Agora, Inc. 2025 Q1 Earnings May 27, 2025 Disclaimer Information in this presentation contains forward-looking statements within the meaning of Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this presentation are forward-looking statements, including but not limited to st ...

Core Viewpoint - Agora, Inc. reported its second consecutive quarter of GAAP profitability in Q1 2025, driven by disciplined cost management and double-digit revenue growth year-over-year, excluding certain end-of-sale products [2][4]. Financial Performance - Total revenues for Q1 2025 were $33.3 million, a 0.8% increase from $33.0 million in Q1 2024 [4]. - Agora's revenues were $18.6 million, up 17.7% from $15.8 million in the same period last year, attributed to business expansion and growth in sectors like live shopping [4]. - Shengwang's revenues were RMB105.5 million ($14.7 million), down 13.9% from RMB122.6 million ($17.2 million) in Q1 2024, mainly due to a decline in revenues from certain end-of-sale products [4]. Cost Management - Cost of revenues decreased to $10.6 million, down 16.9% from $12.8 million in Q1 2024, primarily due to the end-of-sale of certain products [5]. - Gross profit increased to $22.6 million, an 11.9% rise from $20.2 million in the same period last year, with a gross margin of 68.0%, up 6.8% from 61.2% [6]. Operating Expenses - Operating expenses were $26.5 million, a decrease of 20.5% from $33.3 million in Q1 2024 [7]. - Research and development expenses were $14.0 million, down 22.7% from $18.1 million in the same period last year [17]. - Sales and marketing expenses decreased to $6.2 million, an 8.5% reduction from $6.8 million [17]. - General and administrative expenses were $6.2 million, down 25.6% from $8.4 million [17]. Profitability Metrics - Net income for Q1 2025 was $0.4 million, compared to a net loss of $9.5 million in Q1 2024 [11]. - Loss from operations was $3.7 million, improved from a loss of $12.6 million in the same period last year [9]. Cash Flow and Financial Position - Total cash, cash equivalents, and financial products as of March 31, 2025, amounted to $388.0 million [4]. - Net cash provided by operating activities was $17.6 million, compared to a net cash used of $6.5 million in Q1 2024 [4]. Share Repurchase Program - The company repurchased approximately 1.2 million Class A ordinary shares for about $1.2 million during Q1 2025, representing 0.6% of its $200 million share repurchase program [13]. - As of March 31, 2025, the company had repurchased approximately 131.8 million Class A ordinary shares for about $116.4 million, representing 58.2% of its share repurchase program [14]. Future Outlook - The company expects total revenues for Q2 2025 to be between $33 million and $35 million, compared to $30.9 million in Q2 2024, excluding revenues from certain end-of-sale low-margin products [16].

Core Viewpoint - Agora, Inc. is set to release its financial results for Q1 2025 on May 27, 2025, after U.S. market close, followed by a conference call to discuss the results [1][2]. Company Overview - Agora, Inc. is a pioneer and leader in Real-Time Engagement technology, providing a Platform-as-a-Service (PaaS) that enables developers to integrate real-time conversational AI, video, voice, chat, and interactive streaming into applications [3]. - The company operates two independent businesses: Agora and Shengwang, with Agora headquartered in Santa Clara, California, and Shengwang based in Shanghai, China [3][4]. Conference Call Details - The conference call for discussing the financial results will take place at 6 p.m. Pacific Time / 9 p.m. Eastern Time on May 27, 2025 [1]. - Investors are encouraged to log in at least 15 minutes prior to the broadcast and can register for the call through a provided link [1][2].

