Tuya Inc. (NYSE:TUYA) Q4 2021 Earnings Conference Call March 14, 20228:00 PM ET
Reg Chai - Associate Director, IR
Jerry Wang - Chief Executive Officer
Jessie Liu - Chief Financial Officer
Conference Call Participants
Yang Liu - Morgan Stanley
Liping Zhao - CICC
Good morning and good evening ladies and gentlemen. Thank you for standing by and welcome to Tuya Inc.'s Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in 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, Investor Relations Associate Director of Tuya. Please go ahead, sir.
Okay. Thank you. Hello everyone and welcome to our fourth quarter 2021 earnings call. Joining us today are Founder and CEO of Tuya, Mr. Jerry Wang; and our CFO, Ms. Jessie Liu. The fourth quarter 2021 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 will 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 first only English translation.
Hello everyone. 2021 was a remarkable and a critical year for Tuya. In March, we completed our IPO and our shares started trading on the New York Stock Exchange, we achieved over $300 million in annual revenue for the first time representing an increase of approximately $0.68 y-o-y. Notably, we continue to leverage our leading technology and the service offerings to support the business growth of our customers. For example, a well-known international brand with 50 years of operating history, one of our customers thinks 2018 became our first brand customers with annual deployments of Tuya IoT PaaS exceeded over 10 million units. They achieved this impressive sales performance with 52 IoT SKUs, powered by Tuya.
Our SaaS and others business segments achieved year-over-year growth of more than 170% for four consecutive quarters. Our total number of customers increased from approximately 5000 in 2020 to approximately 8400 in 2021. In particular, IoT PaaS premium customer with revenue contribution of more than $100,000 increased from 188 to 311 around 50 of customers with revenue contribution, around 50 of which are fortune 500 companies. The annual retention rate of premium customers remained higher than 99%. And the annual retention rates of our top 100 IoT PaaS brand customers reaching 99% as well.
In 2021, for the first time we experienced challenges in supply chain international logistic disruptions and high global inflation not seen in decades. However, we still further expanded our gross profit margin from 34% in 2020 to 42% in 2021. While our gross profits increased 106% year-over-year, the world's top technology research organization Gartner said Tuya as an example of a successful global IoT technology company in [indiscernible] research report published in 2021.
In 2021, we organized the flagship events such as the Bluetooth Development Conference, and the Cellular Communication Development Conference, which also served as a press conference for our outdoor travel IoT products. We also continue to partner with global leaders such as Google, Microsoft, Amazon and other project organization to promote the rapid development of the IoT industry.
Looking back on 2021, I would like to take this opportunity to thank our investors, employees, customers, partners, and everyone who had supported us.
Now let’s talk about business developments int the fourth quarter.
For the full year of 2021, IoT PaaS business had DBNER of 153% leading level in the cloud PaaS and SaaS industry. Our IoT PaaS business acquired nearly 1000 new customers in the fourth quarter and that the total number of customers served increased by 41% year-over-year.
We continue to attract the well-known and high-quality companies around the world and turn them into IoT PaaS customers. One of these new customers, for example, is Trust, headquartered in the Netherlands, with a history of 40 years of operation, Trust is the leading brand of consumer electronics accessories in Europe. Other new customers include [Stunning] [ph] a top three Turkish home appliance brand and the Schneider consumer group, a well-known European home appliance company.
In Asia, we helped our new customer COMMAX, a global smart home brand founded in South Korea, developed, visual doorbells and IoT sensing products. Other Asian customers were acquired during 2021 include ACE, a leading robot vacuum cleaner brand in Korea. Crompton Greaves a leading manufacturers of consumer electronics with 75 years of history in India. Usha international with 80 years of history that's managed over 1200 stores in India and Bajaj Electricals the diversified consumer electronics, one of the India leading business conglomerates, Bajaj Group. In South America, we helped our new customer Coppel, one of the largest department store chain in Mexico, build their own smart home ecosystem is more home appliances, safety and wearable devices.
We also worked with Service Entel SA, the largest telecom operator in Chile. In the [UAE] [ph], our service offerings enabled Powerology, the leading consumer electronics distributor and brand in the region to develop a series of IoT products such as smart cameras, robot cleaners, car refrigerators, [indiscernible] and ambient lights.
