AIXI — Xiao-I Corporation

Summary of AIXI Q4 2023 Earnings Call

1. Key Financial Results and Metrics:

• Total Revenue: $59.2 million, a year-on-year increase of 22.8%.
• MaaS Revenue: Grew by 48.5% to $19.2 million, representing over 30% of total revenue for the first time.
• Non-MaaS Revenue: Increased by 13.4% to $40 million.
• Gross Profit: $39.4 million, up 28% from $30.8 million.
• Gross Margin: Expanded to 66.6%, up from 63.9% the previous year.
• Operating Expenses: Increased to $61.3 million, primarily due to a 118.3% rise in R&D expenses, totaling $52.4 million.
• Operating Loss: $21.9 million, compared to a loss of $3.1 million in 2022.
• Net Loss: $27 million, up from $6 million in the prior year.

2. Strategic Updates and Business Highlights:

• Launched the Hua Zang Universal Large Language Model (LLM) and established the Hua Zang ecosystem, which has begun commercializing AI solutions across various industries.
• Focus on global expansion with new subsidiaries in the U.S. and UAE.
• R&D team comprises 158 members, representing 56.2% of the workforce, with a strong emphasis on innovation and product development.
• Filed 36 new patent applications in 2023, indicating a commitment to advancing AI technology.

3. Forward Guidance and Outlook:

• Anticipate continued revenue growth of around 20% in 2024, driven by B2B operations and the expansion into B2C markets.
• Expect to maintain R&D investment at approximately 50% of total revenue while aiming to reduce losses and potentially achieve profitability in 2024.
• New products, including OOTDiffusion and Diff, are set to launch in May 2024, targeting both consumer and financial markets.

4. Bad News, Challenges, or Points of Concern:

• Significant increase in operating losses, raising concerns about financial sustainability in the short term.
• Operating expenses are rising faster than revenue growth, particularly in R&D, which could strain resources.
• The competitive landscape in AI technology is intensifying, with pressures to innovate and maintain market relevance.
• The company faces risks associated with global expansion, including market acceptance and regulatory challenges in new regions.

5. Notable Q&A Insights:

• The OOTDiffusion product is expected to launch in May 2024 with a subscription-based model, targeting consumer audiences.
• The Diff platform is aimed at retail investors, providing market analysis and insights, expanding the company's reach into the consumer market.
• Management emphasized the need for cost-effective AI solutions, suggesting a shift from purely large models to more economically viable applications.
• The company is focusing on both B2B and B2C strategies, with plans to deepen relationships with existing clients while exploring new consumer applications.

Overall, while AIXI demonstrated strong revenue growth and strategic initiatives in the AI sector, it faces challenges related to rising costs and operational losses that need to be addressed to ensure long-term sustainability and profitability.