Q3 2023 Agora Inc Earnings Call

Okay.

Good day and thank you for standing by welcome to Alcoa, Inc. Third quarter 2023 financial results Conference call at this time, all participants in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask the question. During the session you will need to press star one on your telephone.

You will then hear an automated message by saying go ahead is rice to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

The company's earnings results press release earnings presentation S. E C filings and a replay of today's call can be found on its IR website at <unk> dot.

Ah Gora thought I are joining me today are attorneys al founder Chairman and C. R. Jim Jim Barr Wang the company's CFO.

Reconciliations between the company Scott and non-GAAP results can be found in its.

Earning press release during this call the company will make forward looking statements about its future financial performance and other future <unk>.

And trends. These statements are only predictions that are based on the company's belief today and actual results may differ materially.

These forward looking statements are subject to risks uncertainties assumptions and other factors that could affect the company's financial results and its performance of its business and which companies discussing details in its filings and the S. E. S. A C, including todays earnings press release, and the risk factors all the information contained into <unk>.

Final prospectus relating to its initial public offering.

Laura Inc remains no obligation to update any forward looking statement. The company's may take on today's call with that let me turn it over to Tony Hi, Tony.

Okay.

[laughter].

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

In the third quarter, our revenue was $15.3 million for a girl flat compared to last quarter.

141 million RMB for sure.

The increase from 24% quarter over quarter.

As of the end of this quarter, we have more than 16 countries active customers for agora and more than 4000 for sure.

Increase of 26% and 6%, respectively compared to one year ago.

Now moving onto our business product and technology updates for the quarter.

Let's start with Agora.

We recently.

Not the general general liability off of a video based solution to power like shopping experiences.

In recent years loves shopping has disrupted and transformed the entire e-commerce market in China.

We believe that the U S and the other dynamics of the market, where some ketchup and brief Lotte shopping.

Big trend.

According to Mckinsey Lotte shopping could account for 20% of our e-commerce sales by 2026.

In the U S life shopping market.

Estimated worth $35 billion by 2020.

We're also proud to mention that Agora was highlighted as a leading lender in Govs recent market guide.

For life Commerce in retail.

With Agora breath marketplaces, and platforms and I'll cede the Lotte shopping opportunity with Eve.

For example, we recently helped comment itself, the leading fashion lives shopping platform for retailers.

To introduce a new functionality that allows sellers to your wife external participants into their short simply by sending them to link all QR code.

Sellers cut easily and professionally holes celebrated.

I can easily add professional hosts celebrate is.

Celebrate as Influencers.

<unk> customers to join their lap shopping session Wow, we do to provide more engaging content and boost commercial.

This quarter, we also partnered with the sandbox, a leading decentralized gaming Bush war to promote real time engagement and social interactions within the meta works through what we do in China.

Box choose Aurora because of our comprehensive product stack, which kind of seemingly kind of seamlessly integrate three D. Spatial audio persistent topshop and interactive live streaming functionalities at scale.

As a result.

Clean Earth ability to connect collaborate on the full meaningful communities in the matter was is significantly enhanced.

Moving onto somewhat.

We recently launched our AI T C. Rte SDK are.

Our real time engagement solution connecting human users with large language models.

So far people have largely interact with AI models in tax format.

Only recently companies such as open they are have a beta launch their direct was conversation between human users and AI models.

However, there is surely a significant delay of six to seven seconds.

More to receive a simple voice response.

Our solution has been designed to tackle the latency issue. So that the users kind of hear the response within two seconds.

This near real time response is close to the natural pause expected in human to human conversation.

And therefore provide a much more engaging and your real experience for users.

All of our air TCR T S be paid also comps with great flexibility.

So a lot of her can easily create their application with the freedom to choose from a wide range of large language models.

Speech to text Ngos and the synthetic wise to fit their unique use case.

We do a demo of our <unk> solution can be found in our earnings presentation with more details all its features and capabilities.

Please also feel free to download the demo application pride yourself.

No.

Let's move to the.

Real reward factories to see highway assist BMW in their digital transformation journey.

Historically, we are with local engineers needed technical support from a specialist and B R. W headquarters in Germany.

