Q4 2022 Agora Inc Earnings Call

Good day, and thank you for standing by and welcome to the fourth quarter 2022 financial results. 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 ask a question during this session.

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I'd now like to hand, the conference over to your Speaker today Fiona Chen. Please go ahead.

Thank you operator.

Good morning, everyone and thank you for joining us today or I for us fourth quarter of 2022, and the full fiscal year 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 a dog or a door aisle. Joining me today are Tony Zhao, our founder Chairman and CEO , Jean Paul Wang our CFO reconciliations between our GAAP and non-GAAP results can.

And 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 and these statements are only predictions that are based on what we believe today and actual results may differ materially. These 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 with our filings with SEC, including todays earnings press release, and the risk factors and other information contained in the final prospectus relating to our initial public offering.

Our goal 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.

Thank you Joanna.

Welcome everyone to our earnings call.

Revenue for the first full fourth quarter remain flat.

<unk> million dollars compared with the same quarter last year.

During this quarter, so thats, either solve and new applications or adjusted all of our platform and.

And our total number of adjusted applications exceeded 548 48 solvent.

End of 2000, Internet tool or number of active customers was really solid.

66, adding close to 400 compared to one year ago.

On the product side recently, we launched a beta version of our speech to attached product for real time engagement.

Traditional stage two paths products do not work well in our team used cases due to the tenants such as synchronization of course these tests in the device portfolios issue.

Working with industry, leading partner partners specialized in speech to text technology, we've developed pilot native transcription product that delivers reliable performance in noisy environment.

Article individuals talk simultaneously and therefore network conditions.

As a call lithium product no additional local processing is required and performance is consistent.

There is a range of devices.

We believe this product has.

Yes.

Experiences.

In many ways.

For example people is empowered heron can now watch live streaming or Pete.

The live auction.

<unk>.

Auto translation model this product could easily overcome language barriers and then par people with different cultural backgrounds to mingle with each other and naturally.

In addition speeches attacks.

<unk> has also laid the foundation for other complementary features such as content moderation and transcripts recording.

This quarter, we also announced the general availability of two new first party infections, <unk> spatial audio and AI powered noise suppression.

Each will enable developers to create more immersive and engaging services. So there are any others.

With our flexible flexibility of Aurora SDK for all open and modular.

Architecture. This extensions can be easily integrated into our core rte products, such as voice, calling video, calling and the interactive live streaming.

There is a public beta phase this two extensions have been well received by Phillip Hurst.

For example, Hello, a social and live streaming platform for language learning followed by the best way to learn a new language is by regularly speaking with native speakers.

By leveraging <unk> AI noise the prices.

Hello has removed the vaulted background noises there sure users worldwide have a destructor free learning experience regardless of their environment.

About our new use cases.

This quarter, we continue to see new use cases emerging and gaining adoption for.

For example, as we mentioned previously live video shopping.

Expanding rapidly in the U S market and has attracted some well known brands who are investing in this capabilities.

For example.

Uh huh.

Important American TV networks that traditionally specialized home shopping.

<unk> working with our board last quarter to provide its worth audiences with live interactive shocking.

Now that we have discussed our latest product and user and use cases.

I would like to take a moment to share some of my thoughts were looking back at 2022 and look looking ahead to 2023.

Total 2022 was an extremely challenging year, which I think many of you would agree with our.

Agree with.

Our full year revenue was.

$161 million, a decrease of about 4% or $7 million compared with 2021.

However, please bear in mind that during this period or run them from the Paypal ophthalmic tourism sector in China has gone all has all along.

Okay.

Our revenue from Paypal Ophthalmic children's segment in China Law was down by 70 by 70 $737 million.

$37 million from 40 million to $3 million.

Excluding this segment our revenue in 2022 increased <unk>, 4%, mainly thanks to our global expansion new use cases, such as live video shopping and new products such as Florida.

<unk> screening.

This was no small feat, especially if we also consider the challenging macro environment, such as stock market correction inflation and the tightening of venture capital funding.

As mentioned in our list, our last earning call considering the challenging operating environment, we recognized our global R&D.

<unk> organized our global R&D team and reduced our overall workforce in October to focus all of our strategic.

Priorities and improve efficiency.

In the past few months.

Further streamlined and refocused our developer experience.

Content marketing teams in the U S and the international markets.

Also a point Robin Lu as Chief operating officer, China to lead our commercialization efforts in that market.

I believe this stuff, we will help our teams become more customer centric and more.

More focused on local markets.

In addition, we recently completed the sale of his mobs customer engagement called our CEC business.

A car is mall in early 2021, it had to do to this segment.

Tap API business and the CEC business.

The top API do this has been fully integrated into <unk>.

Our platform.

The other hand, the CEC business is not a core market for us.

Phil of the CEC business will help us focus our resources on our core products and markets.

Now looking at 2023.

I'm cautious about the macro environment, but continue to see new opportunities in the global Rte market.

On the macro side inflation and tough financing environment will likely remain in the post COVID-19. We are opening in more countries, where reduced demand for our product for certain use cases.

On the other hand, there are clear opportunities for US for example, a large competitor recently shuttle a key product and seek significantly reduce its investment in this market due to competitive pressure.

We also start to see demand from a certain poorest untapped verticals.

Facing these challenges and opportunities our strategy for 2023 can be simplified can be simply summarized into the following.

Laser focused on customer value.

Has competitive advantage and gain market share.

First we will strengthen our customer centric value and leverage our latest innovation to enhance value creation for our customers.

Also acting as an innovation partner for our customers, we can create a flywheel effect leveraging customer feedback to help refine our roadmap.

Second we will focus on the Lora the word best performing Rte product.

