Tuya Inc. (NYSE:TUYA) Q3 2022 Results Conference Call November 9, 2022 7:30 PM ET
Company Participants
Reg Chai – Capital Market Associate Director
Jerry Wang – Founder, CEO and Director
Jessie Liu – Senior VP, CFO and Director
Conference Call Participants
Yang Liu – Morgan Stanley
John Wang – Goldman Sachs
Mingran Li – CICC
Operator
Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Tuya’s Inc. Third Quarter 2022 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’s prepared remarks.
I will now turn the call over to the first speaker today, Mr. Reg Chai, Capital Market Associate Director of Tuya. Please go ahead, sir.
Reg Chai
Thank you. Hello, everyone. Welcome to our third quarter 2022 earnings call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang; and our CFO, Ms. Jessie Liu. The third quarter 2022 financial results and webcast of this conference call are available at ir.tuya.com. A replay of this call will also be available on our website in a few hours.
Before we continue, I refer you to our safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements.
With that, I will now turn the call to our Founder and CEO, Mr. Jerry Wang. Jerry will deliver his remarks in Chinese, which will be followed by a corresponding English translation.
Jerry Wang
Hello, everyone. Thank you for joining our third quarter 2022 earnings call. I will start today’s call with an overview of our financial and operating performance.
Our third quarter results reflect both the challenges we face and the opportunities we’re focusing on. In the third quarter, global inflation continued to increase and remained elevated. By the end of September, the U.S. CPI reached 8.2%, while the Europe CPI hit a new record 10% in Europe. Meanwhile, the intensifying Russia-Ukraine war, geopolitical unrest, and the consequent regional turmoil created extensive impacts on the global energy and consumer sectors. As such, the overall business environment is still full of challenges and uncertainties.
As you all know, the consumer discretionary sector is undergoing a severe inventory correction. Major online and offline retail channels, including Walmart, Best Buy, and Amazon are reducing their inventory to appropriate levels, especially in electronics and household products. As the year has progressed, many consumer electronics brands maintained their conservative approach towards their inventory management and procurement strategies in the first three quarters of the year in response to the uncertainties in the markets out. The contraction of the downstream…
As part of our efforts to navigate the down cycle, we are actively channeling our resources, refine our customer base structure, invest into new promising product lines, and optimize operating costs and expenses. We believe these efforts will enable us to emerge with an improved customer base and a more efficient operational structure when the macro environment recovers.
Third quarter total revenue was $45 million, among which our SaaS and others revenue grew by 60% year-over-year to $8.9 million. Our gross profit for the third quarter was $19.6 million and the overall gross margin was 43.6%, maintaining steady amid a challenging environment. Most importantly, we reduced our non-GAAP operating expenses by 37.1% year-over-year to $43.4 million and narrowed our non-GAAP net losses by 49% to $15.9 million as we continued to streamline our operations.
Now, let me elaborate on each of these areas. First, the number of our IoT PaaS premium customer was 265 in the third quarter, remaining stable compared to 267 in the second quarter. Looking closer, we had over 30 customers that dropped below the premium customer revenue contribution threshold. This is largely offset by more than 30 others that qualified for premium customer in the third quarter. The addition of this new premium customer is a positive sign that despite the difficult environment, we’re still well positioned to leverage our premium IoT PaaS offerings to continue the expansion of our customer base and navigate the challenging environment.
The total number of customer we served in the third quarter was 3,100, down 24% sequentially and 31% year-over-year from 4,500 in the same period last year. Let me explain what led to the changes in our customer number. First, the current environment forced the downstream brands and channels to tighten their budgets and reduce orders. Many of our small- and medium-sized customers on our platform had to suspend their business and stay dormant during the market downturn. Moreover, some of our long-term customers with small operations and less business resiliency that were experimenting with IoT either reduced their business or transitioned away from IoT.
The second factor is the consistent execution of our key account strategy since the beginning of the year. With our focus now on efficiency, we upgraded our customer service systems and reformed our service team to utilize the trilateral collaboration to provide target-based PaaS to both new and existing customers. For our long tail customers and those that suspended their business, we integrated them into our platform operation model to continue serving them through our operation teams while matching them with the appropriate resources.
