Tuya Inc.

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

Thank you. Hello, everyone. Welcome to our third quarter 2021 earnings call. Joining us today are founders and CEO of Tuya, Mr. Jerry Wong, co-chairman and the president of Tuya, Mr. Leo Chen, and our CFO, Ms. Jessie Liu. You can refer to our third 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 that may present to the State 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 risks, 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 the cautionary statements, risk factors, and details of the company's filing with FDC. The company undertakes no duty to revise or update any forward-looking statements for selected events or circumstances. after the date of this conference call. I will now turn the call to our first speaker today, founder and the CEO of Tuya, Mr. Jerry Wang.

Hello everyone, and thank you for joining us on our third quarter of 2021 earnings conference call. In 2021, the third quarter was a challenging quarter for the industry. Although the global pandemic has brought a number of factors that have affected the quarter's share price, including the addition of Amazon power, marine difficulties, and other problems, our Q3 total revenue has gained about 45% of the share price growth, reaching $8,558 million. In line with our expectations and guidance, the business of 2BIT, which is mainly based on SaaS and others, is less affected by the red light environment. Q3, Q1, Q2, Q3, Q3.

The third quarter of 2021 was a challenging quarter for the industry. Despite the impacts of the global pandemic, which caused volatile sequential growth, Amazon store closures, shipping difficulties, and other global events, we still achieved roughly 45% year-over-year growth in our total revenues, which reached $85.6 million in line with our expectations and guidance. Our SaaS and other business segments, which are mainly to-be services, were less affected by the systemic risk factors and achieved strong year-over-year growth of over 210%. Our overall growth margin remains stable, increasing slightly on a sequential basis to reach 42.6% for the quarter. During the quarter, we leveraged our industry leadership position and empowered our main customer groups to remain competitive amid macro-averse factors such as cheap shortage and supply chain constraints.

Next, we'd like to share our quarterly progress in IoT PaaS, SaaS, and developers. Since September 30, 2021, within the past 12 months, our IoT PaaS business income has expanded by 179%. It has maintained a high position in the cloud PaaS and platform-based industry for the eighth consecutive quarter. Payment customers have contributed more than 100,000 yuan within 12 months. From 285 new customers in the second quarter of 2021 to 306 in the third quarter. As for new customers, Q3, our IoT Park business has acquired more than 1,000 new customers. The total number of customers we serve has increased by 46%. At the same time, the number of brand customers that have been pressurized has increased from more than 3,300 in the last three seasons to more than 3,800.

Well, the trailing 12 months ended September the 30th, 2021. The dollar-based net expansion rate for our IoT past business was 179%, as we continue to maintain one of the leading rates for this metric in the industry for the eighth consecutive quarter since we began tracking this metric. Our number of premium customers, which are defined as customers contributing to over $100,000 in IOT pass revenue during the trailing 12-month period, grew to 306 as of September 30, 2021, from 289 as of June 30, 2021. During the third quarter, we acquired over 1,000 new IoT PaaS customers, growing our IoT PaaS customer count by 46% year over year. Meanwhile, the number of brands on our platform grew to over 3,800 from 3,300 at the end of last quarter.

These brands are among the top three in Europe. One of them is China's Tuya, which has developed a new smart device. A Greek company has chosen Tuya to build a smart product brand. An Indian company has chosen Tuya to use Tuya to complete all kinds of electrical and heat-resistant products. In addition, there is Korea's Taobao Electronics. A Chinese company has chosen Tuya to build all kinds of IoT products. At the same time, we also see a huge potential for growth in some new products, such as a world-famous retail giant's electric tools, original tools, and free products. After the original tool's free brand came to us, the first batch of IOT parts was sold for more than 2 million taels, etc.

Some of these customers include one of the top three weather station specialists in Europe, which developed a smart weather clock through the Tuya platform. A leading Greek lipstick company chose Tuya to build its smart product brand. Additionally, a leading Indian bathing and bathing brand, Sharian, used the Tuya platform to assess interfaces for various electrical and water heating products. Finally, South Korea's top electronic goods sales channel and China's home furnishing leader in particle boards have both chosen to build a full set of private label IoT products on the QVR platform. Notably, we're also seeing great growth potential in several emerging categories. For example, during the quarter, our initial delivery to a world-renowned retail giant's private label brand in electric and gardening tools exceeded 200,000 sets of IOT paths.