In North America, we acquired several new customers during the fourth quarter such as the top outdoor show brand, the largest vacuum cleaner brand and the leading kitchen appliance brands in the Fortune 500 air conditioner brands.
In China, we have also continued to win new customers for example, we partnered with Shell promoters to create in WeCool intelligent consumer electronics products for them. We also helped the change our [indiscernible] to make their independently designed models and product smarts. We worked with Mercury home textile a well-known Chinese brand to upgrade his plumbing blanket products without capabilities.
In 2022, we will expand our partnership with Mercury in welding products such as pull, seat belts, aromatherapy, machines and others. Another example is Deli group, a leading stationery and office supplies company in China that's utilized our service to upgrade a variety of bestselling consumer products. We also partnered with China's leading borewell company, cubbies and China's famous Commercial Lighting brands Guangzhou Aurora for IoT implementation.
In 2021, our IoT PaaS settlements has maintained a solid growth trajectory in all regions around the world. We're excited to see that the growth rate of IoT business powered by Tuya Inc in emerging markets such as China and other Asian regions, South America and Central America has significantly exceeded that of developed markets. This trend is aligned with our strategy of building a more balanced global business, deaccelerating IoT penetration has further demonstrated being out ability of IoT technology.
As consumers in developed markets fall in love without IoT products, more emerging markets are quickly falling suits. Additionally, we further expanded our categories and empowered new IoT products while striving to gain substantial worldwide market share in each new category. According to IoT industry data from Influential Professional Statistical Research Institutions, such as [EuroMonitor] [ph], we estimate that we have achieved more than 25% of global market shares in outdoor lighting and electrical things entering in 2015.
In 2017, we began to focus on home safety related products like sensors, locks, and we now have a market share of about 15%. In 2018, we expanded into home appliances and now have a market share of about 10% in the robots vacuum cleaner vertical. In particular, we have a market share of about 20%. Since 2020, we have expanded into digital entertainments and consumer energy related products. For 2022, we will focus on outdoor categories growth for every new category we enter our goal is to achieve a considerable market.
Next I like to share some updates on our SaaS and other segments which delivered robust performance in the fourth quarter with revenue increasing to 105% year-over-year about $19 million in 2021.
For value-added service monthly subscription revenue of end customer more than tripled in 2021. Demand was strong for services such as Cloud Storage for IoT devices and a message pushing services that provides real value to end customers. We believe that there is still a lot of head room for value-added services to grow in the long-term.
We further expanded our customer base for SaaS solutions during the quarter. For example, we provided smart SaaS solution for industrial park and offices through hybrid cloud to one of China's top five power generator which is also a fortune 500 company. In addition to Cheung Kong Holdings Group large scale real estate developer listed in Hong Kong integrated our IoT platform as well as our smart SaaS solution for community and industrial park into its newly updated products concepts to build up their smart offerings which will be regarded as the core system for its next generation residential products.
Moreover, we provided a smart hotel SaaS and smart apartment SaaS solution to Grupo Moraira a well-known real estate developer in Spain operates in office buildings, hotels and student apartments. We also partnered with core system a well-known hotel system integrator in Malaysia to provide solutions for the first smart hotel powered by Tuya in the country. Through our smart commercial lighting [insta] [ph] solution, we enabled future building intelligent technology industrial lighting leader who helped to renovate the maintenance [indiscernible] international airport and successfully achieved in almost 55% power system of boosting new material use which will reduce its lighting power consumption by about [Audio Gap]
[Audio Gap] efficient efficiency reduce power consumption and gaining industrial sites through database system management.
In summary, we're proud of our performance in our first year as a public company, especially considering the significant economic disruptions caused by the COVID pandemic, global inflation, financial constraints and logistic disruptions. Our key operating metrics such as a number of active customers and the number of registered developers on our platform grow substantially, we also deepened our collaboration with customers. As the revenue contribution from our domestic business continue to grow, our global business is more balanced than ever before.
