Agora (API) 16 Aug 222022 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to Agora Inc.'s Second Quarter 2022 Financial Results Call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. hand over to Ms. like now the to conference I'd Investor Fionna of Chen, Head Relations. you. Thank ma'am. Please go ahead

Thank evening us operator. and quarter you Good earnings thank in for XXXX you Asia people for call. joining conference for second everybody, Agora's good morning

release our Our on a replay be website at investor.agora.io. filings of earnings SEC and call today's results can press IR found

release. Joining Jingbo non-GAAP Reconciliations press CFO. GAAP and Wang, results our me be between today in are Tony Zhao, our our Founder, Chairman and found can CEO; our earnings

risk this make future risks, future and financial business, factors of other only During will and financial may materially. performance on affect trends. results could including are actual and that performance our we obligation statements about today, differ contained based make me These the call, over press our forward-looking statements call. we assumptions are and any release to our today's filings relating no prospectus offering. which and with events our initial predictions statements our to forward-looking Tony. we uncertainties, the and forward-looking let believe Tony? and results subject update what statements other on in With in to public we that These are turn Agora today's earnings detail that the final factors remains SEC, to it other discuss and may in information

welcome and Fionna, everyone to our Thanks Yes. call. earnings

China. of a the bringing Our in track year-over-year, for sector regulatory us growth revenue the decrease an acquisition X% on after increase K-XX quarter million, $XX X% in back was and of quarter-over-quarter, the change

engagement active compared exceeded June, remain our year strong. and platform. In to our the markets, our X,XXX, registered adding During this number the At on real-time XXX for quarter, end demand XX,XXX one international US platform ago. over applications of customers of new

last XXX% same revenue a with segment consistently since year expansion rate above XX% this period recorded increase net Our the XXXX. for based with a compared dollar

and can platform promotion live of potential highly cost. sub-second months, experiences in and and higher we have several May, the In only enhance our expand of I'm product, for this We interactive the fashion has such create the to announcement We moderately market benchmark interactive our sector. efficiency our experiences key their this by as betting. globally. witnessed deliver among can confident already customers streaming several traditional engaging have disrupt streaming response sports we streaming in product live product CDN-based live that and lower chat the in-game recent a latency to our globally. a in to gaming well-positioned customers go-to-market are of range end wide Following synchronized users live Powered live believe a strong streaming executives audience and a we our with as

to platforms more believe live enlarge product streaming as fans. through consumer provide with increase more their live With attraction in platform live MBC seen Group, media leading video and streaming and We new this content on enable total Middle by embrace streaming directly is to entertainers streaming audience substantially interactive transactions our from our that in place already biggest the to of For one the XX% social sub-second platform gaming creators, also the live powered the it this their growth. and North interacted largest forecast offer live features the country product. in has Asia's addressable platform. product streaming WIZZO players a technology example, high-quality East legacy Live and their game become market monetize influencers interactive live Agora-powered of technology this Pulse powering MBC Africa user And has solutions. live We and will platform's and WIZZO Polo streaming uses platform streaming

and export, the are systems broadest Chat and Through the can has user demonstration from use, onto In industry-leading chat emojis real-time presence US for powerful and translations, to I'm By international over end indicator, features in of a It Agora able Chat the media the combining content messaging Asian messaging with development similarly say in easy messages, more. from year. our Agora's to code and for messages, application. their new in type the US integration glad is which of to engaging add synergies experience as much Easemob very their Agora among past products also Next third-party and Chat, perfect using message product real-time Agora those create moderation in for for send functions, rich Easemob and multimedia we immersive API history also Chat product. with of files global sessions. to a customers and operating that competitive messaging developers comprehensive we're offer is products. markets. the voice developers any beta-released users to experience frameworks a within few business market. an international similar tool provides video Agora providing markets, lines is especially and compatibility and APIs our who our infrastructure, to such highly market already engagement

quarter Revenue by shortfall was recorded more sectors. sector as K-XX in to our China other compensated China. growth X% in in a the business a tutoring academic quarter-over-quarter in increase Now move this than let's from update for

than the an other with sectors approximately grow increase year. to XX% continue in healthily compared K-XX period with last same revenue Our

