Earnings call transcript Q2 2023

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Operator

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

Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings, and a replay of today's call can be found on its IR website at investor.agora.io.

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

about future events results today trends. the make company are During predictions are and may and financial the based this other forward-looking actual on These call, what statements and performance its only will materially. that statements differ future believes company

the today's the in Inc. factors company's to any update statements subject risk certainties that no are performance could risk other its the the final the affect obligation the its remains contained results forward-looking statements and make on company prospectus forward-looking These earnings with relating initial release in of Agora financial assumptions and today's including the information to detail and offering. call. and which and filing SEC, business, factors company in to and press may its other public discussed

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

Tony Zhao

Hi. Thanks welcome call. earnings our to operator, everyone and

Our quarter conditions year-on-year, global was X.X% for down a Agora, to due mainly environment second for customers. certain and tightening macro the of $XX.X financial million revenue challenging

from Shengwang, cloud sector, RMB downstream revenue million Our fast-evolving in excluding customer and to regulation a XX.X% due business certain mainly verticals. disposed for XXX.X if year-on-year revenue and was K-XX tutoring the engagement down academic slowing economy

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

business product and moving update our the technology Now on quarter. for to

service. violence solution from leading global content, goods, bullying our more. announced detection keep recently end adult child spectrum hate with the harassment, including provider and online and the behavior We unwanted of widest a abuse, content safe Agora. harms, content, malicious ActiveFence, with starting and First, illegal users of speech, AI-driven ActiveFence and moderation partnership

and processes. is help without removing handle given Agora can moderation consumed Through our better boosting engagement easily of live By safety particularly emerging detecting moderation significant video We Extensions for while trusted real add in a time, unwanted content their content to Marketplace, in functionalities complex applications believe content time. more important that and and developers time ActiveFence’s generated audio online to applications, in user harms kinds customers moderation environment. is their allow real to ActiveFence tools real end safer a challenge change all development engagement and and and content

vertical example fan engagement case area as platform their the have specialized live religion, quarters, usage strology and a the from of typical side, Astrotalk, or influencers good or creative applications over use network sports X,XXX or an in for communities. interest-based or adoption, operating over few meditation, yoga, past social we is base real in sessions. arts, a astrology, seen creators, online A with through video On in networks interactive streaming time use increase experts XX cases, prominent a over calls such engage with astrologers. In countries

talking engage The clients potential with astrologers and live to technology, use to predictions providing broadcasted clients. Agora’s to platform enables multiple observe astrologers innovative inclined to leveraging introduced calls between show to By that would objective are clients Astrotalk a be case that astrologer, astrologer. customers. an the When simultaneously video create they more others was with same

following has of feature. in active sessions experienced launch threefold Astrotalk the result, a this remarkable As growth

proprietary experience to took often considering deliver the video case architecture find customer’s end separately beautification customer latency, codecs, had unique most specifications quarter, for and Shengwang. live to streaming. super video And time upgraded to In enhancement order integrate solution calling use on functionality high product user our Moving and the as features the effects. video device resolution, to and compatibility. video it quality, video-based extensions other Previously, our we in third-party definition for and substantial such a and past fluency, suitable for balanced

live With their live and customers. oriented experience. streaming for host monetization multiple only shorter ultimately our now retention use but development improved not new Customers use as to case leads to specific practices solutions, shopping. interaction, an host also streaming, single from such PK, and cases enhanced experience host-audience better best benefit customers time, user hosts user a opportunities easily can access This live tailored end our

to recently to their standard platform from and solution definition one-on-one For streaming our adopt example, video definition. live upgrade a dating high comprehensive

with provided also environment and In addition improved noise to poor lighting, the beautification. perceptual increase resolution, quality uneven suppression, coding solution video video our in or video in video

a XX%. Meanwhile, definition than the tips increased also dating duration the of more high generated the the upgrade, hosting user higher by and itself result As and revenue. platform matchmakers average

