Tuya Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc. second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. We will be hosting a question and answer session after management prepared remarks. And I will now turn the call over to the first speaker of today, Mr. Reg Chai, Investor Relations Associate Director of Tuya. Please go ahead, sir.

Okay, thank you. Hello, everyone. Welcome to our second quarter 2021 earnings call. Joining us today are founders and the CEO of Tuya, Mr. Jerry Wang, and our CFO, Mr. Jesse Liu. You can refer to our second quarter of 2021 financial results on our company's IR website at ir.tuya.com. You can also access a replay of this call when it becomes available in a few hours on our IR website. Before we start, please note that this call may contain forward-looking statements made presumptive to the safe harbor provision for the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the management's current expectations and observations that involve known and unknown risk, uncertainties, and other factors not under the company's control. which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by cautionary statement risk factors and details of the company's filing with SEC. The company undertakes no duty to revise or update any forward-looking statements for the selected events or circumstances after the date of this conference call. I will now turn the call to the first speaker today, founder and CEO of Tuya, Mr. Jerry Wang.

Hello, everyone. Thank you for joining us for our second earnings call since going public earlier this year.

I'm very pleased to report that we are seeing a sustained strong momentum across the entire business as we continue to successfully execute our growth strategy, despite the macro headwinds that are impacting the industry.

The second quarter of 2021 is a strong quarter. Our total revenue growth is 118% to $84.7 million. The main business IoT PaaS and SaaS have achieved more than 160% of the total growth. The company's overall net profit is stable at 12.2%. In the second quarter, the global chip shortage is becoming more and more severe, but thanks to the strong network efficiency business model of the global IoT platform with extensive, extensive, and high-value, and the scale effect of the pre-release advantage, we can continue to provide complete and consistent IoT services and unique solutions for all new and old customers on all platforms. For example, the T-SYNC program that we launched this quarter will help support customers to be more competitive in the area of the infrastructure channel or to deal with the impact of the shortcomings, further consolidate the advantages, or quickly cut into the market head. In addition, this quarter, we seize the opportunity to carry out talent preparation, optimize the efficiency of operation, and remove the impact of equity incentives, and our business loss rate will be further improved.

QEI delivered robust results in the second quarter, as our total revenues grew by 118% year-over-year to $84.7 million. Revenues for our primary IOC PaaS business and our SaaS business both achieved over 160% year-over-year growth, and our gross margin saw a steady quarter-over-quarter increase to 42.2%. during the second quarter the global chip shortage became more severe but thanks to our highly scalable and valuable global iot platform the strong network effects of our business model and the economy of scale we have built as a first mover in our industry we were able to continue providing comprehensive and cost-effective iot services and unique solutions such as our IoT microcontroller alternative solution to both our existing and new customers on the IoT platform. In doing so, we enhance their competitiveness in their respective industries, support them in dealing with the chip shortage, and further enable them to quickly enter the market and grow into IoT leaders. In addition, during the quarter, we seized the opportunity to reserve talent and optimize the operating efficiency. Our operating margin, excluding the impact of share-based compensation costs, further improved year-on-year. Next, I would like to share some updates in terms of customer acquisition, product development, and our general progress.

As one of the leading platform technology subsidiaries in the world, the success of our customers' assistance is our best affirmation and encouragement. Within the past 12 months of June 30, 2021, our IoT PaaS business income expansion rate, DBNER, has reached 211%, which is the average level of the platform company industry in the seven consecutive seasons since we finalized the benchmark. As a leading global IoT platform in the business of empowering enterprise customers with technology, helping our customers achieve success is what motivates and drives us every day.