The high global inflation will likely continue to suppress consumer purchasing power. While we expect the 2022 to be a challenging year for the IoT consumer electronics industry. We have also seen significant improvements in upstream supply chain and logistics. Additionally, certain ecommerce customers affected by foreclosures in the third quarter are also showing signs of recovery, our plan is to navigate the challenges in the macro environment through the three growth drivers, the private cloud solution, cost effective smart lights IoT solution and our industry SaaS. At the same time, we will focus on the optimization of our organizational structure and operating efficiency as we aim to better balance our business growth and the timeline to profitability.
Even after seven years of rapid growth, we believe our TAM remains significantly under penetrated. There are 1000s of products categories that can be made smart with connectivity. According to various industry research, while there are 10s of billions of consumer electronic products sold in the world every year, the penetration rate of IoT solution remains low at 3% to 5%, where we can see a dramatic and existing future growth potential now, the ultimate opportunities presented by the massive TAM. We intend to continue to invest in research and development for the foreseeable future. We believe the global IoT sector is at expense stage and we aspire to become as industry giant who sets the standards for the industry and connect device globally.
And that concludes my remarks, I will now turn the call over Jessie our CFO to review the financial details.
I will provide a closer look into our financial results. Before I begin, please note that all amounts are in U.S. dollars, and all comparisons are on a year-over-year basis unless otherwise stated.
As mentioned earlier, we faced a number of industry wide challenges in the fourth quarter nonetheless, we have achieved a total revenue of $75 million in the quarter around 3 point of our previous guidance range.
Our IoT PaaS revenue for the quarter grew by 13.9% year-over-year to $62.1 million. For the full year of 2021, total revenue was 302.1 million up 67.9% year-over-year, and IoT PaaS revenue was 261.4 million, up 72.3% year-over-year. We have 311 premium IoT PaaS customers for the trailing 12 months ended December 31, 2021 up 65.4% from 188 a year ago.
During the quarter, premium customers accounted for approximately 87.3% of our IoT PaaS revenue, our dollar-based net expansion rate for IoT PaaS segment was 153% for the trailing 12 months ended December 31, 2021. This is a testament to our ability to expand our platform usage over time and grow revenue from existing customers.
During 2021 among all the categories supported by our IoT PaaS solutions, home safety and sensor products, home appliances, products, and entertainment energy saving products grow at a significantly faster pace than electrical and lighting products.
In 2021, the electrical and the lighting category products contributed to about half of IoT PaaS revenue. And the contribution of other categories continued to increase in the past few years, reflecting the success of our category expansion strategy. As for our customer base, we classify our top 200 brand customer into four groups. First, well-known multinational brands; second, regional brands with local influence in all continents and countries; third one, self-owned brands have large regional retail channels and telecom operators; and the last one, China's cross border ecommerce brands. In 2021, China's cross border ecommerce brands accounted for about 30% of the sales of products powered by Tuya.
During 2021, brands and business operators are increasingly recognizing the value of pre-packaged industry specific solutions, which enables them to focus on their own key points of differentiation while not wasting resources, reinventing IoT industry standards. As a result, our revenue generated from SaaS and others more than tripled to $7.3 million in the fourth quarter and $18.6 million in the full year.
At the end of 2021, our smart hotel and apartments cumulatively supported IoT upgrade of more than 14000 hotel rooms in China, 9x times at the end of 2020 and the customer repurchase rate exceeded 85%. Our smart commercial lighting has supported nearly 300 commercial lightning projects in 12 countries and the regions including China, Singapore, Germany and the Netherlands, United Kingdom, Canada, especially in office buildings sport clubs, gas stations, shopping malls and a lot other use cases. This project also includes more than 100 schools providing students with lighting for improved eye protection. Our community and the real estate SaaS was adopted by more than 100 real estate community projects in 2021 to help real estate developers and the property managers to manage their properties more efficiently.
Our gross profit in the quarter increased by 34.1% to $32.4 million, while gross margin improved to 43.2% from 38.3%. IoT PaaS gross margin continued its increased to 42.5% from 14.1% a year ago, primarily due to our increased economics of scale improved efficiency for IoT PaaS deployment achieved through effective R&D and expansion into higher margin IoT PaaS product lines. We believe our increased IoT PaaS gross margin is a testament to the strong value that we delivered to the industry chain.