suppression disruption-free which early algorithms, XX at AI its XXXX innovations remove capabilities more for Shengwang deep on Shengwang companies chosen In a than noises of and was Conference. July, X the users. of Artificial echoes, noise more unwanted immersive can as experience and XXX then demonstrated the learning showcase based to leading Intelligence ensuring types effectively AI-powered World background end

suppression AI used verticals customers by such noise been our across and collaboration, remote as widely Our gaming. social telehealth, has

in in suppression length AI For our average application. our voice platform noise a example, after social session realized their increase X% integrating

our consist I the like site, remarks, Agora of you Before events. conferences. this program X to to of all RTE RTE On year concluding upcoming my would invite prepared will

India events Social, facilitating & Korean virtual on a and rapidly the long and and in be India how key Tech, RTE Media a series We on communities Live this languages, within Shopping will live Indonesia focused Gaming. education with place highlighting hosted Shopping, discussions take APAC be month Live Astrology, and new RTE shopping. Xth. featuring programs APAC will space. webinar RTE event Metaverse, Regional evolving Faith launch will for of evolution fully Entertainment, RTE exclusively RTE will and around is technology leaders October RTE

RTE through global growing and foster community innovation of spirit to our conferences. excited We the continue are our

XXth – held October year’s will from be leading by immersive This will of immersive to Together around possibility conference the artificial RTE experiences. explore practitioners, On expert shaped to Beijing environment be definition the in center and how intelligence envision will generative conference advancement RTE. future and XXth. Shengwang bring the side, will industry with technology will and and we this that high

With me that, let Jingbo, turn financial results. to things reveal will our over who

Jingbo Wang

Tony. everyone. Hello, you, Thank

X.X% me reviewing quarter the third last the million were Let decrease for results second a revenues second and year the the outlook in start of quarter Total a and for I of will by $XX compared same of first discuss XXXX. financial with then quarter XXXX, XX.X% of quarter-over-quarter. quarter, decrease

$XX.X cases products due and second quarter to a year-over-year from starting increase use decrease to primarily an emergence macroeconomic XXXX, of social customers half in usage pricing X.X% Tony reduced challenging the as of year-over-year X.X% decrease increase the was networks, of of of second were primarily due sensitivity usage to Agora The just increased as growth our and last million revenues of and vertical The environment year. was such quarter-over-quarter. quarter-over-quarter due mentioned.

Shengwang from for decrease in Shengwang RMB Agora a is revenues the and revenue X.X% were retention economic of and quarter X.X% slowing tutoring K-XX Shengwang to tutoring rate year-over-year sector, markets. due XX.X% the excluding a Dollar-based academic general If from regulations primarily sector. second business decrease quarter-over-quarter. XXX.X of was disposed XXX%. XX.X% decreased K-XX CEC net and the revenues excluding which of evolving million fast and year-over-year during is rate for revenues conditions downstream certain Dollar-based quarter-over-quarter, XX%, academic retention net XXXX,

Moving on to cost and expenses.

and XXXX, to amortization compensation exclude mainly in X.X% I which for some margin intangible adjusted product of due share-based comments, expenses, gross acquisition-related than and flat intangible which acquired of financial QX to measures, equipment property quarter of non-GAAP Adjusted was following QX tax to right. impairment a my expenses related of goodwill, acquired income and XX.X%, lower mix was assets, talk will land use expenses, XXXX. amortization compared was For depreciation assets, second change

As mentioned controls. calls, QX implement expense and have in continued reduced global we previous to in effective we restructured XXXX, workforce our and earnings

QX, of year-over-year. quarter revenues expenses in to expenses million year. revenue XX.X% QX, expenses Adjusted sales in $X.X compared XX.X% to decreased As and year-over-year. expenses and total million a R&D total the year. XX.X% quarter in result, represented in adjusted QX decreased R&D the compared marketing $XX.X XX% last represented marketing were of Adjusted in QX XX.X% in were last XX.X% Sales