For the trailing 12 months ended June the 30th, 2021, the dollar-based net expansion rate for our IoT past business was 211%, exceeding the industry average for the seventh consecutive quarter since we began tracking this metric. The number of premium customers, which are defined as customers contributing over US$100,000 in IoT PaaS revenue during the trailing 12-month period, grew to 285 as of June 30, 2021, from 216 as of March 31, 2021. 新客户方面,本季度我们的IoT PaaS业务获取了超过700家新客户。

The number of customers we serve has increased by 113%. At the same time, the number of brand customers with low-pressure has increased from more than 3,000 in the last three seasons to more than 3,300. We are delighted to see that these customers from all over the world, from brands, channels, and services, play a unique role in IoT, product and market. And thanks to the low-pressure platform, these new, smart, During the quarter, we acquired over 700 new IoT PaaS customers, growing our IoT PaaS customer count by nearly 113% year over year.

Meanwhile, the number of brands on our platform grew to over 3,300 from approximately 3,000 at the end of the first quarter. It's very exciting for us to see our customers from various industries all over the world flex their creativity in IoT product and market development. Empowered by the Tuya platform, these brands, channels, service providers, and more are able to see their innovative idea come to life in the form of smart devices and software services, serving a vast and diverse number of use cases and needs for various industries.

例如在户外出行领域,全球四大轮胎品牌之一, 固特意在的欧洲总部选择 Tuya的IoT Pass, 或能他们的 Thank you very much. 在家具领域,一家同时拥有线下上千家门店及线上B2B平台的国际家具集团, 在涂鸦平台上开发智能升降桌椅,成为涂鸦平台赋能的第一款家具产品。 一家从事美容美妆家庭护理业务的全球知名欧洲百年早店品牌, 通过涂鸦平台打造智能美妆镜,智能洗手机等一系列产品。

For example, Goodyear Europe, one of the top four tire brands in the world, chose our IoT Pass services to empower their scooter products and featured our Powered by Tria logo, or as we like to call it, the PBT logo, on its products to showcase the brand's influence of our IoT Pass engaging ecosystem. In the wine industry, the world's most authoritative wine storage organization in the wine cellar industry joined our platform to explore the use of smart cold storage for wine. In the home furnishing industry, an international furniture group with thousands of offline stores and an online B2B platform developed smart height adjustable tables and chairs on our platform. These products are the first pieces of furniture to be powered by Chouya. In addition, a world-renowned Centrio European beauty and personal care brand also chose Tuya's platform to develop smart makeup mirrors, soap dispensers, and more. Finally, an overseas cleaning product business owned by a well-known public home appliance group in China chose Tuya to be its first IoT platform provider.

We have also seen many channels that are rich in services and have extensive consumer experience. They are working hard to further provide better product experience to their customers through the free brand of Powered by Tuya. For example, a large-scale online channel that is favored by the capital market, Lamei. A home and home retail channel that covers hundreds of stores in Hong Kong and Macao, JHC Japan City. We have also seen many highly experienced retail channels working towards providing their customers with better product experiences through their private label products powered by Chuiya.

Some of these channels include one of the largest local online channels in Latin America, favored by the capital market. JHC, which is a home appliance and furnishing retail channel listed on the Hong Kong Stock Exchange with hundreds of stores in Hong Kong and Macau. One of the most popular shopping apps and e-commerce platform in Asia. And Minasol, a domestic global fast fashion retail channel from China, etc., etc.,

In the second quarter, we also helped dozens of impoverished brands to enter the global sales channel and gain cooperation support.

During the second quarter, we leveraged our IoT brand ecosystem and strong network effects to help dozens of customers establish new channels and obtain exposures through the resources of a number of global retail giants.

At the same time as acquiring new customers from various industries, we are also supporting the supply of more new products. From the SKU that supports the supply, we have increased from 310,000 in the first quarter to 410,000 in the second quarter. In addition to acquiring new customers in various industries, we also continue to empower entirely new product categories. In the second quarter, the SKUs empowered by Chuya reached 410,000 compared to 310,000 at the end of the first quarter.

We further expanded our PBT product line capabilities and continue to help customers enter market with unprecedented opportunities.

In the second quarter, we implemented a series of professional lighting products that are well-known to everyone. We used agricultural products to cover multi-products, such as urban, agricultural, and industrial areas.

