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 session. 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 Wang, and our co-founder and CFO, Mr. Alex Yang. Our 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'd like to refer you to our Steve Hubbard 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.

Hello everyone and thank you for joining Tuya's earnings conference call for the second quarter of 2026. When Tuya maintained solid growth momentum during the quarter despite the continued complexity of the global operating environment, our total revenue reached 92.9 million USD a year over a year increase of 16%, with growth accelerating from the first quarter. Within this, Revenue from our core path business increased 16.9% year-over-year. These results reflected ongoing rising smart product penetration, including steady demand across home appliances. Increased adoption of differentiated solutions, such as smart door locks, and growing demand for emerging AI-enabled product categories, and also underscored the resilience of our platform business across different regions and product categories. In terms of strategic execution, we continue to advance our AI-driven development strategy, extending our AI capabilities beyond foundation models and standalone features towards platformization, productization, and scenario-based deployment. In the second quarter, shipment volumes of AI companion product solutions continued to expand, and consumer acceptance of new forms of AI hardware began to be validated. Meanwhile, we launched the 3i Compute, which applies one coding to AI hardware development, enabling developers to cover the core development process, from project concept to physical device validation, using natural language, further shortening AI hardware development techniques. This development further reinforced AI's evolution from a mere conversational tool into a technology that operates in real physical environments and participates in sensing, understanding, and execution Looking ahead, we will deepen our focus on the following three key areas. First, we will continue to advance AI's native application and product innovation, centering on high-potential scenarios such as AI homes, AI energy, and AI robots. We will drive the large-scale adoption of AI across a broader range of physical devices. We will continue to enhance AI development tools such as live coding, agent orchestration, and cloud-edge device collaboration, further shortening the cycle from ideation and development to deployment on physical devices or AI hardware. Third, we will advance the global expansion of proven solutions while further strengthening our developing ecosystem. And industry partnership to jointly explore Long-term opportunities in the AI application market. Now, let me send 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 a brief overview of our second quarter result. Please note that unless otherwise stated, all figures are in US dollars and all comparisons are on year-over-year basis. In the second quarter of 2026, we generated total revenue of approximately 92.9 million US dollars, up 16% year-over-year, and accelerating from the 8.3% growth recorded in the first quarter. Our past business maintained strong growth, where revenue from the smartphone and robot products segment is also increased by double digits.

Of our total revenue,

The past business generated revenue of about 67.9 million USD, a year-over-year increase of 16.9%, serving as the important growth drivers for the quarter. At 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 remain stable. The AI application and other segments generate revenue of about 11.5 million US dollars, a year-over-year increase of 3.9%, prevalent 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, among others. We enable applications capabilities while gradually strengthening our renew and recurring service capability. Smart home and robot product revenue was about 13.5 million US dollars, a yearly yield 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. Looking at the 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 expansion of their Geographic Reach, a higher contribution from smart enable products, and the migration of short-term overseas brand projects from our customers' legacy solutions into 2S. Growth in smart door locks was primarily driven by increased adoption of audio, video, and no-power Wi-Fi solutions. By comparison, demand recover in categories such as traditional lighting and IP cameras has been relatively slow, reflecting continued divergency in performance across products and regions. In AI-compatible products, shipment volumes of the devices powered by our solutions continue to expand. During the June 18th shopping festival in China, Fezuzu, built on 2D solutions, ranked first in the AI toy categories on Tmall, 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 devices. Beyond basic voice interactions, you have building out capabilities in multi-model perception, personnel and memory, content services, and Yuzhe engagement, helping customers accelerate the development and mass production of the AI-enabled consumer hardware. In the energy sector, solutions including EV chargers, smart power distribution, metering, and home energy management maintain solid growth. We are expanding our AI energy capabilities from electricity, consumption analytics, abnormal alerts, and personalized and personalized recommendations towards dynamic electricity tariff management and user-authorized automated device coordination. Within the smartphone ecosystem, customers' adoptions of matter-based solutions continue to increase across categories such as electronic products, lighting, and climate control. In parallel, we enhance local control, multi-protocol Chai, and the third-party ecosystem compatibilities. On the margin side, our blended gross margin for this quarter was 46.3%. By segment, gross margin for PaaS was 46.8%, gross margin for AI adoption and others was 72%, and gross margin for smart home and robot products was 21.9%. Gross margin fluctuations were mainly driven by the volatility in upstream semiconductor's costs and changes in business mix in line of the expectation. Despite this, gross profit increased by 11.1% year-over-year to approximately 43 million US dollars. On expenses, We maintained disciplined expense management while continuing to invest on AI and R&D and platform capability. GAAP 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 GAAP profit from operating of approximately 9.3 million U.S. dollars with a gap operating margin of 10%. Non-gap profit from operating is approximately 9.6 million U.S. dollars, a year-over-year increase by 11.7%. While non-gap operating margin remained in the double digit at 10.3%, while delivering revenue growth, we maintained 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 income and foreign exchange losses, while co-operating profit continued to grow. On cash flow side, net cash generated from operating activities was $6.2 million during the quarter and remained positive. At the end of the second quarter, the company's total liquid assets, including cash and cash increments, time deposits, and treasury securities amounted to approximately $976 million, continually to provide Anbo Resources to support the development of AI capability, global business extension, and our ability to navigate external uncertainties and a long-term strategy investment. Next, I'll briefly walk you through our progress in the AI developer ecosystem. At the end of the second quarter of 2026, the number of registered developers on our platform exceeded 2.09 million. Launched during the second quarter, Tuya co-builder served as an AI developer gateway to the Tuya developer platform, applying backcoding to AI hardware development. By describing their requirements in natural language, developers can complete product definition at user interface embedded firmware, AI agents, and workflow development in one place, and then proceed directly to the device flashing and debugging. This covers the whole development process from product concept to physical devices validation and helps shorten the AI hardware development cycles. In just over a month since launch, 2UP Core Builder's AI-powered panel generation capabilities has expanded to cover 30 product categories with average generation time for a single panel reduced to approximately 190 seconds only. This progress demonstrates that we are advancing our developer tools beyond development assistance towards end-to-end delivery capability, spanning product definition, software generation, and deployment on physical devices. As an application layer, we continue to enhance pay-to-use 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, pack care, and video understanding. Certain scenarios have already begun to generate early payment and renewals. 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 sensory. Contextually understanding, memory, agent orchestration, 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 a broader 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 path, including paths, smart products, and AI applications. Despite the impact on gross margin from semiconductor supply chain price fluctuation and business mix change, we maintain stable operating profitability and amble financial resources. Looking ahead, we'll remain focused on AI-native applications We will now begin the question and answer session. To ask a question now, please press star 1-1 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, 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 US or in Europe and ASEAN, et cetera. Thank you.

