Tuya Reports First Quarter 2023 Unaudited Financial Results
SANTA CLARA,Calif.,June 8,2023 --TuyaInc.("Tuya"or the"Company") (NYSE:TUYA;HKEx:2391),agloballeading IoT cloud development platform,today announced its unaudited financial results for the first quarter ended March 31,2023.
FirstQuarter 2023FinancialHighlights
Total revenue was US$47.5 million,down approximately 14.2% year over year (1Q2022: US$55.3 million).
IoT platform-as-a-service ("PaaS") revenue was US$33.6 million,down approximately 19.6% year over year (1Q2022: US$41.8 million).
Software-as-a-service ("SaaS") and others revenue was US$8.5 million,up approximately 47.2% year over year (1Q2022: US$5.8 million).
Overall gross margin for the quarter increased to 44.3%,up 3.1 percentage points year over year (1Q2022: 41.2%). Gross margin of IoT PaaS for the quarter decreased to 40.5%,down 1.8 percentage points year over year (1Q2022: 42.3%).
Operating margin for the quarter was negative 68.0%,up 32.3 percentage points year over year (1Q2022: negative 100.3%). Non-GAAP operating margin for the quarter was negative 31.5%,up 36.9 percentage points year over year (1Q2022: negative 68.4%). Net margin for the quarter was negative 44.3%,up 55.0 percentage points year over year (1Q2022: negative 99.3%). Non-GAAP net margin for the quarter was negative 7.8%,up 59.6 percentage points year over year (Q12022: negative 67.4%).
Total cash and cash equivalents,and short-term investments were US$937.5 million as of March 31,2023,compared to US$954.3 million as of December 31,2022.
FirstQuarter 2023OperatingHighlights
IoT PaaS customers[1] for the first quarter 2023 were approximately 2,000 (1Q2022: approximately 2,600). Total customers for the first quarter 2023 were approximately 2,800 (1Q2022: approximately 3,900). The Group's implementation of its key-account strategy enabled it to be more focused on serving strategic customers.
Premium IoT PaaS customers[2] for the trailing 12 months ended March 31,2023 were 261 (1Q2022: 303). In the first quarter 2023,the Group's premium IoT PaaS customers contributed approximately 80.2% of its IoT PaaS revenue (1Q2022: approximately 85.6%). The decrease in premium IoT PaaS customers was primarily attributable to a reduction in order size among certain previous premium customers,thus falling below the premium customer revenue contribution threshold,which is $100,000 in the last 12 months.
Dollar-based net expansion rate ("DBNER")[3] of IoT PaaS for the trailing 12 months ended March 31,2023 was 49% (1Q2022: 122%).
Registered IoT device and software developers,or registered developers,were over 782,000 as of March 31,up 10.6% from approximately 708,000 developers as of December 31,2022.
1. TheGroupdefinesanIoTPaaScustomerforagivenperiodasacustomer whohasdirectlyplacedordersfor IoTPaaSwiththeGroupduringthatperiod.
2. The Group defines a premium IoT PaaS customer as a customer as of a given date that contributed more than US$100,000ofIoTPaaSrevenue duringtheimmediatelypreceding12-monthperiod.
3. TheGroupcalculatesDBNERofIoTPaaS for a trailing 12-month period by first identifying all customers in the prior 12-month period (i.e.,thosehaveplacedatleastoneorderforIoTPaaSduringthatperiod),and thencalculatingthequotientfromdividingtheIoTPaaS revenue generated from such customers in the current trailing 12-month period by theIoTPaaS revenue generated from the same group of customers in the prior 12 month period. The Group'sDBNERmaychangefromperiodtoperiod,duetoacombinationofvarious factors,includingchanges inthecustomers'purchasecyclesandamounts andtheGroup'scustomermix,among otherthings.DBNERindicatestheGroup's abilitytoexpandcustomeruseoftheTuya platform over time and generate revenue growth from existing customers.
Mr.Xueji(Jerry) Wang,FounderandChiefExecutiveOfficerofTuya,commented,"Even amidst a relatively complex macroeconomic landscape this quarter,our strategic pivot towards key customers and high-value offerings has enabled us to stabilize our operations and support our growth. This improved approach contributed to a 5% sequential revenue growth in the first quarter of 2023,typically a period characterized by extended holidays and softer performance. We also made further progress in managing our pricing structures,helping us maintain solid gross margin profiles. Looking ahead,we will continue our focus on high-yield,cost-effective products and solutions to solidify our leadership position in the IoT industry. With our innovative capabilities,extensive device ecosystem,and comprehensive solutions,we are well-positioned to seize emerging market opportunities."
