Good day and thank you for standing by. Welcome to the Agora, Inc. First Quarter 2023 Financial Results Conference Call. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to the IR Director, Ms. Fionna Chen. Please go ahead, ma'am.

Thank you, operator. Good morning and evening, everyone. Thank you for joining us for Agora, Inc.'s first quarter 2023 earnings conference call. Our earnings results press release, earnings presentation and an explanatory note on certain reporting and disclosure adjustments, SEC filings and a replay of today's call can be found on our IR website at investor.agora.io. Joining me today are Tony Zhao, Founder, Chairman and CEO; Jingbo Wang, our CFO. Reconciliations between our GAAP and non-GAAP results can be found in our earnings press release. During this call, we will make forward-looking statements about our future financial performance and other future events and trends. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could affect our financial results and the performance of our business and which we discussed in detail in our filings with the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to our initial public offering. Agora, Inc. remains no obligation to update any forward-looking statements we may make on today's call. With that, let me turn it over to Tony. Hi, Tony.

Thanks, Fionna, and welcome, everyone, to our earnings call. Before diving into our operational results for the quarter, I would first like to make a few remarks regarding recent changes in the organizational restructure of our company. Since our inception 9 years ago, we have mostly operated under the Agora brand globally to better meet the requirements of our customers and compete more effectively in the unique market we serve. We will now operate 2 independent divisions under the same holding company. Our Agora division will focus on our business in the U.S. and international markets, and our Shengwang division will focus on our business in the China market. Agora and Shengwang will each be run by a local management team and adopt local standards and best practice. We have appointed Stanley Wei as Chief Operating Officer of Agora and Robbin Liu as Chief Operating Officer of Shengwang. We believe this strategic reorganization will allow us to optimally focus our resources on the specific needs and the priorities of each business. Agora will focus on acceleration of growth and on gaining market share in the U.S. and international markets, leveraging our leading technology and competitive product offerings. Shengwang will focus on enhancing our quality of experience advantage and improving the ease of adoption of our products, further strengthening our competitive position in the China market. By empowering the local management team of each division, we will be able to respond more quickly to the needs of our customers and become more agile as new opportunities emerge. From this quarter onwards, we will report our revenue and operating metrics separately for Agora and Shengwang to help investors better understand the dynamics and our operational results in each of these markets. Our revenue for the first quarter was $15.1 million for Agora,…

Thank you, Tony. Hello, everyone. Let me start by first discussing certain reporting and disclosure adjustments in our financial results. And I will review financial results for the first quarter and outlook for the second quarter of 2023. Following our recent reorganization, Agora, Inc. is now the holding company of 2 independent businesses, Agora and Shengwang, which will operate under their own unique brands and distinct legal entities and will be run by separate local management teams. Beginning from the first quarter of 2023, we will report revenues separately for Agora and Shengwang based on the legal entities with which customers enter into contracts. This differs from our previous practice, which was to separately report revenues for China and U.S. and international based on geographies of usage. For example, certain Chinese customers offer application that primarily target end users outside China. Such revenues were previously included under U.S. and international. We now include such revenues under Shengwang to reflect in terms of contractual relationships. For the same reason, we will report number of active customers and dollar-based net retention rate, or DBNRR, separately for Agora and Shengwang, but definition of active customers remain unchanged. The calculation methodology of retention rate is same as expansion rate, which is the term we previously used. As almost all revenues generated from Agora customers are denominated in U.S. dollar and almost all revenues generated from Shengwang customers are denominated in RMB, we calculate DBNRR in U.S. dollar for Agora and in renminbi for Shengwang instead of converting everything into U.S. dollars. Revenues for Easemob's chat API business will also be included in calculating active customers and retention rate for Shengwang business. A detailed explanatory note, including a recapped historical results reflecting these adjustments can be found on Investor Relations website. Moving on to our…

Our first question comes from the line of Yang Liu from Morgan Stanley.

Two questions from my side. The first one is about the outlook. The number implies a largely flattish or slightly sequential decline in second quarter. Could management share more about the outlook for Shengwang and Agora differently for the second quarter? Do you see further diverging of the growth trend or a similar trend in the next few quarters for the 2 entities? And my second question is regarding the AI impact to the company. Tony mentioned a lot in terms of the product and the customer demand or use case driven by the new AI GC technology. But I'm wondering if there is any potential cost savings room from the new technology.