Okay, thank you. Thank you, Liu. So right now we see that the end demand and internal momentum is still within our expectation. So as we stick in the beginning of this year that the entire customer and the consumer side, they're looking forward to still to consuming more and to transfer more legacy devices and solutions into the new AI one that we provide. So this maintenance continues. So what we see is that we have the accelerating type of rebouncing on the demand side. So this will be the overall overview. So we see that the recovery will not come overnight, so it's gradually climbing. What we found here is the momentum still continues, especially based on this kind of positive, very positive sales-through feedback from the and the user side. That's the first one. If I break down into the geographic areas, so there are different type of demand drivers. Europe still show very strong on the demand side, especially for all type of energy related segments. So including the new AI HEMS, so home energy management solutions we provide as a solution, or include different type of energy efficiency improvement Wang, and so on. So we have a single device. No matter it's what we provide as a patch or we provide as a home and robot products to the solution together, that shows very strong demand still. That's the first one. And Southeast Asia and Latin America, the driving forces majorly come from our strong channels in the telecom carriers. So while starting to establish a strategic partnership along with them around one and a half years ago and we're starting to commercialize that part. So through their own channels to deliver some comprehensive total solutions for their users in the AIoT fields. That's a very strong potential and a very promising one because they're running on the B2B cycle By the end of the time, it's the B2C, but they run really strong B2B cycles rather than the retail side. They're campaigning on that. That's for Southeast Asia and Latin America. And immediately, it's still kind of in a pause right now because of the military conflict going on in the second quarter. So right now, we're still kind of wait and see. The customer is still there, and the customer is still doing a lot of preparations including the product development and the new concept definitions and the type of stuff. But right now, I think that all the business is not coming back yet. And we're looking forward to have better scenarios, perhaps maybe end of Q3 or Q4. We're looking forward to have some agreement for those competing countries. and then we'll be able to catch the demand. And so that's where we'll go. And North America is that the sales rule is still there, but some price sensitive, especially no price type of the devices, not to show kind of fluctuations by the pricing rates coming from the supply chain side. And so we are, we structure that type of product mix along with my customers and to deliver a better sales too in the second half of this year. And so I think that will be overall. And for China right now, we will be seeing some really good promising categories including part of the home appliances that we can find that the major brands right now they are speeding up the transformations from the legacy the type of devices into the smart one. And from first generation IOT type of smart devices into the AI one. So we are catching the transformation trend and helping a lot of China brands to do that. And the second one is that in China, so some AI native categories starting to booming, like the AI companion. So our first market we're starting to break through for AI companion categories is from China. So that's why Fuzhou is a sales trading team. So we see that based on a large target consumer scale in China and what we find the right type of applications and coming on with a very active customer base and we'll try to find more potentials in the new type of innovations in China.

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.

Great. 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 PAT 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? Thank you.

