API - Earnings call transcript Q2 2024

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Operator

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

Second Quarter 2024 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

between company's reconciliations in The the earnings be results press found can release. GAAP and non-GAAP

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

let that, turn With to it Tony. me over

Bin Zhao

second Shengwang past due and operator, were very driving million Agora this by our Thanks, digital and everyone earnings the a quality cases. our I'll in up challenging existing our new delivered revenues revenue glad see Agora products to million value review in certain growth year-over-year of despite year-over-year, the quarter, expansions the welcome business X.X% quarter-over-quarter, Shengwang success as in environment. innovation our use quarter, use mainly in This shopping. relentless results I'm RMB due growth revenue that were such to transformation cases and is macro to and first customers. enhancing $XX.X up second of to Internet-of-Things usage year-over-year live in both quarter operating driven and the call. X% X% and quarter. mainly in cases, use XXX

and products quarter. technology business our to on this updates moving Now for

Let's about Recently, real-time Agora. speech-to-text availability. from our product talk transitioned general first beta to

call, transcribe in experience. development enables of and be product our channel channel. of up stage, mentioned captions to Text to to product language this each previous and customers we live enhance As to the as audio all accessibility I to distributed earnings participants simultaneous added user our the beta improved and in Throughout can the have support major testing our X user speakers and dialects. performance for accommodate the

the events large generated models, Additionally, insights gain our at receive each product session. to and integrated customers is end allowing meetings of language with of or automatically summaries

leading first has language example, our more than For our HelloTalk, a XX learning adopt customers of one to text to product. users speech platform real-time with been million

our capabilities, language and provide live assessment, the language With live the contextual proficiency creating product integration translation, large including users model, can HelloTalk of their personalized advanced now language and analysis, experiences. learning

experience. user modern interface, create happy all developers of an tailored launch new the both a a resources Recognizing I'm enhanced we decision design of website. business are innovative our Agora's to announce new intuitive Agora, a to website sleek key and heart. at our also Additionally, customers the It of boasts developers litigation to more spirit At makers. believe and offers cool wealth and

to Next, let's turn Shengwang.

seamlessly This capabilities all resources It to developers developers announce integrate to calling our studios We skill address to games. China's to is voice are Unity in-game game with add in collaboration excited especially the set and often on recent voice allows independent multi-player small to who China their their engine. partnership our own. into Unity challenges technical lack channel the UOS game appealing and

experiences AI as for XD to available are to cancellation them proprietary features noise addition, advanced suppression immersive developers, enabling echo such our spatial create In audio, players. and

of application AI In this wider quarter, customers' in also use cases. our we have facilitated

For the example, other their calls hear the conduct add often difficult flagship calling smartwatch. clearly. for when it users smartwatch to real-time was on -- transcription in party video XiaoTianCai helped calling we latest Previously, video in to video noisy environment,

closer the the wrist the choice to video. impossible between watch make ear forcing would hard and therefore, to video see screen, audio a it to Moving make and users on

Now their cloud experience. with calls users captions AI our user on significantly smartwatch, capabilities, video with transcription real-time can enjoy their enhance

then, SDK we September, enables Last company first AI models. customer productivity and voice become assistant, in generative our language AI AI offer such real-time to use various with launch applications customers service. that companion, conversational tutor have we to the facilitated cases as conversations Since

still adoption user have Although stage, in are these early we and engagement trends. promising their applications already seen

enable Looking pace we to are forefront of AI advancement build faster application at tomorrow. innovate developers technology the a committed forward, to and of the to at conversational staying

AI efforts coming that technologies, and and firsthand the possibility the on exciting to vibrant be share products traditional welcome marks you This XXth anniversary attend the hand. such RTE community verticals Experts entertainment, more the vision applications. the real-time spirit education economic experience of There revolutionary focusing engagement This to and And to we RTE and the October, both for conference year digital of host intersection in technologies. lies as and industry. gather RTE the We all create practitioners opportunities. the and of also will and our Beijing, or Internet focusing conference on RTE will transformation, from will a conference. AI our

and teams during I prepared to thank my Before challenging both commitment and work period. the concluding their Shengwang remarks, hard Agora for want

Let's stay long-term and market value on strengthen focused creating customer our leading position.

