Agora (API) 30 May 232023 Q1 Earnings call transcript

Good day and thank you for standing by. Welcome to the Agora, Inc.

First Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to the IR Director, Ms. Chen. Fionna ma'am. ahead, go Please

you, operator. for XXXX everyone. you and conference Good us for morning joining quarter evening, Agora, call. Thank Thank Inc.'s earnings first

on presentation Our and filings IR of be an release, website results can replay and earnings call on earnings explanatory adjustments, press a note found certain today's SEC at reporting disclosure and our investor.agora.io.

Tony CEO; Jingbo CFO. Joining and Wang, Chairman me Zhao, today Founder, are our

GAAP and earnings non-GAAP results found be our our can press in release. between Reconciliations

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

With that, Tony. let me turn it Hi, over to Tony.

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

a results few our into company. the operational the to our for recent remarks restructure regarding quarter, first changes make diving Before of would organizational I like in

our market compete effectively have Since requirements to under meet the and our operated Agora more mostly of globally we unique better we ago, the years brand the in serve. inception X customers

divisions X same under operate holding company. now the will independent We

in best will a in adopt our be China local and and by on practice. each run standards the focus markets, business market. local focus will the Our and management and U.S. on and Agora will business our division Shengwang Agora Shengwang division international our team

Operating Chief as of Robbin Stanley Officer Liu of Officer Agora Wei Chief We as Operating have appointed Shengwang. and

international optimally focus this of will and competitive We believe on on our technology strategic enhancing and specific the the on share each our focus reorganization and gaining acceleration products, leading priorities U.S. will of on our resources of needs our Agora in experience focus business. us our to allow growth and market Shengwang competitive will improving advantage the offerings. quality product leveraging markets, of further and adoption of strengthening ease and the our better this to our operational metrics we By onwards, to market. From team understand separately customers results operating more and be China of investors our emerge. local empowering report the for these quarter needs we the division, new dynamics Agora Shengwang and each each as able of the in will more become agile respond position markets. and will management of quickly revenue the in help to opportunities

last increased to of for adjusting business customers. customer factors, disposal dollar, due decrease quarter revenue primarily and these same Easemob's our Shengwang's usage year. tutoring After KXX the to decrease for U.S. $XX.X and was U.S. to quarter Agora's revenue year-over-year; Shengwang's $XX.X Agora, in Shengwang, growth due million first for usage XX% the business year-over-year. XX% revenue and international million Our for revenue primarily was expansion in down growth markets. was would of appreciation academic X% from engagement up and in have compared the cloud by

year As ago. increase nearly and for X,XXX an active of we Shengwang, X%, X,XXX respectively, compared Agora have to customers end nearly one of XX% for and quarter, the of this

our to updates. product moving Now and technology on

e-learning, with the were classrooms, recognized by as Webby we the starting technology U.S. Video between gain of The continue and market SDK First, for under online our for users momentum HTC's PaaS adoption XXXX Experience global scalable flipped low-code Classroom, ecosystem, Best & power honoree category Virtual engagement for blended, the named the or online finalist Immersive VIVE to HTC to real-time Recently, Classroom mentioned has In our solution our virtual Flexible to in end Agora. of partnership we accelerate [ph] and within Flexible category. as with real-time designed VR how ecosystem. in a environments. a building Awards our Recently, in solution collaboration use applications. continued the customizable Previously, developers the used learning was solution remote Awards grow. to in demand is The the Real-time Sync VR HTC's Metaverse, VIVE EdTech

our integration tools. Datadog our enables for access customers, premium support identity we to manage customers and further quality and and enterprise integrations The Datadog the Datadog. of enables to added Okta visualization. team to with usage, Agora data, analytics To have package directly with value Console increase through to analysis push performance integration customers the Okta for and Analytics The Agora management Okta and -- platform virtualization members' current

karaoke deliver a the upgraded When in accommodate wanted to have give features mixing version, and would to first users solution microphone. users soundtracks our synchronous low real-time to new X with to highly multiple to due customer's user on users the the recently challenge of current manner sing latest at wide which X applications. third can users for limitation could the time. product. mainly X was in we launched technology our same this join, real-time to at it output range unlocks If Shengwang; together Moving up all was X a now XXXX, With the together, of This up latency. time our singing of a

can room in battle of songs users singing turns our part karaoke take customers singing random in-person in replicate by together. within application. all And upgraded product, now powered our experience participate virtual example, or For can a karaoke the now their

generative can this despite captivated will the latest generative enhance like were by opportunity enormous -- AI, the holds engagement previously year, industries, and Next, generative early its combination combines many AI. stage, in to advance dramatically last that their AI I Generative the in world no empower real-time customers been create model People has believe would significant discuss impossible. language end in for use engagement AI future. the and real-time to of that this being the combination and Since of user or new cases shifts drive exception. paradigm in applications widely experience is end and large

of Let's seen look language be some of model advent powerful the of significantly AI-powered ChatGPT performance The the as growing large and at format examples. chatbots search text improved engines. can in in popularity has