related importantly our their live manage Through and in to video for combined. use Our also works the players. China China. only the recorded companies regulations the approved Corporate in we also association streaming largest able to Agora undertake of National solution by revenue Agora in RTC with audio sessions in management report, market market next the the more than digital music by management partnership, to music in corporate According formed IDC copyright our number all Copyright one-stop China greater among definition rights as of each seven China, growth covers share XXXX. published in rights than this leading more in a CAVCA, the to its and Association and with known are work Administration their customers Audio/Video we XXX,XXX visible. a Under our rights solution now one in market collective application the partnership the a In is every provide high now on with and China, for China. position cloud maintained full is works once this demonstrated compliance, that in again in laws works system position latest and IDC's recent video usage report customers'

with immersive paying MetaKTV customers with and flat product solution delivering owners be choose usage copyright a a from believe value per Our will We then the for profound in fee to in one-stop networks. our make for and customers experience go-to partnership can unlimited compensated. our and real-time our help this CAVCA duly key will access

invite XX San will you either RTE October October Before conferences. Francisco. XX. concluding attend join to my Pacific October The prepared American XXXX The October to in remarks and will our like conference take North for all are welcome this person to online online in XX conference or would from you of from quarter held be XX to Asia to I place

future brightest more. me over Things video who With metaverse explore We financial bring of things business Internet our voice will expect to turn and and the in technology that, let the review results. to minds of the Jingbo field to

Thank you, everyone. Tony. Hello,

million year-over-year, were start QX of $XX fiscal the increase by XXXX. reviewing of quarter for XXXX, will me revenues year I an first results and our Total Let X.X% financial X.X% of a second in of discuss then quarter-over-quarter. and outlook decrease for the

in sector new on in As we negatively China. previous academic tutoring our earnings this revenue was growth mentioned, quarter by impacted K-XX calls, the regulation in

this period Our $XX from the in revenues million compared sector were from quarter year. XXXX, of last second same $X million the approximately to

momentum quarter-over-quarter in growth this our On solid XX.X% and the and $XX.X sectors revenues representing in to million In grew geographies markets QX, and remained XX.X% quarter. XX.X% other revenues. in in year-over-year US total other hand, from particular, international of our

XX%, net excluding XX Easemob. rate months Our dollar-based constant trailing currency is expansion

about by was K-XX which strong business, the expansion China Specifically, international for and healthy; and US XX% the rate was which sector. XXX% impacted negatively and approximately remains business, was

cost expenses. to on Moving

the represented For was assets our by funding sales my X.X% and and QX margin the year. Mainland, operating year-over-year, which million Non-GAAP expenses R&D credit year-over-year, million we in and dollar Non-GAAP quarter higher up dollar. which held XX% expenses last to cash in revenues due last were balance teams continue XX.X% and to to expected driven our was amortization attributable year. currency by as loss Non-GAAP R&D our were appreciation QX, in was China. advertising tax compared million revenues excludes last translating in for was the subsidiaries results, go-to-market as $XX.X in marketing gross the first Sales loss expenses XX.X%, up mainly operating QX The expenses $XX.X year-over-year, year, on infrastructural income RMB-denominated G&A Kong short-term to XX.X% intangible compared and event of compared of will total in quarter in in intangible continue I G&A quarter the acquisition-related total XX% year. marketing XX.X% an QX share-based loss $XX to increased mainly $X.X and and hire QX, of $X a up in in expenses, and of Non-GAAP of Non-GAAP XX.X% strengthen QX Non-GAAP were efforts QX, quarter XX.X% anticipation we subsidiaries quarter of expenses, expenses expenses, acquired XX.X% Exchange Hong R&D than last mainly margin to provisions. QX, non-GAAP XX.X% up to increase expenses optimizations. mainly of expenses to functional total compensation due last represented investments employees US revenues focus loss operating non-GAAP technical were in to globally. and in following XX.X% in XX% related margin assets. in million and loss US RMB comments, million expansion to team to acquired with talented to year. QX in team. compared expansion step