For our well-established lighting product line, we launched and supported a series of professional lighting products during the quarter that cover various smart agricultural, commercial, and industrial use cases. Taking agricultural applications as an example, we began supporting various IoT plant lighting and cultivation management capabilities which have broad prospects for planting and cultivation and greenhouses.

机器人产品线中,我们进一步迭代了早期机器人所需的IoT能力, 丰富APP交互方案及传输通道能力,并加强各类开发者产品与服务。

In the robotics product line, we upgraded the IoT capabilities needed for robotic sweepers, enriched app interaction and IoT transmission capabilities, and improved our various development products and services across all our product categories.

家电类产品中如智能胶囊咖啡机,具备更多type能力的空气大锅,食物探针等系列是市场的新宠。

During the quarter, we gained traction with home appliance brands, including companies developing smart capsule coffee machines, air fryers with smart recipe capabilities, and food probes. Utilizing our knowledge of the industry, we optimize compatibility and interfaces to enable our customers to develop products that are on par with the leading international kitchen appliance brands. 同類產品中,我們持續快速響應自2020年來持續大賣的一個寵物市場。

We have updated the new products, such as pet toys, pet toys, pet toys, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets, pets,

We continue to observe and react quickly to changes in the booming smart pet product market, which has been growing rapidly since 2020. We introduce innovative products such as smart pet food containers, leashes, and more. We continue to maintain a quarterly iteration rate of more than five versions for existing pet toys and food dispensers. 接下来我再给大家讲讲下次业务的一些进展。 Next, I would like to share some updates on our SaaS segment.

在第二季度,涂鸦发布的自助设备SaaS 以自助共享办公无人健身房作为试点 在北京厦门等地实现商业模板的落地

In the second quarter, we launched our self-service equipment SaaS. Our pilot projects include self-service co-working spaces and unmanned gyms, which we are operating in Beijing, Xiamen, and several other cities to test scalable commercial models.

社区SaaS在第二季度围绕未来社区顶层设计和社区治理需求, 完成了社区SaaS核心模块的整体优化升级,实现产品应用的组件化, In the second quarter, a number of real estate groups in mainland China and Hong Kong, such as Hong Kong's third company Riyang Group and Rijing Group, started cooperating with Tuya, which led to Tuya's rich hardware ecosystem and platform software capabilities. The owners' recognition and choice of Tuya has led to some hardware head companies that do not use Tuya platforms in any field, voluntarily opening up and sharing resources with Tuya, and thus being able to enter the real estate community project. This has shown a strong network effect in our business model.

While smart community SaaS segment, we completed upgrades and optimization for the core modules of our product around the top floor designs and community management needs of the future communities. This allowed us to achieve componentization of IoT capabilities for various things across smart communities. During the quarter, several leading real estate groups in mainland China and Hong Kong, such as the Hong Kong-listed Soyon Land Group and Lijian Group, initiated partnership with us. Thanks to our abundant hardware ecology and the software capabilities of our IoT platform, recognition and partnerships with many of these real estate companies have resulted in many leading hardware companies in various verticals sharing their resources with us to participate in real estate community projects. This is one of many examples that showcases the strong network effects of our business model.

As a hotel apartment SaaS, in the second quarter, we continued to improve the basic capabilities of enriching guest rooms and public areas. At the same time, we started promoting the overseas version, and signed a number of overseas hotel apartment head services and customers. In order to fully promote the future, we prepared and prepared. In the second quarter, the demand rate of hotel apartment SaaS is still at about 90%, and we will strive to maintain the same level in the future.

For our smart hotel and apartment staff solution, we continue to optimize the basic capabilities of our guest room and public area solutions in the second quarter. Meanwhile, we started to promote the international version, signing several leading hotel and apartment service providers overseas, paving the way for subsequent comprehensive marketing initiatives. In the second quarter, the renewal rate of our hotel and apartment staff services remained at around 90%. and we remain committed to maintaining a similar level of renewals going forward.

