Q1 2022 Agora Inc Earnings Call
Good day, everyone. Thank you for standing by and welcome to our core Op, Inc. First quarter 2022 financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Lots of questions on the phone please press star one.
Please be advised that today's conference call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the call over to your speaker today, Mr. Beyond that Chen. Thank you. Please go ahead.
Thank you operator.
Good morning, everyone and thank you for joining us for our first quarter of 2022 earnings Conference call. Our earnings results press release, SEC filings and a replay of today's call can be found on our IR website at Investor Day, I Grand Isle joining me today are Tony Zhao Thunder chip.
And as CEO , Jean Paul Walsh, CFO reconciliations between our GAAP and non-GAAP results can be found in our earnings press release. During this call. We will make forward looking statements about our future financial performance and other future events and trends.
These statements are only predictions that are based on what we believe today and actual results may differ materially.
Forward looking statements are subject to risks.
<unk> assumptions and other factors that could affect our financial results and the performance of our business and which we discuss in detail in.
Our filings with SEC.
In today's earnings press release, and the risk factors and other information contained in our final prospectus relating to our initial public offering a GOR remains no obligation to update any forward looking statements. We may make on today's call with that let me turn it over to Tony Tony.
Hi, Thanks, <unk> and welcome everyone to our earnings call.
As many of you may have known one of our global headquarter Shanghai will squeak by outbreak of Omicron March.
It has been in lockdown for nearly two months two months now.
<unk> has just started the process of resuming offline business activities.
During this time our teams.
<unk> have been working remotely.
There has been no disruption of our business operations or research and development efforts.
Here I would like to express my sincere gratitude on the cure to all of our team members impacted by Covid.
Before going through our performance in Q1, let's take a look at our leading market position and recognition by ubiquitous market observers.
According to a recent industry report from CIC.
A girl continued to be distilled undisputed leader in the global real time engagement platform as a service market.
With more than twice the market share our near nearest competitor both in terms of revenue and number of units delivered in 2021.
As of March 2022.
We maintained our number one market share RP SDK installations globally.
In regions like the North America.
South East Asia.
So.
Yes.
Our SDK installation market share is dominant compared to other RPE or public cloud service provider.
For example, if we.
Look at the top 10, social dating apps globally.
All of them have rte features embedded and half of it half of them apart by Agora.
And if we further look at different regions.
<unk> power five of the top 10, social dating apps in North America, and southern all of the top 10 in China.
Also in this quarter <unk> was selected as a finalist for SaaS companies towards changing ideas 2022.
I read your fast company owners that businesses and organizations driving trends in the award.
This year in the workplace category.
Company has selected <unk> as a finalist to recognize our innovations in connecting works rewards of the metal worse to the physical one.
None of this would be possible without our team's strong commitment to driving technology and product innovation.
And our customers cost and the confidence in us.
Next let's move to our.
Business update.
Sure.
Sorry.
Alright.
Let's move to our business update in Q1, our revenue for the first quarter.
So the $8 6 million.
<unk>.
<unk>, 4% year over year.
This quarter 74, solid solid new applications rejected or platform at <unk>.
End of March our number of active customers exceeded 700, adding nearly 400 compared to one year ago.
Our results this quarter were impacted by the drop in demand from key call ophthalmic children customers in China due to regulation.
On the other hand, we continue to see strong growth momentum in markets, such as Middle East Southeast Asia.
Europe .
Which not only offset most of the shortfall from the <unk> use case, but further diversified our revenue mix and enhanced our business resilience.
More importantly.
Excited to see solid evidence of a long lasting shift in people's mindset and behavior as they continue to move their lives online and spend more time in what's your engagement sessions.
Even in countries, where lives have largely returned to pre pandemic norms.
We believe this is.
You reverse flow trend across all regions and verticals, which will bring tremendous market opportunities for us.
Next I will walk you through some important updates on our UK solutions and technology and product advancements during this quarter.
Our last earnings call, we talked about our metal chat meta lives under medical television solutions that enable developers to easily create immersive and.
Underpinning.
Voice chat live streaming and <unk> experience with <unk>.
Even through the virtual space.
Recently, we launched meta interactive game to further strengthen our metal worst product offerings.
Through partnership with game developers with Brent lightweight part of games to redo and whats chat room live streaming sessions, which add another dimension of fun and engagement to the users.
In addition to redo and engagement.
Engagement, our customers seamlessly embedded such game.
Lastly, embed <unk> in their social and entertainment applications.
Has the experience.
And engagement.
Moving to another vertical.
<unk>.
Moving to another where to go where do you see many new use cases that strive to make the world a better place.
Of things or Iot.
We recently launched a currency software solution for IP cameras, such as video doorbell Smart speakers.
Our solution parse critical functions of the device, including real time monitoring two way video, calling remote control and the recording.
Leveraging our knowledge and.
Expertise rte devices with our solution established with recession in just one or two seconds.
With very low latency.
Our module is efficient in par usage.
And it is compact enough to fit on almost any small and low cost devices.
Another interesting use case in the Iot space is new eyes.
Leading augmented reality smart glass.
Its user Humphrey access to the virtual world.
The realization of real time information, including <unk> modules.
Designs and the data.
Whether it's being used.
<unk> utility safety check.
Or on the constructive side of Sky's scrubbers workers can leverage our video API to safely transmit video information to make informed decision quickly.
Our low code and local platform continue to gain traction among developers globally.
For example studied dot com.
A leading online education platform using our low code solution app builder to accelerate its digital transformation.
Sorry, Dot com has traditionally been an on demand offline course powerhouse.
But we also enable live tutoring as a part of their offerings using <unk>.
On the technology front.
<unk>, our proprietary AI powered noise suppression algorithms in this quarter.
Traditional noise suppression algorithm works fine on general occasions, but it sometimes fails to catch unique noises, especially used cases.
Such as a sound of breathing and swallowing when thinking us all.