In the context of the new year, we want to ensure the continuous expansion of our customers and the scale effect of DeepKaio's main platform. For example, we will analyze and set up the production capacity of the chip supply chain, and we will lock the production capacity in advance. In terms of the product, we will help customers upgrade and change their own chips for the main categories such as power supply and power supply, and effectively deal with the shortage of chips, which will lead to an increase in chip prices. We will continue to explore a way of working together on the entire IoT supply chain.

In the context of this year's cheap shortage, the scale effect of TDR platform is indispensable to ensure the continuous expansion of IoT past customers. For example, we analyze the production capacity of the industrial chain and secure production capacity and events. In terms of our regular product lines, such as electrical engineering and lighting, in response to the chip shortage, we helped customers switch and upgrade their manufacturing processes to effectively hedge against increasing chip prices. Looking ahead, we'll continue to pursue an additional win-win partnership throughout the IoT ecosystem.

为加强涂鸦独特和领先的品类互联互通竞争壁垒,我们继续迭代户外线产品。 通过涂鸦Link SDK软件能力,打通更多行业四季生态模组与涂鸦云平台的一个连接。 to expand the ecosystem, and to introduce more outdoor features, equipment capabilities, and app solutions. For example, HID can be used to create and install G-MOOS apps that are close to the automatic lock. It can also be used to install outdoor vehicles, motor vehicles, and other mobile smart scenes.

To strengthen our unique and leading competitive barriers in cross-device category connectivity, we continue to iterate our outdoor product lines. By leveraging our Tuya Link SDK software capabilities, we connected many of the 4G ecological modules for various industries on our cloud platform, enabling us to further expand our product reach. We also expanded into more outdoor product subcategories and developed more IoT device capabilities and app solutions, such as HID SS control, modularized development capabilities, enabling users to develop apps at will, and adaptability for smart mobile applications for outdoor RVs and mobile vending trucks.

Combined with the open strategy of PaaS, developers can realize individualized, differentiated, and diversified product development on a high-speed basis. Therefore, the SKU supported by us has increased from 410,000 in the second quarter to 500,000 in the third quarter, maintaining a good growth system. The expansion of SKU means that the hardware ecosystem on the Tuya IoT platform is further differentiated. We have built a long-term relationship between the ecosystem of Internet developers

As part of our strategy to create an open path platform, developers can develop personalized, differentiated, and diversified products utilizing the above-mentioned features. As such, we sustained our growth momentum in the number of SKUs empowered by Chuya, reaching roughly 500,000 by the end of the third quarter, compared to 410,000 at the end of the second quarter. The solid growth signifies our continued diversification of the IoT hardware ecosystem on the platform. As we continue to expand the solid foundation towards our long-term vision of building an IoT developer ecosystem to enable everything to be smart. Next, I would like to share our progress in the SaaS and other segments.

Thank you. Thank you. Thank you. Thank you. The 9.3K version of Tuya helps a Chinese telecommunications industry to be the best brand in the world. The company has accurately identified the smart hotel project. GongyuSat provides a unified device management, modular business management and data analysis system for the first innovative model talent rental community in the country. And a powerful third-party system collection capability. A famous Chinese company, Sanye Lighting, is one of our three SaaS customers. It can be used in office, traffic, industrial, retail, and other areas. It can even be used in more than 900 kilometers of mainland America. It can also be used in local nursing homes.

During the third quarter, our commercial SaaS maintained steady growth. For example, one of Russia's largest telecom operators announced a smart home development strategy based on 2S ecosystem and placed an order for our flagship cloud services. In addition, one of Europe's largest insurance groups believes that conducting risk predictions based on IoT devices is a core capability for remaining competitive in the future and that our SaaS capabilities are fully capable of enabling and serving such capacity. In China, the Chuya Hotel SaaS KA version held China's best brand power enterprise in the mattress field, secure a smart hotel project. Chuya's apartment sales provided unified equipment management, modular business management, data analytics dashboard, and powerful third-party system integration capability for the first innovative residential housing project for talent in China. Meanwhile, a well-known public company in China, the leader in the commercial lighting industry, used our commercial lighting SaaS services to implement intelligent lighting solutions in fields such as office, rail transit, industrial, and retail. Notably, over 900 kilometers away from the American continent in Bermuda, we also welcome an enterprise customer using our SaaS services to serve local nursing homes.