However, the this is beginning. only

time. and as will input/output provide engage more video voice in [ph] all and casual through can all-powerful, that have models AI humanlike IoT devices, evolve become gain As video. AI more or in at to feeds Using processing an hardware multimodal carry people and out adept tasks voice generating they response chats real will continue capabilities, information, powerful body and

tutors help manner Education AI analyzing learning with learning AI-powered is pattern another industry experiences. student a match that hopes progress, people to data, can revolutionize best generate feedback. learning and where By an deliver plans generative have everything and personalized tailored student's can strong interactive in content real-time

affordable education. did access addition, those In and tutoring provide quality AI who can previously tailored education to not have to opportunity also

of industries. AI is and in the and There A real person job facilitating making generative entertainment just disrupt do initial a for the well the to huge dating virtual introduction as conversations gaming application. as also matchmaker can potential a social,

by connection, and session to a digital take can the a to up. for leave while network short summary being an you need catch or interactive your you conversation. available twin come continue can you be If When immediately back, disrupted over for

characters. impossible to become almost online gaming, real social are opponents or tell AI-controlled will nonplayer it or For your teammates if players

above at of many real-time people. among something and real-time significantly common. AI scope expand Generative largely Previously, took engagement in opportunity of groups the we Looking examples can see others, place and engagement.

to help of language between occur cases. use a people characters, digital model, now opening fully AI-based the people, the large With of much and range broader among virtual, -- possible twins can of RTE door

In enhanced solutions usage This of increase engagement become user RTE will will opportunities. and business and likely bring the trend addition, real-time times intelligent, multiple with overall more enjoyable. greatly immersive more experience,

utilizing verticals, pilot AI use we applications their in certain will been while have the to and in with customers real-time latest engagement continue working to customers cases. our generative monitor developments assisting our We closely in create

prepared remarks, work during Shengwang reorganization strengthen transitional believe position our for this who period. this the both hard global more ability us a I and and most both in markets Agora their to financial will importantly, and strategic agile that, Jingbo my to let allow teams want concluding Before and With customers thank and and will I things sharpen China our results. review to serve over in way. me turn efficient developers our

Thank Hello, Tony. everyone. you,

second financial first quarter And results and Let me disclosure adjustments quarter in outlook for XXXX. and by the will certain discussing our I reporting the for review first of financial results. start

Agora Following X XXXX, and of distinct the our be the to from separate and international holding Inc. with operate we previous on U.S. local geographies entities and reorganization, which legal This run customers usage. Agora, quarter and from will Shengwang company on contracts. businesses, legal will separately our brands first Shengwang, Beginning enter report will for now which was Agora revenues of their revenues by under the of which recent China and and based entities based teams. for differs is management into separately own practice, report unique independent

include end revenues included users under and For customers in Such example, We primarily Chinese Shengwang now of previously U.S. that revenues such relationships. under certain contractual target international. reflect offer to terms application outside were China.

active number we but expansion retention Agora same term or is we used. rate active For net will report unchanged. methodology same the dollar-based of of calculation and for of definition DBNRR, The the and remain customers reason, rate, separately which customers Shengwang, rate, retention previously is as

revenues Agora converting we Shengwang customers reflecting and Shengwang As instead historical be Investor included calculating into Shengwang in generated for U.S. business retention [ph] DBNRR including API in will found almost for a these on RMB, revenues business. in renminbi calculate can detailed U.S. and generated Relations A almost all active all for adjustments dollars. chat Easemob's of customers Revenues in U.S. recapped rate denominated dollar also are note, dollar from customers results be Agora are denominated and in everything explanatory website. for from

expansion Moving our year-over-year and revenues challenging to our primarily and macroeconomic a decrease for quarter decrease Agora business X.X% XXXX, The were was of year-over-year an XX.X% usage financial quarter-over-quarter first and to increase environment. in due due was primarily results growth, QX. million to of on $XX.X quarter-over-quarter. increase of the