With this strategy, we further refined the structure and improved quality of all these new customers we acquired in the quarter. In the IoT PaaS segment, the number of customers with the initial business scale, which we define as customers spending over $20,000 on our IoT PaaS solution, has exceeded the level of the same period last year. Notably, a Spanish project company contributed nearly $1 million to our revenue in the third quarter. These kinds of customers with initial business scale collectively contributed to almost 64% of our revenues from new customers compared to less than 50% in the same period last year. The refined structuring of our customer base further illustrated the effectiveness of our improved and more focused customer acquisition strategies and will enable us to further improve our efficiency.
In the third quarter, as the world reopened in the wake after pandemic, our senior management and operation teams visited our customers across the globe from Hong Kong, Singapore, and other Asian and Southeast Asian regions to North America and Europe. Through our visits, we forged new partnerships with many regional leading brand customers and strengthened our long-standing relationships with the existing customers by discussing their needs. I want to highlight a few examples of IoT PaaS customer updates.
The robot vacuum cleaner brands of the leading home cleaner manufacturer in the U.S. with over 100 years of history has confirmed a partnership with us on smart home appliances. One of the largest importers in Germany and Europe with products ranging from battery packs and power tools to household appliances and personal healthcare also became our customer.
One of Mexico’s largest consumer electronics and office supplies retail channels is building its own smart home ecosystem including pets, lighting and electrician products based on our platform. [indiscernible] largest manufacturer of device drivers became our customer in the third quarter. Our collaboration will focus on products including gateway system and device driver products where we expect to complete the intelligent transformation of the local driver production in the fourth quarter.
We’ve also expanded our presence in the Indian regions during the quarter. We have acquired a customer including Chinese-listed companies with operations in India and the Indian business divisions of the telecom groups including Lava, a leading local mobile consumer electronics brand and Kent RO system, which has 40% of the market share of the purifier devices in India [indiscernible]. These customers can now leverage our value-added services through the Tuya platform to execute their smart device product strategies.
We also achieved solid progress in Europe. At the recent IFA, many of our key account brands and channel customers such as Calex, Netis, [indiscernible] shared their new product strategies, market insights, key product selections and future strategy updates onsite. As our customers, we saw many dominant home appliances brands in Europe or across the world such as Italy’s well-known appliances brand Candy, Germany’s well-known consumer electronics brand Hama, a leading home and kitchen appliances brand in Spain, Taurus Group, and a leading home appliance brand in Greece, MORRIS also showcased the wide range of products they developed through partnership with us.
These products included home appliances such as coffee machines, floor sweepers, oil diffusers, portable air conditioners and outdoor products such as lawn mowers and scooters. A world-renowned Japanese home appliance company will also pre-install the Tuya OEM app in its Android TVs as one of the portals to its home IoT ecosystem in its European business. We also made an Italy partnership with a well-known Italian home appliance brand with an extensive network of local connections to accelerate the implementation of intelligent solution in local Italian manufacturing enterprises.
As for consumer electronics such as TWS headphones, will leverage our multiple [EQ support] and tracking capabilities to impress a number of customers. For example, a well-known Spanish consumer electronics brands, Energy Sistem, showcased its PBT smart headphones at the IFA. We then shared the successful use case with other headphone brand customers and garnered significant interest.
The above customers include existing customers that are deepening their partnerships with us and new customers who have just established a relationship. Although our customers under the downstream markets are facing severe inventory pressure and high inflation, they remain enthusiastic and optimistic about the transition to intelligent products in the long term.
One of the leading brands in the world with a dominant share of the cooling fan market has partnered with us and purchased our value-added services to upgrade the voice control capability of its products. At the same time, this customer also told us that they are very optimistic about the smart device sector and ready to make large investments. However, they couldn’t place substantive orders this year under the current market environment. They will wait for a clear signal of the market rebound to start scaling up their smart device business.
On the other hand, from a product perspective, we are encouraged by the warm reception of our central control products and we believe that these products have the potential to explode on to the market. In the third quarter, our revenue generated from the central control segment grew by more than 140% year-over-year, although the contribution is still relatively small in dollar amount compared to our overall business. This segment has demonstrated robust growth momentum and a positive market response in the first three quarters.