In the real-time service section, we currently provide more than 60 real-time service services to help customers in all areas to enhance their IOS products. For example, Tuya Mall allows customers to quickly get into the app and cover all the basic essential functions of the e-commerce system. This is a favorite of the real-time service service brand customers.

As for our value-added services, we currently offer over 60 value-added services supporting customers with an all-rounded enhancement of their IoT products. For example, our Zhuyao Mall is gaining widespread market popularity through enabling brands to quickly embed e-commerce systems with basic essential functions in their apps.

再来说说图样 IoT开发者的一些情况。 Next, I'd like to share some updates on Chuyah IoT developers. During the quarter, we increased our number of registered developers to over 440,000 compared to around 280,000 in the previous quarter.

Q3

China's IoT market has achieved key breakthroughs, such as a comprehensive property management and service operation group led by China, as well as the development platform of Tuya to build its real estate community property, business operation and life services, and other business software. A management area of more than 1 million square meters, China's leading office space to build a smart shared office, has now reached the stage of reshaping.

The industry barriers formed by our developer strategy have also become the key to our development breakthrough in China's IoT market during the quarter. For example, one of China's leading comprehensive property management and services group, which built its real estate community property management, commercial operations and live services application software on our developer platform. Another example is a leading office space service provider in China managing more than 1 million square meters use our platform to scale the expansion of its smart co-working office space business.

In terms of developer products, our Q3 focuses on the hardware product development of edge network class products. In Apple's development, such as China's market IOT, microchip small program SDK, Thank you very much.

In terms of developer products, during the third quarter, we focused on and iterated the Edge Gateway products in hardware product development, the IoT WeChat mini program SDK for the domestic market in app development, and the IoT core in cloud development services products. Overall, we remained determined and committed to our strategies in the third quarter, as we have done so for many years, and achieved rapid growth in the face of multiple macro environmental factors, Moreover, as we continue to create value for customers and society in response to their rigid demands and constantly elevate our unique competitive barriers, we are confident in our long-term prospects.

Finally, I would like to mention that since the fourth quarter, we have implemented two new products, such as the SEO solution and IoT high-end features.

Finally, I would like to share some updates on new products that we have been implementing since the fourth quarter, i.e., our private cloud solution and advanced IoT features.

主要为全球客户提供了覆盖云端,APP端,边缘端的一整套统一的IoT标准, 使得所有基于涂鸦平台开发的设备均能够在长远的未来实现真正优秀的互联互通体验。 The approach of the cloud-based cloud solution is similar to that of ERP systems. It is a new product on the client's cloud. The client's cloud is a cloud-based infrastructure that he bought by himself. It is the same as the standard used in the cloud public cloud system. It has the ability to interact with each other through cloud-based Internet communication with other devices and scenarios with standard development standards. After the loss of customers of leading companies in several different fields, we are now officially pushing the global market to implement a plan to suppress self-sufficiency to meet the needs of customers in a more diversified way.

We provide global customers with one set of unified IoT standards covering the cloud, app, and edge modules so that all devices developed on TRIAL platform can experience excellent interconnection in the long term. Our private cloud solution is similar to the implementation of various ERP systems. This new product deploys the standard IoT business source code on the customer's private cloud, which is an iCloud infrastructure owned by the customer. Utilizing the same standards as our public cloud system, our Project Cloud product is capable of interconnecting with all other smart devices and scenes under 2-yard IoT standards via the cloud. after the trial and landing of several leading enterprise customers in different fields we are now officially launching 2r private cloud solutions in the global market further diversifying our solutions to meet customer demand worldwide

In terms of the value of PaaS, we have strategically launched more than 100 IoT high-end functions, so that when developing a dedicated smart product, customers can select these capabilities in secret. For example, the human lighting of the lighting products, the energy management and statistics of the power supply field, the management of BMS, the management of the power supply, the map capability of the agricultural products, the map capability of the robot equipment, the cloud type capability in the small home electricity field, and so on. App or third-party voice connection control devices are the basic functions of IoT, and the high-level functions of IoT that are constantly used and passed on can not only help customers realize the competitiveness of product opening, but can also help customers to reach the customer base through functional products to the re-created service value of smart products.