Currency Risk Management - The company does not hedge against currency risk, which may lead to fluctuations in revenue-generating transactions and expenses [653]. - A 10% depreciation of Renminbi against the U.S. dollar would result in a change of the company's holding U.S. dollar equivalents of US$1.6 million for cash and cash equivalents [656]. - The company has not engaged in any foreign currency transactions that would require it to obtain the most favorable exchange rates, which may lead to potential losses [665]. Cash and Cash Equivalents - The company had Renminbi-denominated cash and cash equivalents of RMB123.0 million as of December 31, 2024 [656]. - The company does not expect significant changes in the fair value of cash and short-term investments due to interest rate fluctuations [657]. Accounts Receivable Management - The company regularly updates its allowance estimates for accounts receivable based on various factors, including historical collection trends and current economic conditions [486]. - Changes in estimates and assumptions regarding accounts receivable could materially affect the financial statements [486]. - The company assesses expected credit losses based on various factors, including the age of accounts receivable balances and customer risk characteristics [484]. - The company has not deemed certain accounting estimates as critical, although they could still have a material impact on financial results [483]. ADS Program Costs - The company received reimbursement of US$0.8 million from the depositary for costs and expenses related to the establishment and maintenance of the ADS program for the year ended December 31, 2024 [666].

Core Insights - Agora, Inc. is expanding into AI-powered robotics and interactive toys with the launch of its ConvoAI Device Kit, developed in partnership with Beken, aimed at creating intelligent, voice-driven interactions for smart devices [1][2] - The ConvoAI Device Kit integrates Beken's AI chip modules with Agora's technology, enabling ultra-low latency voice interactions and intelligent dialogue processing, enhancing the interactivity of AI-driven devices [2][4] - Agora's technology is being utilized in Robopoet's AI companion robot, Fuzzoo, which focuses on emotional wellness and personalized interactions, showcasing the potential of conversational AI in emotional support [3][4] Company and Industry Developments - Agora's ConvoAI Device Kit is designed to overcome challenges in on-device conversational AI, such as background noise and latency, through advanced voice activity detection and real-time speech synthesis [4] - The partnership with Beken allows device makers to integrate AI seamlessly into their products, paving the way for the next generation of responsive and interactive devices [4][5] - Agora's vision includes creating intelligent devices capable of real-time, human-like interactions, with applications ranging from educational AI toys to smart home devices [5]

Core Viewpoint - The article highlights the launch of Agora's conversational AI engine, which enables any text-based large model to be upgraded into a conversational multimodal model, emphasizing affordability and efficiency in AI voice interaction [2][4]. Group 1: Product Features - The conversational AI engine supports a wide range of large model providers, including DeepSeek and ChatGPT, allowing developers to choose freely [4]. - It features low latency with a median voice conversation delay of 650ms and an intelligent interruption technology that allows for responses as low as 340ms [5]. - The engine can filter out 95% of environmental noise, ensuring accurate voice recognition, and maintains stable conversations even under poor network conditions [5]. Group 2: Development and Cost Efficiency - Developers can deploy the AI engine with just two lines of code in about 15 minutes, significantly lowering the development barrier [6]. - The cost for AI voice interaction is set at 0.098 yuan per minute, with an initial bonus of 1000 minutes for new users [7]. - Average conversation costs are calculated to be around 0.03 yuan per interaction, making it highly economical for frequent use [8]. Group 3: Application Scenarios - The conversational AI engine can be utilized in various applications such as smart assistants, virtual companionship, language practice, customer service, and smart hardware [10]. - It enhances the functionality of smart devices by enabling voice control and personalized services, applicable in AI toys, educational hardware, and home assistants [10].