X.X% negative fair value in fourth adjusted EBITDA G&A million million, $X decreased private offset loss year. EBITDA last in in of primarily Adjusted million represented million. in the year-over-year. investments QX, companies loss translating was lower expenses than equity on adjusted a $X.X quarter, Adjusted in G&A revenue QX EBITDA to were to margin compared QX $X.X to loss by in last margin of was part in XX.X% the the which expenses QX, XX.X% $X.X million, loss investments total in certain XX.X% XX.X% $X.X quarter due significantly year. of of change Investment was

Non-GAAP was quarter million last QX net net $XX.X and net in in to to $X.X QX, QX in this a fourth XX.X% million compared in translating margin margin loss year. year loss non-GAAP of loss a XX.X%

is of reporting which Easemob's identified completed items operation, of the we P&L extraordinary While after integration only In the in unit. this one impairment quarter goodwill. we QX,

which in the Considering of performed and the million. $XX.X is on regulatory the impact and the relation global quantitative in we Easemob on tests challenging as natural impairment certain recognize of market a acquisition, sectors, result environment to impairment demand changes macroeconomic goodwill goodwill full

of was goodwill the no QX, there As on outstanding sheet. end of balance

net $XX.X flow to $X.X flow year. in was last $XX.X negative to million million QX million $X.X Free turning year. was compared Operating Now flow. compared million to last cash negative negative cash cash a

due XXXX June quarter ended XXXX, issued company. commitment Since in Net cash approximately to of negative million Moving in $XXX.X and $X.X free deposits to shareholders Board's our equivalents, repurchases, products by share We share safeguarding confidence returned in of mainly to the repurchase the in the long-term $XX $XX demonstrating on and the cash share Board February, have and million as to and outflow prospect its bank to was of we cash balance value million. banks. million program approved shareholder of the repurchase sheet. with cash, flow QX financial XX,

As had from reduction outstanding XX% million total January XX, ADS of of XX.X outstanding, shares XXXX, XX, reflecting XX.X before a the June company share reduction the approximately started. XXXX ADS program million approximately repurchase or of

which return program, shareholders. February, $XXX of our far, repurchase to will its meaningful of and share expire So million have completed XXXX, end the undertake continue at to we we to intend XX% capital

turning to Now guidance.

are technology, and engagement and market real-time to long-term we prospects of In are well-prepared for challenges. operational confident revenues of near-term global market currently third the to XXXX, XX.X million. and views reflects This and For total the current million preliminary be our quarter expect XX.X USD about between we the we conditions, are which USD forecast uncertainties subject closing, to change. for on the

teams for Thank Shengwang to work a and Thank you, today. call trust. both everyone, you our Agora the and investors their for attending hard for

Operator, let's it open up questions. for

Operator

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

Unidentified Analyst

Yang Liu This is from Morgan Lydia Stanley. representing

So our your as domestic outlook management, the you question is your and market this demand for of observation recovery well the of and situation, year? half overseas both as in for second review can

Tony Zhao

Sure.

terms market would – and of the China market. into international market I U.S. the this In divide

pretty for just that see and social demand are interest the the at do So well doing like certain e-commerce, moment. mentioned, U.S. groups, vertical as verticals focused sectors we from networks such and pretty market, on international education IoT healthy

weaker. emerging the such certain and popular hand, pandemic, use given cases as relatively the On that were events online other are markets

is side, training, more demand financial see China sector such demand healthy academic transformation professional large the institutions, from also education. from On we resilient, and digital enterprises as

social healthy China, growth see to also in promising the customers, we China, comment regulatory And on in operating regional from also I’d pretty sectors, situation, top demand like side. despite the environment product challenging pretty the entertainment growth And there. within we on see the apps of

demand see such on we On customer moderation, AI-based and features high side, the as definition content healthy for products. transcription of – demand real product a time also base pretty video lot

products new gradually and cautiously macro of we will improve in both driven offset during just So like at year, in in other year of outlook, that ongoing are the demand also by optimistic terms remainder I by overall time, mentioned, the China emerging markets. same and challenges, the these full

