Good day and thank you for standing by. Welcome to the Agora Inc. Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And now, I'd like to hand the conference over to Ms. Fionna Chen, Head of Investor Relations. Thank you. Please, go ahead, ma'am.

Thank you, operator. Good morning, everyone, and thank you for joining us for Agora's third quarter 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.agora.io. Joining me today are Tony Zhao, Founder, Chairman and CEO; Jingbo Wang, 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 results may differ materially. These forward-looking statements are subject to risks, uncertainties, 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 the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to our initial public offering. Agora 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.

Thanks, Fionna, and welcome, everyone, to our earnings call. Our revenue for the quarter was $41 million, a decrease of 9% year-over-year and flat quarter-over-quarter. During this quarter 36,000 new applications registered on our platform and our total number of register applications exceeded 0.5 million. At the end of September, our number of active customers was close to 3,000 adding more than 400 compared to one year ago. In the past few quarters, we faced an extremely challenging operating environment. Our revenue was hit by restrictive regulations in certain markets, which was the main reason behind year-over-year revenue decrease. More recently, inflationary pressure, interest rate hikes and continued turbulence in global capital market have impacted some of our customers through the expansion plan and their ability to raise funding, which, in turn, limited the usage of our products. Lastly, the appreciation of the US dollar also had a negative impact on our non-US dollar denominated revenues. Despite those macro changes -- challenges -- despite those macro challenges, we continue to see strong demand for our products for new use cases, such as live video shopping which didn't really exist in the US market 18 months ago. As we have seen again and again in our history, real-time engagement technology can transform any online activity and make it more immersive and engaging. This is why we remain optimistic about the long-term potential of our technology and products. However, the macro environment will likely remain volatile for some time. To cope with such uncertainties, we must remain nimble, laser focused and entrepreneurial. In recent months, we have been working hard to improve our operational efficiency and focus our efforts on priorities including enhancing the purity of experience and ease of use of our core products, strengthening our go-to-market efforts and winning benchmark…

Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for Q3, and then I will discuss the outlook for the fiscal year of 2022. Total revenues were $41 million in the third quarter of 2022, a decrease of 9% year-over-year, and flat compared to last quarter. The year-on-year decrease was mainly due to restrictive regulations in certain markets, which was offset in part by revenue growth in other sectors and regions. If we look at Q3 versus Q2 this year, the recent interest rate hikes and tightening of financing environment has impacted some of our customers' business and their ability to raise funding, which led to reduce the usage on our platform. In addition, the continued appreciation of US dollar has impacted our non-US dollar-denominated revenues when translated into US dollar amount. Our trailing 12 months constant currency dollar-based net expansion rate is 84%, excluding Easemob. Specifically other base net expansion rate was above 130% for the US and international business, which remain strong and healthy and approximately 70% for the China business mainly due to restrictive regulations in certain markets. Moving on to cost and expenses. For my following comments, I will focus on non-GAAP results, which exclude share-based compensation expenses, acquisition-related expenses, financing-related expenses, amortization expenses of acquired intangible assets and income tax related to acquired intangible assets. Non-GAAP gross margin for the third quarter was 59.8%, which was 5.7% lower than Q3 2021 mainly due to increased revenue from our broadcast streaming product, which contributed approximately 80% of our total revenues in the quarter and at lower gross margin. As Tony mentioned just now, we made a difficult decision to restructure and reduce our global workforce last month. The associated severance costs of $3.2 million are reflected in operating expenses in Q3. We…

Thank you. We will now begin the question-and-answer session [Operator Instructions] Our first question comes from David Lee [ph] from Bank of America Securities. Please ask question, David.

Hi, management. Thanks for taking my questions. I have two questions. Firstly, could you share more color on the customer demand trends for the domestic market and overseas especially in Q4? My second question is, regarding the ARPU and gross profit margin. It seems that the implied ARPU of overseas business declined in Q3, versus year-over-year growth in Q2. How do we see the ARPU and gross profit margin change in the falling quarter or last year? Thank you.