Based on powerful IoT capabilities, our smart SaaS business components

It complements our smart device ecology, advancing with our IoT past business side by side. Utilizing these synergies, our IoT business continues its fast growth and is positively signaling to the market on how to effectively serve the inelastic needs of the IoT era.

接下来我们再来说说本季度涂鸦IoT开发平台的一些情况。

Next, let's talk about our IoT development platform.

主要IoT平台的独特设计具有极大的延展性。 我们致力于将不同的业务、场景能力结合成为一个个组件, 使得平台上的开发者能够各取所需的进行创造, 或将已有的能力附用,拓展至其所在的新的领域。 每一项能力我们都做好了未来进行PaaS化的打算。 As a result, our number of developers increased from 320,000 at the end of the first quarter to more than 380,000 at the end of the second quarter. Just like the IoT development platform used by the new residential service provider Becker, which is driven by technology, we are working together to explore the new experience of smart residents. A top smart kitchen service provider of a global top power supply brand has developed all kinds of cloud types on the print platform. We will continue to deepen our understanding of each industry, do our best, and carefully approach new areas in a platform-based way to better serve our global developers.

The unique design of our Chuiya IoT platform enables enormous scalability. We are committed to decoupling our many different operational features and use cases into individual components so that developers on our platform can mix and match to meet their unique and evolving needs by extracting and recomposing these components. Each existing feature can be reused and expanded into new development areas, and we have planned their integration into our path solutions in the future. As a result, the number of our developers increased to over 380,000 at the end of the second quarter from 320,000 at the end of the first quarter. For example, technology-driven residential service provider Beike uses Tuya IoT development platform to explore innovative smart living experiences. In addition, one of the top smart kitchen platform service providers serving the world's leading kitchen appliance brands are developing various recipes on our platform. Another leader in the professional equipment management industry has become a developer on our platform, designing and developing a smart professional equipment storage box and building a complete set of smart device management solutions. There are countless cases like these. As we continue to deepen our understanding of each industry and upgrade our respective products, we'll be able to also make prudent decisions on entering new path solution segments at the appropriate times to better serve developers around the world. 最後,塗鴉始終將安全合規視為公司最高優先級。

to build a comprehensive protection system that covers the safety, protection, and security of the three entities. In addition, we are actively cooperating with the top security companies, audit agencies, and law firms around the world to verify the safety and compliance capabilities of the third-party independent audit.

Finally, QIA has always regarded data security and compliance as its top priority and has invested heavily in this respect. We've built an all-rounded guarantee system to cover the data trinity of security defense, privacy protection, and system audits. In addition, we are actively cooperating with the world's top security assessment companies, audit institutions, and law firms in the industry to verify and consolidate our security compliance capabilities through independent testing and audits by third parties.

在第二季度,我们通过了全球物联网安全行业认证机构IOFT Alliance的评估并成为了会员成员。 IOSD Alliance consists of more than 200 industry-leading cloud services, service providers, standard design associations, and regulatory laboratories. This is to facilitate the best security practice, and the board members include Amazon, Google, Honeywell, etc. In the third quarter, we have started a new, deeper, more comprehensive security testing program, and invited a series of independent third-party institutions with a wide range of professional ethics around the world. They will provide us with professional security assessments and independent security tests,

In the second quarter, we passed the assessment for IoT security certification from IOXT Alliance and were initiated as a member. IOXT Alliance is composed of over 200 industry-leading operators, service providers, standard groups, and compliance labs, etc., practices. Its boards include leading companies like Amazon, Google, and Honeywell. In the coming third quarter, we're launching a new round of deeper and more authoritative security testing with several independent third-party firms with long-standing reputations for professional ethics in the industry worldwide. These firms will provide us with professional security assessment services and independent information security penetration tests These services will help us to ensure our platform always upholds the highest security standards and further verify the secure localization of data.

In 2021, our number of employees grew from 2,900 at the end of the first quarter to more than 3,500. Among them, the development team is still more than 70%. To establish a foundation for future continuous high-speed growth.