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

Jingbo Wang

everyone. Tony. you, Thank Hello,

of results and start discuss the for XXXX, financial I will outlook quarter by the third reviewing quarter. first second then for Let me

in the quarter, an year-over-year. second and were of increase of $XX.X revenues million quarter-over-quarter Total X.X% an X.X% increase

the year-over-year since changes We regulatory the to growth have impact returned the pandemic, the XXXX. for turmoil, first of macroeconomic finally and overcome revenue and time

reduced in and emerging decrease an X.X% such of usage year-over-year. increase growth usage Agora as revenues of year-over-year live quarter-over-quarter shopping. The increase quarter-over-quarter to the customers were verticals The to business due primarily second $XX.X decrease quarter, from due in markets. and was certain million primarily in X% expansion a was

were RMB revenues increase and from as The quarter, an X.X% an such primarily the year-over-year. increasing in second certain increase increase verticals quarter-over-quarter due Shengwang revenues Internet-of-Things. million were of to of X.X% XXX.X

net retention Agora, XX% for is Dollar-based rate discontinued Shengwang and for from XX% business. revenues excluding

Moving expenses. cost and on to

my will land amortization expenses use intangible to tax For of non-GAAP on financial depreciation income assets, which right. adjusted amortization acquisition-related acquired following impairment assets, expenses, share-based of compensation comments, related equipment, of acquired I expenses, intangible focus and exclude of goodwill, and property measures,

mainly than the higher than product X.X% was was this year lower to to infrastructure. utilization margin Adjusted quarter-over-quarter and increase in of change gross year. for QX which last second was The quarter rate year-over-year improved QX decrease The XX.X%, due due was mix. X.X% mainly

of Adjusted R&D R&D control XX.X% decreased expenses cost represented year. continued the to measures. X.X% revenues expenses last quarter to to due $XX.X year-over-year Adjusted QX XX.X% compared our in in million QX, total mainly in

were Adjusted in and XX.X% year-over-year. in XX.X% expenses marketing year. sales decreased XX.X% marketing compared QX represented Sales million QX, last of expenses in to and $X.X revenues the quarter total

compared in $X.X XX.X% year. the XX.X% slightly of expected expenses primarily in were increase to of expenses loss. represented QX, year-over-year, QX quarter G&A credit G&A last to increased the X.X% revenues Adjusted million total due in

shares this sequential when expenses year, Overall, to thanks was period reduce The were with control. certain for adjusted expenses than our in X.X% share-based value. mainly operating QX higher our were dilution than to Adjusted decided effective shareholders we X.X% for compensation year. because operating lower the are employees, last below to increase cash cost compensation replace same cash trading order

adjusted loss in to EBITDA Adjusted million, margin year. QX EBITDA to was XX.X% quarter negative $X compared the for a translating last XX.X%

million margin loss the QX lower margin QX, to last of XX.X% the net translating than Non-GAAP XX.X% net loss net was $X loss year. quarter in for a in

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

cash, and quarter or due by was cash equivalents, bank Net onto of the negative $XXX products of $X.X repurchase free sheet. mainly share ADS. cash in We million. outflow to with million financial ended Moving cash balance and deposits the issued in $X.X million per $X.XX banks flow QX

Now turning to guidance.

XXXX generated of margin approximately $X.X $X.X million the be expect and quarter with of forecast revenue unsatisfactory million of of gross million. and to profitability. XXXX, XX%. $XX.X This products certain currently products Such third of in of $XX.X of second For the end sale revenues quarter was third we revenue quarter below million the average in The of our such XXXX. products reflects total between

and operating our we expect change. in in bottom outlook increase our which also lead subject of the views are end on current margin positive So such preliminary to will a line This a reflects products market impact gross the meaningful on and and quarter. of to third conditions, sale

inspiring year-over-year challenging environment. turning returning point under an closing, growth In the to a operating is

intersection AI, engagement real-time We are excited and growth confident remain about emerging use especially the between and conversational our potential. about long-term we cases,

teams the attending hard Thank call this Agora today. both you and for their work Thank and everyone, contribution period. for you, to during Shengwang

it open questions. let's Operator, up for

Operator

from the [Operator Yang of Liu First Morgan Stanley. line Instructions] question is with

Yang Liu

X questions I have here.

