Agora, Inc.

Good day and thank you for standing by. Welcome to Agora Inc. First Quarter 2025 Financial Results Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings, and the replay of today's call can be found on its IR website at investor.agora.io. Joining me today are Tony Zhao, founder, chairman, and CEO, Jingbo Wang, the company's CFO. During this call, the company will make forelooking statements about its future financial performance and other future events and trends. These statements are only predictions that are based on what the company believes today and actual results may differ materially. These four looking statements are subject to risks, uncertainties, assumptions, and other factors that could affect the company's financial results and the performance of its business and which the company discussed in detail in its filings with the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to its initial public offering. Agora Inc. remains no obligation to update any fault-looking statements the company may make on today's call. And with that, let me turn it over to Tony. Please go ahead, Tony.

Thanks, operator. And welcome everyone to our earnings call. I'll first reveal our operating results from the past quarter. I'm very happy to report our second consecutive quarter of GAAP profitability in Q1, driven by double-digit revenue growth year-over-year on a comparable basis and disciplined cost management. This is a great achievement, and I want to thank Agora and Shengwang teams for their efforts and dedication. Total revenue in Q1 were $33.3 million, up 12% year-over-year, excluding revenues from certain end-of-sales low-margin products, with healthy business expansion and net retention rate recovery from both the Agora and Shonwon sites. Our gap net profit for the quarter, though still at a modest base, more than doubled from the previous quarter. As you know, Q1 typically marks our seasonal low point with fewer calendar days and reduced online activity during the New Year holiday period. Considering the seasonal trend and our current business momentum, we're confident that we will maintain gap profitability for the remainder of the year. At the end of Q1, we had more than 1,800 active customers for Agora and close to 2,000 for Shenzhen, excluding Izhma, both representing an increase of 5% compared to one year ago. Now, let's turn to our business product and the technology updates for the quarter. In March, we announced the general availability of our conversational AI engine in China, enabling developers to create interactive voice experience with any large language model. This product has been refined based on extensive customer feedback during the private and public beta phase. Today, this product is still in the public beta stage for the US and global markets, and it already delivers industry-leading performance on latency, noise suppression, interruption handling, and network resilience. Our conversational AI engine unlocks innovation across multiple verticals and uses, from virtual companions and shopping assistants to customer service and all-bound marketing. Particularly, we believe education is where the conversational AI experience can have a huge impact in boosting student engagement with personalized content and adaptive practice. Imagine an AI teaching assistant that talks in real time, adjusting to each student's needs, and providing truly personalized instructions at scale. We are already seeing this vision come to life. Several ad tech customers, such as Dou Shen AI in China, are in the advanced stage of developing AI-powered language tutoring products with our solution. In Q1, We also launched our conversational AI device kit, our 10K turnkey IoT module combining our software call service and high-performance chips from Deccan. This device kit enables device manufacturers to add conversational AI to any IoT devices, from toys and robotics to smart speakers. As a turnkey solution, It can significantly reduce upfront R&D cost and time to market for device manufacturers. For example, our customer RoboPoet announced their latest AI companion robot, Fazuzu, at the Mobile World Congress. Powered by our device kit, Fazuzu listens, senses, and responds in real time, creating personalized support and even emotional connections with end users. We are also making exciting progress on our open source initiatives and developer's ecosystem. Ten, our sponsored open source project for building real-time conversational AI agents continues to gain remarkable traction. With 6,000 GitHub stars, It is the fastest growing project in its category globally. Leading cloud providers, including AWS and Oracle Cloud, are providing support for deploying TEN on their infrastructure. Recently, we launched voice activity detection and turn detection modules as part of our TEN project. which outperforms all existing open source alternatives, further demonstrating our commitment to the community and the conversational AI ecosystem. Over the past few months, we have seen a tremendous amount of interest in our conversational AI products and open source projects. Product registrations and inquiries following the product launch have reached record highs, and our developer workshops in Beijing, Tokyo, and San Francisco have attracted large passionate audience. Today, many customers are working closely with us in proof of our concept development. Before I wrap up, I want to give special recognition to our incredible teams at Agora and Shonwon. In this fast-moving AI revolution, Their dedication and innovative spirit are what allow us to pioneer the future of human-AI interaction. Each day, we are not just keeping pace with changes. We are creating it, unlocking new possibilities, and shaping a new paradigm. The opportunities ahead are truly exciting, and I cannot wait to share our next chapter of progress with all of you. With that, let me turn things over to Jingwo, who will reveal our financial results.