Our AI powered algorithms can deal with over 100 types of background noises.
Which gives good offers the flexibility to do the best lowest depression for their specific use cases.
Edition.
Our algorithm is designed to be compact and efficient and therefore performs well on web browsers.
Lastly, our team.
Glad to announce that Mr. Roger Hale for more formal.
Walmart Chief Security Officer at.
Personal data privacy and protection company Big IV has joined our GOR in the same role.
Roger will work with our executive team to navigate complex compliance and security and determining risk management and the security best practices for the organization.
Will also serve <unk>.
He will also serve as the process owner of all business of all.
Of all assurance activities related to the availability integrity and confidential entity, all customers business partners employees and business information.
Business information.
So currently in compliance have never been more critical than they are today.
With all in process with an impressive track record in the many years of experience and expertise.
We're excited to welcome Roger to the team.
In addition to the hiring of Roger while also growing our executive team through internal promotions.
Including Chief Strategy Officer, Chief revenue Officer, and Chief experience Officer.
Most aimed at streamlining our global go to market efforts and are further enhancing our gulfport experience.
I am confident that our expanded.
Executive team will continue to drive innovation and overall.
Help create award where real time engagement.
Ubiquitous.
With that let me turn things over to <unk>, who will review.
Our financial results.
Thank you.
Hello, everyone.
Let me start by reviewing our financial results for Q1.
And then I will discuss our outlook for the fiscal year on May 22.
Total revenues.
So the endpoint six minute owners.
Quarter of 2022.
A decrease of $1 six minute or two 1% year over year.
Our revenue growth this quarter was negatively impacted.
<unk> resignation on K 12 mid.
$2.
Got it.
Our revenues from K 12, tutoring sector in China were approximately $14 million.
Fiscal year 2021.
Our revenue from this sector, where approximately one point for a minute.
First quarter of 2022.
A decrease of approximately $10 million from the same quarter last year.
The other half.
Gross momentum.
Other geographies and sensors remained strong in the quarter.
In particular revenue.
From U S and other markets also China.
Almost 50%.
And 16% quarter over quarter to $16 4 million in Q.
Sure.
Representing 42.5% of total revenues.
As we continue to expand globally on a revenue basis also became more balanced and resilient.
In this quarter.
<unk> contribution from top 10 customers with one 2% compared to 35%.
Same quarter last year.
Our trailing 12 months constant currency Paul Anthony.
Thanks Julie.
95%.
Excluding small.
The expansion rate was also negatively impacted.
K 12 segment.
Any other.
Other sectors and geographies.
Uh huh.
Moving on to expenses.
Well my following comments I will focus on non-GAAP results.
Exclude share based compensation expenses.
Acquisition related expenses.
Amortization expenses.
Good morning.
And income tax related to acquired intangible assets.
non-GAAP gross margin fourth quarter.
63%.
One 6% higher than Q1.
As we mentioned in previous earnings calls.
Mainly driven by technical and infra.
Restructure recommendation, we have been implementing.
The beginning of 2021.
non-GAAP R&D expenses were $25 3 million do you up.
45 points, we present year over year.
As we continue to hire talented employees.
<unk> R&D team.
non-GAAP R&D expenses.
65, 6%.
Revenues in the quarter.
What is <unk>, 3% in Q1 last year.
What is the enormous opportunity RPE technology presents globally.
We will continue to invest hasnt been one.
To strengthen our technology leadership.
And empower emerging use cases.
In the near term.
Our plan is to keep R&D expenses.
Are they relatively stable level in dollar terms.
And focus our resources.
All of our projects.
To maximize long term impact.
non-GAAP sales and marketing expenses.
11 six.
Thank you.
Up one 5%.
Yes.
Let me ask Paul to team expansion and increased advertising expenses.
As we continue to step up come to market efforts globally.
And the marketing expenses represented 30% of total revenues in the quarter compared with 18, 6% in Q1 last year.
non-GAAP G&A expenses.
Kevin.
Thank you.
64, 7%.
Yes.
Mainly due to continued expansion.
Credit loss provisions.
Yes.
Represented.
Okay.
In the quarter.
Compared with 11, 1%.
Yeah.
non-GAAP operating loss was $18 nine minutes.
Making 249% non-GAAP operating loss margin fourth quarter.
Compared to operating loss margin.
Very good numbers in Q1.
Turning to cash flow.
Operating cash flow.
$15 million do you want.
Compared to a negative $2 7 billion.
Free cash flow was negative 17 minutes.
Okay.
Okay.
Moving on the balance sheet.
In Q1.
The $18 million in cash cash equivalents and.
So come the investments.
Compared to 155 minutes.
Q4.
Net cash outflow in the quarter.
Can we do to free cash flow of enacted.
A minute.
Cash.
Well welcome investments.
Certainly.
Hi.
Answering your question.
Kevin six minutes.
Now turning to guidance.
COVID-19 has.
Variable perpetual model.
Our historical experience may not apply.
Our guidance.
Revenues Okay.
There is assumptions.
Subject to change its toll certainty related to the impact of the COVID-19 pandemic.
Is that what was it.
Good morning, Glenn.
We maintain our previous guidance.
Total revenues for that.
I expect it to be in the range of 176 minutes to understand.
Okay.
Now turning to the update on the status there.
Holding touring company accountable act or HFC.
I'll leave my first 2022.
RPC.
Additionally name Nicole.
Sure.
Let me check.
Hello, you are filing of our annual report.
Yes.
For the fiscal year.
So regarding 2021.
We understand that.
Yes.
I didn't hear it.
And then two really types.
Okay.
<unk>.
All of it.
And this indicates that.
Yes, Sir.
<unk> you.
It was working paper cannot be inspected or investigators.
Uh-huh IV PCA.
Can you just would you have you're painting.
Financial statements included in the 2021, one 20-F.
In accordance.
Thank you Jessica.
Do you see.