In terms of enriching the value of path layer, we strategically upgraded our standard IoT path and began to deliver over 100 advanced IoT features for our customers to select as needed when developing their own smart devices. These features include human-centric lighting for lighting products, energy management, and statistics in the electrical field, BMS charging and discharging management, smart irrigation for agricultural products, localization and mapping capabilities for robot devices, cloud recipe capabilities for home appliances, and many more. Compared with the basic IoT function of connecting and controlling devices through an app or third-party voice and audio devices, constantly refining and improving the advanced IoT features in PaaS can not only help customers enhance their product's differentiated competitiveness, but also help them to hedge against inflation and meet the rigid demand for word-of-mouth products through regenerating service value from functional products to smart products. This concludes my sharing for today. I will now turn the call over to Jessie, our CFO, to review the financial details.

Thank you, Jerry. Before I begin, please note that all amounts are in U.S. dollars and all comparisons are on a year-on-year basis unless otherwise stated. We navigated a challenging third quarter to deliver approximately $85.6 million in total revenue, approaching to the high end of the guidance range that we previously provided. Our IoT path revenue reached $72.6 million, achieving year-over-year growth of 37.4% compared with the first half of 2021. It's a relatively slow year-over-year growth for third-quarter IoT path revenue. It was mainly due to the range of challenges Jerry mentioned earlier. Because we are in a sector of IoT that involved real physical devices, the majority of which are consumer-level devices, Our short-term revenue may be impacted by the downstream fluctuations of the entire consumer electronics industry. We believe that looking at our performance for a longer period of time, such as the sum of the first three quarters of 2021, will provide a better picture of our actual conditional long-term growth. Total revenue for the first three quarters of 2021 was $227.1 million, up 94% year-over-year. And IoT PaaS revenue was $199.3 million, up 105% year-over-year. We totaled 306 premium IoT PaaS customers for the trillion 12 months, ended September 30, 2021. up 87.7% from 163 for the same period ended September 30, 2020. During the third quarter of 2021, premium customers accounted for approximately 89.2% of our IoT PaaS revenue. Number of IoT PaaS customers and new customers we served during each quarter grow sequentially this year. This expanding customer matrix demonstrates our healthy customer structure and the potential for future organic business growth. Our dollar-based net expansion rate for IoT part segment was 179% for the trillion 12 months ended September 30, 2021, flat year over year. We have maintained 160% or higher, which is an excellent performance for eight consecutive quarters since we began to track this matrix. This reflects our ability to expand our platform usage over time and grow revenues from existing customers. Our revenue from SaaS and others increased to 5.6 million, representing 214.2% year-over-year growth. We saw increasing demand from service providers to provide various innovative software-enabled services for their customers, by leveraging the combination of Tuya IoT SaaS and connected by Tuya devices. We also saw a strong need from brands and other players in the industry to largely boost their own smart devices applications and IoT business-related capabilities. Meanwhile, revenue from our non-core smart device distribution business increased by 66% to $7.4 million, primarily due to the increased demand from customers. for the specific smart devices directly sourced from OEMs by the customer. Our growth profit increased by 79.2% to $36.4 million, while growth margin improved to 42.6% from 34.4%. IoT PaaS growth margin continued its increase to 42.9% from 34.9% a year ago, which represents our strong value in the industry chain, 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. Now turning to our operating expenses, please note that we are excluding share-based compensation expenses from our non-GAAP members to provide greater clarity on the trends of our actual operating base expenses so that you can review performance in the same way as our management. During the quarter, our non-GAAP total operating expenses were $69 million, up 120.8% year-over-year, of non-GAAP R&D expenses up 144.8% to $47.1 million. Non-GAAP sales and marketing expenses up 114.6% to $19.7 million. Non-GAAP G&A expenses up 124.6% to $6.7 million. And other operating income net of $4.5 million compared to $0.1 million in the third quarter of 2020. The increase in the non-GAAP total operating expenses were mainly due to the increased in employee-related cost. As of September 30, 2021, we had 3,700 employees representing a year-over-year increase of around 80% and a slight quarter-over-quarter increase of 4%. The sufficient reserve of talent is part of our long-term sustainable development strategy. During the recruiting peak season in the second quarter, we strategically attracted a large number of new employees to join us and support our business