All right. I'll talk about -- discuss the demand from both markets. On Shengwang side, we can broadly push on customer into 3 segments. One is domestic digital native and another is domestic digital transformation and going overseas customers. On digital native customers, recently, demand remained soft primarily due to macroeconomic challenges and regulation. However, on this segment, as I mentioned earlier, we also see large opportunities on generative AI-powered use cases. That would take some time. On digital transformation side, recently, we saw longer sales cycle. But there is clearly a lot of unmet demand from traditional enterprises. We expect this segment to generate sustained growth for us. Ongoing overseas customers, the overall growth momentum has been strong. On Agora side, we see overall positive demand momentum in more developed market, especially on the following verticals: live streaming e-commerce, Twitter economy, sports live streaming, future of work. For emerging markets, we see pressure on our customers due to macroeconomic challenges and market competition, such as in South Asia and Southeast Asia. That's from the outlook of the demand side. And generative AI side, we actually have invested in this area for quite some time to help improve audio/video quality. And as I mentioned, large language model can actually help create more use cases in many verticals. But if your question is around reduced cost, I don't think it's going to hugely help us to reduce cost. But in terms of disrupting like many business models, like in education, AI-powered tutor can be much cheaper than a real tutor, or a virtual celebrity or similar can also be much cheaper, or virtual matchmaker the same sense or even in social space. As you can see, our popular character who's busy talking to people in one social platform can be also AI-powered person to reduce the platform's cost to maintain and pay a real person who's active on that platform. I think on those, it can hugely disrupt their business.

Our next question comes from the line of Daley Li from Bank of America Securities.

I have one question regarding our international -- the Agora business. For this quarter, it's delivered quite solid growth. What's the key drivers for our growth, for example, regarding the volume and ASP? And what's the outlook for the volume and ASP going forward?

As we explained in previous earnings calls, so the market in China and the market in the U.S. and international markets are at different stage of development in terms of adopting the RTE technology. So China market is comparatively more mature. So in the past 18, 24 months , we certainly see U.S. market catching up quite rapidly. For example, in live streaming e-commerce use case, that was already popular in China 2 years ago and probably even earlier. But that's really just taken off in the past 12, 18 months in the U.S., and that has created a lot of new demand for technology. Also, we have been expanding into more geographic regions, South Asia, Middle East and even South America. So that trend is stronger, cause momentum on the Agora side. And looking forward, as Tony just explained, in China, we do see more kind of macro challenges, overall macroeconomic environment, and also regulation in terms of the more traditional enterprise customers in China. We also see more budget constraints. So looking at the next few quarters, we are also more optimistic in terms of demand for the Agora side.

Our next question comes from the line of Ethan Zhang from Nomura.

This is Bing Duan from Nomura. I have one question regarding the China market. As we noted that there are a few changes in the competition landscape, such as Ali Cloud's plan of spinoff and the recent price cuts from the large cloud companies like Alibaba and also some Chinese telecom operators. So how do we see this impact our Shengwang business in China, such as the ASP and margins, and also about our future market share in China?

First of all, the public cloud price adjustment recently does not really related to us and giving pressure to us. However, in China, as I mentioned earlier, the overall competition has remained strong for a long time, and the demand is actually, especially for domestic native part, is actually soft. With this situation, we do proactively enhance our competitive edge. And sometimes, we reduce our pricing on certain areas to increase competitive pressure and try to gain more market share. For major public cloud previously also rolling out similar service in RTE sector, honestly, there's no one being left. Everyone already released some similar products already. However, over the course of past like 2, 3 years, many of them have mostly exited the business. They either stopped really selling that product or some already started partnership with us and value-added our product on their offerings. Thank you.

I am showing no further questions. I will now turn the conference back to Fionna for closing remarks.

Thank you, operator. Thank you, everybody, for joining our call today. Again, if there are any further questions, feel free to contact us. And also, the presentation and the remarks of this call will be posted on our website. Thank you, everybody. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. Bye, bye.

Bye.