The half a week 24 hours before the specialist could arrive on site.

Which could impact manufacturing timeline and even cost delays in delivery.

Our solution enables the remote specialist at BMW headquarter to remotely is that even the smallest detail with heights. It was actually a video and low latency.

In addition, when the specialist.

Makes inquiries or provide instruction local engineers can see exactly where the specialist is marking with the help of our devices.

This solution demonstrates our commitment to becoming a trusted partner of large enterprise for their digital transformation initiatives.

Last month, we held our Rte conference for the ninth.

Consecutive year.

Where are we discussed the role.

Intelligence plays in a real time engagements.

We have been leveraging AI to enhance the quality of experience in real time engagement for a long time.

Wait till after the AI part in real time on device noise suppression and echo cancellation artisans.

And then secondly improved audio quality.

On the video front, our AI based real time on device or with others, such as Super resolution perceptual video coding.

Chip supplementation.

Adaptive coding and video quality assessments.

Enable us to deliver optimal video quality and really experience up to four came to resolution.

Many of our customers worldwide.

Great in all related I speak.

With this AI technologies and more our use of proceeds to upgrade.

With our constant pursuit of more efficient AI part SDK.

To overcome the limits of device and network infrastructures.

We have substantially reduced the barrier to high quality Archie.

This means that people around the war, even those with all of the latest smartphones or access to high speed Internet can now enjoy a wide range of RT use cases.

Just like how they have access to basic utilities, such as clean water and electricity.

With billions of smartphones and devices powered by our SDK with AI driven capabilities.

We're making solid progress to realize our mission of making real time engagement ubiquitous and allowing everyone to interact with anyone anytime and anywhere.

We have also closely followed the debacle of large lumpy the modal.

And generally AI around the war.

As mentioned earlier, our LTC Rte solution enables developers to put AI powered characters into what's conversation with users we.

We have been working closely with some customers and expect to see them lost their innovative use cases so.

Such as AI companions are personal assistance.

The adoption of games with AI players.

AI tutors to help users learn from foreign language learning foreign languages.

As large language models continue to advance in their ability to process and then generate multimodal informations.

Substantial amount of data in video.

Our format will need to be transmitted between human users and AI models.

The volume of such state of such data will one day surpass today's humana's procurement traffic.

And we are uniquely positioned to become the critical infrastructure.

Tables, human users and AI models to interact with each other through video and audio.

Before concluding my prepared remarks, I would also like to announce a change in our board of directors.

MS talk like coal has tendered his voluntary reorganization due to personal reasons.

<unk> has been working with us since our inception, a decade ago.

First.

After that I got dropped our sales 2018.

I would like to sincerely talk for his dedicated service and invaluable alive to our board.

MS. Shang Tau currently our Chief Technology Officer, and Chief scientist has been appointed as a doctor I would like to warmly welcome Sean to join our board and I'm confident that shopper insights and expertise well half the board and the company stay on.

The forefront of real time engagement technology, and create long term value to our shareholders.

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

Thank you Tony.

Hello, everyone.

Let me start by your first one.

<unk> financial results for the third quarter.

I'll discuss outlook for the fourth quarter of plenty of 'twenty three.

Total revenues or 75 million third quarter of 2023.

Increase of two 9% quarter over quarter.

And a decrease of 14, 6% year over year.

Our core revenues were 15 3 million in the third quarter.

So that compared to last quarter.

And decreased eight 9% year over year.

Year over year decrease was primarily due to reduced usage and increased presence in activity from customers in emerging markets.

The challenging macroeconomic environment, and our lending financing conditions.

Starting from the second half of last year.

Chevron revenues were RMB well.

And were $41 2 million in the third quarter.

An increase of seven 4% quarter on quarter.

And a decrease of nine 2% year over year.

Excluding revenues from it as opposed to the CEC business.

The quarter over quarter increase was primarily due to an increase in revenues from digital transformation customers or.

Large enterprises.

Let's see that area, where we are seeing strong revenue growth in the past two years.

Going forward we.

Digital transformation market.

They kind of increasingly important revenue and profit contribution there.

Our wealth business.

The year over year decrease was primarily due to slowing general economic conditions and the fast evolving regulations in certain industrial markets.