growth. And most of the new hires were onboarded and in place during the second quarter to the third quarter. Building the large pool of qualified talents has positioned us well to tackle challenges of a challenging external economy environment, and its current and future impact on workforce and long-term sustainable growth. Going forward, we expect to maintain a workforce size that is appropriate to our business-scale long-term growth strategy, and we will evaluate changes as necessary. We believe maintaining a healthy personnel structure is critical to an enterprise business development operating efficiency. To continue to support and extend our ability to develop IoT solutions and to support our customers' IoT growth, we must continue to invest in R&D, sales, marketing, and G&A. As of September 30, 2021, our R&D personnel accounted for over 72% total employees, which is generally consistent with previous periods. With rapid growth in the company's business scale, the corresponding growth of IMD personnel provides long-term support for various business and product updates and iterations going forward. Likewise, the number of sales and marketing personnel need to match our growth in scale in order for us to deliver sufficient marketing capacity and carry our effective promotions. Meanwhile, G&A personnel also need to expand accordingly to ensure a high operating efficiency of the company as a whole. Our current personnel structure has been tried and proven throughout the rapid growth and expansion of our business and the products over the past few years. As we have grown our personnel within each of these functions, our non-GAAP R&D sales, marketing, and G&A expenses have also increased on a dollar basis. In addition to the employee-related factors, the increasing in non-GAAP sales and marketing expenses in this quarter was mainly due to our participation in a series of worldwide marketing events, such as the U.S. ISC West in July and the Guangzhou International Lighting Exhibition in August this year. The increasing of non-GAAP G&A expenses was mainly due to an increase in a series of professional service fee incurred due to being a public company, such as audit fee, legal council fees, and HR services fees paid for establishing our talent reserve. During the quarter, our other operating incomes were US$4.5 million, primarily due to the receipt of the software value-added tax refund. In the third quarter, our non-GAAP loss from operations was $32.5 million, and our non-GAAP net loss was $31.2 million. Our non-GAAP operating margin was negative 38%, down 19.5% percentage points from negative 18.5% in the same period of 2020. And the non-GAAP net margin was negative 36.5%, down 19.1 percentage points from negative 17% in the same period of 2020. Net cash used in operating activities for the third quarter of 2021 was 46.1 million. or 53.8% of total revenue, compared to 2.2 million net cash used, or 3.6% of revenue in the third quarter of 2020. The increase in net cash used was mainly due to the increase in employee-related expenses and the working capital changes to support ordinary costs of business. As compared with net cash used in operating activities, including a one-off cash inflow from our IPO depository bank related to our IPO for the second quarter. The increase in cash outflow for this quarter was mainly due to the net increase in accounts receivables after an offset by advance from customers, mainly as a result of the more favorable credit limits and the payment terms that we offered to certain customers with good credit history to help them cope with the adverse impacts of the challenging external environment. this year, and the decrease in accounts payables primarily due to in-time cash payment of our purchases just before the end of quarter, according to the payment terms stipulated in contracts. This was ordinary working capital changes that were well controlled under our strict management of cash flow and credit risk. Moving on to the balance sheet, as of September 30, 2021, our cash, cash equivalents, and short-term investments increased to $1,179.6 million. We believe this balance is sufficient to meet our current liquidity and working capital needs. Finally, turning to the share repurchase, during the quarter ended September 30, 2021, we repurchased approximately 2.8 million ADS from the open market for total consideration of approximately $28.6 million pursuant to the share repurchase program, representing around 14.3% of the $200 million authorization announced pursuant to the share repurchase program. The average repurchasing price was over $10 per . This shows our strong confidence in the company's long-term growth prospects. Now turning to Outlook, for the fourth quarter of 2021, we expect total revenue to be in the range of $72 million to $77 million. This forecast only reflects the company's preliminary view on our current market and operational conditions, which are subject to change due to various uncertainties, including, among other things, those related to changes in the global economy, inflations affecting the purchase power of end users. supply chain constraints and disruption due to chip shortage and the limited safe rate capacity, and the recovery of customers impacted by selling policies on online retailers. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