Okay, yeah, so first of all, as everyone knows that the upstream cost of fluctuations is going to increase over two quarters on a global basis and we are the last one to touch the impact because of our buying forces so for the Inc. Q2 what we do is that the major of the product which has passed through the cost rate and so we think that we maintain the gross profit but we don't speak to the gross margin. But till now that we really built a very good buffering on the imagery and cost balance between now and future. And in next two quarter or three, and right now we have the confidence that we'll be able to working through a more stable cost level of my major type of materials we needed. So we're looking for to either to stabilize the gross margin and we figure out whatever or all the possibilities that by offering new capabilities, new technologies, we have to improve the gross margins overall. So that's pretty much it with that. So for the customer side, we're really sure our kindness, that's practically the cost. But in the future, anything happens, so we don't... We're looking for the most positive way to help the company to continue to run the business. So it's not stick to the cost, but it must stick to the value and the competence that we deliver to the customers to help them get through that.

Right. Thank you.

Thank you.

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

Okay. Thank you, management. This is Kai. I have two questions. One is on Tuya Co-Builder you mentioned in the quarter. So I wonder what's the current adoption status of Tuya Co-Builder and what's the company's meaning?

Okay. And so CodeBuilder is something we have to do for a couple of quarters. So starting from second half of last year, some departments into your R&D centers were really starting to do the back coding and to improve our own coding efficiency and also to bring more ROIs on R&D side. So we start to do that as a major users of coding. And while we have enough experience, how we'll be able to manage, how we'll be able to use that and deliver it right to our eyes and be able to know how to manage that. And we're starting to think about the way we need to, you know, duplicate our experience and open it up to our customers. So at the beginning of this year, we're starting to build a computer. And we're happy to launch it at the second quarter. And so we believe that will be the new type of default gateway In the future, for many developers, even not only device developers, many developers to load the bar, and including me right now, including my financial department, so many of them, they don't know coding at all for their entire lifetime, but they're trying to write their own agent, to improve their own workflow, to improve their own individual efficiencies. I believe some of you did that too. So a code builder will be kind of the shower where, I mean, how low the bar can reach, and how easy, Those ideal developers will come with some innovative ideas that they can really quickly to testify the innovations and to validate whether those kinds of ideas make sense for some of the users and build a demo and get some pilot users and starting to run, including the fundraisers and the scalers. So CodeBuilder, we believe, will be kind of the, in the hardware world, should be kind of the momentum, like wow, you have the class code maybe one year before. And we believe that will be defaulted quickly. And so continue to bring that to, Inc. Q2, well, after we launch it, and then we continue to do a lot of webinar trainings for those developers, even while they don't know what coding means, and how they can deal with it, and we're starting to train a lot of you know developers and also in the same time we'll use this tool to attract those not developers at this moment but they're more considered as a product manager maybe in some hardware companies and in the past the strength or capability for those type of talents are user insight are the correct definition and interface in design and psychological understanding. But right now, we offer them better tools that they can transfer that part with or without annoying any of their engineers. They'll be able to stretch that out in themselves. So that will be the value of the computer. And so we can use that to enlarge the entire developer base by building up a better target and also be able to improve my customers' R&D efficiencies.

Thank you. We will now take our next question from the line of Matt Ma of Jefferies. Please ask your question, Matt. Your line is open.

Hello, thank you for taking my question. I have a question on the AI application segments. 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? I calculated it. It seems that Q2 growth is only Chen, and Liu, and we can get this line back to a double digital growth. And then also on the second 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 seems 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?

Okay. I'm sorry, I lost the second question. So is the margin for which segment? You mean the home run robot?

AI application.

Okay, AI application. Got it. So the first one is, thank you for being the question. And so for A applications, right now the growth slowly majorly come from the mix of my offering. So as you might know that in that segment, they covered two offers. So one is B2B, and especially some of the project-based customization services we provide for the key customers. and the second part of that is B2C, so directly services we offer for the consumer, which are the user of the devices. So they activated my web added services through subscription. So the growth major is that we gradually still is growing and we don't want to handle this kind of B2B projects for a long time. So the B2B project based revenue and the growth slower. But actually, the CN grows good. So my CN services recurring revenue growth in Q2 is 22%. We're happy to see that change because we want to have this segment that the B2C will be able to cover more and more portion of this segment because we believe that would be a better value for that. So that's for the first question. And so the second question about the, so you're monitoring the application segment, right? You're asking the margin for... Yeah. Yeah, so for this one, the thing is that the segment we want to have more is based on the count and based on the AI capability. So that will be a higher valued one. So 7% up is the target margin for this segment. So right now we've hit it. So in the future, we'd like to hit between 75 to 80. And the driver for that, the first one that I explained, we don't want to have those kind of project and customization-based services take a larger portion because that's kind of more neighbor-centric and lower margin type of services. We try to lower the entire portion of that. So by increasing more and more cloud-based one B2C side. And on the B2C side, not only enlarge the contribution percentage on revenue, but also in the same time, by always scale the services and be able to improve more and more efficient architecture on the technical side. So we'll be able to figure out a better way to manage the cost and the end-to-end assumptions in the long run. So through that, we'll be able to push the cost-based services margin from 70 into 75.8. I wish my next year.

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, Alfreda, and thank you all once again for joining us today. If you have any further questions, please feel free to contact the IR team of Tuya. Goodbye and see you next quarter.

No participation in today's conference. This does conclude the program. You may now disconnect your lines.