Operator

of line [Operator Bank the America of Zhuang Securities. Instructions] Our from from next question comes Harry

Harry Zhuang

questions. X have I

plan some future margins the also the what First the the one about give AI of X margin the products revenue second and for next us is And the question you year? contribution trend. regarding next gross the the in quarters the is is company? Can for outlook and

Jingbo Wang

level. as On sequentially, the not is flat, it's can gross pretty margin, healthy you currently a at and basically see,

of remainder expect stable for remain do margin we gross relatively year as cost to the the continue our So optimize to we structure.

to try certainly year, gross healthy our but maintain early plans for levels? margin stable to it's As and to a next still say, probably

Tony Zhao

is AI-related initiative. improve products, our in that what video ActiveFence true real-time leveraging we mobile XXXXP As definition mobile of We Also capabilities real-time the solution and AI. to is AI video high the to one mentioned third-party provide our on or document mature also product and I leveraging real-time this video of leverages video is also opening real-time are performance. believe that prop, content first moderate transcription ones the activities initiative a actually, state, other are first our expansions, able HD to to greatly the like are technology AI HD based level remarks, like to

expand encouraging. firmly boundaries development end as revenue stage experience, user all is large AIGC early a will Also, believe a RTE models. enhanced of a multi-model won’t significantly capabilities video short-term are and as be contributor AI the bigger but still the voice for and their much very at generative trend, We it major

We certain voice-based real-time and vertical AI cases companies. have working game AIGC, on customers such AI-powered been as leveraging players use with closely

the We expect to launch announcement product coming make months. in

be addition, October. of main AIGC will one the upcoming in conference our of topic also In RTE

more We showcase will also join deeper us Please a during have conference detailed this AIGC. and the latest for demo discussion. on

Operator

from Instructions] Citic. [indiscernible] line comes next [Operator Our Wong question from the of

Unidentified Analyst

related there company's my the within two any that, will the more side. been on first Actually in change any has year? the questions there optimization from be And is one And profit? the guidance

Tony Zhao

Can you second repeat question? your

Unidentified Analyst

resource And there be about the more year? within any related [indiscernible] will the optimizations

Tony Zhao

I'll those take questions.

breakeven year. and QX goal the committed So regulatory income challenges in to of remain macroeconomic recent despite we challenges, non-GAAP this our achieving net

non-GAAP level income per the QX against So this year in net year.

by the few expenses have So quarters, XX%. operating see effectively past can as you reduced we in roughly

the level we operating with efficient at we are team now right So believe a size. quite

to as in have focus our breakeven a still cutting incremental revenue of We our further to chance end cost we and drive really headcount So the is QX but net year. growth we see make revenue the savings. incremental recover, towards rather non-GAAP good small we achieving income of think

Unidentified Analyst

noticeable competitive there a change one international my that And is one. the has my That's second been in environment? domestic last and

Tony Zhao

previous Sure. increasing competition start-ups. There and quarter. change In see much China, in landscape competitive the U.S. been same in But markets, competitive landscape. international overall regional hasn’t the we slightly remains as from

I accelerated with drive create more good forward. thing industry, market a customers more and is of ideas general. for the think overall a this more choices for and RTE technology industry to adoption in will Together, we vibrant

macro will players And smaller the went out competitive landscape companies impact largely especially market, recent same. also The for those saw environment Overall, we remains business. some competitors. the challenge, oweverr, also in of

in technological this of terms of We’re still the leader completeness space clear performance features. in and

share during I With the right gain market period. execution, and are focus to the think well-positioned we challenging

Operator

attending you, showing company's our I'm queue. Thank the concludes the for everybody, further no in This Q&A. questions today. call

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

Agora (API) 21 Aug 232023 Q2 Earnings call transcript