Similarly, in the current situation where energy and environmental issues are becoming increasingly prominent, there is a strong demand for energy saving products in the downstream residential and commercial sectors. Tuya-enabled energy saving products including smart circuit breakers, utility meters, and charging-related products recorded a 155% year-over-year revenue growth in the first three quarters of the year. We will also continue leveraging our industry research resources to maximize efficiency as we invest and develop solutions in these emerging areas.
In the SaaS and other segments, we slowed down the expansion of our hotel business in China due to the impact of COVID resurgence. However, we have completed several key milestones in our overseas expansion. Such milestones included signing our distributor in the U.K. and progressing towards signing our distributor in Hungary. These smart hardware distributors will match our SaaS customers with the equivalent solutions and options needed for the hotel and rental SaaS products to better support the smart business implementation of our customers.
In the commercial lighting and property SaaS segments, we have partnered with the world-renowned Honeywell. Honeywell is dedicated to helping building owners and operators build healthier, safer, energy-efficient and sustainable facilities and we will provide IoT ecosystems of PaaS in various aspects such as smart hardware apps and cloud development platform. To date, for device, we have collaborated on visual intercom devices and Honeywell has completed the development of its [Live Smart] app and cloud platform development will continue to utilize the Cube’s smart private cloud and deepen our partnership. For example, we’ll improve the construction efficiency of smart properties by utilizing the [vast] construction SaaS solutions.
In terms of our value-added services, our VAS including various products such as cloud storage, app-related services and device capability related VAS such as voice skilled services delivered solid results in the third quarter. In addition, we partnered with several leading global telecom operator in their respective regions for our IoT services. These partners included a Fortune 500 and also one of the largest telecom groups in Latin America, as well as the leading regional telecom operators in Thailand, Indonesia and Nigeria.
Telecom operators have unique business strengths in users and channels, as well as strong communication services, infrastructures to support their technology capabilities. Our software capabilities and hardware ecosystem would allow them to offer more value-added services to their user and strengthen their user operations. These telecom operators may also be potential customer of our Cube smart private cloud.
Moving on to our private cloud business segment, with our key account strategies and the relentless efforts, we added several new customers or projects for our Cube private cloud business. For example, Thailand’s construction material industrial leader with over 100 years of operating history will use Cube private cloud to expand its hardware ecosystem in its IoT residential projects through the Cube platform.
Another example is a well-known Fortune 500 multinational conglomerate, which has been our IoT PaaS customer, also adopted Cube to build a complete smart home landmark project in India with plans to replicate its success in Europe in the future. An Australian distributor of the well-known cellphone brands has already paid in advance to leverage our private cloud, [Smart Life] app, central control screen and other devices for property installation to improve the local life quality. These customers have already paid the deposit and this revenue will be recognized after products are implemented and accepted.
In addition to the customer use cases I highlighted so far on the call, we are also actively acquiring large number of high-quality new customer with high business potential. As such, we are solidifying our partnerships with existing customers, while capitalizing on new opportunities. Admittedly, Tuya and many other companies in the industry are in the midst of an economic downturn and an increasingly challenging macro environment. However, I want to highlight the adjustments and efforts we have made in the face of these challenges. Our steady path towards breaking even, our long-term commitment to the IoT industry and pursuing mutually beneficial relationships with our customers.
Finally, I will talk a little about Matter, which has been a topic of interest. Last week, we participated in the launch event in the Netherlands organized by the Connectivity Standards Alliance, the committee behind Matter. One of our Co-Founders Alex delivered a keynote speech on the Tuya Matter project during the event, which garnered the audience attention. At the same time, the CSA issued the first batch of Matter product certifications to Tuya.
This is a testament to our strong technology and product leadership, as well as our ongoing efforts to promote IoT developments and the open intelligence ecosystem. The President and CEO of the Connectivity Standards Alliance stated Tuya’s commitments as a board member and active alliance participant is critical to Matter’s success. Their adoption and integration of Matter will enable global customers to achieve commercial success and deliver enjoyable experience for smart home consumers.
With that, I will now turn the call over to our CFO, Jessie, to provide everyone a closer look at our operating and financial performance.