Turning that corner filed quarterly report.
I just don't have it but that.
That is not being subject to inspect action.
What would the PCL.
So we conducted.
Any 2020.
You said Chuck.
You bet.
Sure.
Yes from being traded.
National Securities Exchange.
Over the counter trading market.
Yes.
We will continue to monitor market.
Actively explore hospital solution.
Interest.
I couldnt try to maintain our listing status.
NASDAQ.
In closing.
Delivered a strong first quarter performance in this challenging.
We are excited and very confident about long.
Long term prospect of our global business.
Thank you to the entire Guardian.
Javier everyone attending the call today.
And hope you're healthy and safe.
Let's open it up for questions.
Thank you.
At this time, if you would like to ask question. Please press star one on your telephone and wait for a name to be announced.
If you would like to cancel request. Please press the hash key.
Once again to ask a question please press star one.
I have a question or line of Yang Liu from Morgan Stanley . Please go ahead.
Thank you.
Yes.
Two questions.
The first one could management share.
Revenue growth outlook for this.
Three business lines that is overseas business.
China K 12.
Also China now.
In the next few quarters.
Is it.
Is it fair to say that our first quarter. This year should be the last quarter to see negative impact from the.
Education regulation.
And also.
We are curious about the outlook for the China business as well.
That is our first one.
The second one is on the gross margin because we see that to six.
62, 4% gross margin in the first quarter is quite good considering losing some education related to volume.
Do you think this number will be relatively sustainable.
The future or there'll be some fluctuation either on the <unk>.
Downside or upside.
Gross margin, especially given the overseas part is growing very rapidly.
And the third question is.
Regarding the.
Or are there maybe depreciation recency.
Though the companies.
Revenue have both China part of it the non China part and also the cost.
On the Opex.
Also have a China now I'm trying to parse what is the overall impact.
Also FX to the.
To the future.
Could management share a little bit on that thank you.
Thank you.
Okay.
Yes.
On the first question.
Regarding Smith has evolved.
So.
If you look at the last 12 months so basically.
Please take me trying to K 12.
90%.
One versus Q1 last year.
And then K 12 business in China.
Put down 15%.
And you asked a lot of international markets.
It was up about 50%.
So thats the last 12 months.
So I.
Okay.
Right.
Hopefully this will be the bottom.
Impacted in China.
We still have some revenues in that.
Sector.
One question remaining in the quarter.
Much less.
Much less.
Looking now.
And if we look forward in the next.
Four months.
We would expect something similar.
Well, 50% growth.
Are you asking how the international markets.
Yeah.
On a per some growth in China.
Obviously.
Macro uncertainties.
Yes, so all these numbers obviously.
A lot of assumptions that would be the expectation.
The second question gross margin.
So actually.
Okay.
We think the technical optimization has been very effective.
There was some.
Mike.
The loss of the K.
Good morning.
Sure.
We've done a reduction in utilization about infrastructure.
That was compensated by a.
Thank you Christian Costco.
Costco elimination.
K 12 has largely gone now we don't expect this impact to continue in the future.
Actually we are expecting GP margin to remain stable.
Stable.
Remainder of the year.
Compared to Q1, obviously, there will still be some.
Current period to period fluctuation.
We expect it to be very significant.
The third question RMB depreciation.
It's bill.
Right.
Thank you.
A couple of them.
So.
Roughly speaking RMB depreciation by about 5% in Q2, so far come back to you.
On the revenue side.
About 60 person on board revenue.
Currently denominated in RMB.
Assuming the FX.
FX rates stay where it is today and it will have an impact.
1000, shippers and all that.
Yes.
You too.
And causing expenses.
I couldn't have similar fashion.
But net net I think impact.
The impact on the bottom line.
Much less.
Okay. That's good.
Thank you that's.
That's very helpful.
Thank you for the questions. Once again to ask question. Please press star one and wait for a named Japan nodes.
Our next question comes from the line being drawn from Nomura. Please go ahead.
Thank you management for letting me ask the questions.
So my first question is about.
The impact from the COVID-19, and the Lockdown in China.
Since March.
And how do you think about the.
Impact to be.
To the demand and the volume growth.
Different verticals or whether it's good or bad whether it's positive or negative impact on my second question is about the.
Competition.
So glad to see that.
<unk>.
We are still maintain a global leading position in the global Rte market.
But do you see that going forward.
The competition in China will intensify, especially for the large.
Internet or our tech companies.
Which may ramp up there their product launch or.
Are there.
Other strategies in this in this market and its rte market.
The last question is about the.
Stock repurchase plan I see we have completed 4%.
The total.
$201 million program and <unk>.
So can we so just wanted to get your thoughts.
How we are going to proceed with this the stock repurchase plan in the next couple of months, where we accelerate.
The repurchase.
Q2, Q3 Q. Thank you.
Alright, I will take the first two one is on the.
Call it in Lockdown in China, I think the recent lockdown in Shanghai and other cities.
It has been.
Hi, sell small positive impact on our revenue mostly from education sector. The reason why it's really a small impact is twofold.
First this time only a few cities were affected.
The entire country compared to 2022nd K.
K 12 after school tutoring is skol.
The number of incremental online classes is also much smaller than 2019.
In the near term the overall macro environment in China is very challenging.
See that.
General business activities.
<unk> Dong.
Which will affect our customers and their end users.
Also some debate on regulation of social and entertainment apps.
Unclear Hollywood will play out in.
In summary, we are very bullish about the long term perspective.
Arty, but there's just a lot of macro uncertainties in the near term, we're watching closely and we'll adjust our strategy and operations if needed.
And second about the competition.
There hasn't been too much change in strategy.
From our main competitors such as <unk> in the U S and Tencent in China.
On the Rps side.
We're not seeing any big difference.
From operations, we have a lot of competition already in tunnel markets, especially but we did notice that Bob.
Compared to the competitors.
Making efforts in the low latency live streaming area. This proves that our earlier.
