Agora(API) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2023 were $34 million, a decrease of 16.9% year-over-year and a decrease of 6.6% quarter-over-quarter [15] - Agora revenues were $15.3 million, down 5.6% year-over-year but up 1.3% quarter-over-quarter [16] - Shengwang revenues were RMB 131.5 million, down 19.8% year-over-year and 9.9% quarter-over-quarter [17] - Adjusted gross margin for Q2 was 67.2%, a decrease of 2.6% year-over-year [18] - Adjusted EBITDA was negative $6.6 million, with a loss margin of 19.5% [20] Business Line Data and Key Metrics Changes - Agora had 1,560 active customers, a 24% increase year-over-year [4] - Shengwang had close to 4,000 active customers, a 5% increase year-over-year [4] - Dollar-based net retention rate for Agora was 108%, while for Shengwang it was 91% excluding K-12 academic tutoring sector [17] Market Data and Key Metrics Changes - Demand in the U.S. and international markets is healthy in sectors like e-commerce and vertical social networks, while emerging markets show weaker demand [25] - In China, demand from digital transformation sectors remains resilient, particularly in financial institutions and large enterprises [25] Company Strategy and Development Direction - The company is focusing on AI-driven features such as content moderation and high-definition video products to drive growth [26] - The company aims to achieve non-GAAP net income breakeven in Q4 2023 while maintaining a stable gross margin [33] Management Comments on Operating Environment and Future Outlook - Management is cautiously optimistic about demand recovery in the second half of the year, driven by new products despite ongoing macro challenges [26] - The competitive landscape remains largely unchanged, with slight increases in competition from regional startups in the U.S. and international markets [35] Other Important Information - The company ended Q2 with $391.6 million in cash and cash equivalents, with a share repurchase program returning approximately $82 million to shareholders [22][23] - The company plans to continue its share repurchase program, having completed 41% of the $200 million program [23] Q&A Session Summary Question: Demand recovery situation in domestic and overseas markets - Management observed healthy demand in the U.S. and international markets, particularly in e-commerce and vertical social networks, while demand in emerging markets is weaker [25] Question: Outlook for gross margins and AI products - Gross margins are expected to remain stable for the remainder of the year, with AI products anticipated to enhance user experience but not contribute significantly to revenue in the short term [29][30] Question: Changes in profit guidance and resource optimization - The company remains committed to achieving non-GAAP net income breakeven in Q4 2023 and has effectively reduced operating expenses by roughly 30% [33] Question: Changes in competitive environment - The competitive landscape has not changed significantly, with slight increases in competition from regional startups, but the company remains a clear leader in technology performance [35][36]