Now turning to our operating expenses, please note that we are presenting our operating expenses on a non-GAAP basis by excluding share-based compensation expense from our non-GAAP numbers to provide greater clarity on the change of our actual operating base expense so that you can review performance in the same way as our management.
During the quarter our non-GAAP totaled operating expenses was 6.3 million, non-GAAP R&D expenses grow to 42.1 million, non-GAAP sales and the marketing expenses increased to 16.8 million, non-GAAP G&A expenses increased to a $9.1 million and other operating income net was 1.7 million compared to $0.7 million a year ago. The increase in the non-GAAP total operating expenses was mainly due to the increase in employee related cost.
Our research and development employee headcount, for example, increased by 56% year-over-year by the end of 2021. We are committed to building a sufficient reserve of talents, which we believe is an integral part of our efforts to navigate external challenges and she sustained long-term growth. We're also executing a series of initiatives to optimize our organizational structure and streamline our operating procedures in order to ensure our operating efficiency.
As such, we're constantly evaluating our personnel structure to maintain a workforce size that is appropriate to our business scale in the long-term growth strategy. Our non-GAAP loss was from operation was $33.9 million in the first quarter and $117.5 million in the full year. Our non-GAAP net loss was $31.2 million in the first quarter and a $109.3 million in the full year.
Net cash used in operating activities in the fourth quarter of 2021 was $53.2 million, or 71% of total revenue compared to $9 million net cash use of 14.3% of revenue in the same period of last year. The increase was mainly a result of higher employee related expenses and a change in our working capital.
Moving on to the balance sheet as of December 31, 2021, our cash, cash equivalents and short-term investment increased to $1.07 billion. We believe this balance is sufficient to meet our current liquidity and working capital needs.
Finally, turning to the share repurchase during the fourth quarter we repurchased approximately 4.3 million ADS from the open market for total consideration of approximately U.S.$25.1 million spent to the share repurchase program representing around 12.5% of 200 million authorized announced pursuant to the share repurchase program. This shows our strong confidence in the company's long-term growth prospects.
Now turning to outlook for the first quarter of 2022, we expect total revenue to be in the range of $50 million to $57 million. As you can see, this is a rather large range considering that we are two weeks from the end of the quarter, and certainly wider than the ranges we have given in previous earning reports. So let me explain.
Historically majority of our revenue for the first quarter of the year was recognized in March due to the Chinese New Year holidays. As of today, we have a good visibility on demand. And there's a substantial volume of our product to be delivered in coming two weeks and of March. While the sudden severe COVID outbreak in China is causing uncertainty on to revenue recognition because we can't recognize revenue until our products are delivered and confirmed restrict by our customers. This is currently a challenge as the number of cities including Shenzhen and Shanghai, and Hangzhou are implementing preventive measures while people remain staying at home of course, business activities, we may experience practical logistical difficulties. Depending on how things unfold in the next couple of weeks, we could have a substantial delivery in some stage of delay. Having said that, we fully expect orders placed and paid, which will eventually make to our customer and be recognized either in Q1 or Q2. Nonetheless, we are very cautious at this moment. That's why we have provided our outlook in a relatively wider range.
We plan to provide an updated guidance are our total revenue for the first quarter of 2022 around the end of March, when we have more clarity regarding the severity of the above-mentioned logistics challenges.
So this concludes our prepared remarks for today. Operator, we're now ready to take questions. Thank you.
Thank you. [Operator Instructions] Your first question comes from the line of Yang Liu of Morgan Stanley. Your line is open.
[Foreign Language] Let me translate my questions. The first question is on the IoT PaaS also from multinational customers on a global brand after the Ukraine war, whether there's any meaningful change for the full year output. The second one, the SaaS and other key products, were very strong revenue growth last year and going into 2022. What should be the growth strategy here and which vertical we expect to see a good growth potential in addition to hotel and the commercial items. And the third question is, the gross margin outlook in current improving environment supply chain. Thank you.
