Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Tuya Inc.'s Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at any time. I will now like to turn the call over to Ms. [ Regina Wong ], Investor Relations Senior Manager of Tuya. Regina, please go ahead.

Thank you, operator. Hello, everyone. Welcome to our second quarter 2025 earnings call. Joining us today are our Founder and the CEO of Tuya, Mr. Jerry Wang; our Co-Founder and CFO, Mr. Alex Yang. The second quarter 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 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.

[Interpreted] Hello, everyone. Thank you for joining Tuya's earnings call for the second quarter of 2025. Let me start with a brief overview of our performance. In the first half of 2025, Tuya generated revenues of approximately USD 155 million, representing about 15% year-over-year growth. Revenue in the second quarter reached around USD 80.1 million, an increase of 9.3% year-over- year. During the quarter, global trade uncertainties intensified with U.S. tariff policy significantly disrupting the global discretionary of consumer electronics industry. As a result, downstream retail channel brands, importers and exporters delayed or adjusted their operations and planning. Nevertheless, Tuya remains resilient, delivering positive outcomes across multiple fundamentals, including revenue growth, gross margin and profitability, as well as AI products and ecosystem development. In terms of profitability, we maintained a blended gross margin of around 48% for both the second quarter and the first half, with all 3 business segments achieving stable gross margin, both sequentially and year-over-year. On the operating profit side, despite the seasonal softness in the first half and global external challenges, we still achieved a 10% non-GAAP operating margin and 25% net margin. Notably, non-GAAP operating profit grew approximately 127% year-over-year, highlighting the operating leverage embedded in Tuya's business model, which remains sustainable even in a complex environment. Opportunities and challenges from both AI adoption and the global trading environment are driving higher market penetration. We are also engaging our developer platform to deliver high value and next-generation AI experiences. At the end of the second quarter, the number of global developers on our platform has reached over 1.51 million. We will remain committed to long-term strategy initiatives such as Tuya Open and our AI agent development platform to broaden effect to AI developer tours and build a business ecosystem that supports Tuya and the industry's long-term growth. 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 business progress.

Hello, everyone. This is Alex. I will now provide more details on our second quarter results. Please note that all figures are in U.S. dollars and all the comparisons are year-over-year based. Let's start with the financial performance. In the second quarter of 2025, Tuya delivered revenue of about USD 80 million, representing 9.3% year-over-year growth. By segment, PaaS leveraged its diversified product ecosystem to capture essential consumption demand in home appliances, delivering year-over-year growth of 7%. Smart solutions supported by focused hardware offering and a differentiated solutions tailored to various customer segments withstood macro pressures and achieved year-over-year of 16.7%. SaaS and others revenue was about USD 11 million, up 15.6% year-over-year, driven by the continued increase in recurring revenue, which exceeded 6% in Q2. From a regional perspective, leading long-term customers in Europe achieved a double-digit growth in niche categories such as the ambient lighting and home appliances, including air conditioners and air fryers. New customers, including a top Turkish solar storage companies and medium HVAC manufacturers in Austria and other regions, too, who began corporations on energy saving production lines. In Asia Pacific, various rollouts progressed as expected. Several Southeast Asian telecom customers, starting with the Cube platform deployment entered the large-scale delivery space, while smart home and real estate products in Singapore advanced into implementations, contributing meaningful revenue across both hardware and software in the now quarter and the future. In North America, our flagship AI solutions, the smart bird feeder saw strong momentum and demand, reflecting consumers' sustained willingness to pay for emotional-driven experience by AI. In China, AI toy solutions gamed positive feedback in Q2 with plans to expand IP collaborations and target diversified audience. Admittedly, even since shifting tariff policies introducing global trend uncertainty. Stakeholder across the discretional consumers electronics value chain and…

[Operator Instructions] Our first question is going to come from the line of Yang Liu with Morgan Stanley.

Two questions from my side. The first one is regarding the growth outlook given the changing global trade environment in second quarter and the third quarter. What is the management expectation of the business growth going into the third quarter or the rest of the year? Should we see some acceleration in top line or the past shipment growth? The second question is regarding the FX impact. Could the management update us what is constant currency growth for top line in the second quarter and to help us to understand what is the FX impact to the P&L?

Yes. So I'll answer the first one first. So yes, for Q3 and the rest of this year, we'll see that the uncertainty on the tariff situation continues because till now, we still don't have a conclusion. We don't have the agreement between countries. So the rest of this year, we'll see that and consumer electronic categories recovering right now is still under pressure. And also, the first shipment for the Q2 for those products that's been tariffs, and we will have to meet the product tend to sell, but the retail product tend to impact it. So we will have to close the eye to witness what's going to be the end demand reflect looks like. And as far as we know that right now for the major retailers for the North America and the brands and the importers and manufacturers, so they all have the concern that the demand we're starting to have the risk of the decline after the retail price raising. So for this year, we already see that for the promotion seasons like Christmas, Black Friday, back to school, and so all the new product planning and the promotion and forecast. So those buyers, they have the -- they already show this kind of concerned mindset. So instead of too optimistic.and like -- so some of the orders that would shift from the higher value of the smart one into some lower value and with entry-level one. And even including Europe, that they have the same type of uncertainty as we have. So those kind of virus, they're not too optimistic. So they will have very -- they are very conscious to review all the reflects on the end users in the very short term dramatically. And also, we are facing a very long supply…

Our next question will be from the line of Timothy Zhao with Goldman Sachs.