Ms.Yao(Jessie) Liu,DirectorandChiefFinancial OfficerofTuya,added,"Our first-quarter financial performance reflects our resilience and adaptability. Importantly,we have illustrated our commitment to prudent financial management by trimming our non-GAAP total operating expenses by over 40% － a testament to our stringent budget controls and efficient cost-saving practices. These efforts contributed to a substantial reduction in our non-GAAP net loss,reaching the lowest level since 2019. For the remainder of 2023,we acknowledge the possibility of persistent market challenges,leading to limited visibility in the industry. Despite these uncertainties,we are confident that our improved financial position,marked by reduced losses and a strong cash reserve,provides us with a solid base to support our strategic goals and foster future growth."
FirstQuarter 2023UnauditedFinancialResults
REVENUE
Totalrevenueinthefirstquarterof2023decreased by14.2%toUS$47.5million fromUS$55.3 millioninthesameperiodof2022,mainlyduetothedecreases inIoTPaaSrevenueandsmart devicedistributionrevenue,partiallyoffsetbytheincrease inSaaSandotherrevenue. More particularly:
IoT PaaS revenue in the first quarter of 2023 decreased by 19.6% to US$33.6 million from US$41.8 million in the same period of 2022. During the quarter,the Group's customers remained cautious in their purchase decisions due to the persistent inventory backlog pressure in the downstream supply chain caused by the mismatch between supply and demand in the discretionary consumer electronics sector. Additionally,although the global inflation has shown some signs of relief in recent months,it continues to affect consumer sentiment,resulting in continued soft discretionary consumer electronics spending in multiple regions. Also,an adverse impact of US$2.5 million,or 6.0 percentage points,was caused by foreign exchange rate fluctuations compared to the same period of 2022. As a result of these factors,the Group's DBNER of IoT PaaS for the trailing 12 months ended March 31,2023 decreased to 49% compared to previous periods.
SaaS and others revenue in the first quarter of 2023 increased by 47.2% to US$8.5 million from US$5.8 million in the same period of 2022. During the quarter,the Group remained committed to offering value-added services ("VAS") and various software products with strong value propositions,including SaaS and Cube private cloud solution,to its customers.
Smart device distribution revenue in the first quarter of 2023 decreased by 30.3% to US$5.4 million from US$7.8 million in the same period of 2022,primarily due to the fluctuating timing and volume of customer demands and purchases.
COSTOFREVENUE
Cost of revenue in the first quarter of 2023 decreased by 18.6% to US$26.5 million from US$32.5 million in the same period of 2022,generally in line with the decrease in total revenue.
GROSSPROFITANDGROSSMARGIN
Total gross profit in the first quarter of 2023 decreased by 7.9% to US$21.0 million from US$22.8 million in the same period of 2022 and gross margin percentage increased to 44.3% in the first quarter of 2023 from 41.2% in the same period of 2022.
IoT PaaS gross margin in the first quarter of 2023 was 40.5%,compared to 42.3% in the same period of 2022,primarily due to the changes in product mix and pricing structure,as well as a negative 0.8 percentage points impact caused by a provision of US$0.3 million recorded for certain slow-moving IoT chips and raw material inventory in relation to the IoT PaaS business during the quarter.
SaaS and others gross margin in the first quarter of 2023 was 74.1%,compared to 77.1% in the first quarter of 2022.
Smart device distribution gross margin in the first quarter of 2023 was 21.0%,compared to 9.1% in the first quarter of 2022,primarily due to higher-value products solution we provided to our customers during the quarter.
OPERATINGEXPENSES
Operating expenses decreased by 31.9% to US$53.3 million in the first quarter of 2023 from US$78.3 million in the same period of 2022. Non-GAAP operating expenses,defined as operating expenses excluding share-based compensation expenses,decreased by 40.6% to US$36.0 million in the first quarter of 2023 from US$60.6 million in the same period of 2022. Share-based compensation expenses in the first quarter of 2023 were US$17.3 million,compared to US$17.7 million in the same quarter of 2022.
Research and development expenses in the first quarter of 2023 were US$28.1 million,down 41.1% from US$47.6 million in the same period of 2022,primarily because of the strategic streamlining of the Group's research and development team and operations. During this quarter,average salaried employee headcount of the Group's research and development team was down approximately 46.9% year over year,compared to the same quarter in last year.