All are basic not there right now.

For example car.

89% of all shall walk excluding revenues from discontinued business.

Moving onto coffee expenses.

Well my following comments I will focus on non-GAAP adjusted financial measures.

Excluding share based compensation expenses.

<unk> related expenses.

Financing related expenses.

<unk> expenses of acquired intangible assets and.

Income tax.

The acquired intangible assets.

Impairment of goodwill.

On property and equipment.

<unk> of that is right.

Adjusted gross margin for third quarter was 66, 9%.

3.3% higher than kill shape quantifying it here.

Mainly due to the change in product mix.

And the implementation of technical and any infrastructure optimization.

As mentioned in previous earnings calls.

Structured and reduced our global workforce in Q4 of last year.

And we are continuing to implement effective expense control.

I didn't say that.

Adjusted R&D expenses.

Or 15 claim 7 million interest rate decrease.

36, 4% year over year.

Adjusted R&D expenses represented 44, 8% total revenues in the quarter.

Compared to 64, 2% in Q3 last year.

Adjusted sales and marketing expenses were $6 6 million in Q3.

Decreased 48.8.

8% yea over year.

So the marketing expenses represented 18.9% of total revenue in the quarter.

Compared with 31, 5% in Q3 last year.

Yeah.

Adjusted G&A expenses were $6 2 million of interest rate.

Yeah, Chris 15 point or 1% year over here.

G&A expenses represented 17, 6% of total revenue in the quarter.

Compared with 17, 7% in Q3 last year.

Yeah.

Adjusted EBITDA was negative $12 for a minute.

That's leading to a 12, 7%.

The EBITDA loss margin for the quarter.

Definitely lower than they were.

Ross Marshalls, 40% in Q3 last year.

And that's my last one was 13 point for many interesting maybe.

Mainly due to the fair value change.

The equity investment.

And lastly investments in certain private companies.

<unk> six points.

non-GAAP net loss, excluding investment loss was $2 2 million or excuse me.

Translating to a six 3% and that lost margin.

Quarter.

We're to a noncash net loss margin of 42, 9% in Q3 last year.

19, 4%.

Q2 this year.

Now turning to cash flow operating cash flow was <unk> 300 billion interest rate.

Compared to negative <unk> 8 million last year.

Free cash flow was negative $3 2 million.

Compared to negative $9 9 million last year.

Yeah.

When we have the balance sheet.

This is Kim <unk> with 273 points.

<unk> 4 million in cash cash equivalents bank deposits and the financial products you shouldn't buy backs.

Net cash outflow in the quarter was mainly due to free cash flow on that same point for a minute.

And share repurchase.

12.5 minutes.

Since the board approved a share but our.

Share repurchase program in February 2022.

As of September 32023.

Returned approximately $94 for a minute.

To shareholders so share repurchase.

Demonstrating the board's commitment to safeguarding shareholder value and as confidence in the long term prospect of the company.

As of September 32023.

We had approximately 94 planes for many years he has outstanding.

Reflecting a 16% reduction in total shares outstanding.

Compared with January.

Sorry for 2022 before any share repurchase program started.

So far we have completed 47% of up.

200 million dollar share.

Share repurchase program.

What's really expire.

February 2024.

And we intend to continue to undertake its meaningful capital return plus shareholders.

Now turning to guidance for.

For the fourth quarter I was put in 'twenty three.

Currently expect total revenues between $45 five.

37 five minutes.

That's forecast.

Our current and preliminary view on the market and operational conditions, which.

Which are subject to change.

In closing we are very.

I'm proud of our execution in this quarter, especially.

It's connecting krone in profitability.

Well stick to our strategy and be laser focused on driving revenues.

Efficiency.

For the long run as Tony just mentioned.

We're excited to see emerging use cases.

And we are well prepared to.

<unk> combines the power of generic and.

And you are having engagement.

Thank you to the Boston Garden show on teams.

Hard work.

And project investors.

Trust.

Thank you everyone for attending our call today.

Operator, that's all.

I'll turn it up for questions.

Thank you.

We will now conduct the Q&A session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.

Two of jaw. Your question. Please press star one again.