Thank you. To ask a question, you need to press the star 1 on your telephone. And to withdraw a question, press the pound key. As a reminder, 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. Please stand by while we compile the Q&A roster. Your first question comes from the line of Hongjie Li with CICC. Your line is open.

Good morning, Mr. Jesse. Good morning. First of all, congratulations to the company for achieving a strong growth in such a challenging environment. I have two questions. The first is about SaaS business. You can see that the growth rate of 3G is still very strong. I also hope that the management can launch a development plan on SaaS. What are the next key areas of expansion, including what kind of adjustments will be made in terms of organization acquisition? The second question is about domestic business. Will there be any further development plans in the future? In addition to this, will the income ratio be further improved? I will quickly translate it. Thanks, management. Congratulations on the continuous strong growth of SaaS business. Could you give us more color on development plans for SaaS business? Which areas are your top priorities to expand next? Whether there will be organizational structure adjustments? Second question is, could you share some latest thoughts and plans on domestic business? Should we expect an increase on the proportion of the domestic revenue in the future? Thank you, Hongjie.

Yes, overall SaaS and other segment is growing strongly, and we saw a huge demand for IoT upgrades in various business scenarios other than home. With a gradual improvement in the maturity of our SaaS and industry developer products, we can better serve and meet the needs of different business scenarios for IoT, providing business scenarios operators with high efficiency, energy saving, safe, and user experiences and accession. In the third quarter, we delivered SaaS and industry developer products to over 400 customers. Next, I will give an update and the development directions of the segment. Hotel and apartment staff, we have currently covered over 40,000 hotel and apartment rooms in China, connecting approximately 500,000 connected by 2-yard consumer electronics devices in daily use. And a substantial majority of the revenue in this segment was generated in China. With the improvement of our software products and the enrichment of connected by Tuya's hardware ecology for hotel and apartments, we foresee that there is still a considerable room for growth in the future. And also, with the ease of the COVID situation, we received more hotel and apartment SaaS requests from overseas customers. In the future, we will work with our OEM and brand customers together to grow the oversea hotel and apartments segment. For real estate and community staff, we delivered a good result in this segment this year and also in third quarter. Many very well-known Chinese real estate developers and the property management firms purchased real estate and community staff from Tuya in third quarter, including New Hope Service and Excellence Group, both the top real estate groups and property management firms in China. They further applied Tuya's SaaS to residential communities. For example, Wanke, which started cooperating with us since last year, has applied Tuya's real estate SaaS to their residential properties across six cities, including Wuhan, Changsha, Xi'an, et cetera. It will further contribute to the growth of IoT path business as the top consumer electronic brands who have been cooperating with these real estate groups for a long time would deploy 2YAS IoT paths that the electronic devices can be controlled by 2YAS SaaS and provide a better IoT experiences for real estate groups or property management firms. In the future, except for obtaining more SaaS contracts from renowned real estate groups and the property management firms, we will also cooperate with various channels in different cities which own the capability of installing. They can implement residential community staff directly to the huge existing residential communities in China. And also, we will expand from the residential community to industrial parks, school campuses, logistics parks. Those places have similar demands as residential community parks. Our SaaS product for non-residential parks is under development. And we will continue to focus this SaaS business on the broad market in China. And as commercial lighting SaaS business, this is also one of our fast-growing SaaS products this year. And it's energy-saving group control functions and very cool lighting experiences created are very popular among our customers. Currently, more than 1,000 classrooms in China have implemented our commercial lighting SaaS, protecting the eyesight of tens of thousands of students. In the third quarter, another flagship project was an advanced manufacturing factory in China achieved significant energy saving by using more than 500 sets of lighting fixtures connected by Tuya in conjunction with Tuya commercial lighting SaaS. A national airbag inspection center in China also equipped with Tuya commercial lighting cells. Meanwhile, this product is also