Thank you, Tony. Hello, everyone. Let me start by first revealing financial results for the first quarter of 2025, and then I will discuss outlook for the second quarter. Total revenues for the first quarter reached $33.3 million, exceeding the high end of our guidance range. On a year-over-year basis and excluding revenues from certain end-of-sale low-margin products, revenue growth accelerated to 12.1% up from 3.6% in Q4 last year. This demonstrates a clear pickup in our business momentum. Agor revenues reached 18.6 million in Q1, growing 17.7% year-over-year. and 6.9% sequentially. This sustained performance reflects a successful market expansion and growing adoption, particularly in high-potential verticals such as live shopping and entertainment, where usage continues to grow. Shunwang revenues reached RMB 105.5 million in Q1. Excluding certain end-of-sale low-margin products, Shunwang revenues grew 6.7% year-over-year and declined 13.7% sequentially. The year-over-year growth reflects continued business expansion and adoption in key verticals, such as entertainment and IoT. While the sequential decline is mainly due to normal seasonality, with Q4 historically seeing peak demand for digital transformation projects and Q1 experiencing software activity from social and education customers due to holidays. Dollar-based net retention rate is 96% for Agora and 85% for Shunwang. Both improved from previous quarters. Moving on to cost expenses. Gross margin for the first quarter was 68%. If we exclude gross profit from certain end-of-sale products, gross margin of continuing business increased 0.6% year-over-year and 1.4% quarter-over-quarter. As we mentioned in previous earnings calls, we restructured and reduced our global workforce in November 2024. As a result, operating expenses decreased 6.1 million from 32.6 million dollars in Q2 2024 as a baseline and reached 26.5 million in the first quarter. R&D expenses were $14 million in Q1, decreased 22.7% year-over-year. R&D expenses represented 42.1% of total revenues in the quarter, compared to 54.5% in Q1 last year. So the marketing expenses or 6.2 million in Q1, decreased 8.5% year-over-year, so the marketing census represented 18.7% of total revenues in the quarter, compared to 20.5% in Q1 last year. Q&A census, or 6.2 million in Q1, decreased 25.6% year-over-year, G&E expenses represented 18.8% of total revenues in the quarter, compared to 25.2% in Q1 last year. Moving on to the bottom line, we delivered net income of $0.4 million in Q1, representing a 1.2% net income margin. This represents a substantial turnaround from the 28.7% net loss margin in Q1 last year and marks our second consecutive quarter of GAAP profitability. With our current business momentum and visibility, we anticipate maintaining profitability throughout 2025. Now turning to cash flow. Operating cash flow was 17.6 million in Q1 compared to an active 6.5 million last year. The positive cash flow included $17.8 million in interest proceeds from maturity of bank deposits and financial products issued by banks. Moving on to balance sheet, we ended Q1 with $380.8 million in cash, cash equivalents, bank deposits, and financial products issued by banks. That cash inflow in the quarter was mainly due to operating cash flow. of $17.6 million and the release of $3.5 million in illustrated cash, which was offset in part by a share repurchase of $1.2 million. Since our board approved the share repurchase program in February 2022, we have repurchased $116.4 million worth of shares through March 31st, 2025. So far in Q2, we have already bought back over $8 million worth of shares. We remain committed to creating shareholder value through this program while preserving the financial flexibility needed to invest in future growth opportunities. Now turning to guidance, for the second quarter of 2025, we currently expect total revenues to be between $33 and $35 million, compared to $30.9 million in the second quarter of 2024, representing year-over-year growth rate of 6.8 to 13.3 percent. If revenues from certain end-of-sale, low-margin products are excluded. This all reflects our current and preliminary views on the market and operational conditions, which are subject to change. In closing, I want to take a moment to recognize the exceptional work of the Agora and Shengwang teams. Your dedication and execution have made these outstanding results possible. This quarter, we are proud to have delivered revenue above expectations, achieved consecutive gap profitability, and maintained a robust financial position. Thank you all for joining in today's call. We appreciate your ongoing support. That's opening up for questions.