And services.

With a railroad real time video and voice experience for end users and best in class ease of use for developers.

Supported by above.

We will continue to win over the competition and expand our market share globally.

At the same time, we will continue to improve our operational efficiency and optimize our cost structure.

Before concluding my prepared remarks.

I want to suck all agora is for their hard work and commitment.

An extraordinary year.

I will always cherish the memory of us facing obstacles shoulder to shoulder and celebrating our ways big and small.

Let's stay laser focused on creating customer value in housing.

Competitive advantage of our core product and gaining market share in 2023.

Thank you all.

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

Thank you Tony.

I don't want.

Let me start by first <unk> financial results for Q4, and then I will discuss all of them.

Fiscal year of 2023.

Total revenues were 14 1 million in the fourth quarter of 2022.

Please.

<unk>, 7% compared to Q4 of last year.

And a decrease of one 1% quarter over quarter.

The year over year decrease was due to a significant decrease in usage.

K 12.

During sector.

Certain market.

Following regulatory changes.

And a decrease in revenues from the divested customer engagement cloud business.

Which were offset in part.

Business expansion and use it across other sectors and regions.

The quarter over quarter decrease was mainly due to decreased revenues from the divested customer engagement cloud business.

Hey, Chris.

From U S and international markets.

Challenging macroeconomic environment.

As Tony mentioned just now.

Great hugs worldwide inflationary pressure.

And gardening interim capital funding negatively.

It impacted some of our customer financial conditions.

Their ability to responding which led to reduced usage of our products and increased pricing sensitivity.

We expect that trend to persist in the near term.

I just want to continue to negatively impact on revenues, especially from U S and international markets.

Total revenues for fiscal years plenty of 90 to 167 minutes.

Represented four 4% decrease from 2021.

This was mainly due to a $37 8 million drop.

Revenue from the K 12.

Tutoring sector in certain markets.

The regulatory changes.

If we exclude the segment our revenues would have increased 24% from $127 7 million in 2021 to $158 2 million.

<unk> thousand 22.

Okay.

Our trailing 12 month constant currency dollar based net expansion rate.

81% excluding asthma.

That's perfectly.

That expansion rate was 100.

18% for the U S and international business.

And approximately 100% for the China business excluding packet.

Changes in the K 12 tutoring sector.

Moving on to cost and expenses.

For my following comments I will focus on non-GAAP results, which exclude share based compensation expenses.

Positioning related expenses financing related expenses.

Cash expenses.

Acquired intangible assets.

Income tax related to the acquired intangible assets.

An impairment of goodwill.

Yeah.

non-GAAP gross margin.

The fourth quarter.

61, 2%.

Was one 4% higher than last quarter.

I'm calling efforts.

Mining infrastructure and architecture.

non-GAAP gross margin in this quarter was $2, 8% lower in Q4 2021, mainly due to increased revenue from from a broadcast streaming product, which has a lower cost market.

As we mentioned last earnings call, we have been structured.

<unk> global workforce.

Yeah.

When you think.

Pinpoint one 2 million.

Quarterly non-GAAP operating expenses in Q4 compared to Q3.

Yeah.

non-GAAP R&D expenses were $17 2 million in Q4 decreased.

On the six 9% year over year.

non-GAAP R&D expenses.

42, 8% of total revenues in the quarter.

<unk> to 58, 1% in Q4 last year.

non-GAAP sales and marketing expenses.

$10 8 million in Q4 decreased.

11, 9% year on year.

Marketing expenses represented 26, 8% of total revenues in the quarter.

Compared to a 32% in Q4 last year.

non-GAAP G&A expenses.

$7 5 million in Q4 slightly increased one 8% year on year.

G&A expenses represented 18, 6% of total revenues in the quarter compared to 18, 1% in Q4 of last year.

non-GAAP operating loss was $10 seven minute translating to a 26, 7% non-GAAP operating loss market first quarter.

<unk>.

Operating loss margin of 38, 2% in Q4 last year.

Adjusted EBITDA was negative $8 5 million translating to a 21, 1%.

Adjusted EBITDA loss margin fourth quarter.

Which is significantly lower.

Adjusted EBITDA margin.

EBITDA loss margin sorry.

32, 5% in Q4 last year and 40%.

Carefully.

Thanks to our cost control efforts.

In Paramount goodwill.

$1 9 million in Q4, primarily due to the impairment.

Each model.

<unk> financial performance Altra divested customer engagement, our business well below original expectations.

Yeah.

Investment loss.

$7 8 million in Q4.

Primarily due to impairment of certain minority equity investments.

The challenging macroeconomic environment and personally funding have cost difficulties at several companies in which we made environment minority equity investment back in 2021.

We have taken a prudent approach evaluating related situation and making a impairment decision.

Now turning to cash flow operating cash flow was $3 4 million in Q4 compared to $5 1 million last year.

Free cash flow was $1 nine minutes.

Patrick two nine.

9 million last year.

Moving on the balance sheet, we ended Q4 with $428 million in cash cash equivalents and short.

That's compared to 480 square in Manhattan.

Yes.

Net cash outflow in the quarter was mainly due to cash paid for time deposits with maturity over one year of 39 million.

Sure and purchase of 18.

In 2022.

We purchased approximately $35 8 million.

Class a ordinary shares equivalent.

Equivalent to approximately $9 million yes.

So approximately 21 $8 million.

Representing <unk>.

21% of our two.

100, <unk> share repurchase program.

Our board of directors has authorized an extension of the existing share repurchase program. So on February 28 2024.

All the other terms unchanged.

Extension reflects the board's view that our stock is currently undervalued and.

Again demonstrates the board's confidence in fundamental strategies.