Predictions that a lot of streaming services will return to low latency technology.
This prediction is actually correct.
The industry is embracing it we think this is an important market with huge potential and our technology is actually well positioned to capture opportunities in this market.
But we did see a field startups also reading more phones.
This industry trying to build similar offerings, mostly on the local side overall I think this is a good thing for the industry with more choices for customers and the more ideas to drive the industry forward together, we will create more weapons market and accelerate the adoption of <unk>.
Keith oncology in general.
With Guo calling competition, we also see that some companies went out of business.
Overall competitive landscape remains largely the same we're still the clear leader in this space.
Turns of technology performance.
Competitiveness of features.
Okay I'll take the second question I was just talking to purchase yes.
Yes.
It's about $8 million.
In Q1, and your purchase continued in Q2.
However, with us that way.
The pay downs.
Okay.
Given the what.
What happened in the past.
Months.
The general economic uncertainties in China.
You asked them.
Macroeconomic environment.
Possible recession, some will be more prudent.
Mountains.
Yes.
Uh huh.
So that's all I have to share at this point.
Thank you that's very clear thank you.
Thank you for the questions. Once again to ask question. Please press star one and wait for a name to be announced.
We have a follow up question for Yang Liu of Morgan Stanley . Please go ahead.
Yes, thanks for the opportunity to ask questions. Okay, I have a quick follow up and come off.
Overall demand in overseas market.
Because we see that several.
Major countries.
Moving back to normal after the COVID-19 semi locked down or whatever.
And.
Just want to have an update whether this will impact overseas demand and what is our current observation.
From those key markets like the U S Middle East and.
ASEAN market. Thank you.
Yes.
Yes.
Sure life in most countries have returned to normal this does have a negative impact on the demand for our services for certain use cases for example usage from online events industry is now lower than one year ago, given the peak of the pandemic.
However, if you look at our numbers our revenue growth in U S and other international market actually accelerated in Q1.
That's because there is the much stronger shift in people's mindset and behavior here.
During the past two years people have learned that interactive reader engagement can be useful on many occasions outside of video conference now.
A lot of businesses find out ways to leveraging real time video engagement to conduct their business online and enhanced user experience or increased efficiency.
For example, we saw strong usage growth from education customers in Southeast Asia, Middle East and Europe .
After that.
Opening.
Because live video cost is a very effective and low cost way of teaching.
We know par minor of the largest education technology unicorns in South Asia.
This market has huge population and the penetration of Rte part.
Online education is still very low.
It means there is huge revenue potential for agora.
Another exciting example is media.
Finally see that the media industry is starting to embrace rte pathology.
Recently, our technology was used to broadcast live sports game to thousands of audience.
With low latency and highly synchronized really experience.
We believe this is a large and almost untapped market for us.
The last example, I want to mention is interactive e-commerce.
One of our customers in the U S is leveraging our technology to enable video social by where users can discuss and advising as a group through video.
This offers a very different and more engaging experience comparator to traditional to traditional online shopping based on broadening catalogs.
To summarize I think the pandemic has accelerated.
Related to the adoption of <unk> technology across industries today.
Today, the penetration of RP is still very low and there is a definitely.
A long way to go for us.
Thank you.
Thank you for the questions.
As a reminder, if you'd like to ask question. Please press star one.
Once again to ask question. Please press star one.
Yeah.
We have a follow up question is dropping to <unk> from Nomura. Please go ahead.
Thank you management.
Two follow up questions one is about the.
The regulations on the.
Social entertainment sector in China do we currently.
Currently do we see any like potential.
Potential tightening policies that may effect.
The demand in this sector.
For example, the short video sector.
And the second one is about our margins.
Growth trends, so I heard that.
I mentioned <unk> commented that the GP.
GP margin.
<unk> remained largely stable in the next.
Couple of quarters.
Just water.
What would be the trend for R&D and sales and marketing expense.
In the next couple of quarters do we expect to add more headcount.
In the next few quarters. Thank you.
Yes.
Yes.
There are notable in the past one two years many evaluation.
Actions.
And as I mentioned as of now there is also some different direction sort of the debate on regulations of social and entertainment apps.
For example, there are really show off.
Game titles.
And what.
What is about stabilizing the overall.
The overall policy.
Policy in those areas, but also certain research.
Discussions on my rollout for gifting.
<unk>.
So.
There are still many changes in this space and I think as we.
<unk> mentioned early.
A little unclear how it will finally pay off and we are working closely with our customers and.
Related to bodies to find out what would it be the best for us to to help customers and developers.
The second question on margin so.
We expect GP margins will remain.
Stable.
In terms of R&D and sales and marketing.
We will.
We'll improve the R&D efficiency.
We now project.
Our project so.
We also control the outcome, we do not expect R&D headcount to increase.
What that means.
In dollar terms, we want to keep the R&D expenses.
Thank you.
Yeah.
In percentage terms, so who depend on revenue growth.
Sales and marketing sales and marketing, we do not plan to expand in China.
However, we need to.
You have plans to further expand our marketing efforts.
Got it.
I can explain that.
We still see a lot of activity.
Many markets in many verticals.
We will continue to do.
So in the near term.
Sales and marketing.
Thank you Ingrid.
Ooh.
It will be more cautious about.
The efficiency.
Not yet.
And we.
We intend to.
You get next one or two quarters.
Some pressure on the bottom line.
Alright.
Andrew.
Could be.
We're controlling overall operating margin.
Alright.
Yeah.
Thank you very much.
Thank you for the question.
As a reminder, if you'd like to ask a question. Please press star one.
At this time there are no further questions I would like to hand, the call back to the management for closing.
Thank you operator, thank you everyone for attending today's call and the replay and the presentation of this call are already posted on our website in the prepared remarks will be posted later after this call.
Thank you again, if there anything please feel free to reach out to us. Thank you.
Yeah.
Thank you. Thank you.