Great. Congrats on the very solid results. Also 2 questions from my side. One is really on the competitive landscape in the AIoT PaaSsegment. Just wondering how much you can see the competitive advantage when I think the whole industry is moving from the traditional say, IoT path to AIoT? And what are our ways to maintain that kind of competitive advantage globally. Secondly is on your shareholder return policy. I think it's very pleased to see the dividend declaration announcement from this quarter. Just wondering if management can provide us more structural way in terms of understanding the shareholder return policy for the years ahead.

Yes. Thank you, Timothy. So for the first one, what we see is that we are doing a lot of things to push -- not push it, to motivate those developers from the existing -- from the historical IoT applications into the AI applications. So like I described that we're doing a lot out of different webinars, trainings and events to grab all those kind of ideas, innovative plans from the developer side that they have anything that we can think on how it can bring AI into the new user experience together. And the data I already shared is that so for the first half of this year, over 93% of the products that's building with the Tuya platform for the first half of this year already come with AI capability. So we're already doing quite good penetration of the combined the new AI feature set into the existing Tuya developer ecosystem and a customer base as well. So that's the first one. But we'll continue to do more because the -- a very exciting opportunity we see is that coming on through the AI stuff. We have more categories that this technology will be able to cover. And so like the toy, like this kind of emotional-driven entertainment. So without the large language models, those types of categories doesn't exist or doesn't seem the opportunity how we can turn that into smarting. But right now, it is. So we'll continue to do that to have more of my existing developers to start to try out of the AI feature set and understand those kind of air technology and also to exchanging the ideas of creativity. So that's the one thing. And also, another thing is that whilst we find out those kind of great ideas or great prototypes. So we're using our networks using our marketing resources to incubate and helping our developer to commercialize. So that's what we continue to do. And so we're looking for to have more, I would say, AI essential and applications be built out in the future for the long run. And so that's one. And the second part for the dividend or for the shareholder return. So like we said for the 2 quarters before, so we will consider the dividend as a regular policy or to or solutions that we offer for the shareholders' return, besides any other things. And the dividend is based on the stable profitability of the company, the stable business model and growth and also a very healthy net operating cash flow. So our dividend will be based on that, and we're offering as a regular solution for the shareholders. That all, Timothy.

[Operator Instructions] Our next question comes from the line of Kai Xiao with CICC.

Okay. And I have 2 questions as well. My first question is on your gross margin. So with this quarter, your gross margin has steadily expanded with margin, in particular, is rising fast. So my question, what are the key drivers for the gross margin going forward? And in particular, how would the AI-related revenue affect your overall gross margin mix? So that's for the gross margin question. And my second question is on the SaaS and smart device solutions. So could you share the primary growth engines for the 2 sectors? And what's your outlook going forward?

Okay. So the first one, I think that the gross margins represents -- okay. The gross margin represents I think the competitiveness of the technology we provide and also the value proposition for us in the entire industry. So right now, all the customers will really see my gross margin. I think that will be as a public company. But they continue to satisfy with what we're offering, no matter is on the technology is on the services is on what we can offer to help them to transit from a legacy device maker into a smart device maker from a device reselling business model into more like the software services, AI services-based recurring model. So I think that will -- the gross margins will print that. And for us, is that we manage the 3 business model separately. So for the past, we're offering. So we're satisfied with the gross margin range so far. And for the SaaS, the key part is that it's a regular software based. So gross margin above 70% will be regular based. So we're not looking forward to push that up like the into 80% or 90% because that's not realistic. But we're looking for to scale that faster. As you can see here is that starting from Q2, we really see the SaaS trend growing faster than PaaS past and because we're starting to acquire or transit more end users to those kind of SaaS orphan as a premium feature as a recurring model. And we have more stickiness on the recurring side. So that's for the SaaS. And for the solutions we're looking for the long run is that because it's software and hardware combined and essentially have more and more portion come from the hardware side. So for that part is…

Our next question comes from the line of Matt Ma with Jefferies.

I have 2 questions. So the first one is also related to the U.S. tariffs. Are we observing a shift of China-based supply chain to overseas for our brand customers. If so, what other impacts on Tuya? And should we expect to see incremental costs, for example, in module logistics? And the second question is related to margins. We are seeing that for Smart Solutions is gross margin is 22.5% in the second quarter, which is relatively lower than previous quarters. Just wondering what is the reason behind that? And also, given our business model can enjoy very strong operating leverage. Over the next 3 to 5 years, what kind of margin profile do you expect to see the company to achieve.

Okay. Yes. So the first one is that, yes, after the tariff situation, every people talking about the shift in supply chains globally. And -- but that kind of topic has not been talking -- it's not been discussed this year because the first tariff rating took in place in 2018. So what we see here is that just for those products manufactured and so to United States, different categories react in different ways. So for those categories, we acquire a less component and less rely on very diversified supply chain. So some simple stuff like the plugs, maybe LED box. So those type of categories, not only this year, I think that 4 or 5 years ago that many manufacturers trying to relocate it in other countries like Mexico, like Vietnam, Thailand, including India. So those manufacturers are already relocated somehow. But some categories, super rely on the key components supplying like the air conditioner. So they have way more complicated supply chain. It's not easy to move that out entirely. So the major air conditional manufacturers still they have to produce in China. So different categories right now impacting in different levels. But those shifting supply chain already took in place for years. So for us, is that we just follow the flow is that wherever the customers want to produce their finished products. we just deliver on modules to their location. So I think that's the first one. But the pressure comes from that especially in Q2, as we can see that those tariff policy, I mean, challenge is that United States or President Trump tried to raise the tariff almost every other country, including Mexico, including Japan, including Vietnam and Thailand. So for the short term that the importers don't know where is the safest place…

Seeing no more questions in the queue. Let me turn the conference back over to Regina Wong 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 IR team of Tuya. Goodbye and see you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]