well received by overseas customers. with approximately 15% of Tuya commercial lighting SAS revenue generated from overseas market in the third quarter. For example, one of the largest sport clubs in the Netherlands with 120 years history has also deployed Tuya commercial lighting SAS in third quarter and equipped with over 100 sets of flat lights connected by Tuya. Our commercial lighting SAS product is relatively comprehensive now, and our team is extending it into building SAS, which can connect HAV system with IoT cloud platform, connecting those powered by Tuya devices through industry edge gateway to make HAV systems smarter and achieve a better energy efficiency. Currently, a number of well-known HAV system companies have expressed their interest and are discussing the cooperation with us. Energy saving and the carbon reduction is a rigid global demand and a major trend. Therefore, commercial lighting and the building SaaS is embracing a big global market. Our residential security SaaS and the self-service SaaS also has good application scenarios. Due to the limited time available, I'm not going to go through them one by one. At last, regarding to the business of industry cloud developers, which has some similarities with SaaS, it's also addressing the IoT demands of various commercial and other scenarios apart from home. The difference is that we provide products such as IoT Core, and the upper software application layer is developed by the ISVs themselves. In our exploration this year, we found that there's a great demand for IoT spaces in China, such as shared offices and all kinds of retail stores. For example, our ISV, My Dream Plus, in Chinese name, Mengxiangjia, has used our Tuya IoT Core, which is our industry cloud developer product, to implement over 150 smart shared offices areas in Beijing and Shenzhen this year. Meanwhile, a number of industrial scenario operators, such as a wastewater treatment company, is cooperating with us and using Tuya IoT Core to connect a cluster of wastewater treatment facilities to their IoT platform on their own cloud. We believe there is a huge existing spaces that require IoT upgrades. We will continue to optimize our industry cloud developer products to help operators in different scenarios obtain IoT upgrades easily. In terms of organizational structure improvement, since the industry cloud developer business and SaaS have many similarities, an underlying IoT core is the same. We have recently merged the two teams to attain higher efficiency in production and research. Because of the huge connected by Tuya hardware ecology accumulated in last seven years, there are thousands of excellent OEMs and brands we can cooperate with for long term, which makes our IoT SaaS business well positioned and is able to meet the needs of customers for IoT devices and IoT upgrades in different kind of scenarios around the world. And then regarding the second question, we'll ask our president and the co-chairman, Leo, to answer.

Okay.

Now, we first established our IoT business in the overseas market and we started our IoT business in China in the first half of 2019. We've made very good progress in the past three years. Right now, the distribution of our business across the global region is becoming more balanced and we'll continue to increase the proportion of our business in China.

To be specific, we will cooperate with brands. Currently, PPT devices are already competing with many sales channels. For example, in China, on various e-commerce platforms, you can find PPT's various consumer e-commerce products.

We now have very active cooperations with different brands, so devices empowered by Tuya have been penetrated into many distribution channels. For example, consumer electronics products that's powered by Tuya can be found on all major e-commerce platforms in China.

Next, we collaborated with a channel company. For example, we collaborated with a lot of domestic and post-market channels. We collaborated with a telecom operator, so that they can sell PPT smart device.

We also cooperate with channels such as the post-home improvement market, telecom operators, etc., so they can sell smart devices that are powered by Tuya.

Third, SaaS and industry-oriented developers have also opened a new field in China. These scenarios, due to the use of Tuya's IoT SaaS or Tuya's IoT Core, have also been used in a large number of PPT products. These companies are well-known and powerful companies. They will ask their leading brands to deploy IoT PaaS. This will have a better effect than talking to our own brands.

thousand industry cloud developer businesses have also coughed out a niche market in china as these scenarios use to your iot sas or iot core they will also adopt a large number of products empowered by tuya as the and the operators of these scenarios many of which are extremely well-known enterprises with very strong negotiation power in the market so they can require top-tier brands that they work with to deploy to your iot path which is very beneficial for us because this coming in effect will be more powerful when dealing with brands by ourselves in terms of customer acquisition.