That does conclude today's conference call. Thank you for participating you may now disconnect your lines.
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Good day, everyone. Thank you for standing by welcome to Alcoa, Inc. First quarter 2022 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to answer questions on the phone. Please press star one.
We advised that todays conference call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the call over to your first speaker today beyond that Chen. Thank you. Please go ahead.
Thank you operator.
Morning, everyone and thank you for joining us for <unk> first quarter 2022 earnings conference call our earnings.
Press release, SEC filings and a replay of today's call can be found on our IR website at Investor Day, I Garand Isle joining me today are Tony Zhao founder Chairman and CEO , Jim <unk> CFO .
The Asian between our GAAP and non-GAAP results can be found in our earnings press release. During this call. We will make forward looking statements about our future financial performance and other future events and trends.
These statements are only predictions.
But we believe today and actual results may differ materially.
Forward looking statements are subject to risks uncertainties assumptions and other factors that could affect our financial results and performance of our business and which we discuss in detail in.
Our filings with SEC.
In today's earnings press release, and the risk factors and other information.
Pain in our final prospectus relating to our initial public offering.
Remains no obligation to update any forward looking statements. We may make on today's call with that let me turn it over to Tony Hi, Tony.
Hey, Thanks, <unk> and welcome everyone to our earnings call.
As many of you may have known one of our global headquarter Shanghai, what's keyed by an outbreak of on the ground in March.
It has been in lockdown for nearly two months two months now and has it.
<unk> just started the process of resuming offline business activities.
During this time our teams in Shanghai have been working remotely.
There has been no interruption of our business operations, our research and development efforts.
Here I would like to express my sincere gratitude and the cure to all of our team members impacted by Covid.
Before going through our performance in Q1, let's take a look at our leading market position and recognition by Juventus market observers.
According to a recent industry report from CIC.
<unk> continued to be built.
Bill undisputed leader in the global real time engagement platform as a service market.
With more than twice the market share that our near nearest competitor both in terms of revenue and number of minutes delivered in 2021.
As of March 2022.
We maintained our number one market share rte SDK installations globally.
In regions like the North America.
South East Asia and Middle East.
Our SDK installation market share is dominant.
Part two other rte or public cloud service provider.
For example, if we look at the top 10, social dating apps globally. All of them have rte features embedded and half of that half of them are powered by agora.
And if we further look at different regions.
<unk> power.
The top 10, social dating apps in North America, and seven of the top 10 in China.
Also in this quarter Agora was selected as a finalist for SaaS companies towards changing ideas 2022.
I read your fast company owners that businesses and organizations driving change in the <unk>.
Ward.
This year in the workplace category fast company selected <unk> as a finalist to recognize our innovations in connecting works rewards of the metal worse to the physical one.
None of this would be possible without our team's strong commitment to driving technology and product innovation.
Our customers cost and the confidence in us.
Next let's move to our.
Business update in.
Sure.
Uh huh.
Yeah.
Yeah.
Alright.
Okay.
Alright.
Now, let's move to our business update in Q1, our revenue for the first quarter was.
$8 6 million.
Four.
4% year over year.
During this quarter 74 solid solid new applications rejected our platform at the end of March our number of active customers exceeded 700, adding nearly 400 compared to one year ago.
Our results this quarter were impacted by the drop in demand from K 12 academic children customers in China due to regulation.
On the other hand, we continue to see strong growth momentum in markets, such as Middle East Southeast Asia and Europe .
Which not only offset most of the shortfall from the Cape Hull use case, but further diversified our revenue mix and enhanced our business resilience.
More importantly, we are excited to see solid evidence of a long lasting shift in people's mindset and behavior as they continue to move their lives online and spend more time in virtual engagement sessions.
Even in countries, where lives have largely returned to pre pandemic norms.
We believe this is.
Reversible trend across all regions and the articles, which will bring tremendous market opportunities for us.
Next I will walk you through some important updates on our UK solutions and technology and product advancements during this quarter.
Our last earnings call, we talked about our meta chat Metlife on American television solutions that enable developers to easily create immersive and.
Entertaining.
Voice chat live streaming and <unk> experience with leading three D virtual space.
Recently, we launched meta interactive game to further strengthen our metal worst product offerings.
Through our partnership with game developers, we print lightweight part of games to redo and voice chat room live streaming sessions, which add another dimension of fun and engagement to the users.
In addition to redo and.
Engagement, our customers can seamlessly embedded such game.
Lastly, embed <unk> in their social and entertainment applications.
It has the experience.
And engagement.
Moving to another vertical.
<unk>.
Moving to another vertical where we see many new use cases that strive to make the world a better place.
Internet of things or Iot.
We recently launched a currency software solution for IP cameras, such as video doorbell Smart speakers.
Our solution parse critical functions of the device, including real time Warner in two way radio, calling remote control and the recording.
Leveraging our knowledge and.
Expertise rte devices with our solution established with recession in just one or two seconds.
With very low latency.
Our module is efficient in par usage.
And is compact enough to fit on almost any small and low cost deposits.
Another interesting use case in the Iot space is new eyes.
Leading augmented reality smart glass that allows user hands free access to the virtual world.
The visualization of real time information, including <unk> modules.
Designs and the data.
Whether it being used for underground utility safety check.
Or on the constructive side of Sky's scrub cars workers can leverage our video API to safely transmit video information to make informed decision quickly.
Our low code and local platform continue to gain traction among developers globally.
For example studied dot com.
Leading online education platform.
Using our low code solution app builder to accelerate its digital transformation.
Sorry, Dot com has traditionally been an on demand offline course powerhouse.
But we also enable live touring as a part of their offerings using <unk>.
On the technology front, we launched our proprietary AI powered noise suppression algorithms in this quarter.
Traditional noise suppression algorithm works fine on general occasions, but it sometimes fails to catch unique noises in specific use cases.
Such as a sound of breathing and swallowing when thinking us all.
