Xiao-I Corporation Announces Unaudited and Unreviewed First Half 2023 Financial Results

- Net revenues grew 106% year over year to a record high of US$26.5 million

- Gross margin rose 620 basis points year over year to 77.3%

- Cash and cash equivalents more than quadrupled to US$4.7 million, compared with end-2022

SHANGHAI, China, Sept. 25, 2023 (GLOBE NEWSWIRE) -- Xiao-I Corporation (Nasdaq: AIXI) (“Xiao-I” or the “Company”), a leading cognitive artificial intelligence (“AI”) enterprise in China, today announced its unaudited and unreviewed financial results for the six months ended June 30, 2023.

First Half 2023 Financial Highlights

  • Net revenues increased 106% year over year to a record high of US$26.5 million.
  • Sale of cloud platform products increased 523% year over year to US$22.7 million.
  • Gross profit increased 124% year over year to US$20.5 million.
  • Gross margin was 77.3%, up 620 basis points year over year.

Mr. Hui Yuan, Chairman and Chief Executive Officer of Xiao-I, commented, “Amidst our industry’s dynamic and ever-evolving landscape, we remained steadfast in our dedication to innovation and growth. Our results speak volumes, as we achieved an outstanding 106% increase in net revenues during the first half of this year, reaching a record-breaking $26.5 million. This remarkable performance underscores the value of our continuous investments in cutting-edge AI technology that are effectively aligned with the growing digital transformation demands of various businesses.”

“Our commitment to innovation is exemplified by our unparalleled R&D investment in the first half of 2023, which surpasses our entire investment for the previous year. More importantly, we have significantly expanded our product and service portfolio with the introduction of our distinguished large language model, Hua Zang. This innovative offering is expected to be seamlessly applied across a wide array of industries swiftly with cost-efficiency, opening up new horizons for our clients. In addition to our product innovations, we have also made substantial strides in our global expansion. This includes the establishment of a U.S. subsidiary and active participation in a local exhibition. These concerted efforts place us in a good position to lead the global AI industry into a future full of immense opportunities and transformative solutions to drive our continued growth.”

Recent Developments and Strategic Highlights:

  • Secured Contract for AI Contact Center Project with Leading Chinese Aviation Group: In June 2023, Xiao-I secured a contract for an intelligent contact center project with a leading Chinese aviation group. This partnership aims to enhance the aviation group's service provision capabilities and drive its digital transformation.
  • Introduced Pioneering Hua Zang Generative AI Model: In June 2023, Xiao-I launched Hua Zang, its advanced large language model. The model, analogous to an operating system, is built on Xiao-I's robust platform capabilities and designed to empower various industries.
  • Establishment of U.S. Subsidiary as Part of Going Global Strategy: In June 2023, Xiao-I established an U.S. subsidiary, Xiao-I Plus Inc., marking another significant milestone for its global expansion strategy.
  • Launched IDP Solution for Future-Ready Enterprise Document Management: In May 2023, Xiao-I launched its state-of-the-art Intelligent Document Processing (“IDP”) product. This innovative solution is delivered by a smart and efficient platform that streamlines and automates the document management process, empowering businesses towards an era of intelligent operations.
  • Recognition as Outstanding Supplier by China Merchants Bank Credit Card Center: In May 2023, Xiao-I announced that the Credit Card Center of China Merchants Bank Co. recognized it as an outstanding supplier. This prestigious acknowledgement follows the Bank's annual supplier assessment evaluation for 2022, during which Xiao-I demonstrated exemplary performance in business collaboration, product implementation, and service quality.

First Half 2023 Financial Results

Net Revenues
Net revenues were US$26.5 million for the first half of 2023, up 106% year over year from US$12.9 million for the same period of 2022. The increase was primarily due to the increased sales of cloud platform products and hardware products.

By Revenue Type 1H 2023

 1H 2022 % Change
Sale of cloud platform products $22,719,659 $3,648,339 523 
Technology development service  1,763,797  6,296,844 (72)
Sale of software products  535,004  1,397,996 (62)
Maintenance & support service  1,426,784  1,497,871 (5)
Sale of hardware products  30,175  18,431 64 
Total  $26,475,419 $12,859,481 106 

Cost of Revenues

Cost of revenues was US$6.0 million for the first half of 2023, up 61% year over year from US$3.7 million for the same period of 2022. With a smaller increase compared to net revenues, cost efficiency has improved due to economies of scale.