Jessie Liu
That concludes the remarks by Jerry. As I review our results, please note that all amounts are in U.S. dollars and all comparisons are on a year-over-year basis, unless otherwise stated.
For the third quarter of 2022, total revenue was $45 million, down 47.4%. The decline was mainly driven by a 57.4% year-over-year decrease in our IoT PaaS revenue, which decreased to $30.9 million for the quarter. Please note that RMB weakened against dollar during Q3 from RMB 6.69 to RMB 7.1, which resulted in RMB revenue translating to $2.9 million less than it would have using the start of quarter exchange rate.
Let’s focus on the business. Among all the product lines of our IoT PaaS business, the consumer lighting sector experienced the most pressure as consumer demand softened. In response, our customers slowed orders as they were adjusting their inventories. As Jerry mentioned earlier, we believe that smart device developers overreacted to strong market conditions last year and overstocked their inventories. Consequently, almost all online and offline retail channels are now working through their excess inventory. This summer, brands and wholesalers experienced large order cancellation from retailers. Naturally, we closely monitor our customers’ demand and overall environment through public macro and expert data, estimate sales volume of retail channels, economic trends, as well as shipments information directly from our customers.
Breaking down the revenue contribution by product line in the third quarter, we achieved a more balanced revenue structure. Contributions were balanced between 20% to 30% for each consumer IoT PaaS category, which includes lighting and electricals, consumer security and sensors, appliances and others. The revenue contribution of non-consumer products such as industrial smoke detectors, circuit breakers, mining lighting, heat pumps, electrical chargers increased to nearly 3% of total IoT PaaS revenue. This is a result of the successful execution of our vertical expansion strategies.
Looking at geographic and market demand, we estimate that the contribution of each region remained stable. We constantly strive to maintain balance across our global business. SaaS and other revenue in the third quarter of 2022 increased by 16.2% to $8.9 million from $5.6 million in the same period of 2021, sustaining its robust growth momentum. The growth was mainly driven by our continuous efforts in offering value-added services and various software products with strong value proposition for our customers.
Our gross margin expanded to 43.6% in the third quarter from 42.6% in the same period of 2021, primarily due to an increase in higher margin SaaS revenue. IoT PaaS gross margin decreased from 42.9% in the same period of 2021 to 37.2% in the third quarter. The contraction was mainly caused by a $1.6 million increase in accrued inventory allowance for certain slow-moving IoT chips, which negatively impacted our IoT PaaS gross margin by about 5 percentage points. We originally stocked these materials in 2021 to adjust chip shortage risks at the time. Excluding the inventory allowance impact, our IoT PaaS gross margin would have been about 42.2%, representing a steady and healthy trend over the past quarters.
Now, let’s move on to our operating activities and the related expenses. Please note that we are presenting our operating expenses on a non-GAAP basis by excluding share-based compensation expenses from our GAAP numbers to provide better clarity on the channel of our actual operating base expenses so that you can review performance in the same way as our management team.
During the quarter, non-GAAP total operating expenses decreased by 37.1% to $43.4 million from $69 million in the same quarter of 2021. Specifically, non-GAAP R&D, sales and marketing, and G&A expenses decreased to $29.3 million, USD12.4 million and USD4.3 million, respectively, and other operating income net was $2.6 million. Similar to the previous quarter, the reduction in our non-GAAP operating expenses were mainly due to large decreases in employee-related costs such as payroll and benefits, partially offset by one-off additional costs arising from headcount optimization initiatives.
Our average salaried employee headcount during the quarter decreased by approximately 38% year-over-year. The reduced headcount was combined with initiatives to improve efficiency. We further optimized our team structure and work allocation in line with our financial and operating plans. We believe that this efficiency improvement measure will continue to benefit the Company in the long run. We also keep implementing initiatives that accelerate our efficiency improvements and drive our progress toward our business goals.
Now, turning to our bottom line. Our non-GAAP loss from operations narrowed by 27.1% to $23.7 million in the third quarter from $32.5 million in the same period of 2021 and our non-GAAP net loss significantly narrowed by 49% to $15.9 million in the quarter from $31.2 million in the same period of 2021. In the third quarter, our non-GAAP operating margin was negative 52.7% compared to negative 38% year-over-year as total revenue declined at a faster pace than expenses.
