Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Agora Inc (API, Financial) reported a 3% quarter-over-quarter increase in revenues, reaching $15.8 million, driven by usage growth from emerging use cases such as live shopping.
- The company launched adaptive video optimization technology, enhancing live video quality and user experience, which has already shown positive results for clients like KUMU.
- Agora Inc (API) made significant progress in engaging with Twilio customers, reflecting growing mindshare among developers.
- The company is positioned to benefit from the anticipated increase in real-time voice and video interactions due to advancements in generative AI models.
- Shengwang launched a new solution for live sports forecasting, offering significant cost savings and operational flexibility compared to traditional satellite-based broadcasting.
Negative Points
- Total revenues for the first quarter decreased by 8.4% quarter-over-quarter and 9.4% year-over-year, indicating a challenging financial environment.
- Shengwang revenues declined by 16% year-over-year, primarily due to macro-economic and regulatory challenges.
- The adjusted gross margin for the first quarter was 63.2%, which is 3.9% lower than the same quarter last year.
- Adjusted EBITDA was negative $6.1 million, translating to an 18.4% adjusted EBITDA loss margin for the quarter.
- Operating cash flow was negative $6.5 million, and free cash flow was negative $7.1 million, indicating ongoing cash flow challenges.
Q & A Highlights
Q: We saw a sequential decline in the first quarter this year, mainly for the Shengwang parts. What is the reason for that? And is customer churn behind us or will it be an ongoing process?
A: Jingbo Wang, CFO: The decline in Shengwang revenue was consistent with the decrease in the number of customers, driven by a tougher regulatory environment and macroeconomic conditions in China. This has made it difficult for smaller social and entertainment start-ups, leading to higher churn. We expect this trend to moderate in the coming quarters.
Q: The guidance implies some quarter-on-quarter improvement and year-on-year stabilization of total revenue. What is driving this? Is it mainly Agora revenue, or do you expect Shengwang to recover as well?
A: Jingbo Wang, CFO: We expect both Shengwang and Agora to show sequential improvement in Q2. Q1 is generally a low season for social and education customers, and digital transformation projects slow down due to the New Year holiday. We anticipate a pickup in Q2 for both segments.
Q: Could management give more color on the AI opportunities and potential revenue impact?
A: Bin Zhao, CEO: The rapid evolution of generative AI models, including multimodal capabilities, will expand real-time engagement activities from human-to-human to human-to-AI interactions. This will significantly increase the amount of real-time voice and video traffic, making low latency and high reliability crucial. Our technology is well-positioned to support these needs.
Q: There was a quarter-on-quarter increase in operating expenses, especially R&D. How do you see the trend in the following quarters?
A: Jingbo Wang, CFO: The low operating expenses in Q4 were due to a reversal of accrued expenses for year-end bonuses. We are cautious about the operating environment and will manage expenses carefully. We do not expect a sequential increase in operating expenses from Q1 onward and will aim to control overall expenses.
Q: What are the key drivers for the sequential improvement in Shengwang revenue expected in Q2?
A: Jingbo Wang, CFO: The improvement is expected due to the seasonal pickup in social and education customer activities post-New Year and the resumption of digital transformation projects. These factors typically lead to higher usage and revenue in Q2.
Q: How is Agora leveraging its adaptive video optimization technology to enhance user experience?
A: Bin Zhao, CEO: Our adaptive video optimization technology dynamically adjusts parameters to optimize video quality and performance, even under varying network conditions. This has led to significant improvements in user engagement, as seen with KUMU, a social live streaming application that reported a 30% increase in session length after adopting our technology.
Q: Can you provide more details on the new solution for live sports broadcasting launched by Shengwang?
A: Bin Zhao, CEO: Our cloud-native solution for live sports broadcasting reduces latency and enhances image quality compared to traditional satellite-based methods. It allows hosts and commentators to cover events from anywhere with an internet connection, offering cost savings and greater flexibility. This solution will be used for major events like the European Football Championships and the Paris Olympic Games.
Q: What are the expected benefits of the ChaoYinSu program for start-ups?
A: Bin Zhao, CEO: The ChaoYinSu program aims to support start-ups in developing innovative real-time engagement (RTE) applications. This year, we are partnering with Moonshot AI to provide access to advanced AI functionalities. Start-ups with compelling applications will be showcased at our RTE conference, helping them gain visibility and support.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