Thank you, Liu Yang. So for the first question, we are keeping a close eye on inflation in economic conditions, since they directly impact consumer demand. And that indirectly impact us. Inflation has been accelerating since the third quarter of the last year. We have all seen the -- that is numbers I'm not going to repeat. In Europe, the market is increasingly pessimistic about the economic growth expectation and also same in the U.S. So we think inflation is suppressing consumption and the non-essential consumer goods that will be affected the most.
We can see that retail channel and the brand owners have become cautiously pessimistic since the third quarter of last year. The sentiment is gradually increasing and we haven't seen signs of recovery yet.
The recent geopolitical conflict the Russia and Ukraine war, further intensified inflation especially in Europe, which escalated the situation. Recently we're collecting feedback from our downstream brand customers in Europe and the United States. So for example, in Europe, the sales of IoT lighting products was worse than that of traditional lighting products. Against the backdrop of high inflation this is a common chant. When consumers are under financial constraints, cheaper traditional products are more attractive.
Another obstacle is that some brands are struggling to make a profit due to the high inflation of upstream costs since last year. And also the sharp increase of the transportation costs in summer of last year also pressures their margins. And they can't really -- when they can’t raise their selling prices in the retail channel, because retail channel was facing the pressure of consumer not buying more products. In that case, even when shelf and the inventory are close to empty or empty, brands are reluctant to produce their products, they would rather wait for the upstream cost to drop significantly before placing other orders.
So as a result, we believe the consumption will improve after inflation has moderated and the cost for the upstream supply chain and the logistics decreased significantly close to back to a normal level. And we also noticed the sales channels of some IoT products powered by Tuya. For example, including Best Buy have already given 2022 revenue guidance as a negative growth.
As such, we remain cautious to what 2022 of the challenging macro environment. We will prioritize categories where IoT products are not too expensive than the traditional IoT products such as home sensor products, home appliance products, entertainment products, also transportation products. We also will help some IoT products to reduce the cost by adopting Bluetooth Master Mode solution that are more cost effective. Our PaaS business is conducted in China and it is expanding very rapidly, which we aim to sustain this high growth in 2022. We will also focus on optimization of our operational efficiency in 2022 to accelerate our breakeven timeline.
For the question two about SaaS, so we are mainly focused on developing our SaaS business in China. The focus has yielded encouraging results in 2021. So we will continue this focus, although we do receive revenue outside of China for SaaS products as well, but our focus will remain in China in 2022. We tailor the strategy for each SaaS segments, it's quite different, as well as our extensive hardware ecosystem and software experiences, we expect all our SaaS segments to continue to post robust growth in 2022. The first one, the Hotel SaaS. So for this segment, we already covered over 2,000 hotels. After two years of development, we already proven the market success of our SaaS products. The development strategy in 2022 is to focus on three initiatives. First, expand our coverage to build our competitive moat enhance our industry influence and profit margins, solidifying the foundation of recurring revenue.
Specifically, we plan to build [indiscernible] SaaS solution, increase our penetration into mid to long-term markets by expanding our sales channels in the hotel and apartment verticals. Second, we also plan to focus on acquiring the big clients, the famous hotel chain and key accounts customers. And also giving our key -- the big customers access to our IoT Core, Tuya Cube and industry SaaS service, we will build our auto industry PaaS and prioritize products. The third one, we aim to increase our software subscription revenue by developing a hotel solution as we continue have more hotel rooms, we will able to generate additional subscription revenue on top after Hotel SaaS. The second one is the real estate and the community SaaS. This business line achieved solid progress in 2021 and achieved the -- with the largest revenue and growth among three business.
As we further strengthened our community and residential SaaS products, we have become the preferred IoT platform in China for top real estate and property management firms. Last year, over 150 real estate and community projects will build on our real estate community SaaS, and also our real estate SaaS covered more than 70,000 household last year. Currently, we have dozens of large-scale community projects in hand, including a number of projects with a value over RMB1 million. The strategic focus, our real estate and the SaaS community business in 2022 will be developing the major large Chinese customers due to the collaboration with Citi Partners [Phonetic] and expanding into industry PaaS categories. We will realign our products with IoT foundation, the PaaS and the real estate community SaaS as we support several collaboration models such as out-of-the-box solution, integrated solution, developer capability tools to separate applications hardware and software. This will allow large-scale customers to pick and choose a flexible product based on their needs and quickly achieve their business goals.