In appreciation by our revenue approximately addition, US China X%. affected dollar in adversely

land to on update right use turning purchase. the Now

approximately the XX,XXX independent XX, announced land paid on reconciliation new joint interest We our we right to share meters the premises. XX% a acquire build aggregate fully July. As The acquiring in agreement on joint venture use land area square a a RMBX.X had billion. of right to Shanghai third-parties. District the in so plan of use our for entered We headquarters of equity approximately venture. is we And Riverside the we hold for Yangpu in into land reconciliation June two an is

million $XX.X was to $X.X QX, negative Turning was year. negative Free million, compared $XX.X to last in last cash negative year. to million operating $XX.X flow cash flow, cash flow million compared negative

on $XX.X compared approximately negative mainly end million, the million cash paid By program. we cash quarter and million equivalents with we $XX.X cash of cash, flow of to share long-term million short-term of million the for $X.X representing $X.X million. due approximately in of repurchase for $XXX QX. $XXX in of for $X.X million our investment approximately equivalent XX% ADS was sheet, $XXX paid land share at A free use Moving to to of QX the ended for and ordinary Net repurchase repurchased of the million right our investments, end cash shares, the Class QX, to balance million, deposit outflow million of $XX.X $XX.X purchase

COVID-XX turning where to historical variable to is model still an apply. our experience business guidance, unprecedented not may Now

all year, to are of revenues we impact hard entire that related of the are assumptions to guidance team quarter previous our you the full guidance very revenues Our be in your $XXX everyone and to challenging closing, $XXX With healthy to on the million. execution and the we to the proud call and work, today. subject various based for expected of that, are the year year million full Agora for XXXX, uncertainties for macroeconomic total you the on safe. In COVID-XX change the under our full pandemic. Hope, attending in Thank maintain of range reflects are environment.

open Let's for it up questions.

from Thank Yang, the Liu you. ask question. Morgan from Please line open. your first is Stanley. [Operator comes question Yang of Instructions] line your Our

opportunity. I questions two here. you for the Thank have

start-ups of the positive of The is demand in but is a funding this environment demand start-ups? the side, -- RTE, the we customer getting see week terms lose that lot for terms overall overseas time-to-time the quarter, this a especially risk of us also the on in management funding update from the cannot negative and tougher overseas market. on or from hear we equity first new pickup in one the market Because can side good

us of margin margin this the the quarter, demand? year? think or be gross one-off this see what So, please very in in second is this on outlook or in trend question you sustainable is seeing the the gross Do is by pickup what second you And it should helped update Agora could terms half a is good we the of a benefits? because structural some

the from I'll valuation of trend fund Overall, hear raising customer is now, don't business but some do the difficulties take our talking getting strong lower impression about raising much we have on start-ups we customers etcetera. base. a harder fund our and

delay things hiring, like infrastructure market today. base rollout normal, from this new I to slow given believe very very become In we products more are individual in smaller their features see or cases, of down some ones. challenging is large have own we or customers the etcetera. sensitive costs We customer environment a diverse

and impact why remain XX% we terms the the revenue despite market. markets of by of engagement still our we now overall own is developers strong in technology growth users real-time In international US challenge in strong to for of with achieved up especially QX mentioned adoption a and the business This trend see global revenue that year-over-year. I just

situation We off. how and will the continue monitor it to pays closely see

second I'll question margin. Okay. GP take the on

for is improve less voice this a improve margin very, our XX% has So, X% selling hard QX reduction which so in we to infrastructure XXXX call has XX% annual And in in that in normal consumes have and optimize our like ours, of about last video server and were cloud task quarters or to This less in of year able which prices since why, resulted really our past is significant than year of design, beginning costs QX resources. this six services delivered. despite worked to or decrease from them XX% per more same back-end architectural still in XX% QX our non-GAAP engineering minute to is the the team in very improvement. very COGS average

one-off most reason. factor quarter. important was which this small So a the lower I guess cloud that's in margin. small private Easemob There business also a has has GP

revenues the And private on their cloud delayed had quarter margin projects to a the China. actually situation were GP This in are many impact of the delayed. due COVID this positive because

Looking the will such forward further and COGS margin. lower harder have be optimization GP products new as integrated CDN will

significantly So quarter-to-quarter we increase likely do in not second margin from It the near expect fluctuate GP future. half. the will to in

Thank you.

very the these you Could and in in is a they quite China between margin one here. gap there of still terms please quick Are update now, in still market? follow-up gross two Just markets? us or global

Yes.

no at So two international six it's US markets. number and parity. GP latest is lower see quite a There's bit gap now and we obviously margin between difference in no market there quarters ago. the was

you. Thank

Thank you.