Gross potential of a girl.

So also inform.

Our founder and CEO Tunisia.

As of the end of 2022.

He had.

In personal phones to purchase.

Approximately one 6 million.

Yes in the open market.

He is $17 million.

Ms share purchase.

That's clear.

Now turning to guidance.

Can you still had unprecedented terrible business model, where historically experienced may not apply.

Our guidance on full year revenues reflects various assumptions and are subject to change based on uncertainties.

The impact of it.

COVID-19 pandemic.

Challenging macroeconomic environment and the prevalent.

Global capital markets.

With that current.

Total revenues for us.

The fiscal year of 2023 to be in the range of them.

175 157 million.

Compared to the total revenues.

155 minute <unk>.

Clothing divested customer engagement cloud business in 2022.

In closing our.

Want to express my appreciation to the entire car team hard work in this extremely challenging year and investors while costing us.

Thank you everyone for attending the call today.

Open it up for questions.

As a reminder to ask a question. Please press star one on your telephone.

Wait for your name to be announced two of drawing a question. Please press star one again.

Please standby, while we compile the Q&A roster.

One moment for our first question.

Our first question comes from the line of Yang Liu from Morgan Stanley . Your line is open.

Oh, thanks for the opportunity to ask questions.

Two questions from my side the first one.

Uh huh.

I don't like to imagine that some view in terms of when could we see that.

The inflection point in future.

For domestic and overseas markets.

It can be.

And the second question is.

I remember regimen previously.

Uh huh.

Breakeven by fourth quarter.

Right.

I just want to double check where the U S.

Staying with the target and if so what could be the.

Sure behind arguments.

Like what.

Sure.

Our gross margin.

Professional to reach breakeven target.

Got you.

Okay.

I'll talk about the demand side, there is a slowdown in revenue growth and revenue growth.

That's mainly due to macroeconomic challenges and also post COVID-19 reopening.

More countries.

This has caused pricing pressure.

Temporary demand pressure.

But I don't think this pressure this represents a fundamental change in demand for real time engagement technology.

We remain optimistic about demand in medium and long term.

Driven by further adoption of existing use cases.

And also there are emerging.

New use cases as well.

For example revenue from live video shopping increased.

Several fault in the last 12 months.

We continue to see new demand from new use cases, both in the U S and in China.

Some of them will have meaningful revenue contribution this year.

So in conclusion.

I also don't want to predict possibilities.

Want to focus on concrete work and how to improve our internal efficiency as well as we provide the best products in the market.

Not worried about demand.

Okay.

I'll take the second question.

So.

As you can see from us full year revenue guidance.

Absolutely.

Compared to last year. So we are off to a relatively slow start this year.

Macroeconomic challenges.

Got it.

We expect our revenues to increase.

Quarter by quarter this year.

Well I can just finish at a higher level.

For 2022.

In the meantime, I will.

We will continue to drive efficiency from our operations and optimize costs wherever possible.

But we will adjust our cost structure.

Thank you Andrew.

Actual revenue growth we see.

This year, so we don't have a fixed.

<unk> targeted at this point.

We are determined to significantly improve our financial house small this year.

Okay. Thank you.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Daily Lee from Bank of America. Your line is open.

Okay.

That's management's control the detailed presentation.

I have two questions maybe first one could.

Could you imagine as chairman Conor about the like.

The number of declines and the ESP change for the both domestic and overseas market.

Yes.

Well Q.

Fourth quarter last year.

See the domestic Isps do stable quarter on quarter, but overseas see some oh hold.

On quarter decline, so how do we see the trend in the following quarters.

Second question is regarding the economy.

Employee structure would we consider further optimization.

Given the current Congress I look in our target of improving the.

Probabilities.

Thank you.

I'll take those questions. So in terms of a number of customers as you can see in the press release and.

Presentation.

Number of customers have been increasing quite steadily.

In the U S and international markets and also in China market.

International.

Continued adoption of our technology globally.

Globally.

Pricing.

Either way.

Uh huh.

More.

Challenging pricing pressure.

In the U S international markets, especially in the past two quarters.

We do expect that to persist in the near term.

Okay.

I think the case so first of all.

We do have a relatively large number of our.

Start up companies.

Our next stage company as our customers.

Given the high inflation.

Sure.

Yes, very hyped. So it has become much harder for them to raise funding and that hasn't been out there.

Our products and also increase their passenger connectivity.

We don't see that.

All those factors.

The near term that's why we do expect continued pricing pressure in the near term.

In the China market.

Actually we don't see anything different from previous years.

And our past experience has been that every year on average.

Asking well.

Oh crop.

5% to 10% I'm watching housing wishes.

Question is how this product will gain more and more adoption become widely.

Widely used across.

Across all industries.

Yeah, we would not see any.

He seems different this year.

So in terms of the team.

This year, we don't have any conflicts.

And.

Continuing to optimize where we see donor fees at all.

Well look at those very detailed fashion.

Fashion team by team.

Where they are.

Recurring investment level.

All optimized.

We're also focused on improving the workflow improving.

Question.

Cross teams.

We're also investing in.

Comprehensive.

So that's.

Well, we don't have that.

Uh huh.

Large cut.

Yeah.

Thank you. Thank you.

Thank you one moment our next question.

And as a reminder, star one for questions Star one.

Our next question comes from the line of being drawn from Nomura. Your line is open.

Hi.

Thank you management.

For the <unk>.

Opportunity to ask a question I have two the first the first one is a follow up on the demand side.

So.

What kind of.

Application or industry verticals do we see.

That might accelerate.

Accelerate or slow down.

In 2023 that May drive for.

Maybe higher or lower than.

Our current revenue outlook.