In addition, we also want to continuously expand the applications in new use case, development online capabilities such as online ordering and open frameworks that supports third-party applications will enable our real estate and SaaS -- community SaaS products to interface with third-party hardware as an ecosystem. This will be our core competitive strength and the key factor to improve our customer purchase decision. And for the commercial lighting segment, we completed the business goal of our Commercial Lighting SaaS segment in 2021 in terms of products iteration, customer acquisition, landmark projects and scaling up our use case. In 2021, we took approximately more than 180 Commercial Lighting SaaS customers. In the fourth quarter, we also launched our first Smart Building SaaS project based on the newly developed Smart Building SaaS on the foundation of our Smart Commercial Lighting Solution.
In 2023, we have three major growth strategies for our Commercial Lighting SaaS segment. First, we focus on penetrating large customers, as well as building and the commercial lighting brand owners by forging partnerships with system integrators and independent software vendors with resources, we will launch more landmark projects and help -- second, we will develop value-added services such as human-centric lighting energy saving solutions provide the cloud edge, cloud services to certain customers with their private cloud needs. Lastly, we tend to improve our integrated hardware and software solutions for each use case to accelerate their deployment at a large scale. So we believe that IoT SaaS has solid market demand and long-term growth prospects. So in 2022, we will continue to invest in this area.
For the third question regarding the gross margin, so regarding the pricing of IoT PaaS, our committee always focus on few standards. It is the industry environments, the upstream, downstream operating conditions, second one is our costs, and thirdly, we also consider the end of product sales price. Our pricing strategy always focus on a mutual benefit along the value chain and also our own health growth. The expansion of our gross margin in the last few years come from three prospects. First is the R&D efforts helped us optimize control the cost. Secondly, it's revenue generated from segments with higher margins, such as home appliance, home safety sensors, entertainment, energy saving, those have rapidly grown to almost 50% of revenue.
Certainly, we are benefiting from the increasing economic scales. So looking forward to 2022, supply chain costs we believe is stabilized, although it hasn't dropped. However, high inflation could create significant sales pressure downstream. So as such, we plan to keep the price of IoT PaaS stable. We will continue to improve our cost structure through R&D efforts and also continue to increase the revenue contribution from the complex products, as we mentioned earlier, which have the higher margin.
Also for the company as a whole, the revenue contribution of the SaaS segments will further increase this year. So all this will help us to expand our gross profit margin. However, to cope with high inflation this year, we will also promote the cost effective Bluetooth Speaker products. For those products, the IoT products cost has a higher price or obviously higher price percentage than the traditional products. So that could -- those Bluetooth Speaker products have a lower gross margin versus other IoT PaaS like WiFi or Zigbee et cetera. So as such as a mixed result, we expect our overall gross margin would be flat or slightly higher than last year, but, of course, our goals which help us to increase our gross profit margin. So let's move on to next question.
Your next question comes from the line of Liping Zhao of CICC. Your line is open.
Thanks, Jerry and Jessie for taking my questions. I have two questions here. First is related to a matter that management share a view of measure any impacts on your overall business? And second is about the business adjustments. This is looking ahead in 2022 customer demand and supply chain are still under pressure due to the macro-economic environment. Do you have any adjustment of business operation to mitigate these risks? Thanks.
Let me adjust the question by first clarifying what the Matter is. It is an IoT protocol formed by integrating the technical characteristics of Home Kids [ph], Open Threat and Zigbee 3.0. The integrated protocol focuses on the field of smart homes and the local interconnections. Having multiple influential enterprises developing the protocol together in an open source format will accelerate its adoption, which in turn will help improve the low penetration rate of IoT in home appliances.
There are five key limitation, the Matter is facing currently. First, Matter does not cover cloud connection protocols. Second, it's only supports narrowband data transmission. Third, Matter will mainly -- may experience problems with Zigbee's fragmented protocols. Fourth, Matter will be challenged by other network protocols such as BOE Mesh. And finally, chips that can meet Matter's requirements are more expensive. So our full suite of solution excels at solving fragmentation problems at all levels. Through a platform-oriented approach, we unified our solution across different systems, chips, network protocols and IoT models to provide connections from terminals to the cloud and apps. Our joint development with Matter will definitely accelerate the connection across different brands.