Sales and marketing expenses in the first quarter of 2023 were US$10.3 million,down 32.9% from US$15.3 million in the same period of 2022,primarily because of (i) the strategic streamlining of the sales and marketing team,and (ii) the Group's efforts to control expenditure and improve sales and marketing efficiency.
General and administrative expenses in the first quarter of 2023 were US$16.8 million,down 6.9% from US$18.0 million in the same period of 2022,primarily due to the strategic streamlining of the general and administrative team.
Other operating income,net in the first quarter of 2023 was US$1.8 million,primarily due to the receipts of software value-added tax ("VAT") refunds and various general subsidies for enterprises.
LOSSFROMOPERATIONSANDOPERATINGMARGIN
Loss from operations in the first quarter of 2023 narrowed by 41.8% to US$32.3 million from US$55.5 million in the same period of 2022. Non-GAAP loss from operations in the first quarter of 2023 narrowed by 60.4% to US$15.0 million from US$37.8 million in the same period of 2022.
Operating margin in the first quarter of 2023 was negative 68.0%,up 32.3 percentage points from negative100.3%inthesameperiodof2022.Non-GAAP operatingmargininthefirstquarterof 2023 wasnegative31.5%,up36.9percentagepointsfromnegative 68.4%inthesameperiodof 2022.
NETLOSSANDNETMARGIN
Net loss in the first quarter of 2023 narrowed by 61.7% to US$21.0 million from US$55.0 million in the same period of 2022. Non-GAAP net loss in the first quarter of 2023 narrowed by 90.0% to US$3.7 million from US$37.3 million in the same period of 2022. The difference between loss from operations and net loss in the first quarter of 2023 was primarily because of a US$11.5 million financial income achieved due to well implemented treasury strategies on the Group's cash and deposits recorded as short-term investment.
Netmargininthefirstquarterof2023wasnegative44.3%,up55.0percentagepointsfromnegative 99.3% in the same period of 2022. Non-GAAP net margin in the first quarter of 2023 was negative7.8%,up59.6percentagepointsfromnegative 67.4%inthesameperiodof2022.
BASICANDDILUTEDNETLOSSPERADS
Basic and diluted net loss per ADS was US$0.04 in the first quarter of 2023,compared to US$0.10 in the same period of 2022. Each ADS represents one Class A ordinary share.
Non-GAAPbasicanddilutednetlossperADSwasUS$0.01inthefirstquarterof2023,compared toUS$0.07inthesameperiodof2022.
CASHANDCASHEQUIVALENTS,ANDSHORT-TERMINVESTMENTS
Cash and cash equivalents,and short-term investments were US$937.5 million as of March 31,2022,which the Group believes is sufficient to meet its current liquidity and working capital needs.
NETCASHUSEDINOPERATINGACTIVITIES
Net cash used in operating activities for the first quarter of 2023 was US$18.9 million,down 67.1% compared to US$57.4 million in the first quarter of 2022. The net cash used in the first quarter of 2023 improved mainly due to the significant decrease in operating expenses,particularly employee-related costs,and working capital changes in the ordinary course of business.
SHAREREPURCHASE
Duringthequarter endedMarch31,theGrouprepurchasedapproximately0.6million of ADSs,representing 0.6 million Class A ordinary shares,from the open market,for a totalconsiderationofapproximatelyUS$1.1million,subject totherelevantregulationonthevolumeof share repurchases.
BusinessOutlook
Global discretionary consumer spending in the consumer electronic industry is still expected to continue facing a range of challenges in 2023,including,among other things,a decline or continued weakness in the general economic conditions across various regions,global high inflation,inventory backlog experienced by players such as smart device manufacturers,brands and retail channels in the supply chain,fluctuations in foreign exchange rates,and geopolitical tensions and conflicts.
Atpresent,downstreamenterprisesareexpected tohavevaryingperceptionsafternearlythree quarters of industry-wide destocking efforts. Some brands believe that the inventory pressure has somewhat eased,while other brands indicate that inventory pressure remains relatively high,and they need to continue monitoring the situation.
The Group will continue to make efforts to monitor the uncertainties caused by such challenges,and despite these challenges,the Group remains confident in its long-term growth prospects and stays committed to iterating its products and services,further enhancing its software and hardware layer capabilities,expanding customer base,diversifying revenue streams,and further optimizing operating efficiency.