But our non-GAAP net margin was negative 35.4%, up 1.1 percentage points from negative 36.5% in the same period of 2021. The delta between our non-GAAP operating margin and the non-GAAP net margin mainly included $6.8 million net financial income, primarily consisting of interest income. As our monetary assets are mainly cashed in U.S. dollar held offshore in large banks, we generated more interest income as a result of higher interest rates on U.S. dollar holdings.
Moving on to cash, net cash used in operating activities for the third quarter of 2022 decreased by 70.6% to $13.5 million from $46.1 million in the third quarter last year, thanks to the significant reduction in operating expenses. As of September 30, 2022, cash, cash equivalents and short-term investments that were mainly time deposit totaled $945.9 million, down only $5.6 million sequentially, representing about 0.6% of the total cash assets. Here, I want to reiterate a point Jerry made.
We are always committed to maintaining a strong cash position during this difficult economic period. Our stock market valuation is implying that we’re going to consume a massive amount of cash. Our intention is quite opposite. We have cut expenses significantly and are actively working to stabilize our gross margin. We have a sufficient cash position to support us through the recession. We encourage our investors to consider our efforts on preserving cash and our ability to conserve cash when you analyze our market valuation.
Finally, turning to the share repurchase program. Pursuant to the general mandate of share repurchase to directors was approved by the General Meeting, our Board has approved a new share repurchase plan to purchase up to $50 million worth of shares, including the form of ADS as announced this evening — [this] time or morning Hong Kong time. This shows the Company’s long-term confidence in this business prospect.
Before I close, I want to discuss the near-term outlook. Inflation is still high and the global central banks’ firm intent on arresting inflation before it gets out of hand. They do not appear to be finished raising rates and the global recession is a distinct possibility. Under this situation, our job is to first continue to operate prudently and conserve our cash during the downturn. Second, invest in promising new products that will eventually enable us to grow rapidly and profitably in the long run.
With that, operator, we are now ready to take questions. Thank you.
Question-and-Answer Session
Operator
[Operator Instructions] The first question is from the line of Yang Liu with Morgan Stanley.
Yang Liu
Okay. I will translate my question in English. My question is about the demand. Given the current relatively weak demand and based on Tuya’s observation or discussion with value chain, what is the inventory level now for key customers? And based on current inventory digestion speed, when should we see the inventory fall to a comfortable level and customer restart to build their inventory or we see a demand turnaround at Tuya side?
Jessie Liu
Okay. Based on the information we have now, it’s difficult to determine accurately when we can see the turning point in the downstream market demand. However, based on publicly available information from downstream customers or other sources, we can share some qualitative assessments for your reference. Please keep in mind that we cannot guarantee the accuracy and reliability of this market data.
On the inventory front, while the market conditions are rapidly evolving, we estimate it will still take 8 to 12 months for the downstream OEMs, brands, wholesalers and the retailers to altogether work through their excess inventory and return to a healthy inventory position. What may be good news, however, is that, the end market sales of smart devices appear to have picked up slightly in the third quarter after experiencing continuous sequential declines of segment year-over-year growth since the beginning of the year.
Therefore, as the slow but steady recovery trend continues into the fourth quarter, which is typically the peak sales season of the entire year, it will be a good sign for the industry as the market balances supply and demand balances under the current economic environment. We believe there is still substantial downstream demand for IoT device in the long-term. The problem is simply too much inventory in the retail channel brands, wholesalers, warehouse, and OEMs.
As a result, the supply from upstream sales lags behind the downstream demand by several quarters. As such, if we assume first our brand customers worldwide sell the same number of end market IoT consumer electronics device in 2023 as they did in 2022 this year and the second assumption, the number of IoT PaaS we delivered next year is almost the same as this year. Then by Q4 2023, the downstream inventory level of PBT devices will return to a relatively healthy level as it was before.
In addition, we analyze information from several listed companies in the consumer electronics sectors, as well as upstream chip developers, downstream OEMs, brands and retail channels. The upstream and downstream markets have shown a similar year-over-year trend in the first and second quarters of this year. However, starting from the third quarter, we noted that the consumer electronics upstream and downstream trends had diverged somewhat.
