Good day, and thank you for standing by. Welcome to the Agora, Inc. Second Quarter 2024 Financial Results Conference Call. 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; Jingbo Wang, the company's CFO. The reconciliations between the company's GAAP and non-GAAP results can be found in earnings press release. 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, and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could affect the company's financial results and the performance of this business in 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 under no obligation to update any forward-looking statements the company makes on today's call. With that, let me turn it over to Tony.

Thanks, operator, and welcome everyone to our earnings call. I'll first review our operating results in the past quarter. Agora's revenues were $15.6 million in the second quarter, up 2% year-over-year, mainly driven by business expansions in certain use cases, such as live shopping. Shengwang revenue was RMB 132 million in the second quarter, up 0.3% year-over-year and 8% quarter-over-quarter, mainly due to usage growth of digital transformation and Internet-of-Things customers. I'm glad to see that both Agora and Shengwang delivered year-over-year revenue growth this quarter despite a very challenging macro environment. This success is due to our relentless innovation in driving new use cases and enhancing the quality and value of our products in existing use cases. Now moving on to our business products and technology updates for this quarter. Let's first talk about Agora. Recently, our real-time speech-to-text product transitioned from beta to general availability. As I mentioned in our previous earnings call, this product enables customers to transcribe the audio of each user in the channel. Text can be distributed as live captions to all channel participants to enhance accessibility and user experience. Throughout the development and beta testing stage, we have improved the performance of our product to accommodate up to three simultaneous speakers and added support for our major languages and dialects. Additionally, our product is integrated with large language models, allowing customers to receive automatically generated summaries of meetings or events and gain insights at the end of each session. For example, HelloTalk, a leading language learning platform with more than 50 million users has been one of our customers to first adopt our real-time speech-to-text product. With the integration of our product and the large language model, HelloTalk can now provide their users advanced capabilities, including live language analysis, live translation, language proficiency assessment, creating contextual and personalized learning experiences. Additionally, I'm happy to announce the launch of Agora's new website. At Agora, we believe all our customers are developers at heart. Recognizing the innovative spirit of our new website boasts an intuitive interface, enhanced navigation, and a more modern design to create a cool and sleek user experience. It also offers a wealth of resources tailored to both developers and key business decision makers. Next, let's turn to Shengwang. We are excited to announce our recent partnership with Unity China to integrate our in-game voice calling capabilities in Unity China's UOS engine. This collaboration allows game developers to seamlessly add multiplayer voice channels into their games. It is especially appealing to small game studios and independent developers who often lack the skill set and resources to address all the technical challenges on their own. In addition, our proprietary advanced features such as 3D spatial audio, AI noise suppression, and echo cancellation are available to developers, enabling them to create immersive experiences for players. In this quarter, we have also facilitated wider application of AI in our customers' use cases. For example, we helped XiaoTianCai to add real-time transcription for video calling in their latest flagship smartwatch. Previously, when users conducted video calls on the smartwatch in a noisy environment, it was often difficult to hear the other party clearly. Moving the wrist and watch closer to the ear would make it impossible to see video on the screen, therefore, forcing users to make a hard choice between audio and video. Now with our cloud AI real-time transcription capabilities, users can enjoy video calls with captions on their smartwatch, significantly enhancing their user experience. Last September, we became the first company to offer real-time voice SDK that enables conversations with generative AI models. Since then, we have facilitated our customers to launch conversational AI applications in various use cases such as AI companions, productivity assistants, language tutors, and customer service. Although these applications are still in their early stages, we have already seen promising user adoption and engagement trends. Looking forward, we are committed to staying at the forefront of technology advancement to enable developers to innovate at a faster pace and build the conversational AI applications of tomorrow. This year marks the 10th anniversary of our economic real-time engagement or RTE conference. This coming October, we will host our RTE conference in Beijing, focusing on the intersection of AI and RTE technologies, and the exciting possibilities that lie ahead. Experts and practitioners from both the AI and RTE community will gather to share their vision and efforts to create revolutionary technologies, products, and applications. There will also be forums focusing on more traditional verticals such as digital transformation, entertainment, education, and Internet opportunities. We welcome you all to attend the conference and experience firsthand the vibrant spirit of the industry. Before concluding my prepared remarks, I want to thank both Agora and Shengwang teams for their hard work and commitment during this challenging period. Let's stay focused on creating long-term customer value and strengthening our leading market position. With that, let me turn things over to Jingbo, who will review our financial results.

Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for the second quarter of 2024, and then I will discuss the outlook for the third quarter. Total revenues were $34.2 million in the second quarter, an increase of 3.6% quarter-over-quarter and an increase of 0.5% year-over-year. We have finally overcome the impact of the pandemic, the macroeconomic turmoil, and regulatory changes, and returned to year-over-year revenue growth for the first time since 2021. Agora revenues were $15.6 million in the second quarter, a decrease of 1.3% quarter-over-quarter and an increase of 2% year-over-year. The quarter-over-quarter decrease was primarily due to reduced usage from customers in emerging markets. The year-over-year increase was primarily due to business expansion and usage growth in certain verticals such as live shopping. Shengwang revenues were RMB 131.9 million in the second quarter, an increase of 7.6% quarter-over-quarter and an increase of 0.3% year-over-year. The increase was primarily due to increasing revenues from certain verticals such as Internet-of-Things. The dollar-based net retention rate is 92% for Agora and 79% for Shengwang excluding revenues from discontinued business. Moving on to costs and expenses. For my following comments, I will focus on non-GAAP adjusted financial measures, which exclude share-based compensation expenses, acquisition-related expenses, amortization expenses of acquired intangible assets, income tax related to acquired intangible assets, impairment of goodwill, depreciation of property and equipment, and amortization of land use rights. The adjusted gross margin for the second quarter was 63.4%, which was 3.8% lower than Q2 last year and 0.2% higher than Q1 this year. The year-over-year decrease was mainly due to changes in product mix. The quarter-over-quarter increase was mainly due to improved utilization rate of infrastructure. Adjusted R&D expenses decreased 6.6% year-over-year to $15.5 million in Q2, mainly due to our continued cost control measures. Adjusted R&D expenses represented 45.4% of total revenues in the quarter compared to 48.8% in Q2 last year. Adjusted sales and marketing expenses were $5.9 million in Q2, decreased 16.9% year-over-year, representing 17.3% of total revenues in the quarter compared to 20.9% in Q2 last year. Adjusted G&A expenses were $6.6 million in Q2, slightly increased 6.5% year-over-year, primarily due to the increase of expected credit loss. G&A expenses represented 19.1% of total revenues in the quarter compared to 18.2% in Q2 last year. Overall, adjusted operating expenses were 6.1% lower than the same period last year, thanks to our effective cost control. Adjusted operating expenses were 2.2% higher than Q1 this year. The sequential increase was mainly because we decided to replace certain share-based compensation with cash compensation for employees in order to reduce dilution for our shareholders when shares are trading below cash value. Adjusted EBITDA was negative $6 million, translating to a 17.6% adjusted EBITDA loss margin for the quarter compared to 19.5% in Q2 last year. Non-GAAP net loss was $6 million in Q2, translating to a 17.5% net loss margin for the quarter lower than the net loss margin of 19.4% in Q2 last year. Now turning to cash flow. Operating cash flow was negative $7.6 million in Q2, compared to negative $5.3 million last year. Free cash flow was negative $7.9 million compared to negative $5.6 million last year. Moving onto the balance sheet. We ended Q2 with $371 million in cash, cash equivalents, bank deposits, and financial products issued by banks, or $4.03 per ADS. Net cash outflow in the quarter was mainly due to free cash flow of negative $7.9 million and share repurchase of $2.3 million. Now turning to guidance. For the third quarter of 2024, we currently expect total revenues to be between $31.5 million and $33.5 million. This forecast reflects our end of sale of certain products with unsatisfactory profitability. Such products generated approximately $2.4 million of revenue in the third quarter of 2023 and $3.3 million of revenue in the second quarter of 2024. The average gross margin of such products was below 10%. So we expect the end of sale of such products will lead to a meaningful increase in our gross margin and a positive impact on the bottom line in the third quarter. This outlook also reflects our current and preliminary views on the market and operating conditions, which are subject to change. In closing, returning to the year-over-year growth is an inspiring turning point under a challenging operating environment. We are excited about emerging use cases, especially the intersection between real-time engagement and conversational AI, and we remain confident about our long-term growth potential. Thank you to both Agora and Shengwang teams for their hard work and contribution during this period. Thank you, everyone, for attending the call today. Operator, let’s open it up for questions.