ConferenceCallInformation
The Company's management will hold a conference call at 08:30 P.M. Eastern Time on Wednesday,June7,2023(08:30A.M. Beijing Time on Thursday,2023) to discuss the financial results. In advance of the conference call,all participants must use the following link to complete the online registration process. Upon registering,each participant will receive access details for this conference including a conference access code,a PIN number (personal access code),the dial-in number,and an e-mail with detailed instructions to join the conference call.
Onlineregistration:https://www.netroadshow.com/events/login?show=b2cf3458&confId=51502
ThereplaywillbeaccessiblethroughJune15,2023bydialingthefollowingnumbers:
International:
+44-20-3936-3001
UnitedStates:
+1-855-762-8306
AccessCode:
171541
A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.tuya.com.
AboutTuyaInc.
TuyaInc.(NYSE:TUYA;HKEX:2391)isagloballeadingIoTclouddevelopmentplatform with a mission to build an IoT developer ecosystem and enable everything to be smart. Tuya has pioneered a purpose-built IoT cloud development platform that delivers a full suite of offerings,including Platform-as-a-Service,or PaaS,and Software-as-a-Service,or SaaS,to businesses and developers. Through its IoTclouddevelopmentplatform,Tuya has enabled developers to activate a vibrant IoTecosystem ofbrands,OEMs,partnersandenduserstoengageandcommunicate throughabroadrangeofsmartdevices.
UseofNon-GAAP FinancialMeasures
In evaluating the business,the Company considers and uses non-GAAP measures,such as non- GAAP operating expenses,non GAAP loss from operations (including non-GAAP operating margin),non-GAAP net loss (including non-GAAP net margin),and non-GAAP basic and diluted net loss per ADS,as supplemental measures to review and assess its operating performance. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America ("U.S.GAAP"). The Company defines non-GAAP measures excluding the impact of share-based compensation expenses from the respective GAAP measures. The Company presents the non-GAAP financial measures because they are used by the management to evaluate its operating performance and formulate business plans. The Company also believes that the use of the non-GAAP measures facilitates investors' assessment of its operating performance.
Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using the aforementioned non-GAAP financial measures is that they do not reflect all items of expenses that affect the Company's operations. Share-based compensation expenses have been and may continue to be incurred in the business and are not reflected in the presentation of non-GAAP financial measures. Further,the non-GAAP financial measures may differ from the non-GAAP information used by other companies,including peer companies,and therefore their comparability may be limited. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures,all of which should be considered when evaluating the Company's performance. The Company encourages you to review its financial information in its entirety and not rely on a single financial measure.
ReconciliationsofTuya'snon-GAAPfinancial measurestothemostcomparableU.S.GAAP measuresareincludedattheendofthispressrelease.
SafeHarborStatement
This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts,including statements about the Company's beliefs,and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties,and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases,forward-looking statements can be identified by words or phrases such as "may","will","expect","anticipate","target","aim","estimate","intend","plan","believe","potential","continue","is/are likely to" or other similar expressions. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the SEC. The forward-looking statements included in this press release are only made as of the date hereof,and the Company disclaims any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances,except as required by law. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
InvestorRelationsContact
TuyaInc.
Investor Relations
Email:ir@tuya.com
The Blueshirt Group GaryDvorchak,CFA
Phone:+1(323)240-5796
Email:gary@blueshirtgroup.com
TUYA INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
DECEMBER 31,2022 AND MARCH 31,2023
(All amounts in US$ thousands ("US$"),except for share and per share data,
unless otherwise noted)
As of December 31,
As of March 31,
2022
2023
ASSETS
Current assets:
Cash and cash equivalents
133,161
74,815
Restricted cash
–
4,430
Short-term investments
821,134
862,724
Accounts receivable,net
12,172
14,206
Notes receivable
2,767
2,002
Inventories,net
45,380
42,126
Prepayments and other current
assets
8,752