Which is a which is a flat right.

Clothing East mob.

And the recently.

There is a strong a global phenomenon about chat GPT and AIG.

Do we currently see any kind of applications that related applications or or development.

No that.

It's driving our volume growth.

That's that's on the demand side.

So the second question is about.

About the ASP or take rate, so, which so far our.

New applications.

<unk> to grow this year.

Will there be any difference compared to premier's applications or verticals. Thank you.

Okay.

On the demand side I think there are use cases.

Continue to emerge like I already mentioned.

Speech the tax it can be used.

Several different use cases like electrical teams, but also can be using social use cases and.

There are there are more.

Opportunities in verticals like digital transformation in China.

And also they are original opportunities that.

We see bigger potential, including Europe and.

The team America.

Decides side in all of the used cases or.

Across all of our platforms pumps, we see by.

By enhancing the quality of experience for all video and audio sessions.

Would also.

As our customers.

Taxes to their end users.

Increased demand for us as well is a natural development in the fall when you use case not just us.

Yeah.

Perhaps the social clarity of where it is.

Going to improve over time. So this is just a single trend that we believe that that's going to also have our industry.

We would also spend resources continue to improve our developer experience to reduce friction for adoptions. So that more developers could easily two to create new apps or new use cases, all the time.

So all of those will help us to grow in terms of sort of in a more.

Potential demand and also help our customers to two two.

<unk>.

Generate more demand.

It is interesting.

We're in development in the industry. It is now.

At this time I think.

A lot of discussion around it and we do see some potential in.

In our customers' apps or in.

All of our old practice Oh.

Maybe make sure one on Arizona and social side.

But to be TBD.

It shows.

<unk> dot.

A real human like conversation with the comps hospitals, so in some of the social apps.

We also see all of our platform the star two.

To us this large number to model two eight specific.

Characters with defined.

By ground personality and.

He will like it goes down off the top.

Theyre talking.

Hmm.

<unk>.

And that attract quite summer.

Interest from consumers because that keep customers freedom.

So having.

Having a conversational relationship with someone that by imagination is the ideal partner.

So that's.

Interesting.

Erosion, just recently, but similarly.

Those things could happen in customer engagement UK.

Use cases.

But also people would have naturally emerging data.

There were some.

Smart.

Chat sort of service, including from the past, Alex or I'm, sorry, the positive conversation somewhat becomes the word drive for it.

When they do come and control kind of conversation, but now is the large language Boyle a.

Human.

Human machine interaction interface could be totally.

Disrupt.

That's why we called it has such a conversation or.

Human machine interface.

In a way too.

Sure the interaction to be real time.

So those are all potentials, we could see but there will be more.

Yes, we.

We do have a closed door.

All those possibilities.

Oh, hi, Thanks Hamid takeaways.

And pricing side, so Tony mentioned.

Use cases like Oh.

I could go shopping in the U S.

Where we've seen the pricing remains very healthy.

Uh huh.

Mike transformation in China.

That's a.

Different market.

Large enterprises financial institutions. So it requires a different type of model.

What we see is still very profitable market for us.

Thank you management.

Thank you.

Thank you one moment for our next question.

And our next question comes from the line and then Lee from Jpmorgan. Your line is open.

Okay Perfect and then my second management for taking my question I have two questions. So firstly could you. Please give us some color on the revenue breakdown by key categories, such as entertainment education, and it may be under some rising categories like live video shop.

And my second question is on our basement storage.

Have you seen non China business to slow down quite a bit in past three quarters.

China revenue, excluding K 12 seem to hold up well. So do you think this is more like a temporary thing or are there any structural reasons behind that and how are we going to allocate the resources between China and the international market going forward. Thank you.

Okay I'll take those questions.

<unk> turned off.

Okay first of all.

Already in two markets U S and international markets.

The China market.

Yes.

The vertical breakdown those two markets.

Oh.

Separately.

International markets.

<unk> is still the.

Our largest vertical.

Bye.

Uh huh.

Well my coffee shop work and that would include things like Oh cooperation.

Uh Huh I event.

Uh huh.

Well I think Youre shopping.

That's the second or the second payment.

Okay sure.

And we Havent main verticals.

In China, obviously socially.

Dominant.

Because now after an extrapolation changed.

The much smaller.

Much smaller.

Yeah.

Part of the business now.

And then pushed this transformation.

Traditional enterprises.

It was almost.

And now.

Hum.

As a minimum minimal minimal contribution here and also Iot.

So you know that I'm, saying.

<unk>.

Smart TV.

You also start to contribute revenue in 2022.

That's all.

Oh, yes that kind of breakout in terms of like China.

China revenue holding out in the past few quarters.

Uh huh.

There are a few factors first first of all the.

It has to do with the new product.

When you call the podcast screening product, which had a heart.

Our television marketing.

Hassan.

Very nice revenue pick up.

Got it now contributes to about 10% revenue in China already.

Same to you.

In 2022.

Secondly, we have.

One customer in China.

<unk>.

Not just Fox Tom person in China, but also focus on expanding their apps.

Overseas markets. So that's another growing.

Yes.

Yes.

Lastly, as I mentioned.

Store transformation business.

And existing almost here in 2021.

Okay.

Thank you Kimberly.

Thank you Anna.

Im not showing any further questions in the queue at this moment I'd like to turn the conference back to Fiona for any closing remarks.

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

Again, our presentation for this call and the replay for this call is also <unk>.

Posted on our website later on we will also posted remarks of the.

Earnings call again, if you have any further questions. Please reach out to us at our IR web.

Site, where our E mail thank.

Thank you again.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Thank you. Thank you.

Okay.

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Hum.

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Sure.