Please wait a compile the Q&A roster.

Thus, we have Tom Tang from Morgan Stanley. Please go ahead.

Okay.

Okay. Thanks again for the chassis.

Texas is pumped a monastery so I have two questions.

One is regarding the 2024 outlets.

All right.

I found.

Alright.

And the second question is regarding <unk>.

Okay.

Bye now.

Thank you.

Yes.

Sure.

The status for our <unk> and <unk>.

Oh of course side I think of course, our global market overall.

Optimistic about demand in midterm to long term.

I think one big factor is the pandemic actually really changing consumer behaviors.

You know before the Panamax, the only scenario where people use.

Real time audio video is a physically web conferencing.

The U S market.

People are not.

That you know get.

Get used are familiar with all other use cases like a KOL watching experience et cetera, now after pandemic, although in some of the use cases.

The one of them did.

But consumers are more adapt to all types of hanmi engagement.

Activities online such as shocking with live conversations and religion.

With last session is online our KOL, Washington, a watch party.

I think the overall.

As consumer behaviors change.

Help us too.

To see a lot of growth in both use cases and William Meanwhile, the macro environment is still challenging.

But it's for all companies operating in this market.

As a matter of fact, we actually see some small competitors start to run into financial difficulties.

For 2024, our goal is to stabilize our existing business and to grow into new regions and new use cases.

In terms of market a lot of macro and.

Regulatory headwinds.

You, probably already know, but the usage on our platform continued to grow.

Our market share in Europe.

Adoptions also increased nearly 200% this year.

And our digital transformation business.

Serving large enterprise also grow more than 50% this year.

For 2024, we expect our digital transformation business to continue to grow and our goal for the Internet and that is to further gain market share.

And on the question about the.

Demand in the pricing.

Uh huh.

For our gas market.

Our number of customers continuing to grow at about 25% as I mentioned earlier.

Also you know, we'll see some more use cases start to emerge into gross margin such as life shocking.

And also mentioned the customer behavior change.

Can you give us you know our hope.

Hope that.

There will be more growth potential in both use cases and pneumonia or all that challenging environment is still there and those are in there.

Short term still impact, though the accretion, but a lot of our potential in the medium to long term on timeframe pricing wise more pressure.

In emerging markets.

But pricing has been healthy and stable in developed market.

In China overall demand is stable.

Demand is stable from internet customers with some bright spot such as online car oaky and premium broadcasting and streaming product.

We see strong demand from digital transformation side.

Understand.

Pricing in Internet sector generally talk about.

10% each year, but our gross margin remains healthy.

Pricing in this whole transformation is also more attractive in this market.

Yeah.

Thank you.

Next we have daily Lee.

From Bayer SA Securities.

Hi management, Thanks for taking my question Oh.

One question about the AI I mentioned they're.

They're small application scenarios for the Adi like yes, it and agile teams et cetera.

And when do you think the EIA can you already tell more meaningful revenue contribution of our business.

Or.

Which applications do you think which have could how much potential to drive our business growth in the future. Thank.

Okay.

Yeah Youre right.

Also talked about you know there are many.

Potentially seeing all sorts of use cases use cases like companions AI game players.

Et cetera.

Uh huh.

I also mentioned we rolled out this AI G E R T SDK module.

And in the last few months, we do have our domestic real off those potentials.

Interesting.

Basic concept concept.

There are going to be much more real time audio and video traffic among not just humans, but between human and models. That's a long term charter hire where the development is still undergoing I think theres a lot of hum sales needs, which kicked out for large long lead.

So to be able to really act as a humor lag.

<unk> also not like the yes.

Companion are a player in it.

That's where we work with and work hard with a lot of our customers and partners together to try to brands to realize and I don't want to over estimate in near term of such growth.

I really like in the states that.

We and our customers and partners trying to.

Validate and breakthrough into.

Each and every use case.

In the last few quarters.

Thank you.

Thank you.

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

For your name to be announced.

Thank you.

There are no further questions.

Thank you everybody for attending this companys call today.

As a reminder, the recording in the earning release will be available on the company's website.

Desktop.

Gaurav I thought I heard and if there's any questions. Please feel free to email at the company.

And have a great day.

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