Core Viewpoint - The article discusses the launch of Agora's conversational AI engine, DeepSeek, which offers low-latency, real-time voice interaction capabilities at an extremely low cost, making it accessible for developers to integrate AI into applications [1][4][17]. Pricing and Cost Efficiency - The cost of using the AI engine is remarkably low at 0.098 yuan per minute, with an initial offer of 1000 free minutes for new users [3][5]. - Average conversation length is approximately 21.1 seconds, resulting in a cost of only 0.03 yuan per interaction, leading to a monthly cost of less than 0.5 yuan for 15 interactions [5]. Technical Performance - The engine achieves a median response latency of 650 milliseconds, significantly below the 1.7 seconds threshold for natural conversation [7][8]. - It supports interruption of responses with a low latency of 340 milliseconds, mimicking human conversation dynamics [9]. - The engine can filter out 95% of background noise, ensuring high-quality voice recognition even in noisy environments [9]. Network and Compatibility - Agora has established over 200 data centers globally, allowing for stable connections even in poor network conditions, with the ability to maintain communication despite 80% packet loss [10]. - The engine is compatible with various large models, including DeepSeek and ChatGPT, and supports over 30,000 device types, ensuring broad accessibility [10][16]. Developer Accessibility - The integration process for developers is simplified to just two lines of code, allowing for deployment of a conversational AI agent within 15 minutes [11][12]. - Developers can easily switch between different underlying models and voice synthesis providers without altering the front-end logic [13][14]. New Service Model - The launch of the conversational AI engine signifies the emergence of a "voice interaction as a service" model, decoupling RTC technology from large model development [17][18]. - Agora positions itself as a middleware provider in the AI voice interaction ecosystem, facilitating the integration of RTC technology into various AI applications [19][21].

Core Insights - Agora, Inc. has launched its Conversational AI Engine, enabling developers to create interactive voice experiences with any AI model, optimized for ultra-low latency and natural conversation flow [1][2][3] Product Features - The Conversational AI Engine allows the use of any AI model and text-to-speech voice solution, designed to optimize real-time conversation flow with low-latency responses and intelligent pauses for interruptions [2][3] - Built-in features include background noise suppression, AI-driven acoustic algorithms, and real-time speech-to-text capabilities, ensuring clear voice interactions in various environments [3] - The Engine is powered by Agora's global Software-Defined Real-Time Network™, which minimizes latency and handles packet loss effectively [3] Integration and Accessibility - Agora plans to extend the Conversational AI Engine's capabilities to its App Builder product, enabling a no-code approach for creating conversational AI experiences [4] - The public beta of the Conversational AI Engine is now available, allowing businesses and developers to start building advanced voice AI applications [7] Strategic Partnerships - Agora is partnering with Oracle to leverage Oracle Cloud Infrastructure (OCI) for optimizing performance, security, and efficiency of the Conversational AI Engine [5][6] Application Areas - The Conversational AI Engine is designed for various applications, including 24/7 customer support, IoT integration, virtual shopping assistants, live AI hosts, mental health support, live tutoring, AI-powered NPCs in gaming, and employee onboarding [6][9]

Financial Data and Key Metrics Changes - Total revenue in Q4 2024 was $34.5 million, up 4% year over year, excluding revenues from certain end-of-sale low-margin products [7][20] - Core revenues were $17.4 million in Q4, an increase of 10.8% quarter over quarter and 13.7% year over year [20] - Gross margin for Q4 was 66.6%, slightly decreased by 0.1% quarter over quarter and 0.8% year over year [23] - Net income was $0.2 million in Q4, translating to a 0.5% net income margin, compared to a net loss margin of 7.2% in Q4 last year [26][27] - Operating cash flow was $4.5 million in Q4, compared to $3.7 million last year [28] Business Line Data and Key Metrics Changes - Xiong Wang revenues were RMB 122.2 million in Q4, increasing 8.2% quarter over quarter but decreasing 5.4% year over year [21] - The base net retention rate was 95% for Agora and 79% for Xiong Wang, excluding revenues from certain end-of-sale products [22] Market Data and Key Metrics Changes - Demand in the China market is primarily driven by IoT and digital transformation, while the global market sees growth from live commerce and retail economy [36] - The company noted significant interest in AI-related technologies, particularly in applications for companionship and education [38][54] Company Strategy and Development Direction - The company aims to maintain operational efficiency and deliver sustainable profitable growth, with a focus on emerging market opportunities in generative AI [6][30] - The launch of the conversational AI engine is expected to drive growth by enabling developers to create interactive voice experiences [13][17] Management Comments on Operating Environment and Future Outlook - Management highlighted the challenges faced over the past few years, including the pandemic and regulatory changes, but emphasized a return to profitability [6][27] - The company expects total revenues for Q1 2025 to be between $31 million and $33 million, reflecting a year-on-year growth rate of 7.7% [30] Other Important Information - The board has authorized a 12-month extension of the share repurchase program through February 28, 2026, reflecting confidence in the company's long-term growth potential [29] Q&A Session Summary Question: Trends in overseas and China markets and key sectors driving growth in 2025 - Management noted demand in China is focused on IoT and digital transformation, while globally, live commerce and retail economy are key growth drivers [36] Question: Increase in AI-related demand and application scenarios - There is growing interest in AI technologies, particularly for voice AI applications in companionship and education [38][54] Question: Gross profit margin and GAAP profit targets for 2025 - The company expects gross margin to maintain around 67% and aims for stronger growth on the bottom line compared to the top line [42][44] Question: Strong recovery of Agora's growth rate in Q4 and future momentum - The growth rate was driven by new usage in live commerce and the creator economy, with optimism for continued growth in 2025 [49][51] Question: Impact of DeepSeq on demand for voice and multimodal interaction - Management sees significant potential in voice AI applications and plans to focus on practical use cases in the next two years [56][59]

