Agora, Inc.

Good day and thank you for standing by. Welcome to the Agora Inc. First Quarter 2026 Financial Results Conference call. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. The company's earnings results press release, earnings presentation, SEC filings and a 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, Jimbo Wang, the company's CFO. During this call, the company will make forward-looking 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. The actual results may differ materially. These four looking statements are subject to risk, uncertainties, assumptions and other factors that could affect the company's financial results and the performance of its business and in which the company discussed in details in its filings with the SEC. Including today's call, earnings press release and their risk factors and other information contained in a final prospect relating to its initial public offering. Agora Inc. remains no obligation to update any for-looking statements the company may make on today's call. Now, with that, let me turn it over to Tony. Hi, Tony.

Thank you, operator, and welcome everyone to our earnings call. I'll start with a review of our operating results for the quarter. I'm pleased to report our sixth consecutive quarter of GAAP profitability, alongside another quarter of strong top-line growth. Total revenue for the first quarter of 2026 reached $37.7 million, up 13.5% year-over-year. Growth further accelerated our prior quarters. GAAP net profit was $1.1 million, more than double the level of Q1 last year. These results reflect the continued expansion of our real-time engagement use cases globally, as well as the increasing contribution from AI-related applications and products built with our solutions. Now, let me turn to our business product and technology update for the quarter. Over the past several months, we continue to make progress in bringing conversational AI to real-world production, deepening the capabilities with our real-time engagement infrastructure and expanding our ecosystem partnerships. In March, we officially launched Agent Studio, a visual no-code environment that enables developers and enterprises to rapidly build, test, and deploy with AI agents at scale. We also introduced conversational AI agents for inbound use cases, such as customer service, as well as outbound use cases focused on sales and marketing. The market opportunity here is enormous. According to Gartner, conversational agents are expected to automate 70% of customer interactions by 2027, and by 2028, AI agents are projected to outnumber human sellers by 10 to 1. At the same time, many enterprises still struggle to deploy voice AI in production environments. The challenge is not simply the AI model itself, but the complexity of outstripping multiple technology layers. while maintaining low latency, reliability, and the natural conversational experience at scale. In addition, prospective enterprise deployment require domain-specific expertise. A successful voice AI agent must do more than respond accurately. It must reflect the tone, personality, and workflow of the industry it serves. For example, a car sales assistant and a debt collection agent need very different conversational styles, complex barriers, and customer engagement approaches. Our solution is designed to eliminate this complexity through a fully integrated stack that combines three core components. that allows enterprise to design, test, and deploy AI agents in minutes rather than weeks or months. Second, our conversational AI agent orchestrates ASR, large-language model, and TDS capabilities with intelligent interaction handling, noise suppression, multilingual support, and domain-aware conversation design. enabling more natural and human-like interactions. Third, our global real-time network infrastructure delivers sub-second latency and carrier-grade reliability worldwide. We are already seeing strong early validation from real-world deployments. In Q1, one customer implemented a survey and polling agent that matched 10% conversion rate of human agents. This allowed them to scale data collection and reward distribution far more cost-effectively without adding operational hack-ons. Overall, enterprise feedback has been highly encouraging. Customers increasingly recognize that scalable conversational AI requires not only powerful models but also real-time infrastructure's capability of delivering and seamless integration. We believe we are uniquely positioned at the intersection of these capabilities. Last month, we also strengthened our position in the enterprise collaboration market with the launch of our Intelligent Meeting Engine product. Intelligent Meeting Engine offers end-to-end encryption flexible deployment options, including on-premises and private cloud, and a full data isolation to help ensure that customer meeting content remains entirely within their controlled infrastructure. At the same time, it integrates AI-powered capabilities, such as real-time transcription, translation, intelligent meeting summaries, and automated follow-up workflows that can connect with customers' existing business system. This solution addresses growing enterprise demand around contents, data serenity, and intelligent workflow automation, and has been well received in industries including finance, government, and healthcare. Turning to ecosystem partnerships, we continue to integrate the latest AI models such as Google's Gemini Live and XAI Squawk models into our conversational AI solutions. In particular, Google has featured Agora as a recommended partner for building real-time conversational AI, validating our technology leadership in this space. In addition, we recently entered entered a strategic partnership with NetEase Enterprise Service Division, NetEase Smart Enterprise. Today, together we will provide integrated solutions spanning real-time video, content moderation, and AI agents. This partnership combines NetEase expertise in AI and content moderation with our leadership in real-time engagement infrastructure. We believe this partnership is a meaningful addition of our technology from one of China's leading internet companies, while also expanding our go-to-market opportunities across education, customer service, digital entertainment, and enterprise collaboration. Before I conclude, I want to thank Agora and Shenwang teams for their continued dedication and execution, and thank our shareholders for their ongoing trust and support. Globally, conversational AI is rapidly moving from proof of concept to large-scale deployment. Since the official launch of our conversational AI engine product last year, usage has demonstrated remarkable momentum, with over 150% sequential growth every single quarter. Many prices today are no longer asking whether they should adopt conversational AI. Instead, they are asking how to deploy it at scale with reliability, low latency, and seamless integration. We believe our decade of experience in real-time engagement infrastructure uniquely position us to help customers solve exactly these challenges. With that, let me turn things over to Jimbo, who will reveal our financial results.