Gross Profit

Gross profit was US$20.5 million for the first half of 2023, representing an increase of 124% year over year from US$9.1 million for the same period of 2022. Gross margin was 77.3% for the first half of 2023, up 620 basis points from 71.1% for the same period of 2022. The increase in gross margin was mainly due to a shift in product mix towards subscription for cloud platform products from one-time software sales.

Operating Expenses

Total operating expenses were US$34.1 million in the first half of 2023, representing an increase of 355% year over year from US$7.5 million for the same period of 2022. While the selling, general and administrative expenses demonstrated improved efficiency with larger business scales, they couldn’t offset the increase in research and development expenses, which grew by 708% year over year.

Income (Loss) from Operations

Loss from operations was US$13.6 million for the first half of 2023, compared to an income of US$1.6 million from operations for the same period of 2022.

Total Other Loss
Total other loss was US$1.3 million for the first half of 2023, generally on par with the same period of 2022.

Net Income (Loss)

Net loss was US$18.8 million for the first half of 2023, compared to a net income of US$0.6 million for the same period of 2022.

The financial statements for the first half year ended June 30, 2023 herein have not been audited or reviewed by the Company’s independent registered accounting firm. The financial statements for the six months ended June 30, 2023 to be disclosed in the Company’s Form 6-K may differ from the above-mentioned unaudited and unreviewed financial statements.

Conference Call Information

The Company will conduct a corresponding conference call at 8:00 a.m. U.S. Eastern Time (8:00 p.m. China Time) to discuss the results.

What: Xiao-I First Half 2023 (ended June 30, 2023) Earnings Call
When:8:00 a.m. U.S. Eastern Time on Monday, September 25, 2023
Webcast: ir.xiaoi.com/events

To join the conference call via telephone, participants must use the following link to complete an online registration process. Upon registering, each participant will receive email instructions to access the conference call, including dial-in information and a PIN number allowing access to the conference call. This pre-registration process is designed by the operator to reduce delays due to operator congestion when accessing the live call.

Online Registration: https://register.vevent.com/register/BI10db54de77c5448db98e85f4efbfed41

Participants who have not pre-registered may join the webcast by accessing the link at ir.xiaoi.com/events.

A live and archived webcast of the conference call will be available on the Investors section of Xiao-I’s website at www.xiaoi.com.

About Xiao-I Corporation

Xiao-I Corporation is a leading cognitive intelligence enterprise in China that offers a diverse range of business solutions and services in artificial intelligence, covering natural language processing, voice and image recognition, machine learning and affective computing. Since its inception in 2001, the Company has developed an extensive portfolio of cognitive intelligence technologies that are highly suitable and have been applied to a wide variety of business cases. Xiao-I powers its cognitive intelligence products and services with its cutting-edge, proprietary AI technologies to enable and promote industrial digitization, intelligent upgrading, and transformation.

Forward-Looking Statements

Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as “approximates,” “assesses,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the SEC.

For investor and media inquiries, please contact:
Ms. Berry Xia
Phone: +86 186 8158 5169
Email: ir@xiaoi.com