from to rate which and worldwide reduced increased of inflationary to we and some usage pricing funding, calls, raise starting of in customers' and notably of inter-capital funding tightening impacted our pressure last business mentioned ability sensitivity. earnings and products As their led hikes, our [ph] previous the had second half interest of financial conditions year

the tutoring revenues was rate cloud academic traditional of depreciation and XX.X% enterprise $XX.X would is decrease was a from customers have longer-than-expected revenue New Shengwang quarter-over-quarter The X.X% sales Dollar-based decrease tutoring in exclude cloud million usage following revenues primarily lower of Dollar-based customers. for XX.X% for is were XXX%. customer disposal year-over-year usage and from quarter decrease Chinese decrease quarter-over-quarter. factors, holiday the The increased due net first change Agora for RMB XXXX, net KXX during of to in retention KXX Easemob's and dollar. for Internet of customer decrease in business, the If U.S. of a due the regulatory we academic retention year-over-year. excluding against engagement to of a XX%, these RMB Year year-over-year Shengwang primarily engagement sector. denominated rate disposal sector business, the cycle

on expenses. Moving cost to and

first disposal had gross impairment XXXX following non-GAAP was which was the margin. acquired assets, of margin to financing-related gross results, intangible quarter tax of will XX.X%, acquisition-related X.X% expenses, customer exclude intangible cloud than expenses due focus lower related business, share-based goodwill. compensation expenses, my income comments, Non-GAAP to expenses, acquired the higher engagement for QX which and of For on assets I mainly amortization which

global As we reduced mentioned restructured workforce our QX we calls, in in earnings and previous our XXXX.

to XX.X% non-GAAP last $X.X quarter of in a Non-GAAP year. in the represented revenues XX.X% a R&D in XX.X% in year-over-year. were of Non-GAAP and in of of marketing quarter XX.X% the As QX, revenues a million last QX year-over-year. decrease in $X.X decrease expenses of decrease total in expenses marketing QX to represented R&D XX.X% expenses last expenses year. to were a million XX.X% $XX.X sales Sales and year-over-year. year. expenses compared XX.X% Non-GAAP the were QX, represented million result, XX% quarter QX in [ph] of G&A X% compared QX, total expenses revenues G&A in total compared

loss for margin margin Adjusted value QX margin negative operating loss Non-GAAP $X.X to of an than EBITDA lower million, first a Investment quarter, million equity to a $X.X operating as significantly margin last million, adjusted compared translating XX.X% the $X.X due loss change XX.X% year. as $X.X last year. of in operating was to loss of well EBITDA XX% to of loss primarily debt the in XX.X% investments in in translating credit QX $X.X loss gross was was million QX million, quarter $X.X investments million. non-GAAP the fair disposal loss in of

compared Now turning was flow; was negative to QX million to last Free $XX year. negative negative cash flow cash million to cash negative in $X.X $X.X operating $XX.X flow million million compared year. last

flow quarter by equivalents, relation million. cash Net and mainly in of $XX.X balance banks. $XXX.X cash headquarters negative Moving project with we to million, cash in in repurchase to products net the on due issued deposits cash, cash million of free -- to share sheet; financial ended flow paid million $X.X $X.X cash QX of was bank and outflow

During ordinary share X.X ADSs, XX.X Class equivalent QX, program. for $XXX we million repurchase million our of repurchased XX% shares, our of million approximately million, A representing to $XX.X

our of million ADSs, repurchased of program. had, of approximately A XX.X million $XX.X million, equivalent of repurchase XX.X in the As ordinary our for QX, shares, representing end to Class we aggregate, XX% share

revenue Now be macroeconomic may inflation exchange and foreign business of uncertainty in this our instead starting turn, quarterly we guidance; conditions, guidance. to providing in have as Therefore, turning increased which and we'll quarter, more full recently, guidance such rates, rate, have interest revenues. on uncertainties year impact our greater-than-expected customers' to saw

For on and to operational and of views range subject XXXX, $XX revenue in total which quarter forecast expect to the the be This conditions, million currently of reflects our second million. we change. and the are $XX market preliminary current

to to for this and investors Thank I trust deepest for Shengwang the express challenging our closing, you, during to for teams everyone, our my team. and appreciation in our today. call hard both In work want their and their attending Agora period vision