Thank you, Tony. Hello, everyone. Let me start by first revealing financial results for the first quarter of 2026. Then I will discuss outlook for the second quarter. Starting this quarter, we have simplified our disclosure approach for revenues and active customers, and we will no longer separately disclose these metrics. We've also refined our dollar-based net retention rate for DB and ER methodology. We now compare quarterly revenue from the same cohort of paying customers year over year to calculate DB and ER. This change aligns DB and ER more closely with our quarterly revenue growth rate, making it easier for investors to compare the two. Total revenue for the first quarter reached $37.7 million, representing 13.5% year-over-year growth. Those results exceeded the high end of a guidance range of $36 to $37 million and reflected continued expansion and usage growth of real-time engagement services in sectors such as U.S. live shopping, social and entertainment, and financial services. EV and ER first quarter was 99% compared to 95% in the first quarter of 2025. Gross profit first quarter was 23.9 million, representing a 5.7% year-over-year increase. Gross margin was 63.4% compared to 68% in the same period last year, mainly due to product mix change. especially conventional air products, remaining at a subscale stage. Turning to expenses, R&D expenses were 14.4 million in Q1, up 2.9% year-over-year. R&D expenses accounted for 38.1% of total revenues, compared to 42.1% in the same period last year. The increase was primarily due to continued investment in conversational and air products. So the marketing census were 5.9 million in Q1, down 4.8% year-over-year. So the marketing census represented 15.6% of total revenues in the quarter, compared to 18.7% in Q1 last year. The decrease was primarily due to this plain expense management, including lower personnel and promotion census. General and administrative expenses were $6 million in Q1, down 3.4% year-over-year. G&A expenses represented 15.9% of total revenues compared to 18.8% in Q1 last year. The decrease was primarily due to a lower allowance for current expected credit losses, mainly as a result of improved customer credit conditions and collection outcomes. Only onto the bottom line. We delivered net income of $1.1 million in Q1, more than double the net income in the first quarter last year, representing a 2.9% net income margin. This marks our sixth consecutive quarter of GAAP profitability and reflects continued improvement in our operating leverage Now turning to cash flow, operating cash flow was $5.7 million in Q1, including interest received of $4.3 million, compared to $17.6 million in Q1 last year, which included interest received of $17.8 million. Moving on to balance sheet, we ended Q1 with $366.1 million in cash cash equivalents and deposits, and financial products issued by banks. Now, cash outflow in the quarter was mainly due to share repurchase. During the quarter, we repurchased approximately 12.5 million Class A all-generation shares, or 3.1 million ADS, representing approximately 3.6% of our total outstanding shares at the beginning of the quarter. for approximately $13.1 million. As of March 31st, 2006, we had repurchased 174.7 million Class A ordinary shares or 43.7 million ADS for approximately $156.2 million under our share repurchase program, which represented 78.1% of a $200 million share repurchase program. The current program will expire at the end of February 2027. Now turning to guidance. Based on currently available information, we expect total revenues for the second quarter of 2026 to be between $39 and $40 million, compared to 34.3 million in the second quarter of 2025. representing year-over-year growth of 13.7 to 16.6%. Notably, even at the low end of this range, we expect to deliver faster revenue growth than we did in the first quarter. In closing, I want to thank our teams for their focused execution in the first quarter. We beat revenue guidance by nothing more than double year-over-year. Our second quarter outlook also points to a further acceleration in revenue growth. We will continue to invest in AI with discipline, and we're confident that it will become an increasingly important driver of long-term growth. Thank you all for joining today's call. Let's open up for questions.