Please is your question line your question. comes ahead. go the open. Please of Nomura. from Bing, line from ask next Duan Bing Our

Hi.

morning, Good management. Hi. Sorry.

by give you people us to some do you. market One you is vertical about on So of volume about impact first colors Can of us trend getting I and work? a And or the the any and question compared the And more expense have are growth. as is Thank the two second about the half, the overseas give we Can sales questions. especially, about the segments? negative as more to application second follow-up marketing back see operating on half? ratio the the expense, the color revenue and/or the breakdown the expense. by R&D more

Okay.

right statements the expenses as you're financial on question is the in our segment first see fastest-growing can you of R&D. the expenses So

future challenging a and China hand markets the US We acknowledge is other have foundation continue always competitor But R&D and ultimately will past the the invested on the we our in to well. lot as heavily the of in other do very the in this environment where in the so is macroeconomic business. because

more So focused comes we R&D. to do intend become to it when

internal small large of the we will and map and our our sub-second strong where a terms such kind organization, special help our real-time will streamline on focus advantage the closer products. streaming And customer-wise remarks And road have can of engineers products And future see our will as as his resources really For opening where as the strong on demand in group customers we on mentioned customers innovative bring audio. of who Tony us we we in we'll really and focus these example product-wise drive we be processes focus customers. of to on live promising such engagement.

So our our in see as hopefully And efficiency. will scale, all we R&D the that these revenue second half. initiatives will improve drop percentage

marketing In actually think terms markets. mainly marketing, to due -- of and international US increase -- and and sales and We was in of as expenses to slow our that marketing add also were expansion in I expenses but sales as China, flat. point to on mostly sales the revenue. the scales In part our G&A increase in of will drop down terms, and revenue will another percentage pace the dollar overall continue to want expenses. a

we our affected, past And four the expenses now in K-XX were terms in expect China. in three that the the negatively but coming with we quite in sector loss quarters, also in So, drop customers from to expected G&A dollar behind quarters. G&A to us,

on So, that's expenses.

about use social I'll cases stronger e-commerce incremental these saw But has certainly the US education And situation, by and of see collaboration platform. will of this e-commerce, for virtual growth from Asia, very were back-to-work kind Middle underpenetrated future. growth use verticals. true of education, and verticals those the such are of that excited back-to-work the room and America. events, market, you that terms to they remote And media mentioned case. because exhibitions trend many e-commerce technology, see a like the Southeast We and usage kind I and the strong opportunities as in in impacted the adoption of terms and it's generated North Strong we quarter. actually media, and of vertical, geographies overall highlight the are particularly cases use East, we in strong few virtual majority we well. where as demand have ones lot very historically international in engagement and from in of continue types In different think a but

As streaming Tony got adopted mentioned, streaming our in sub-second low-latency to be space. only live live product the started sports

now the people in there's technology So, using potential to this are games. believe future. live huge podcast And sports growth for we

So, it's different two cases. We regions adoption don't overall, across many strong driven by use cases. very we think particular see use

you. Thank

[Operator Instructions] of your comes JPMorgan. from line next the ahead. Allen question from Our Please line open. Li go Allen, is

competition. management thanks taking for question question. on Yes, is My my

that the could the have just in we So, so platforms us their profitability, this also the mass pricing is revenue some wondering trend know landscape focus an case, the to you give update, large private shifted for competitive competitors. and And if on Thank growth you. from also market?

don't much landscape. change to compared We last quarter's competition see

partially, last of overall, But providers, revenue of change more no they look to the there similar As compared their trends cloud growth. effort in private reduced field instead profitability just actually of sector, companies maybe quarter. profitability, their kind focus as investment the just On where also on you there's instead I more growth. all to due shift to large our are think mentioned heard huge to we

All you. right. Thank

from of question We the a ask question. Stanley. have follow-up Liu your Instructions] line [Operator Morgan Yang Please from

terms follow-up quick of very one, FX. Just in

the strong actually part this currently, in company the year mean reach And but few the mentioned, the think a a headwind? second to is the deliver the in management than also continue negative second the dollar, half? think it of percentage little given to unchanged, this full impact I of of FX of business a impact And retains needs given terms number will sustained does expected or FX management kind bit US you more have the that the trend kind in of guidance, do quarter. China that

Yes.