Our AI powered algorithms can deal with over 100 types of background noises.
Which gives developers a flexibility to build the best lowest depression for their specific use cases.
In addition.
Our algorithm is designed to be compact and efficient and therefore performs very well on web browsers.
Lastly, our team I'm glad to announce that Mr. Roger Hale for more formal.
Walmart Chief Security Officer at <unk>.
Personal data privacy and protection company Big IV has joined our GOR in the same role.
Roger will work with our executive team to navigate complex compliance and security and determining risk management and the security best practices for the organization.
We will also serve.
He will also serve as the process owner of all business of all.
Of all assurance activities related to the availability integrity and confidential entity of customers business partners employees and business information.
Business information.
So currently in compliance have never been more critical than they are today.
With all in process with an impressive track record in the many years of experience and expertise.
We're excited to welcome Roger to the team.
In addition to the hiring of Roger while also growing our executive team through internal promotions.
Including Chief strategy Officer.
Revenue officer, and Chief experience Officer.
Most.
And at.
Streamlining our global go to market efforts and are further enhancing our developer experience.
I am confident that our expanded.
Executive team will continue to drive innovation Edinburgh.
Help create award where real time engagement.
Ubiquitous.
With that let me turn things over to Jim <unk>, who will review our financial results.
Thank you.
Hello, everyone.
Let me start by reviewing our financial results for Q1.
And then I will discuss our outlook for the fiscal year on May 22.
Total revenues.
So I think endpoint six minute others.
First quarter of 2022.
The decrease.
One six minute or two 1% year over year.
Our revenue growth this quarter.
And that's it.
New regulation on K 12.
Nick tutoring sector in China.
Our revenues from can you talk about that.
200, <unk>, China were approximately $14 million in the <unk>.
Fiscal year, 2020 one.
Our revenue from this sector, where approximately one point for a minute.
The first quarter of 2022.
The decrease of approximately $10 million from the same quarter last year.
The other half.
Gross momentum.
Other geographies and sectors remained strong in the quarter.
Okay.
Revenue from U S and other markets also China grew almost 50% year over year.
And 16% quarter over quarter to $16 4 million in Q.
Sure.
Representing 42.5% of total revenues.
As we continue to expand globally, our revenue base also became more balanced and resilient.
In this quarter.
Contribution from top 10 customers were 20.
2% compared to 35% the same quarter last year.
Our trailing 12 months constant currency Paul Anthony.
Hmm.
95%.
Excluding these mall.
The expansion rate was also negatively impacted by the.
K 12 segment.
Any special or other.
Other sectors.
Uh huh.
Moving onto cost.
Well my following comments.
Our non-GAAP results.
Exclude share based compensation expenses.
Acquisition related expenses.
Amortization expenses.
Corning tangible assets.
And income tax related to acquired intangible assets.
non-GAAP gross margin fourth quarter.
63%.
One 6% higher than Q1.
As we mentioned in previous earnings calls.
Greece was mainly driven by technical.
First our trade optimization, we have been implementing.
Beginning of 2021.
non-GAAP R&D expenses were $25 3 million do you.
Up 45 points representing year over year.
As we continue to hire talented employees.
<unk> R&D team.
non-GAAP R&D expenses.
65, 6% on total revenues in the quarter.
Compared to 43, 3% in Q1 last year.
What is the enormous opportunity.
<unk> technology presents globally.
We'll continue to invest hasnt been one.
To strengthen our technology leadership.
And empower emerging use cases.
In the near term.
Our plan is to keep R&D expenses.
Relatively stable level.
And focus our resources on.
ROI projects.
To maximize long term impact.
non-GAAP sales and marketing expenses.
11, six minute walk.
54, 5% year over year.
Yes, good bolt team expansion and increased advertising expenses.
We will continue to step up.
To market globally.
Globally.
And the marketing expenses represented 30% of total revenues in the course.
<unk> 18, 6% in Q1 last year.
non-GAAP G&A expenses were seven.
4 million. Thank you.
64, 7%.
Mainly due to team expansion.
Expected credit loss provisions.
Yes.
Okay.
One.
Yes.
Compared with Q1 last year.
non-GAAP operating loss was $18 nine minutes Megan.
49% non-GAAP operating loss margin.
Quarter.
Operating loss margin of a certain.
Numbers in Q1.
Turning to cash flow.
Operating cash flow.
$15 million.
Compared to a negative $2 7 million.
Free cash flow was negative 17 minutes.
8 million.
Moving on the balance sheet.
In Q1.
The $18 million in cash cash equivalents and.
So from the investments.
Mm 155 minutes.
Q who are not.
Net cash outflow in the quarter, mainly due to free cash flow.
17 minutes.
Cash paid.
Long term investments.
<unk>.
Right.
And the question.
Seven six minutes.
Now turning to guidance.
COVID-19 has.
Variable cost business model.
Historical experience may not apply.
Our guidance.
Revenues reflect.
Various assumptions and are subject to change there's no certainty related to the impact of the COVID-19 pandemic.
What was that.
What are you going to do.
We maintain our previous guidance.
Total revenues for that.
I expect it to be in the range of 176 minutes.
Good morning.
Now turning to the update on the status there.
Holding touring company accountable Act or.
HFC.
I'll leave my first 2022.
Do you see.
Additionally, named Niccolo mentioned.
You mentioned you identified you score on the human testing.
Hello, you are finding some of the annual report on form pointing out for the fiscal year.
We report 2021.
We understand that yes.
Yes.
That's excellent.
Yes.
And implementation.
All of it.
This indicates that the FCC determines that.
Yes.
It was working paper cannot be inspected.
Got it.
In Britain IV PCA Obi.
Have your opinion.
Financial statements included in the <unk> 2021 'twenty, yes.
In accordance with FCA.
Do you see determining that.
While the report.
Registered public accounting firm.
Not being subject to inspect actual.
What would the PCL.
