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Xiao-I Corporation Reports Unaudited 2023 First Half Financial Results

SHANGHAI, China, Oct. 20, 2023 (GLOBE NEWSWIRE) -- Xiao-I Corporation (“Xiao-I” or the “Company”), a leading cognitive artificial intelligence (“AI”) enterprise in China, today reported its unaudited 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, which was primarily driven by the significantly increase of professional service fee, including the purchase of supercomputing service fees, data services, intelligent computing technology services and software outsourcing, etc. mainly from four third parties for the requirement of big data model development project and other cloud platform products. In November 2022, OpenAI launched the ChatGPT, which opened up a new situation of artificial intelligence. Under such background, the Company increased investment in AI+ Industrial Internet research and development, including the research and procurement of intelligent collaborative platform, digital twin platform, data intelligence platform, industrial enterprise services and research and judgment platform and other platform products.

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.

Significant related party transactions

In early 2022, we invested in Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd. (“Zhizhen Guorui”) at a total consideration of $2.9 million, acquiring less than 51% of its equity interest with significant influence, which was accounted as long-term investment. For the purpose of Zhizhen Guorui’s operation use, on March 31, 2023, Shanghai Xiao-i Robot Technology Co., Ltd. (“Shanghai Xiao-i Robot”) entered into agreement to provide credit line to Zhizhen Guorui of US$13.8 million (RMB100.0 million) with interest free.

As of June 30, 2023, the loan provided to Zhizhen Guorui by Shanghai Xiao-i Robot was US$11.0 million (RMB79.9 million).

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

(In U.S. dollars, except for share and per share data, or otherwise noted)
  As of 

  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 30, 
  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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