QX, at it revenue more So, rate nearly a QX, in major that $X of for the dollar-RMB impact end QX. US if where state would for million exchange was the we have

the FX So full when was assuming we where constant the exchange QX. guidance, we're a rate it year end give at at of

you're we be where impact will in And not appreciation are we dollar. harder. is to need revenue, The to year it it So million. the deliver $X now, further same any full US of stays factoring right, close to guided work it if

So $X that means, need million make more. to we

Got you. Thank it.

Boris line your line comes next [ph] ahead. from open. of question Svend Bernstein. is Our the Please from go Boris,

[ph] my questions, Hi. This Good from is Boris morning. question. to speaking. I have Svend Bernstein two would Thanks ask. for love taking I

performance. regarding, the is first The margin I think, gross

very hear positive about I cost the think and the it's to opportunity. reengineering

in to check to further a is question more Thank about, was had R&D like seems do bit you. your on investments And continues going getting the of grow broadly R&D good efficiencies terms R&D have of R&D. does can around would hear think about R&D this in wanted second in be you we Just when this little something or forward? in But efficiencies one-off, to should it this a continued is I time? I basis? to the that a over same mean lot gain ongoing cases. start use like that Because or vein an and you how

Okay.

optimization. do bit thing diminishing to or we is We'll more. need to a continue effort GP also less the -- mostly on the engineering as same explained, to server question effort, design. to procurement return optimize first XXXX the the The due this but resources I But optimize effort mostly that of bandwidth was there the to technical since margin, so design, a engineering the improvement

can to So always over that in kind healthy And amount can, of margin. we're enough that's guiding not time, is whenever addition, will not get well. so as harder. And we competitive of before, harder. same It's trying improvement like GP as mentioned get I a a instead GP keep maximize Internet our to it why the of it will higher we competitors really so keep margin strategy pressure margin GP our gain

on So GP that's margin.

we are investing the of terms for both for R&D, it's future. and today In investing true,

As to globally, lot environment, But there there. different really invest we macro more Obviously, we cases, R&D expanded we to see two the also inefficiencies. so lot see of we investments more much, a we optimize a so for of eight the more made performance we team future. expand times almost use regions, are need the And years. in past our

looking we'll So forward, of the to some we be remove focused will and -- as more efficiencies. right, I said, work hard we'll

the in a to expect to actually globally. a So do simple as operating not should of we a of very drive we because build use education our and be Eastern terms, solution R&D lot When leveraged we technology, strong continuing expand modification. across it's there the the we lot And product leverage, products we South operation different with can go same Europe very geographies. Asia, do China, the essentially to or cases built across be in actually we we or little go to

So actually be will we're of R&D there seeing, in leverage. lot a the end,

rise revenue. So, again, expect not R&D we QX do [indiscernible]

follow-up Do All any Boris. you right, have question?

very, Thank maybe sales guide be a sort marketing? the are long-term us maybe you, about position on steady-state and thinking R&D positive. how Would you for That's and of the very to in you that. very,

R&D SaaS most very this business. for guided somewhere or we which really XX% PaaS always that long-term a see that business the because is around compared R&D see We to why on be of would We've even high revenue we we other and hand high of this maintain R&D. the the sophisticated through level lower for longer. relatively And marketing gained all be advantage should will given That's technology. sales

state around for that the year. at think XX% that's not long longer not year next this the time steady but stay we in will So if

Okay. very much. Thank you, you. Thank

Thank you. I'll the Instructions] call the for questions. closing back are management remarks. no team There further to [Operator now turn

you for today. you, Thank our everybody attending call thank and operator

a the feel on you. be website the As earnings any Thank questions, us. e-mail are available there our recording free reminder, in investor.agora.io. if And will to release please

Bye-bye. you. Thank

you. Thank

Thank conference for today's Thank you Right. This call. you. participating. concludes

You may disconnect. now