1Q24 Earnings Strong; Record Non-GAAP Net Margin of 20% Shows Business Model Is Working
Tuya reported a strong 1Q24, with revenue of $61.7 million, up 30% Y/Y (consensus was for ~15% Y/Y growth). Gross margin continued to grow, up 360 bps Y/Y to 47.8% (a company record). IoT PaaS revenue grew 36% Y/Y to $45.6 million. Its 590-bp Y/Y margin improvement was significant to corporate margin growth. Cash and equivalents grew to $998.8 million, up $14.5 million in 1Q24, and the company has no debt. Founder and CEO Jerry Wang sounded upbeat and highlighted the strong financial quarter, while reiterating how innovation, including fully embracing generative AI in all its products, is key to the company’s strategy. Wang stated that generative AI offers “the potential to dramatically enhance user interaction experiences and explore new smart business opportunities.” Non-GAAP adjusted net profit was $12.3 million, 19.9% of revenue, a company first in the tough 1Q. GAAP operating expenses totaled $45.9 million, down from $53.4 million even though revenue was up significantly Y/Y. Stock comp was the only adjustment from GAAP to non-GAAP. The GAAP net loss per diluted share was $0.01. CFO Jessie Liu mentioned that the company saw robust demand growth across all categories and the strength of 1Q has made management more confident in 2024 revenue. Liu also expects operating expenses to remain relatively flat for the rest of 2024. Overseas markets represented 83% of revenue and were balanced across all major regions. Both the Asia-Pacific region (ex-China) and the Latin American region are growing rapidly. Europe continues to be the company’s largest revenue generator at approximately one-third of the total. There the company leveraged the French government’s energy subsidy policy to drive sales of smart temperature devices. It seems the world is recognizing the value of Tuya’s AI-driven smart solutions more and more. On an EV/S basis, which takes into account the company’s large cash position, Tuya trades at an 87% discount to comps, 1.7x versus 12.6x. Tuya’s comparables include core infrastructure software companies, high-growth infrastructure leaders, and Chinese software companies. Its comps have a median forward P/S of 13.5x, while Tuya trades at 5.4x, a 60% discount. Tuya is the world’s first IoT cloud development platform, according to CIC, with substantial first-mover advantages in the global IoT PaaS space. Through its IoT cloud development platform, it delivers a variety of offerings. The company’s IoT PaaS enables brands, OEMs, and developers to develop, launch, manage and monetize smart devices and services. You can find our reports on Tuya on the WTR website here.
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