Meanwhile, we will also adjust the inability to conduct due to the Matter's recommended protocols, as well as building connections between Matter and other protocols. These initiatives will improve the differentiation and the overall capabilities of IoT products on the market. Tuya will be compatible with the Matter protocols, just like we are compatible with multiple other network protocols. In an article about the progress of Matter published by the Wall Street Journal on February 22nd, the only app demo displayed was Tuya, which not only showcase that our extensive influence in IoT PaaS build, but also highlighted the synergies between Tuya and the Matter.
Okay. So second question before I dive into specific strategies for 2022, I want to reiterate. Tuya always focus on fundamentals of the business that is first forming overwhelming competitive advantage. Second, gaming unrivaled market share. With a challenging macro-environment, our focus is to strengthening the core value proposition of products, improving customer satisfaction and enhancing our operational efficiency. During a period of consolidation, the weak will be eliminated and the industry leader will gain more market share. So with $1 billion cash on hand, we are well positioned to weather the temporary storms and capitalize on strategic opportunities that are set to emerge. So come to 2022, so first let me talk about our key strategies, our supply chain. So in 2021, we have accumulated extensive experiences in managing the supply chain crisis.
We've got a close partnership with core upstream suppliers and earned their trust. This enabled us to secure the necessary production capacity ahead of time. Now in 2022, the supply chain crisis is easing, although they're still partial shortages, we have solutions in place as we already expanded and refined our list of suppliers in the second half of last year. Come to the revenue strategy in 2022, we have three main strategies to cope with the difficult environment. First, China, we are increasing the revenue contribution of China. Although China has also macro challenges, our IoT PaaS business in China is still in its early stage and has a big headroom for growth.
So take last year for example, our domestic IoT PaaS business grow at a much faster pace than Europe and the U.S., and also more than 90% of our SaaS revenues from China. So we will continue invest in China's PaaS and SaaS business in 2022. Second is the Tuya Cube, the private cloud product. We launched our private cloud product, Tuya Cube last November. This product is designed for brands and enterprises that only adopt private clouds to leverage our IoT capabilities. Tuya Cube is capable of fulfilling customers' needs for local IoT deployment as it enables enterprise to quickly build their own private IoT platforms with differentiated services, high efficiency and stability, while taking the data completely private.
Through the hardware interconnected standards built by Tuya Cube continuously access Tuya's extensive hardware product ecosystem. So Tuya Cube will mainly serve customers that have already developed their own in-house IoT platform or are planning to do so. We can also provide hybrid cloud and edge computing products. We have completed almost 10 private cloud edge computing hybrid cloud products so far. We have more contract projects waiting for delivery from telecom giants in China, South -- and also telecom giants Southeast Asia, as well as well-known domestic and overseas brands. In the IoT sectors, 30% of customer use third-party platform like Tuya, while actually 70% of them develop their platform in-house.
So we believe that Tuya Cube will enable Tuya to penetrate that 70% in-house market. The third one is on the product lines of the PaaS products. We have gained market share over 10% in every major product categories we have operated in. Jerry just talked in his script, the dominance of our products have formed a solid foundation for us to further expand our market share in every major category to a point that no one can challenge Tuya. This year we will focus more on household appliance, outdoor appliance, home safety and sensor products.
Since the start of inflation last Q3, we have observed these categories have shown a much faster growth rate than lighting and electrical products. Even the current level of inflation, we will implement cost effective like smart solutions to produce -- to products that are more high -- more price sensitive. This improvement should enable us to deliver superior customer experiences at a lower cost to put our sales. So our unique ability to integrate software and hardware since our inception to help brand customers equip their products with IoT capability at lower costs. Facing an inflation crisis, we believe this will be a core value for enterprise customers. We are both in awe and wonder of 2022. We might be at the dawn of a global economy recession, but winter will eventually pass and spring should come. So we will be ready for the eventual opportunities. Thank you for the question.
There are no further questions at this time. I'd like to hand the conference back to our management for closing remarks.
Okay, thank you again for our course. 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 earning call. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.