9,966
Total current assets
1,023,366
1,010,269
Non-current assets:
Property,equipment and software,
net
3,827
3,313
Operating lease right-of-use assets,
net
9,736
8,916
Long-term investments
18,031
18,031
Other non-current assets
1,179
1,084
Total non-current assets
32,773
31,344
Total assets
1,056,139
1,041,613
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
9,595
7,154
Advances from customers
27,633
27,060
Deferred revenue,current
6,821
6,339
Accruals and other current liabilities
33,383
27,179
Lease liabilities,current
3,850
3,876
Total current liabilities
81,282
71,608
Non-current liabilities:
Lease liabilities,non-current
5,292
4,738
Deferred revenue,non-current
394
367
Other non-current liabilities
7,004
6,226
Total non-current liabilities
12,690
11,331
Total liabilities
93,972
82,939
Shareholders' equity:
Class A ordinary shares
25
25
Class B ordinary shares
4
4
Treasury stock
(86,438)
(71,801)
Additional paid-in capital
1,584,764
1,586,511
Accumulated other comprehensive
loss
(22,115)
(20,487)
Accumulated deficit
(514,073)
(535,578)
Total shareholders' equity
962,167
958,674
Total liabilities and shareholders'
equity
1,139
1,613
TUYA INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE LOSS
(All amounts in US$ thousands ("US$"),
unless otherwise noted)
For the Three Months Ended
March 31,
March 31,
2022
2023
Revenue
55,324
47,485
Cost of revenue
(32,504)
(26,457)
Gross profit
22,820
21,028
Operating expenses:
Research and development expenses
(47,588)
(28,051)
Sales and marketing expenses
(15,278)
(10,259)
General and administrative expenses
(18,030)
(16,793)
Other operating incomes,net
2,594
1,780
Total operating expenses
(78,302)
(53,323)
Loss from operations
(55,482)
(32,295)
Other income/(loss)
Other non-operating income,net
653
778
Financial income,net
121
11,470
Foreign exchange loss,net
(101)
(34)
Loss before income tax expense
(54,809)
(20,081)
Income tax expense
(144)
(964)
Net loss
(54,953)
(21,045)
Net loss attributable to Tuya Inc.
(54,045)
Net loss attribute to ordinary
shareholders
(54,045)
Net loss
(54,045)
Other comprehensive income
Foreign currency translation
649
1,628
Total comprehensive loss attributable to
Tuya Inc.
(54,304)
(19,417)
Net loss attributable to Tuya Inc.
(54,045)
Net loss attributable to ordinary
shareholders
(54,045)
Weighted average number of ordinary
shares used in computing net loss per
share,basic and diluted
556,808,050
553,994,418
Net loss per share attributable to
ordinary shareholders,basic and
diluted
(0.10)
(0.04)
Share-based compensation expenses
were included in:
Research and development expenses
4,130
4,117
Sales and marketing expenses
1,653
1,606
General and administrative expenses
11,873
11,597
TUYA INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in US$ thousands ("US$"),unless
otherwise noted)
For the Three Months Ended
March 31,
2022
2023
Net cash used in operating activities
(57,374)
(18,882)
Net cash used in investing activities
(141,941)
(33,824)
Net cash used in financing activities
(21,751)
(2,171)
Effect of exchange rate changes on cash and cash
equivalents,restricted cash
1,328
961
Net decrease in cash and cash equivalents,restricted
cash
(219,738)
(53,916)
Cash and cash equivalents,restricted cash at the
beginning of period
964,576
133,161
Cash and cash equivalents,restricted cash at the end of
period
744,838
79,245
TUYA INC.
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST
DIRECTLY COMPARABLE FINANCIAL MEASURES
(All amounts in US$ thousands ("US$"),
2022
2023
Reconciliation of operating expenses to non-
GAAP operating expenses
Research and development expenses
(47,051)
Add: Share-based compensation expenses
4,117
Adjusted Research and development expenses
(43,458)
(23,934)
Sales and marketing expenses
(15,259)
Add: Share-based compensation expenses
1,606
Adjusted Sales and marketing expenses
(13,625)
(8,653)
General and administrative expenses
(18,793)
Add: Share-based compensation expenses
11,597
Adjusted General and administrative expenses
(6,157)
(5,196)
Reconciliation of loss from operations to non-
GAAP loss from operations
Loss from operations
(55,295)
Operating margin
(100.3)%
(68.0)%
Add: Share-based compensation expenses
17,656
17,320
Non-GAAP Loss from operations
(37,826)
(14,975)
Non-GAAP Operating margin
(68.4)%
(31.5)%
Reconciliation of net loss to non-GAAP net loss
Net loss
(54,045)
Net margin
(99.3)%
(44.3)%
Add: Share-based compensation expenses
17,320
Non-GAAP Net loss
(37,297)
(3,725)
Non-GAAP Net margin
(67.4)%
(7.8)%
Weighted average number of ordinary shares used in
computing non-GAAP net loss per share,basic and
diluted
556,418
Non-GAAP net loss per share attributable to
ordinary shareholders,basic and diluted
(0.07)
(0.01)