So we conducted.
Beginning in 2021.
SEC Chubb prohibitive.
Sure.
Yes from being traded.
National Securities Exchange.
Over the counter trading market.
Yes.
We will continue to monitor market developments actively explore hospital solution.
Protect interest all stake holders.
Yes, trying to maintain our listing status.
Mr.
In clothing retailer.
Albert.
<unk> first quarter performance.
In this challenging.
We are excited and very confident about.
Long term prospect of our global business.
Thank you to the entire Guardian.
Javier.
Attending the call today.
And hope you're healthy and safe.
Let's open it up for questions.
Thank you.
At this time, if you would like to ask question. Please press star one on your telephone and wait for a name to be announced if you would like to cancel request. Please press the pound or husky.
Once again to ask a question please press star one.
Okay.
I have a question or line of Yang Liu from Morgan Stanley . Please go ahead.
Thank you.
I have three questions.
First one can management share.
Revenue growth outlook for the.
Three business lines.
Overseas business.
The China <unk>.
And also China downtown.
Next few quarters.
Is it.
Is it fair to say that.
First quarter this year should be the last quarter or two seemed activity impacts from the.
Education regulation.
And also.
So we are curious about the outlook for the China business as well.
That is our first one.
The second one is on the gross margin because we see that.
Our 62, 4% gross margin in the first quarter is quite good considering losing some education related to volume.
Do you think this number will be relatively sustainable.
The future or there'll be some fluctuation either on the <unk>.
Thanks.
Right.
Gross margin, especially given the overseas part is growing very rapidly.
And the third question.
Regarding the.
Or are there maybe depreciation recency.
I know the company's.
Revenue have both China part of it the non China part and also the cost.
On the Opex.
So half of China, and now I'm trying to parse what is the overall impact.
Also FX to the.
To the future.
P&L can management share a little bit on that thank you.
Thank you.
Oh.
So on the first question.
Regarding Smith has evolved.
So.
If you look at the last 12 months.
The.
Roughly speaking.
K 12 merger.
90% in Q1 versus Q1 last year.
K 12 business in China.
Around 15%.
Yes.
The national markets.
About 50%.
So that's the last 12 months.
I guess.
Right.
Hopefully this will be the bottom.
Impacted in China.
You still have some revenue.
Sector.
One question remaining in the quarter.
Much less.
Much less.
These significant now.
And if we look forward into next.
12 months.
We would expect something similar.
A 50% growth.
Some of the international markets.
And.
We're all getting an 8% growth in China.
Oh My God.
Macro uncertainties.
Okay.
Yes.
There will be obviously some particular.
Our assumptions are that would be the expectation.
The second question on gross margin.
So Anthony.
Sure.
We think the technical organization has been very effective.
Uh huh.
Bear with me.
Okay.
Okay.
Hum.
Sure.
A reduction in utilization really come about infrastructure.
That was compensated by all.
Our nutrition Costco.
Costco elimination.
K coffee has largely gone now we don't expect this impact to continue in the future.
Actually we are expecting GP margin to remain stable.
Stable.
Remainder of the year.
Compared to Q1, obviously, there will still be some.
Current period to period fluctuation.
We expect it to be very good.
The first question.
Depreciation.
It's completely.
Completely right.
Hum.
A couple of them.
So.
Roughly speaking RMB depreciation blackout I understand in Q2, so far come back to you.
Sure.
On the revenue side.
About 60% for revenues is currently denominated in RMB.
Assuming the FX.
FX rates stay where it is today and it will have an impact.
1000, shippers and all that.
As you can.
Thank you.
And causing expenses.
It could be in similar fashion.
But net net I think impact.
The impact on the bottom line.
Much less.
Okay. That's good.
Thank you that's.
That's very helpful.
Okay.
Thank you for the questions. Once again to ask question. Please press star one and wait for a name to be announced.
Our next question comes from the line being drawn from Nomura. Please go ahead.
Thank you management for letting me ask the questions.
So my first question is about.
The impact from the COVID-19, and the Lockdown in China.
Since March.
And how do you think about the the.
The impact to be.
To the demand and the volume growth.
Different verticals or whether it's good or bad whether it's positive or negative impact on my second question is about the.
Competition.
So glad to see that the.
We are still maintain a global leading position in global Rte market.
But do you see that going forward.
The competition in China will intensify, especially for the large.
Internet or our tech companies.
Which may ramp up out there their product launch or or.
There are.
Other strategies in this in this market and its rte market.
The last question is about the.
Stock repurchase plan I see we have completed 4%.
Of the total.
201 billion program in <unk>.
So can we.
Just wanted to get your thoughts.
How we are going to proceed with this the stock repurchase plan in the next couple of months, where we accelerate.
The repurchase.
Q2, Q3 Q. Thank you.
Alright, I will take the first two one is on the.
Colin.
Lockdown in China, I think the recent lockdown in Shanghai and other cities.
Husky.
Yes.
As a small positive impact on our revenue mostly from education sector. The reason why it's only a small impact is twofold.
First this time only a few cities were affected.
The entire country compared to 2022nd Okay.
K 12 after school tutoring is skol.
The number of incremental online classes is also much smaller than 2020.
In the near term the overall macro environment in China is very challenging.
We see that.
General business actually it is slowing down.
Which will affect our customers and their end users.
Also some debate on regulation of social and entertainment apps.
Unclear Hollywood will play out in.
In summary, we are very bullish about the long term perspective.
Arty, but there is a lot of macro uncertainties in the near term, we're watching closely and we'll adjust our strategy and depletions if needed.
And second about the competition.
There hasn't been too much change in strategy.
From our main competitors such as <unk> in the U S and Tencent in China.
On the RTL side.
We're not seeing any big difference.
From operations, we have a lot of competition already in China markets, especially but rate is not as complex.
Compared to the competitors.
Making efforts in the low latency live streaming area. This proves that our earlier.