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Okay.

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Yes.

[music].

Good day, and thank you for standing by and welcome to the Gora <unk> fourth quarter 2022 financial results. 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 ask a question. During this session you will need to press star one on one.

<unk> on your telephone.

We'll then hear an automated message advising you heard us raise to withdraw your question. Please press star one again please.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Fiona Chen. Please go ahead.

Thank you operator good morning.

Good evening, everyone. Thank you for joining us today.

Fourth quarter 2022, and the full fiscal year 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 <unk> IL. Joining me today are Tony Zhao, our founder Chairman and CEO .

Jim go along our 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 RIN.

<unk> may differ materially. These 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 with our filings with SEC, including todays earnings press release and the risk factors.

And other information contained in this final prospectus relating to our initial public offering.

Our goal remains no obligation to update any forward looking statement, we may make on today's call with that let me turn it over to Tony Hi, Ken.

Thanks Joanna.

Welcome everyone to our earnings call.

Our revenue for the first four.

Quarter remained flat at $40 million compared with the same quarter last year.

This quarter saw solid new applications or adjusted all of our platform.

And our total number of adjusted applications exceeded 548 48 solvent.

<unk> 2002, our number of active customers was really solid.

66, adding close to 400 compared to one year ago.

On the product side.

Finally, we launched a beta version of our speech to text product for real time engagement traditional.

Traditional speech two paths products do not work well in our team used cases due to the tenants such as synchronization of course theaters and the device portfolios issue.

Working with industry, leading part of our partners specialized in the speech to text technology, we've developed cloud native transcription product that delivers reliable performance in noisy environment, where multiple individuals talk simultaneously and therefore network conditions.

As a call naked product no additional local processing is required and performance is consistent across a wide range of devices.

We believe this product has.

And user experiences.

Anyways.

For example people was empowered heron.

Now watch live streaming or beat.

In the live auction.

Leveraging our two translation module this product easily overcome language barriers and then par people with different cultural backgrounds to mingle with each other naturally.

In addition speeches attacks.

<unk> has also laid the foundation for other complementary features such as content moderation and transcripts recording.

This quarter, we also announced general availability of two new first party extensions.

These special audio and AI powered noise suppression.

Which will enable developers to create more immersive and engaging services. So there are any others.

With our flexible flexibility of Agoura SDK for its open and modular architecture. This extensions can be easily integrated into our core rte products, such as voice, calling with recording and the interactive live streaming.

There is a public beta phase this two.

Two extensions have been well received by developers.

For example, Hello, a social and live streaming platform for language learning followed by the best way to learn a new language is by regularly speaking with native speakers.

By leveraging <unk> AI noise the prices.

Hello has removed the wanted background noises. Therefore users worldwide, however, destruction free learning experience regardless of their alignment.

About our new use cases this.

This quarter, we continue to see new use cases emerging and gaining adoption.

For example, as we mentioned previously.

Video shocking.

Expanding rapidly in the U S market and has attracted some well known brands who are investing in these capabilities.

For example.

Important American TV networks that traditionally specialized a home shopping.

Working with our board last quarter to provide its vast audiences with live interactive shocking.

Now that we have discussed our latest product and user.

Cases.

I would like to take a moment to share some of my thoughts were looking back at 2022 and look looking ahead to 2023.

Total 2022 was an extremely challenging year, which I think many of you would agree with our.

Agree with.

Yeah.

Our full year revenue was 100.

$161 million, a decrease of 4% or $7 million compared with 2021.

However, please bear in mind that during this period, while revenue from the Paypal.

Sector in China has gone.

Has all has alone.

Yeah.

Our revenue from Paypal ophthalmic children segments in China alone was down by 70 by 77.

$37 million.

$37 million from 40 million to $3 million.

Excluding this settlement our revenue in 2022 increased <unk>, 4%, mainly thanks to our global expansion new use cases, such as live video shopping the new products such as Florida.

Screening this was no small feat.

Especially if we also consider the challenging macro environment, such as stock market correction inflation and the tightening of venture capital funding.

As mentioned in our last earnings call, considering the challenging operating environment.

Our global R&D.

Organized our global R&D team and reduced our overall workforce.

October to focus all of our strategic.

Priorities and improve efficiency.

In the past few months.

Further streamlined.

Focused our developer experience and culture and the marketing teams in the U S.

International markets, we also applaud Robin Lu Chief operating officer, China to lead our commercialization efforts in that market.

I believe this test will help our teams become more customer centric.

More focused on local markets.

I think so.

<unk> completed the sale of <unk> customer engagement called our CEC business.

When we acquire is more in early 2021, it had to do this segment.

Tap API.

And the CEC business.

The top API do this has been fully integrated into <unk>.

Our platform.

On the other hand, the CEC business is not a core market for us.

Sale of the <unk> will help us focus our resources on our core products and markets.

Now looking at 2003.

Russia is about at Loughborough alignment, but continue to see new opportunities in the global Rte market.

On the macro side inflation and tav.

Financing environment will likely remain in the post COVID-19, we openly in more countries, we reduced demand for our product for certain use cases.

The other hand, there are clear opportunities for us for example, a large competitor recently sought a key product.

<unk> significantly reduced investment in this market due to competitive pressure.

We also start to see demand from a certain poorer untapped verticals.

Facing the challenges and opportunities our strategy for 2023 can be simplified.

Can be simply summarized into the following.

Laser focused on customer value.

It has a competitive advantage and gain market share.

First we will strengthen our customer centric value and leverage our latest innovation to enhance value creation for our customers.

Also acting as an innovation partner for our customers, we can create a flywheel effect leveraging customer feedback to help refine our roadmap.