Data security and product R&D go hand in hand. To ensure continued strategic focus in these areas, we continue to make investments in our workforce. As of June 30, 2021, our employee count had increased to over 3,500 from 2,900 as of March 31, 2021. R&D staff maintain over 70%, serving as a solid foundation for our sustained future growth.

That concludes my sharing of the second quarter.

I will now turn the call over to Jessie of CFO to review the financial details.

Thank you, Jerry. Before I begin, please note that all amounts in U.S. dollars and all comparisons on a year-over-year basis, unless otherwise stated, I'm pleased to report that our total revenue for the second quarter bit straight consensus, estimated by approximately 5%. The robust operational and financial growth we achieved in the second quarter was mainly driven by the solid growth of our IoT path revenue, which increased 163.9% to 76.9 million. In particular, notable growth in business from both existing and new customers, combined with our rapid iteration of products and technologies led to our success during the quarter. We had about 230 brand customers that increased their IoT PaaS orders by more than five times their orders in the same period last year. As for our products, more and more of our IoT PaaS product categories are achieving meaningful growth and being recognized by major leaders in the global IoT market. For example, deployment of smart agricultural products empowered by our IoT path grew far more than tenfold, and deployment of energy-saving products grew over eight times. We also saw strong growth in deployments of new product lines we released in the first quarter, including outdoor transportation, low-power consumption series, Our revenue from SaaS and others increased to $3.4 million, representing a 175% of year-over-year growth. We saw increasing demand from service providers eager to deliver better software-enabled services. For smart things, there are these combination of two-year SaaS and PVT devices. Meanwhile, revenue from our non-core business of smart device distribution decreased by 48.1% to $4.4 million, affected by customer purchase patterns and business demands. Our gross profit increased by 203.9% to $35.7 million, while growth margin improved to 42.2% from 30.3% same period last year. IoT PaaS growth margin continued its increase to 42.4% from 32.7% a year ago, representing the 10th consecutive quarter of improvement. Primarily due to our increased economies of scale, improved efficiency for IoT PaaS deployment achieved through effective R&D and expansion into higher margin IoT PaaS product lines. We totaled 285 premium IoT PaaS customers for the trailing 12 months ended June 30, 2021, up 114.3% from 133 for the same period ended June 30, 2020. Among these incremental premium customers, more than 50% were engaged in small and big alliances, kitchen appliances, and the census business. During the second quarter of 2021, premium customers accounted for approximately 86.6% of our IoT PaaS revenue. Dollar-based net expansion rates for our IoT PaaS segment improved to 211% for the trillion 12 months ended June 30, 2021, up from 160% as of June 30, This marks the seventh consecutive quarter we have maintained 160% or higher ever since we began checking this metric. This reflects our strong ability to expand our platform usage over time and to grow revenues from existing customers. Now turning to our operating expenses. Please note that we are excluding share-based compensation from our non-GAAP numbers to provide greater clarity on the trends of our actual operating-based expenses so that you can review performance in the same way as our management. During the quarter, non-GAAP R&D expenses increased by 153.2% to $39.7 million, primarily as a result of increase in R&D personnel. As of June 30, 2021, the company had about 2,570 R&D employees, up approximately 120% year-over-year. As a percentage of total revenue, non-GAAP R&D expenses increased to 46.9% from 40.4% of a year ago, primarily because our well-executed talent acquisition strategy achieved a faster expansion in our R&D team relative to our revenue growth during the quarter. The second quarter is usually peak season for talent