Addiction that a lot of streaming services will return to low latency technology.
This prediction is actually correct.
The industry is embracing it we think this is an important market with huge potential and our technology is actually well positioned to capture opportunities in this market.
But we did see feel startups also reading more phones.
This industry trying to build some similar offerings, mostly on the local side overall I think this is a good thing for the industry with more choices for customers and the more ideas to drive the industry forward together, we will create more weapons market and accelerate the adoption of <unk>.
Keith oncology in general.
With Guo calling competition, we also see that some companies went out of business.
Overall competitive landscape remains largely the same we're still the clear leader in this space in terms of technology performance.
Competitiveness of features.
Okay I'll take that question I was just talking to purchase.
Yes.
It's about $8 million.
Sure in Q1, and your purchase continued in Q2.
However, with us all the way.
Demand anticipated.
Given the.
What happened in the past one five months.
Amongst.
The general economic uncertainties in China.
You asked them.
Macroeconomic environment.
Possible recession, some will be more prudent.
Mountain purchase.
So that's all I have to share at this point.
Okay.
Thank you that's very clear thank you.
Thank you for the questions. Once again to ask question. Please press star one and wait for a name to be announced.
That's a follow up question for Yang Liu of Morgan Stanley . Please go ahead.
Yes, thanks for the opportunity to ask question Okay.
Quick follow up in terms of the.
Overall demand in overseas market.
Because we see that several.
The major countries.
Moving back to normal after the Covid semi lockdown whatever.
And.
Just want to have an update whether this will impact overseas demand what is our current observation.
From those key markets like the U S Middle East and.
ASEAN market. Thank you.
Yeah.
Yeah.
Sure life in most countries have returned to normal.
It does have a mic.
<unk> impact on the demand for our services for certain use cases for example usage from online events industry is now lower than one year ago, given the peak of the pandemic.
However, if you look at our numbers our revenue growth.
In other international market actually accelerated in Q1 thus.
And thats because there is the much stronger shift in people's mindset and behavior here.
During the past two years people have learned that interactive reader engagement can be useful on many occasions outside of video conference.
There are a lot of businesses find out ways to leveraging real time video engagement to conduct their business online.
First user experience or increased efficiency.
For example, we saw strong usage growth from education customers in Southeast Asia, Middle East and Europe .
Even after the reopening.
Because live video cost is a very effective and low cost way of teaching.
We know par minor of the largest education technology unicorns in South Asia.
Markets have huge population and the penetration of Rte part.
Online education is still very low which means there is huge revenue potential for agora.
Another exciting example is media.
Finally see that the media industry is starting to embrace rte pathology.
Recently, our technology was used to broadcast live sports game to thousands of audience.
With low latency and highly synchronized really experience.
We believe this is a large and almost untapped market for us.
The last example, I want to mention is interactive e-commerce.
One of our customers in the U S. It's leveraging our technology to enable video social by where users can discuss advising as a group through video.
This offers a very different and more engaging experience comparator to traditional to traditional online shopping based on broadening catalogs.
To summarize I think the pandemic has accelerated.
Related to the adoption of <unk> technology across industries today.
Today, the penetration of RP is still very low and there is a definitely.
A long way to go for us.
Thank you.
Yeah.
Thank you for the questions.
As a reminder, if you'd like to ask question. Please press star one.
Once again to ask question. Please press star one.
Yeah.
We have a follow up question is dropping to <unk> from Nomura. Please go ahead.
Thank you management I have two follow up questions. One is about the.
The regulations.
The social entertainment sector in China do we.
Currently do we see any like potential tightening policies that may affect <unk>.
The demand.
The sector.
For example, the short video sector.
And the second one is about our margins our growth trends.
I heard that mentioned and commented that the GP.
GP margin.
<unk> remained largely stable in the next.
Couple of quarters.
Just want her.
What would be the trend for R&D and sales and marketing expense.
In the next couple of quarters do we expect to add more headcount.
In the next few quarters. Thank you.
Yes.
Yes.
There are notable in the pasta one two years not many evaluation.
Actions.
And as I mentioned that just now there is also some different direction sort of the debate on regulations of social and entertainment apps.
For example, there are really show off.
Game titles.
And what.
What is about stabilizing the overall.
The overall.
Our policy in those areas, but also certain research.
Discussions on my rollout for gifting.
Hum.
So.
There are still many changes in this space and I think as we.
Mentioned earlier.
A little unclear how it will finally play out and we are working closely with our customers and.
Related to bodies to find out what would it be the best for us to to help customers and developers.
The second question on margin so.
Yeah.
We expect GP margins will remain relatively stable.
In terms of R&D and sales and marketing.
No.
We'll improve the R&D efficiency.
Project IRR project.
We also control the outcome, we do not expect R&D headcount increase.
Does that mean.
In dollar terms.
Keep the R&D expenses.
Uh huh.
In percentage terms, so who depend on revenue growth.
Sales and marketing sales and marketing.
Do not plan to expand in China.
Yes.
Do you have plans to further expand the market at that time.
Oh I can explain why.
Okay.
We still see a lot of activity.
Many markets in many verticals there we will continue to do that.
So in the near term.
Sales and marketing.
Great.
We'll be more cautious about.
Yeah.
G anytime now.
And we.
Two of them.
You get next one or two quarters.
There's some pressure on the bottom line.
We do.
Andrew.
Be well.
Controllable.
Operating margin.
Yes, Sir.
Yeah.
Yeah.
Thank you very much.
Thank you for the question.
As a reminder, if you'd like to ask a question. Please press star one.
At this time there are no further questions I would like to hand, the call back to the management for closing.
Thank you operator, thank you everyone for attending today's call.
The replay and presentation of the call are already posted on our website and the prepared remarks will be posted later after this call.
Again, if there anything please feel free to reach out to us. Thank you.
Thank you. Thank you.
That does conclude today's conference call. Thank you for participating you may now disconnect your lines.