Second we will focus on delivering the word best performing rte product.

And services.

With a railroad real time video and voice experience for end users.

First in class ease of use for developers.

Supported by the above.

We will continue to win over the competition and expand our market share globally.

At the same time, we will continue to improve our operational efficiency and optimize our cost structure.

Before concluding my prepared remarks, I want to all <unk> for their hard work and commitment.

This extraordinary year.

I will always cherish the memory of facing obstacles shoulder to shoulder and celebrating our ways big and small.

I'd stay laser focused on creating customer value.

Housing the competitive advantage of our core product.

Gaining market share in 2023 thank.

Thank you all.

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

Okay.

Thank you Tony.

Hello, everyone.

Start by first reviewing financial result for Q4, and then I will discuss outlook for the fiscal year of 2023.

Total revenues were $14 1 million in the fourth quarter of 2022.

A decrease of <unk>, 7% compared to Q4 of last year, and a decrease of one 1% quarter over quarter.

The year over year decrease was due to a significant decrease in usage from K 12 tutoring sector.

And certain market following regulatory changes.

And a decrease in revenues from divested customer engagement cloud business.

Which were offset in part by our business expansion and user growth.

Becker and regions.

The quarter over quarter decrease was mainly due to a decrease in revenues from the divested.

Or engagement cloud business.

Okay Chris.

From U S and international markets.

Challenging macroeconomic environment.

As Tony mentioned just now.

Great.

Worldwide inflationary pressure and hardening intra capital funding.

As Lee impacted some of our customer financial conditions.

And their ability to responding which led to reduced usage of our products and increased pricing sensitivity.

We expect that trend to persist in the near term.

Which would continue to negatively impact our revenues, especially from U S and international markets.

Total revenues for fiscal year 2022.

167 minutes, which represented.

<unk>, 4% decrease from 2021.

The decrease was mainly due to a $37 8 million drop of revenue from the K 12 at time to.

Tutoring sector in certain markets.

Through regulatory changes.

If we exclude the settlement.

Revenues would have increased 24% from $127 7 million in 2021 to $158 2 million in 2022.

Okay.

Our trailing 12 month constant currency dollar based net expansion rate.

81% excluding <unk>.

Specifically net expansion rate was 100 I think.

18% for the U S.

The national business.

And approximately 100% for the China business, excluding business impacted by regulatory changes in the K 12 tutoring sector.

Moving on to cost and expenses.

For my following comments I will focus on non-GAAP results, which exclude share based compensation expenses.

Positioning related expenses financing related expenses.

Pension expenses.

Acquired intangible assets.

Income tax related to the acquired intangible assets.

An impairment of goodwill.

Yeah.

non-GAAP gross margin for the fourth quarter.

61, 2%, which was one 4% higher than last quarter, thanks to our ongoing efforts.

Mining infrastructure and architecture.

non-GAAP gross margin in this quarter was $2, 8% lower than Q4 2021, mainly due to increased revenue from our broadcast premium product, which has a lower cost market.

As we mentioned last earnings call.

Structured and reduced our global workforce.

Thanks.

Pinpoint one 2 million.

Quarterly non-GAAP operating expenses in Q4 compared to Q3.

non-GAAP R&D expenses were $710 2 million in Q4 decreased.

On the six 9% year over year.

non-GAAP R&D expenses.

42, 8% of total revenues in the quarter.

<unk> to 58, 1% in Q4 last year.

Okay.

non-GAAP sales and marketing expenses were 10 8 million in Q4.

Lisa.

11, 9% year on year.

Sales and marketing expenses represented 26, 8% of total revenues in the quarter.

Compared to 32% in Q4 last year.

non-GAAP G&A expenses.

Seven 5 million in Q4 slightly increased one 8% year on year.

G&A expenses represented 18, 6% of total revenues in the quarter.

Bear to 18, 1% in Q4 last year.

non-GAAP operating loss was 10 seven minute.

Translating to a 26, 7% non-GAAP operating loss market first quarter.

Compared to.

Operating loss margin of 38, 2% in Q4 last year.

Adjusted EBITDA was negative $8 five minute <unk>.

Leading to a 21, 1%.

Adjusted EBITDA loss margin fourth quarter.

It's significantly lower.

Adjusted EBITDA margin.

EBITDA loss margin sorry.

32, 5% in Q4 last year and 40%.

Great.

Thanks to our recent cost control efforts.

Impairment of goodwill.

$1 9 million in Q4, primarily due to the impairment.

His model.

<unk> financial performance already divested customer engagement, our business well below original expectations.

Yeah.

Investment loss was $7 8 million in Q4.

Morally due to impairment of certain minority equity investments.

The challenging macroeconomic environment and personally our funding cost difficulties at several companies in which we made environment minority equity investment back in 2021.

We have taken a prudent approach.

Ladies situation and making a impairment decision.

Now turning to cash flow operating cash flow was $3 4 million in Q4 compared to $5 1 million last year.

Free cash flow was $1 nine minutes.

<unk> two point.

Nine minutes.

Moving on the balance sheet.

And then Q4.

$428 million in cash cash equivalents.

The investments compared to 480 square in Manhattan at the end of Q3.

Net cash outflow in the quarter was mainly due to cash paid for time deposits with maturity over one year of certain nine minute.

Their purchase of <unk>.

Good evening.

In 2022, we repurchased approximately $35 eight many of our class a ordinary shares.

Privilege to approximately 9 million yes.

So approximately 41 $8 million.

Representing.

21%.

200, <unk> share repurchase program.

Our board of directors.

Authorized an extension.

Listing share repurchase program. So on February 28, 2024.

With all the other terms unchanged.