I'll take the demand question. In US and the international markets, COVID has already passed largely. So in recent quarters, our demand was not really driven by COVID or anything related to COVID, but rather more drives by new use cases such, as live video shopping, as I mentioned earlier and also increasing adoption in mature use cases such as live cost education and telecoms. Similarly in China, COVID -- also COVID and quarantine here affecting the whole macro economy. However, it's not anymore on significant direct demand driver for us. Currently, the main challenge on the demand side is, rather on also the macro economy environment indirectly from the COVID policy adjustment. As we have been seeing in recent company earnings, internet user growth and revenue growth of internet companies have been flat or significantly slowed down. Many companies, also cutting their growth target for next year, which are limiting their usage of our products. However, we do see incremental demand from more traditional enterprises or IoT industries and a few small sectors. Those will continue the areas that we will continue to invest more into, but it will take some time to ramp up adoption on those areas.

I'll take the question on ARPU and the GP margin. So in the US market actually, ARPU and the marketing has been quite stable, recently. The main challenge was from international markets such as Southeast Asia, -- South Asia. In these markets, we do see more pricing pressure, which also affect ARPU because we continue the continued depreciation of US dollar has effectively made our products more expensive in these markets, in local currency because we charge on global price in US dollar. And against, a lot of these emerging market currencies, so has appreciated more than 10%, in some cases more than 20%. So to better drive demand in these regions, we need to give additional discount and also to be very competitive in those markets. So that's a reason behind me, with some weakness in ARPU margin in these markets. And also more broadly speaking as Tony mentioned, by the rate hike inflation, the capital market turbulence, the tightening financing environment has made a lot of the customers' business more difficult, which in turn affected demand and ARPU. So looking forward, we actually think GP will remain relatively stable actually in this quarter, as I mentioned earlier, the decrease in GP margin was mainly due to a product mix shift and to a lesser extent, due to the pricing pressure from these emerging markets and looking forward product mix will not further change. So there we don't see -- we are not seeing incremental pressure from Q3.

Thank you, Tony and Jingbo. Thank you.

Thank you for your question. Our next question comes from the line of Tom Tang [ph] from Morgan Stanley. Please ask your question, Tom.

Management, I just had a quick question on the guidance. Since we have release our new guidance, just wondering if there's any further insights we can offer on our 2023 outlook. As you have previously mentioned, we want to breakeven by end of 2023, if there's -- just wondering if you bring -- if there's any changes to the plan? Thank you.

Sure. I'll take this one. So as you have noticed, we lowered out a full year guidance for 2022 and this was mainly due to the recent macroeconomic challenges. As I just mentioned, the rate hikes, the financing environment and all that. So in terms of 2023, it is still too early to give any official guidance, but on a very high level we are targeting 20% to 30% growth in US and international markets and a very moderate growth in China. But again all these operating targets are still moving given the highly uncertain macroeconomic environment in US emerging markets and also in China. And as to the breakeven time, we are still committed to the same guidance. We aim to breakeven non-GAAP basis by the end of 2023.

Okay. Thank you.

Thank you. Our next question comes from the line of Bing Duan from Nomura. Please ask your question, Bing.

Hi. Good morning. Thank you management for having ask the questions. I just have one question. So how do we think about the headcount growth in the next few quarters? Do we have an estimate the growth of the R&D and sales marketing employees? And what will this affect the operating expense growth in Q4 and Q1 next year? Thank you.

Yeah. I'll take the first part. I think we take a very serious consideration before we make the decision to restructure and reduce the workforce. So we don't see in the next few quarters we want to expand the workforce. Again, we will continue to operate and trying to practice on more efficient and leaner operation down the road similarly to other costs. I don't know if Jingbo has anything to add.

Yeah. Just to add a few words from a financial perspective. So recent restructuring and the reduction will bring us about $9 million of cash savings in Q4 compared to Q3. And actually we expect to see some additional savings in Q1 compared to Q4, because the reduction happened in the middle of Q4. So we still had one month of higher cost in Q4. And as Tony mentioned, we do not expect to first increase headcount in 2023.

Okay. Thank you, Tony. Thank you, Jingbo

[Operator Instructions] No further question. I'll turn the call back to the management team for closing remarks.

Thank you, operator and thank you everybody for attending our call today. If there are, any more information, please visit our IR website. Today's presentation and also the speakers' remarks will be also posted on the website. Again, thank you everybody. Thanks.

Thank you. Bye-bye.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.