Let's questions. it for up open

[Operator Instructions] Yang line Morgan of Our the Stanley. first question from comes from Liu

my from side. questions Two

Agora mentioned quarter? if impact about And the first Could the and the regarding for Shengwang trend second or next X product second The decline the further in customer terms a a or the technology. you of of is by management to few one GC for the is savings in room share growth my the lot technology. entities? more a see and largely demand differently number outlook the trend I'm new the the question use AI the is driven any flattish diverging potential quarter. slightly quarters wondering in [ph] for about second implies company. Do cost there sequential outlook. or Tony The similar from case new AI But the

overseas is on digital On regulation. customers, customers. recently, challenges both remained about talk we to -- the segments. markets. demand going X All native demand right. into side, due primarily On native and from is macroeconomic One broadly I'll can push discuss Shengwang and domestic another soft transformation domestic customer [ph] and digital digital

However, this On demand enterprises. some mentioned AI-powered we I earlier, large as cycle. there longer digital unmet we saw clearly opportunities side, would use generative lot recently, on cases. on see segment, sales take transformation That But traditional from time. is a of also

been has overseas growth generate sustained We segment to growth for the strong. momentum Ongoing overall customers, expect us. this

on On work. the in economy, demand streaming, e-commerce, Agora side, market, momentum following [indiscernible] of we streaming future sports see Twitter more overall developed positive live live especially verticals:

market in Asia. For the Southeast outlook macroeconomic from see on due Asia South competition, we side. of challenges emerging to as the That's customers such demand pressure and markets, our and

time same is model for I AI-powered models, social large going be like celebrity quite many in hugely quality. in some as help have And a also actually in question generative in mentioned, help audio/video reduced real similar create But many or or sense tutor invested virtual side, help use much cost, actually business or can if verticals. improve us much think But cheaper, to it's tutor, And language in can matchmaker be this or AI to virtual reduce of to area don't cheaper can I space. even we than more like around the education, disrupting cases your cost. a terms

can the one people you be to As our reduce who's talking platform that who's maintain person platform's on active busy cost also pay in character and can popular see, to social AI-powered to person real a platform.

I it think those, on their disrupt hugely business. can

of America the line next comes of Our Securities. Bank from from question Li Daley

regarding question -- international Agora the one business. have I our

For this and the ASP regarding key going the example, for what's And volume our for quite for volume quarter, it's What's solid forward? outlook the the growth, delivered ASP? drivers and growth.

we market adopting are and international so the the market in calls, earnings terms technology. in RTE of different markets the at stage the explained previous and development in in As China of U.S.

comparatively So China mature. market more is

XX, certainly catching So quite up past we rapidly. see in the XX months [ph], U.S. market

example, in e-commerce taken months that's technology. America. even and that probably For expanding the lot streaming geographic years case, was a demand the has Asia, and earlier. in we for in already created even have popular in just of XX been U.S., X and East off new ago XX, Also, into past really live South regions, that Middle But South more China use

more environment, cause macro challenges, momentum in So And the forward, stronger, China, in side. on Agora explained, that as is kind customers China. see looking overall traditional more the terms [ph] in we also regulation enterprise Tony trend do and just macroeconomic of of

more also constraints. budget see We

Agora of few So for optimistic terms the quarters, more the looking demand next at also in we side. are

next the from of Zhang Nomura. comes from line [ph] Ethan Our question

market. China the one I Bing is This regarding Duan Nomura. from have question

cloud the as recent that Chinese some Cloud's telecom cuts we Ali and noted price large also landscape, of plan like spinoff Alibaba operators. changes the such there from few and the As companies are in competition a

see and how Shengwang So do impact business in margins, as China, share market China? in ASP also and about we this such our future our the

adjustment cloud not First public does and to the giving of recently pressure us price all, really to us. related

However, is soft. time, proactively actually, especially edge. overall remained long in China, a for do native the earlier, strong this as our competition competitive enhance we part, has demand for I and situation, With the actually domestic mentioned is

our reduce more to competitive sometimes, And certain increase and areas to gain we try pricing market share. pressure on

products already For no similar rolling left. Everyone out previously there's sector, one in similar also cloud RTE major being public service some released honestly, already.

However, over business. with have X, stopped our They selling the partnership product some offerings. many X value-added exited already the of product either started past really their course years, them mostly of like that us or on Thank you. and

[Operator Instructions] I to Fionna am back conference now will the for questions. further I closing remarks. showing no turn

operator. you, and Again, joining you, posted Thank everybody. remarks And further our contact everybody, call if our any Thank the you. are Thank the you, also, free today. for us. feel Thank there presentation will of to call be this website. on questions,

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

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