First question is from the line of Yang Liu with Morgan Stanley.

I have two questions here. The first is regarding the business outlook. As Jingbo just mentioned that you will face out some of the low-margin business. Could you please elaborate more about the reason behind that led you to the competition or the outlook of that business? And you mentioned that the business has a quite low gross margin, and I'm not sure whether that business operating margin or net margin is also very bad or what is the potential impact to the bottom line. And the second question is based on the company's pipeline, what is your expectation of the future of emerging applications or use cases for RDC or whatever AI-related application, if you see any potential boom in the RDC usage. Could you please share more about that?

I'll take the first question. So yes, we already are in certain products in this quarter, and these products we mentioned a few years back is one more CDN-based technology and given how competitive that market is. These products have pretty low gross margin, but in the low single-digit range. And because they are also related to other expenses, the operating margin basis is close to even slightly negative. As we know, we have been very focused on improving overall operating efficiency and driving the business towards sustained profitable growth. And that's why we believe this business is not generally profitable, and we don't see that market turning around very quickly in the near term. That's why we decided to basically stop the sale of such products. That doesn't mean we will exit the entire kind of medium latency live streaming market. We are getting other innovative products, not based on the traditional existing technology, but more based on the RDC related technology. So we'll continue to be competing in that market, but we will be more focused on innovation versus offering more traditional and legacy products.

I’ll take the generative AI side of the question. We have been actively talking to leading large language model companies globally with very positive feedback in general. The importance of multi-model capabilities and a highly reliable, low-latency transmission network is well recognized by all players. We are working closely with many of them to drive multi-model products and solutions. Some of our consumer applications have already integrated with our SDK. Meanwhile, we have also worked together in engaging with the AI developer community. If you look at the nearly 500,000 different models we have been working with, we are engaging with different communities on that to bring the models into real-world use cases. We have also partnered with companies to help offer innovative solutions. Please stay tuned for more announcements in our RTE conference in October.

One moment for our next question. It comes from the line of David Lee with Bank of America Securities.

I have two questions here. Number one is about the revenue by segment. It seems that Shengwang revenue is getting stronger quarter-on-quarter recovery in Q2 compared to Agora. And what's the key drivers? And how do we see the trend in Q3 for the domestic market and an international one? And the second question about our breakeven target. As we have been actively controlling expenses and also scaling down the low-margin business. Do we have any updates about the breakeven target in the following quarters or some other time?

In terms of Q3 demand, for U.S. and international markets, we see growth momentum in live shopping and IoT verticals, particularly in direct-to-market. Since we became the first company to offer real-time voice SDK that enables conversations with generative AI models, competitors have also followed us and provide similar products. We believe this will be the new battlefield of RTE. With our recent launch of our conversational AI framework, we will gain significant competitive edge to engage with AI developers and serve their applications. In the China market, we see growth pressure in IoT customers, along with some strong demand for conversational AI applications. The competitive landscape has largely remained unchanged during the past quarter. Competitive pressure has stabilized.

I’ll take the second question. So from what we see right now, demand for our corporates remains pretty robust. So we do expect a sequential revenue growth in Q3 compared to Q2 and hopefully Q4 compared to Q3 as well. The gross margin of our corporates remains very healthy. So you will see a pretty nice uptick in gross margin in Q3 and Q4. But as I mentioned earlier, the information on the certain low-margin products will not impact the bottom line. In terms of the OpEx, we’ll continue to manage OpEx very cautiously, and we do not expect to be higher than Q2 in the coming quarters. If anything, we might try to further improve efficiency. So at this point, I cannot promise the timing of the breakeven, given there are still many moving parts, but we are committed to achieving profitable and sustainable growth. So if we think about the business in this quarter, we have returned to year-over-year growth after a lot of the dynamic macro challenges in both China and in the U.S., including funding environmental changes as well as relations. So now we have finally come back to revenue growth, and we believe this is a turning point and the core business will continue to grow from this point on. As we maintain our cost discipline and drive efficiency, it may just be a matter of time before we achieve that goal – to capitalize on continued growth. We expect to achieve such breakeven on a GAAP basis and on a continued basis in 2024.

And as there are no further questions, I want to thank everybody for attending the company's call today. As a reminder, the reporting of the earnings release will be available on the company's website at investor.agora.io. And if there are any questions, please feel free to e-mail the company. Thank you, everyone.