Extension reflects of course, we hope that our stock is currently undervalued and again demonstrates the board's confidence in fundamental strategies and long term growth.

Sure.

So also in form.

Founder and CEO co manager.

As of the end of 2022.

In personal funds to purchase.

Approximately one 6 million.

Yes in the open market under Ias 17 million taller.

Ms share purchase.

It is clear.

Now turning to guidance.

Can you still have one question, it's terrible business model, where historically experienced may not apply.

Our guidance on full year revenues reflect various assumptions that are subject to change based on uncertainties.

Two the impact of COVID-19 pandemic.

Challenging macroeconomic environment and the prevalent.

Global capital markets.

Was that correct.

Total revenues for the fiscal year of 2023 to be in the range of them.

175 to 157 minutes.

Compared to the total revenues.

155 minute, excluding divested customer engagement cloud business in 2022.

In closing I want to express my appreciation to the entire car team hard work in this extremely challenging year and investors well costing us.

Thank you everyone for attending the call today.

Open it up for questions.

As a reminder to ask a question. Please press star one on your telephone.

Wait for your name to be announced to address your question. Please press star one one again.

Please standby, while we compile the Q&A roster.

One moment for our first question.

Our first question comes from the line of Yang Liu from Morgan Stanley .

Line is open.

Thanks for the opportunity to ask questions.

Two questions from my side the first one.

Uh huh.

I don't like to hear managements view in terms of when could we see the impact.

At some point in future.

For domestic market and overheads market respectively.

And the second question is.

I remember regimen previously.

Uh huh.

Our breakeven by fourth quarter.

Right.

I just want to double check whether.

Are you still staying with the target and if so what could be the.

<unk> behind the arguments.

Like what.

Sure.

Our gross margin.

Professional to reach breakeven target.

Got you.

Okay.

I'll talk about the demand side, there is a slowdown in revenue growth.

Growth in revenue growth.

It's mainly due to a macroeconomic challenges and also post COVID-19 reopening.

More cultures.

Has caused pricing pressure.

Temporary demand pressure.

But I don't think this pressure this represents a fundamental change in demand for real time engagement technology.

We remain optimistic about demand in medium and long term.

Driven by further adoption of existing use cases and also there are emerging.

New use cases as well.

For example revenue from <unk> increased.

Several fold in the last 12 months.

We continue to see new demand from new use cases, both in the U S and in China. Some of them will have meaningful revenue contribution this year.

So in conclusion.

I also don't want to predict possibilities.

Want to focus on concrete work and how to improve our internal efficiency as well as group provide the best products in the market.

I'm not worried about demand.

Okay.

I'll take the second question.

So.

As you can see from our Springer revenue.

Our revenue guidance.

Basically.

Compared to last year. So we are off to a relatively slow start this year.

Macroeconomic challenges.

So we expect our revenue to increase.

Quarter by quarter this year.

I can just finish at a higher level.

Four point on it yet.

In the meantime.

We will continue to price efficiency from our operations and optimize costs wherever possible.

We will adjust our cost structure.

Thank you Andrew.

Actual revenue growth we see.

This year, so we don't have a fixed.

A rabbit opex target at this point.

We are determined to significantly improve our financial.

Well this year.

Okay. Thank you.

Yes.

Thank you one moment for our next question.

Our next question comes from the line of Daily Lee from Bank of America. Your line is open.

Okay.

That's investment in for all the detail that transportation.

I have two questions maybe first one.

Could you could management share more color about the.

The number of declines and the ESP change for the both domestic and overseas market.

Yes from Q O Q.

Fourth quarter last year.

The domestic Isps do stable quarter on quarter by that oversees the summer.

Quarter on quarter decline, so how do we see the trend in the following quarters.

Second question is regarding the economy.

Employee structure would we consider further optimization.

Given the current Gulf gross outlook in our targeted approving the.

Thank you.

Thank you I'll take both questions. So in terms of number of customers.

Uh huh.

Press release, and also our presentation a number of customer.

No questions asked.

In the international markets and also in China market internationally.

Continued adoption of our technology.

Globally.

From a pricing you are correct.

Great.

More.

Challenging pricing pressure.

In the U S international markets, especially in the past two quarters.

We do expect that to persist in the near term.

Thanks Brandon.

Oh Wow.

Case.

First of all.

We do have a relatively large number of our.

Start up companies.

Alright, Thanks company as our customers.

Given the high inflation.

Sure.

Thank you <unk>, so they have become much harder for them to grant funding and that hasn't limited there.

Our products and also increase their pricing sensitivity.

We don't see all of that all.

Both factors.

In the near term that's why we do expect continued pricing pressure in the near term.

In the China market.

Okay.

Anything different from previous years.

And our past experience has been that every year on average.

As well.

Well the crop.

5% to 10% I'm watching housing question.

Question is how this product will gain more and more adoption become widely.

Widely used across.

Across all industries.

We're not seeing anything different this year.

So in terms of the team.

For this year, we don't have any conflicts.

And <unk>.

Continuing to optimize where we see donor fees.

Well look at those very detailed.

<unk> team by team.

Sure.

Oh, Macau investment now I don't know.

Optimize.

We're also focused on improving the workflow improving.

Calculation.

Across teams.

And also investing in.

A comprehensive of a team.

Uh huh.

We don't have a plan.

For large cut.

Okay.

Okay.

Thank you. Thank you.

Thank you one moment our next question.

And as a reminder, star one for questions Star one.

Our next question comes from the line of being Duan from Nomura. Your line is open.

Hi.

Thank you management.

For the.

The opportunity to ask a question I have two the first the first one is a follow up on the demand side.

So.

What kind of apps.

Application or industry verticals do we see.

That might.