The first outlook. is regarding the business

elaborate very the just And margin, whether operating and you margin or mentioned net business that low-margin impact mentioned sure ] is low the the [ some is you led also the business or business? quite or out the please reason Jingbo that bad line. what the outlook will bottom Could gross you more margin As to potential has that the to a of face I'm business. behind that of that you not competition about

of Could of any whatever share emerging if on second you usage. expectation use the application, the booming you the of potential is RDC is what based for future question see applications the please AI-related about RDC more company's And your or pipeline, that? or cases

Jingbo Wang

I'll question. first take the

we competitive this are these because years to range. in are mentioned few single-digit a related certain given is. These in yes, market -- -- also low products quarter, but is expenses. margin, they pretty already more products and technology back the that we And so the CDN-based and in products have other gross low how in we So one

the to margin live decided growth. see near not basis, we close we it's -- And why And we the the sale that's we on medium know, actually generally And So operating very latency a a exit in overall term. kind and improving basically that's quickly on we believe market why will been That being business of to business terminate sustained doesn't net inactive. have margin and as towards is focused products. market. of slightly don't such this profitable we drive even entire very streaming the efficiency mean profit, turning that operating

existing technology. getting related the on not innovative We RDC based technology, are the other but traditional products, based on more

products. legacy competing be that and to on innovation market, that we focused but continue more more we'll offering be So in will versus traditional

Bin Zhao

side take the I'll of question. GenAI

to positive We have with feedback talking general. network companies and is a The in reliable, transmission recognized importance very globally all language been capabilities actively model leading by well players. low-latency highly multi-model large of

many them products We are to of working drive with closely and multi-model solutions.

our also worked some have -- already of of our SDK. applications together community. in AI integrated applications with Some developer we have have consumer with real Meanwhile, already consumer engaging

XXX,XXX to real bring the If engage with you [indiscernible] the to at have case. communities models almost with models we into working use them that different different low look such on

in also like to October. to more start-up stay offers in announcements innovate. RTE help with partnered conference our tuned We program companies the [indiscernible] for Please

Operator

next our America Securities. of the David moment from comes Bank Lee of for One with line question. It

David Lee

is It market questions QX in for the to And see I revenue recovery And here. we Number and seems what's the one? have by international segment. key is domestic that stronger QX the in Shengwang do how compared X about revenue Agora. an trend drivers? getting one the quarter-on-quarter

breakeven question second our about And the target.

how following some control or the we the business. the in been have time. the still do target have to -- update the we also given -- and As And about down expenses about low-margin for quarters

Bin Zhao

followed that to In be terms will growth international real-time verticals, this the generative in U.S. the SDK markets, similar conversation and direct-to-market. for demand, us first IoT we shopping and momentum AI a enables models, We believe voice also QX offer Since stabilized. developers have new products. provide framework, applications. see company particularly live competitors with recent Competitive in and become will we unchanged customers, in during of we past gain quarter. AI battlefield applications. largely our pressure AI pressure serve conversational of with some demand see conversational also RTE. strong launch of their significant IoT the In landscape With for competitive China our growth edge AI engage and to Competitive market, we

Jingbo Wang

I'll take second the question.

corporates what now, for from see So we robust. right demand remain our pretty

gross compared compared we a So And hopefully, growth do margin very as QX healthy. QX the and well. revenue in of our expect to remain sequential QX QX to corporates

products I see the and QX. impact in certain as will margin mentioned, bottom information a uptick QX not line. in low But you margin So pretty the nice on gross will the

OpEx of terms efficiency. in cautiously, we'll OpEx, to coming anything, further improve very QX we In might try than act to manage higher and quarters. the continue we do to the If be not

this chat point, the to still parts, at of breakeven, I growth. So that given are a lot moving committed and sustainable are we profitable but cannot there promise timing of achieving

in think about in returned to as we the macro after business this funding the [indiscernible] a U.S., as both the if in the changes and lot macro quarter, we China dynamic, year-over-year of relations. So and growth environment environmental challenges well

discipline matter as out. to before and drive such that business finally and revenue eternal there. the come continue we maintain expect and grow in core our just we achieve this continued on have And then, cost continue to of -- point a we to and point now basis it's but back breakeven will So the on from growth, goal believes to we efficiency, we achieve a halftime grow basis and And maybe GAAP capital a XXXX. from

Operator

company's questions, further attending no want thank for the are to today. I call there as And everybody

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

Agora (API) 20 Aug 242024 Q2 Earnings call transcript