recruitment, while most of last year's HR activities, including interviews, hiring, were suspended due to COVID-19. Continued investment in IMD talent is critical to our growth strategy and allows us to expand our product coverage, enhance our service offerings, and widen our lead in the IoT industry. Non-GAAP sales and marketing expenses increased by 146.6% to $17.9 million this year. mainly due to increases in employee-related cost and marketing spending. Our marketing spending during the quarter includes cost related to holding events like Tuya Bluetooth Developer Conference, a summit which released Tuya's all-in Bluetooth development capability roadmap to enable Bluetooth developers to get ahead of the game. It also includes our Tuya Outdoor Conference, which published full-scene IoT capabilities for outdoor travel and transportation devices. Sales and marketing expense also include costs for business development-related travel and meeting with customers as the world reopened to strengthen good faith cooperation and well-trusted relationships with our customers. As a percentage of total revenue, non-GAAP sales and marketing expenses increased to 21.1% from 18.7% a year ago. Non-GAAP G&A expenses increased by 111.7% to $5.7 million, mostly due to team expansion and increased costs related to being a public company. We have hired and will continue to hire more professional and experienced employees, consultants, and service providers to further improve our internal management. As a percentage of revenue, non-GAAP G&A expenses decreased to 6.8% from 7% a year ago. In the second quarter, our non-GAAP loss from operations was $26.5 million while our non-GAAP net loss was $23.1 million. Our non-GAAP operating margin was negative 31.3%, narrowing 4.4 percentage points from negative 35.7% in the same period of 2020. And the non-GAAP net margin was negative 27.3%, narrowing 6.3 percentage points from negative 33.6% in the same period of 2020. Net cash generated from operating activities for the second quarter of 2021 was $5.8 million, or 6.9% of revenue. Excluding a one-off cash inflow from our IPO depository bank related to our IPO, $7.2 million in net cash was used for operating activities in the second quarter, or negative 8.6% of our revenue, compared to $7.0 million net cash used, or negative 18.1% of revenue in the second quarter of 2020. The improvement in net cash used in operating activities as a percentage of revenue and the narrowing of our operating and net margin was mainly due to the increase in our operating leverage as we achieved very strong growth while maintaining healthy margins, partially offset by the increasing expenses. Moving on to the balance sheet, as of June 30, 2021, our cash cash equivalents and the short-term investments increased to $1,256.1 million from $179.8 million as of December 31st, 2020, primarily due to the net proceeds obtained from our successful listing on the New York Stock Exchange and the proceeds received from the exercise of over by the underwriters in April this year. We believe this balance is sufficient to meet our current liquidity and working capital needs while further enabling us to strengthen our business. Now turning to outlook for the third quarter of 2021, we expect total revenues to be in the range of $83 to $86 million. This forecast reflects our current and the preliminary views on the market and our operating conditions, which are subject to change. Although our customers face a series of challenges, including Amazon's strict execution of seller policy, rising raw material prices, and a shortage of semiconductor components, we continue to support our customers to tide over the near-term difficulties by powerful capabilities of IoT platform and innovations. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to move yourself from the question queue, you may press star followed by two. When asking the question, please state your question in Chinese first, then immediately repeat your question in English for the convenience of everyone in the call. Anyone who has a question... May press star followed by one at this time. One moment for the first question, please. First question comes from the line of Yang Liu with Morgan Stanley. Please go ahead.