Accelerate or slow down.

Uh huh.

In 2023 that May drive for maybe.

Maybe higher or lower.

Our current revenue outlook.

Which is a flat right.

Excluding east mob.

And the recently.

Sure.

Our strong.

Global phenomenon about chat GPT in Aig's.

Do we currently see any kind of applications that related applications or development.

That.

It's driving our volume growth.

That's on the demand side.

So the second question is about.

The.

About the ASP or take rate so.

Which so far our.

New applications are expected to grow this year.

Will there be any difference compared to our previous applications or verticals. Thank you.

Okay.

On the demand side I think there are.

<unk> use cases.

Continue to emerge.

As I mentioned.

Speech the tax it can be used.

Several different.

So it's like like shopping, but also can be using social use cases and.

There are there are more.

Opportunities grow.

Corey.

<unk> verticals like digital transformation in China.

And.

Also they are original opportunities.

With the bigger potential including Europe and.

Latin America.

Besides that in all of the use cases or all.

Across all of our platforms product we see.

Hi.

Hence the quality of experience for all we do and audio sessions.

Would also.

Hence our customers.

Taxes to their end users will.

Increased demand for us as well is a natural development in the fall we use case, not just slipped out of Asia.

Cross border social clarity of where it is.

We're going to improve over time. So this is just a simple trend I believe that that's going to also have that you're already industry.

Plus we would also spend resources continue to.

Cool.

Our developer experience to reduce friction for adoptions, so that more developers could easily too.

To create new apps or new use cases on the platform all of those will help us to grow in terms of sort of in a more.

Potential demand.

So help our customers too.

To.

Generate more demand.

It is interesting.

Our development in the industry is now.

Around this time I think.

Lot of discussion around it and we do see some potential in.

Our customers apps or in.

You have our old practice Oh.

Maybe make sure one on Arizona social side.

But to be TBD.

It shows.

All of that.

A real humanlike conversational becomes possible so in some of the social apps.

We also see all the platform the star two.

To us this large number to model to create specific.

Characters with defined.

By ground personality and.

He was the star of the top.

They're talking Oh.

Hmm.

Long weeks and that attract quite summer.

Interest from consumers because that keep customers freedom.

So having.

Having a conversational relationship with someone that by imagination is the ideal partner.

So that's a.

Interesting.

Erosion, just recently, but similarly, those things could have the customer engagement.

Used cases.

But also people would have naturally emerging data.

There were some.

Smart.

Chat sort of service, including from the past, Alex or I'm, sorry, the parts of the conversation somewhat becomes the word drive but Boris.

When they do come out of control kind of conversation, but not always.

Large leverage model here.

Human.

Uh huh.

Roxanne interface could be totally.

Disrupt.

That's why we called it has such a conversation or.

Human machine interface.

In a way to be sure.

Sure the interaction to be roadhouse.

So those are all potentials, we could see but there will be more.

We do have a closed door.

All of those possibilities.

Thanks Hamid.

Pricing side, So Tony mentioned, a few on use cases like.

It might be to shop in the U S. A.

Uh huh.

We see the pricing remains very healthy and.

Mike transformation in China.

Different market.

Large enterprises financial institutions. So it requires a different type of model.

What we see is still very profitable market for us.

Thank you management.

Thank you one moment for our next question.

And our next question comes from the line and then Lee from Jpmorgan. Your line is open.

Okay.

Thank you management for taking my question I have two questions. So firstly could you. Please give us some color on the revenue breakdown by key categories in trying to send a tool such as entertainment education and there may be some rising categories like live video shopping.

And my second question is on our storage.

We've seen non China business to slow down quite a bit in past three quarters, while China revenue, excluding K 12 seem to hold up well. So do you think this is more like a temporary thing or there is any structural reasons behind that and how are we going to allocate the resources between China and the international markets going forward.

Thank you.

Okay.

Those questions.

Firstly in terms of the.

Okay first of all.

Already in two markets U S and international markets.

The China market, obviously, the vertical breakdown was two <unk>.

Slightly different.

Sure.

Separately.

International markets.

Social is still the.

Our largest vertical.

Bye.

Uh huh.

Well my coffee work and that will include things like Oh collaboration.

Oh I event.

And if you go shopping.

The second is that competitive.

Location.

These are the main verticals.

China, obviously socially.

Dominant because no afternoons congratulation change.

Okay.

Smaller.

Much smaller.

Uh huh.

Part of the business now.

And then pushed this transformation.

A large traditional enterprises.

Previously he was almost done.

No and no.

Okay.

As a minimum minimal minimal contribution last year and also Iot.

So you don't know what I'm, saying.

<unk> Smart TV.

At least I'll start contributing revenue in 2022.

That's all.

Oh, yes.

China revenue holding happened in the past few quarters.

A few factors first first of all the.

It has to do with the new product.

Oh Boy I call ARCUS premium.

Premium product, which had a heart.

RGB market.

Hi.

International revenue pick up so that it now contributes to about 10% revenue in China already.

That's.

Same to you.

In 2020.

Secondly, we have.

One customer in China.

Not just focused on China I have to also focus on expanding their apps.

These markets. So that's another growing business.

Lastly.

Thank you touched on transformation business.

On the existing almost.

Plenty plenty more.

Yeah.

Okay. Thank.

Thank you Kimberly.

Thank you.

And I'm not showing any further questions in the queue at this moment I'd like to turn the conference back to Fiona for any closing remarks.

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

In our presentation for this call and the replay for this call is also posted.

Posted on our website later on we will also posted remarks of the.

Earnings call again, if you have any further questions. Please reach out to us at our IR.

Site, where our E mail thank.

Thank you again.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.