Tuya is focused on enabling first movers in various verticals. While investments are currently stable, they continue to explore new use cases and maintain a reasonable expense rate.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