Thank you very much for the opportunity. First of all, congratulations to the very strong 2G team. I have two questions here. The first question is, please update the company about the progress of the MCU chip replacement project. Will it have a relatively positive impact on the rest of the model industry? The second question is, I would like to ask more about Amazon's treatment of some cross-border e-commerce. I will do a translation. The first question is, could management give us more color on the MCU chipset replacement plan? And do you think it will have positive impact on the growth margin going forward? And the second question, What is the impact of Amazon banning cross-border e-commerce stores, and what is the impact for 2F customers, and whether it will be a sustainable thing or it's a relatively short-term impact? Thank you.

Okay. Thank you, Liu Yang. So for the first question, under our plan, two out of nine major product categories are all eligible for the MCU chipset replacement plan. We started this early this year to help our customers to overcome the difficulties of semiconductor shortage. So at present, our clients in the small home appliances sector are benefiting from this plan the most. A majority of clients who have a need for this plan will likely choose this plan. I will introduce more chip replacement plans in the future. And our main mandate for chip manufacturers is to further design chips according to our requirements and the computing power needs. So for example, we plan to replace those chips that currently cannot handle a certain degree of high precision ADC digital to analog conversion and also multiplex. motor-driven equipment. Part of our strategy is to help our customers to succeed. So professional chipset replacements are similar to the industry applications in terms of being more vertically focused, reducing customers' all-in cost, improving value proposition, and solving the problem of chip shortages. Our growth margin will remain similar. Although the cost of chips will increase slightly, our product price will also increase significantly. to pass this to the customer. So regarding the second question about the impacts of Amazon's banning cross-border e-commerce stores. So first, this was an unexpected event happened in the last couple of months. Majority of our customers sell their IoT products through offline retail channels. We roughly estimate 80% of Powered by Tuya IoT devices were sold through offline retail channel. So there are limited number of e-commerce customers who are impacted by this unexpected event. Our e-commerce customers all have deep experiences in product development, supply chain, and the e-commerce operation, and they are very resilient. For a limited number of e-commerce customers impacted, they are very actively responding to the changes. They are opening new stores in Amazon and also opening stores in other online platforms, setting up their own independent e-commerce store and also, through our help, explore offline retail channels. So this infected Q3 result in a limited scale and was already reflected in our Q3 revenue guidance. From a seasonality perspective, July and August usually are off-season for consumer electronics OEMs. And the peak season runs from September to December for year-end holiday sales and also making up of long vacation of Chinese New Year. So we believe our impacted e-commerce customers will have a decent recovery in Q4. And this is a one-time event. We remain confident for our full year result. Thank you. So we can take questions from the second area.

The next question comes from the line of Emerson Chan with Bank of America Security.

Please go ahead. Hi, thank you, management. I just have one quick question. My question is regarding our ruffling mix by quarter category and by region in second quarter. Thank you.

Sure. Thanks, Emerson. So in terms of revenue by regions, our second quarter is not very different from the previous quarters we discussed. So North America contributed to about 30 percent. Europe contributed to about one-third. And the remaining of the world, China and other places, contributed to the rest. We see All the regions showing strong growth and demand for IoT device and also IoT SaaS service. And some regions show very surprisingly strong need. For example, in Q2 in Latin America, we see a big market opportunity. For example, Mexico, the revenue contribution from Mexico increased significantly. four times in Q2 this year. And also, we saw very strong growth in British, German, Netherlands. So we will continue the region diversification, and we'll continue to grow revenue from the globe. In terms of the product mix, I Let me get into the IoT path part. I think that's usually the question about. So last quarter during the conference call, we disclosed the revenue contribution from lighting and the electrical products was close to 60%. In Q2, it dropped a little bit to around 56%, 57%. And the revenue contribution from appliance, which including big, small appliance, the kitchen appliance, the paper appliance, It's contributing over 15% increase a lot. We saw very strong growth from appliance products, for example, pet products. to continuous revenue contribution growth from appliance. And also the contribution from sensors and the security products contribute to about 15% of the total IoT PaaS revenue. For the rest products, it's usually the new products we are focused on including like outdoors. energy-related products, entertainment products, agricultural products, all those we combined into the segment we call others or new segments that also contribute to close to 15%. So in the past few years, we do see a great trending that the revenue contribution from lighting and electronic products continue to drop. The very strong growth from appliance, from sensor and security products and other new segments.

Thank you.

As a reminder, if you'd like to ask a question, please press star followed by one on your telephone. The next question comes from the line of Kai Qian with the ICC. Please go ahead.

Hello, thank you. First of all, I would like to congratulate the company for achieving such a good performance in the second quarter. I have three questions. The first question is about our PAS business. Now we see which categories grow faster, and which new categories have a chance to explode in the future. This is the first question. The second question is about the large customers who have more acquisitions and acquisitions on the platform. What concerns do we see, such as the industry or others? So I have the three questions. The first one, as present, which categories in L3Path business are growth options? And which new categories have the opportunity to break off? And the second one, What are the commodities of the large customers with high and additional purchase on the platform? The third one, please give more color on the . Thank you.

OK. Thank you, . For the first question, in the relatively large-scale product categories, the growth rate for appliance