Financial Data and Key Metrics Changes - The company achieved GAAP profitability for the first time in several years, marking a significant milestone [6][27] - Total revenue for Q4 2024 was $34.5 million, up 4% year over year, excluding revenues from certain low-margin products [7][20] - Core revenues were $17.4 million in Q4, reflecting a 10.8% quarter-over-quarter increase and a 13.7% year-over-year increase [20] - Gross margin for Q4 was 66.6%, with a slight decrease of 0.1% quarter over quarter and 0.8% year over year when excluding certain products [23] - Net income was $0.2 million in Q4, translating to a 0.5% net income margin, compared to a net loss margin of 7.2% in Q4 last year [26] Business Line Data and Key Metrics Changes - Xiong Wang revenues were RMB 122.2 million in Q4, increasing 8.2% quarter over quarter but decreasing 5.4% year over year [21] - The increase in Xiong Wang revenues was primarily due to digital transformation customers, while the year-over-year decrease was attributed to slowing demand in social and entertainment sectors [21][22] Market Data and Key Metrics Changes - The company reported over 1,700 active customers for Agora and close to 2,000 for Xiong Wang, representing increases of 2% and 8% respectively compared to the previous year [7] - The demand in the China market is primarily driven by IoT and digital transformation, while the global market sees growth from live commerce and retail [36] Company Strategy and Development Direction - The company is focused on driving operational efficiency and sustainable profitable growth, with a commitment to innovation and financial discipline [27][31] - The launch of the conversational AI engine is expected to accelerate the adoption of conversational AI across various industries, becoming a key driver of future growth [17][18] Management's Comments on Operating Environment and Future Outlook - Management noted that the generative AI revolution presents extraordinary opportunities for the company, particularly in enabling seamless voice-based interactions [9][10] - The company expects to maintain sustained profitability throughout 2025, driven by strategic initiatives and emerging market opportunities in generative AI [30][31] Other Important Information - Operating cash flow was $4.5 million in Q4, compared to $3.7 million last year, and free cash flow was $4.3 million compared to $3.4 million last year [28] - The company ended Q4 with $363.8 million in cash and equivalents, with a share repurchase program extended through February 2026 [29] Q&A Session Summary Question: Trends in overseas and China markets and key sectors driving growth in 2025 - Management noted demand in China is primarily on IoT and digital transformation, while globally, live commerce and retail are driving growth [36] Question: Increase in AI-related demand and application scenarios - There is growing interest in AI-related technologies, particularly in voice AI applications for companionship and education [38][39] Question: Gross profit margin and GAAP profit targets for 2025 - The company expects gross margin to maintain around 67% and aims for stronger growth on the bottom line compared to the top line [42][44] Question: Strong recovery of Agora's growth rate in Q4 and future momentum - The growth rate was driven by new usage in live commerce and other novel use cases, with optimism for continued growth in 2025 [49][51] Question: Demand for voice and multimodal interaction in the next two years - Management sees significant potential in voice AI applications, particularly in customer service and IoT devices, with expectations for growth in these areas [53][59]