(In U.S. dollars, except for share and per share data, or otherwise noted)
  As of 
  December 31,
 June 30,
Current assets:       
Cash and cash equivalents $1,026,245  $4,746,836  
Accounts receivable, net  41,362,705   16,025,831  
Amounts due from related parties  346,517   -  
Inventories  768,216   701,119  
Contract costs  2,012,309   1,936,073  
Advance to suppliers  1,115,672   1,586,618  
Deferred offering costs  1,330,902   -  
Prepaid expenses and other current assets, net  460,854   6,656,705  
Total current assets  48,423,420    31,653,182   
Non-current assets:       
Property and equipment, net  219,470   313,953  
Intangible assets, net  637,114   557,995  
Long-term investment  2,852,492   3,187,416  
Right of use assets  865,399   969,400  
Deferred tax assets, net  3,888,574   -  
Prepaid expenses and other, non-current assets  3,697,675   3,616,218  
Amount due from related parties-non current  -   11,018,714  
Total non-current assets  12,160,724   19,663,696   
TOTAL ASSETS $60,584,144  $51,316,878  
Commitments and Contingencies       
Current liabilities:       
Short-term borrowings $18,784,459  $16,548,757  
Accounts payable  9,180,532   7,222,235  
Amount due to related parties-current  896,431   742,714  
Deferred revenue  2,553,808   3,444,636  
Convertible loans  3,754,269   -  
Accrued expenses and other current liabilities  17,006,713   9,214,618  
Lease liabilities, current  435,462   458,018  
Total current liabilities  52,611,674   37,630,978   
Non-current liabilities:       
Amount due to related parties-non current  8,581,743   7,573,563  
Accrued liabilities, non-current  8,073,912   5,194,843  
Lease liabilities, non-current  300,974   392,436  
Total non-current liabilities  16,956,629   13,160,842   
TOTAL LIABILITIES  69,568,303   50,791,820  
Shareholders’ (deficit)/equity       
Ordinary shares (par value of $0.00005 per share; 1,000,000,000 shares authorized as of December 31, 2022 and June 30, 2023, respectively; 22,115,592 and 24,015,592 shares issued and outstanding as of December 31,2022 and June 30, 2023, respectively) $1,106  $1,201  
Additional paid-in capital  75,621,294   108,762,797  
Statutory reserve  237,486   237,486  
Accumulated deficit  (78,483,156)  (102,449,177) 
Accumulated other comprehensive loss  (3,262,666)  (2,852,695) 
XIAO-I CORPORATION shareholders' (deficit)/equity  (5,885,936)  3,699,612   
Non-controlling interests  (3,098,223)  (3,174,554) 
Total shareholders’ (deficit)/equity  (8,984,159)  525,058   

(In U.S. dollars, except for share and per share data, or otherwise noted)
  For the six months ended June
  2022  2023  
Sale of software products $1,397,996  $535,004  
Sale of hardware products  18,431   30,175  
Technology development service  6,296,844   1,763,797  
M&S service  1,497,871   1,426,784  
Sale of cloud platform products  3,648,339   22,719,659  
Net revenues  12,859,481    26,475,419   
Cost of sale of software products  (170,377)  (368,021) 
Cost of sale of hardware products  (12,545)  (26,118) 
Cost of technology development service  (2,661,707)  (1,286,290) 
Cost of M&S service  (339,213)  (805,948) 
Cost of sale of cloud platform products  (536,863)  (3,519,521) 
Cost of revenues  (3,720,705)  (6,005,898) 
Gross profit  9,138,776   20,469,521  
Operating expenses:       
Selling expenses  (2,094,124)  (2,377,409) 
General and administrative expenses  (1,725,928)  (2,070,052) 
Research and development expenses  (3,669,196)  (29,649,703) 
Total operating expenses  (7,489,248)  (34,097,164) 
Income/(Loss) from operations  1,649,528   (13,627,643) 
Other loss:       
Investment losses  (121,618)  (225,351) 
Interest expenses  (1,202,391)  (1,570,847) 
Other income, net  44,160   525,431  
Total other loss  (1,279,849)  (1,270,767) 
Income/(Loss) before income tax expense  369,679   (14,898,410) 
Income tax benefits/(expenses)  220,820   (3,871,118) 
Net income/(loss) $590,499  $(18,769,528) 
Net loss attributable to non-controlling interests  (2,674)  (173,782) 
Net income/(loss) attributable to XIAO-I CORPORATION shareholders  593,173   (18,595,746) 
Other comprehensive income/(loss)       
Foreign currency translation change, net of nil income taxes  145,129   507,422  
Total other comprehensive income  145,129   507,422  
Total comprehensive income/(loss) $735,628  $(18,262,106) 
Total comprehensive income/(loss) attributable to non-controlling interests  124,849   (76,331) 
Total comprehensive income/(loss) attributable to XIAO-I CORPORATION shareholders  610,779   (18,185,775) 
Earnings/(Loss) per ordinary share attributable to XIAO-I CORPORATION shareholders       
Basic  0.03   (0.80) 
Diluted  0.03   (0.80) 
Weighted average number of ordinary shares outstanding       
Basic  22,115,592   23,308,370  
Diluted  22,362,552   23,308,370  


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