The upstream chip developers, especially those focused on smart device chips, IoT communication chips and consumer products, recorded year-over-year revenue decline in Q3 similar or even greater than the first two quarters. Meanwhile, some downstream brands and manufacturers such as robot vacuum cleaner brands have started decelerating their revenue declines. Although this may be a positive result of the aggressive inventory correction downstream, these companies reduced order size and the conservative procurement approach still create pressure on upstream suppliers.
At a macro level, as mentioned earlier, inflation levels in Europe and U.S. remained elevated, but haven’t increased any further yet. We hope that this is the [well inflation picks]. If the economy remains stable and stops deteriorating, we should see a gradual relief of inventory pressure in the short- to medium-term balance in market supply and demand. Of course, the industry growth will still be dictated by the overall economic conditions and the consumption landscape. We still need to analyze the sales figures from the peak sales season in the fourth quarter to make further judgments. With that said, we will adjust our sales and pricing strategies dynamically as needed to support our customers to weather the challenges.
So this is my answer to the first question. Now, we can go to second question.
Operator
The next question is from Mingran Li with CICC. [Technical Difficulty] It looks like Mr. Li dropped off.
[Operator Instructions] The next question is from John Wang with Goldman Sachs.
John Wang
Can you share some colors on your cost control measures? What will be your target headcount by the year end and next year? And any additional measures on the operation cost reduction? Can you share your target for profit breakeven?
Jessie Liu
Okay. Since the end of last year, we have been strategically optimizing our team structure as we planned to improve our efficiencies in customer services, R&D, internal workflow and expense control. In the first half of the year, we focused on trimming down our business and product lines that are fragmented or yet to be proven successful. We recalibrated our focus on large customers by reforming our customer acquisition and service systems. We also adjusted resource allocation of R&D projects at the top level.
We established an evaluation system to assess the ROI of our — every R&D project. We also set up framework of tourists for each business lines to continue improve their efficiencies. Our strategic focus since the third quarter has been implementing detailed adjustments in our core business and each product line. For example, each department will now analyze their workload in detail and gather team members from different functions to review the decision and ROI. We request each product line to breakeven in a few years. These initiatives will help us control our costs as needed.
On the other hand, we perform various monthly and quarterly financial results for every product line to help us review and control expenses outside of R&D and customer support. Expenses such as T&E and marketing expenses are now under strict control. In fact, we reduced our marketing expenses by approximately 62% year-over-year in the third quarter, resulting in year-over-year expenses saving of over $2.5 million.
Marketing activities are undoubtedly important, but in the current economic environment, we must evaluate what marketing activities are more effective. For example, some expenses saved from our marketing programs can be used for visiting our core customers, helping us keep — maintain key relationships and developing business strategies.
We have been actively refining our team structure in the past year with this initiative. Last year, we quickly expanded our teams as industry snowboard. Now, our headcount has returned to the same level as late 2020, so two years ago, at around 1,900 and we are maintaining stable operations. The increased salaries over the last two years, high expenses as a combined public company and incremental expenses as we expand our business have offset some of the expenses we saved by improving our efficiency.
However, excluding one-time expense such as employee severance and rental termination, we have slimmed down our non-GAAP operating expenses to the same level as in late 2020, two years ago. So in addition, we are executing the initiatives I mentioned earlier in stage, we still have room for future optimizations. So going to next year, we will still do our best to maintain a concise team, and whenever we see opportunity to improve the efficiency, we will continue to do that.
Based on our 2022 revenue, gross profit estimation and the current 1,900 staff size, we estimate that our lighting, electrical and home appliance product lines in our PaaS segments are profitable after all expenses, including all overhead appropriately amortized to each business lines. As we budget for 2023, we have required all product teams to prioritize improving profitability by either turning profitable or significantly narrowing the loss with a goal is to make profit in a few years for every line including new lines.
Meanwhile, we have dramatically improved our cash flow. Our cash outflow since the second quarter have reduced significantly compared to the period between Q3 last year and Q1 this year. So turning profit and improving the efficiency will be our top priority for the next few years.