We will continue to focus on business opportunities in China and consistently increase the percentage of revenue generated in China. Thank you.

Thank you. Your next question comes from the line of Yang Liu with Morgan Stanley. Your line is open.

Thank you for the opportunity to ask a question. I have two questions. First, I would like to ask how to consider the contribution of the new pass of the private cloud deployment to finance. Will this part of the income replace some of the previous IOT pass business? Or is this an opportunity to open a new market? The second question is, I will do the translation. The first question is, could management share about the financial contribution from the newly released IoT path on private cloud? Is it a substitute of existing IoT PaaS addressable market, or is it a completely new addressable market for Tuya? The second question is, as it is approaching the year end, when Tuya discuss with the premium customer or big customer about the next year's demand, what is their outlook? Could you please share about their shipment plan or demand plan? Thank you.

Let me answer the first question. Pass is just starting. We also see a lot of big customers are very interested in it. For example, large telecom operators and large retail channels, including well-known leading brands. For example, there is an electric tool global top 10 brand. The major telecommunications companies in Southeast Asia and Southeast Asia are communicating with us. We will have the cost of deployment, maintenance, and the cost of IOT parts for the deployment of Shiyouyun devices. Because Shiyouyun's deployment of parts has just begun, the expected product and pricing model will be more and more perfect.

Let me take the first question. Now, our private path is still in an early developmental stage. Many large accounts are showing interest, such as large telecom operators, large retail channels, and some well-known leading brands. And a lot of them are in the preliminary communication process with us. For example, a global top 10 brand of electric power tools and some large telecom operators in the South and Southeast Asia. and there will be some private cloud deployment costs maintenance maintenance costs and iot past charges upon deployment of the devices as we are still in the initial stage of the development of the business we are going to continue to improve our potential products and pricing models etc thank you

just want to add on one last point for this question so our private cloud pass is a in addition to our major product the public cloud this is not going to replace the existing market this is to open a new market because there are certain customers especially some large customers just have strong requirement need to place all their data on their own private cloud, which the public cloud product cannot serve. So we believe we offer a private cloud product, which still enables all the devices deployed on the private cloud able to connect to all other brands on our public cloud. It's able to open a new market for us. For next question, which asked, let me take on it. Usually, we communicate with our major customers about their plan for next year at the end of December. At present, customers are closely observing the holiday season sales, shipping prices, and a chance in raw material prices. They are generally now more cautious compared to the same time last year. Brand customers are concerned about the impact of high inflation on purchase power, the chip shortage, shipping delays, and the currently still high safe rate prices, which all happen in parallel. So generally speaking, it is currently a stage of weakness in global consumption. However, a relatively good situation is that from our communications with brands, they have exercised the caution so most of brands inventories are in a healthy condition. Although there are many uncertainties in the macro situation, major accounts have generally expressed the interest to grow and continue to expand new product categories next year. This is also a major advantage for Tuya IoT Cloud Platform. On our cloud platform, we are constantly launching new product support capabilities, allowing reputable customers with channel advantages to easily expand their IoT products. For example, as the epidemic gradually eases, outdoor IoT devices will embrace strong demand. Many of our large accounts have expressed interest in working outdoor IoT devices. So we will continue to help customers to expand by creating more valuable IoT devices.

Thank you, Jessie. Thank you, Liu.

OK. So I think that's it. Go ahead.

Thank you. This is the end of the Q&A session. Due to the time constraints, I'd like to hand the conference back to our management for closing remarks.

Okay, yeah. So before we end the call, I want to make one last clarification. We noticed this morning there's news saying that Tuya missed the market consensus for the loss. We just want to clarify we're contacting the news source to correct. I think the news source met the non-GAAP loss from the market consensus, which is $0.06 per share compared to the GAAP loss. Our non-GAAP loss is also $0.06 per share, so it does match the market consensus. So thank you again for joining our call. If you have any further questions, please feel free to contact us our request through the website. We look forward to speaking with everyone in our next earning course. Hope you have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.