So this is my answer to John’s question.
Operator
The next question will be from the line of Mingran Li with CICC.
Mingran Li
Let me translate myself quickly. Given the relative weakening demand for consumer electronics, we need to step further more growth drivers. Could you give us more details on the expanding progress besides consumer electronics like the commercial and industrial segments and the private cloud or anything else?
Jessie Liu
Yes. In addition to the traditional smart consumer electronics, we believe there are new use cases we can capture and expand into. For example, first, the voice control products in our IoT PaaS business. Take the central control screen as example. It combines voice capabilities, display control and other functions into one entrance level product. The product can cover all the intelligent interactions needs in any given space with a similar positioning as an app in a smartphone.
The current market demand is quite strong for this product, mainly in commercial use cases such as hotels, commercial buildings, office, et cetera. Additionally, there’s still demand for home use for this product. However, no brand has been able to deploy high-quality IoT software capabilities to integrate the relevant ecosystems. So our central control product line covers different industries and use cases, integrating third-party voice functions into our software capabilities to make the product more versatile.
As such, we can provide developers with voice workstations to reduce configurations and development barrier. We also offer operational value-added services and other capabilities to enable customers to improve the stickiness of their products and boost their revenues.
We have also developed a flagship version, a cost-effective version and a strategic portion for different type of customers. Geographically, we have different solutions under U.S. and European standards to meet the needs of various customer groups. As one of the products from our software and hardware enhancement strategy, the revenue we generated from the voice capability product line grew by over 110% year-over-year in the first three quarters of this year and over 140% year-over-year in the third quarter.
The energy saving and power products in our PaaS business can serve a wide range of commercial and industrial use cases that align with today’s environmental and sustainable development concepts. During our overseas trip in the third quarter, we found that the demand for energy saving in Singapore, Southeast Asia and other parts of the world is increasing quickly. There is a lack of cost-effective software and hardware solutions. Based on our experience in commercial lighting SaaS and the property energy management, we have already developed replicable use cases of energy saving products in the industry. I will share a few examples. First, we have a hardware ecosystem based on WiFi and Bluetooth dual model SOC solution covering high current applications and flexible remote power distribution. With the solution, we have partnered with an Asia-based — Asia-listed company engaged in new energy and battery equipment, the partnership focuses on developing energy storage power and inverter solutions by leveraging the multi-power adaptive smart charging solutions based on our Tuya Link interface with extensive data functions, quantitative power generation revenue analysis and proficient self-test and alarm capabilities and other core competencies.
On the software front, at the end of September, we released an energy saving and low-carbon applet to streamline our value-added services. The release has paved the way for our future launch of energy saving algorithms, reports, and other application capabilities. We are now in the process of testing the energy meter management system for smart meters in property use cases. We have also launched our smart sensors management system focused on the sensor market and brand enterprises. Meanwhile, we have various new energy storage solutions under R&D. These hardware and software solutions, not only serve the needs of a single customer in the industry, but still also provide a sufficient product support for various new energy projects. In addition, these solutions can also complement our energy private cloud services to customers such as China Gas Holdings. The energy saving and power sector is massive and we will leverage our own strengths to focus on our strategic point of entry to avoid over-expansion.
We have been expanding steadily in the private cloud sector, signed up more major customer in the third quarter, including one of the largest telecom operator in Latin America. For our SaaS solutions, we have been focusing on the Chinese market for the past three years. Now we are expanding into 12 countries, including U.K., Spain, Italy, Germany, France, Canada, Singapore, Mexico, Brazil and other countries.
Our expansion will have regional distributors in each country, providing integrated hardware and software solutions to serve local customers. Currently, we have signed national distribution agreements in several countries in Europe. We are negotiating with very capable distributors in almost all other countries in the top countries we have circled. We will continue to expand in consumer electronics segments to navigate this high inflation period.
Thank you for attending our call today.
Operator
There are no additional questions at this time. I will turn the call over to the management team for any closing remarks.
Jessie Liu
Thank you, again, for joining our call. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a great day.
Operator
That concludes today’s call. Thank you for your participation. You may now disconnect your lines.
Be the first to comment