Good day, and thank you for standing by. Welcome to the Agora, Inc. Fourth Quarter and Fiscal Year 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. The company's earnings results, press release, earnings presentations, 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. Reconciliations between the company's GAAP and non-GAAP results can be found in its 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's belief 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 its business, and which the company has discussed in details in its filings and 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 forward-looking statements the company may take on today's call. With that, let me turn it over to Tony. Hi, Tony.

Thanks, operator, and welcome everyone to our earnings call. Let me first quickly review our operating results in Q4. Revenue was $15.3 million for Agora, flat compared to last quarter, and RMB 148.3 million for Shengwang, an increase of 5% quarter-over-quarter, mainly driven by revenue growth from digital transformation customers. As of the end of 2023, we had close to 1,700 active customers for Agora and more than 4,100 for Shengwang, an increase of 18% and 12% respectively, compared to one year ago. I'm pleased to announce that we've achieved non-GAAP net income of $1.4 million in Q4, despite a very challenging operating environment. Thanks to our effective cost control and relentless drive for revenue growth. Jingbo will discuss in more detail shortly. Now moving on to our business, product and technology update for the quarter. Let's start with Agora. In this quarter, we held a series of webinars to discuss how real-time engagement, which combined with state-of-art technologies and artificial intelligence and AR/VR can greatly influence or even transform various industries, including live shopping, telehealth, and Internet of Things. For example, in live shopping, we see more and more digital brands and platforms relying on interactive live streaming to redefine the way consumers make their buying decisions. By creating a personalized, social and engaging experience for the audience, a loyal community of repeated buyers will strive and help drive sales. The combination of RTE AI and AR/VR is driving a rapid revolution of IoT use cases. For example, heavy machinery operators can work remotely with an enhanced wheel that feeds beyond blind spots, enabling them to corral challenging tasks in a safe and efficient manner. For autonomous driving -- autonomous vehicles or AI powered robotic, human operators can monitor their operations from remote locations and pick a world whenever…

Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for the fourth quarter of 2023. And then I will discuss outlook for the first quarter to 2024. Total revenues were $36 million in the fourth quarter, an increase of 2.9% quarter-over-quarter and a decrease of 10.2% year-on-year. Agora's revenues were $15.3 million in the fourth quarter, flat compared to last quarter and decreased 3.2% year-over-year. The year-over-year decrease was primarily due to reduced usage from customers in emerging markets due to a challenging macroeconomic environment and tightening financing conditions starting from the second half of 2022. Shengwang revenues were RMB 148.7 million in the fourth quarter, an increase of 5% quarter-over-quarter and a decrease of 9.6% year-over-year excluding revenues from the of the disposed CEC business. The quarter-over-quarter increase was primarily due to an increase in revenues to digital transformation customers for large enterprises. The year-over-year decrease was primarily due to slowing demand from internet customers due to regulation and general economic conditions. Dollar-based net retention rate is 93% for Agora and 82% for Shengwang, excluding revenues from discontinued business. Moving on to cost and expenses. For my following comments, I will focus on non-GAAP adjusted financial measures, which excludes share-based compensation expenses, acquisition-related expenses, financing-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. Adjusted gross margin for the fourth quarter was 65.2%, which was 0.3% higher than Q4 2023 and 1.7% lower in Q3 2023. The year-over-year increase was mainly due to the change in product mix and the implementation of technical and infrastructural optimization. The quarter-over-quarter decrease was mainly due to an increase in on-premises solution, revenue which has a lower gross margin. As…

[Operator Instructions] And I show our first question comes from the line of Yang Liu from Morgan Stanley.

Thank you. Thanks for the opportunity to ask questions. First, congratulations on the non-GAAP profit in last quarter 2023. I have three questions here. The first one is what is the management outlook in terms of the 2024 full year profit? Do you think the profitability in the past quarter will be sustained or even be improved in 2024, especially consider the guidance in first quarter implies some year-on-year revenue decline, whether the positive profit can be maintained? That's the first question. The second one is we would like to have some update in terms of the domestic Internet companies going abroad, whether Agora can benefit from that in the overseas market. And what is the revenue split between Agora and Shengwang in the coming 2024 full year? Do you think the Agora revenue contribution will continue to drop a little bit or will turn around in terms of the total contribution? The third question is regarding the partnership with Vision Pro. What will be the revenue model behind this kind of partnership? Will it be based on the consumer time spent? And if not, what will be the revenue model? Thank you.

Thank you. I'll take the first question. Yes, the Q1 revenue guidance would imply a year-on-year revenue decrease. And as you know, Q1 is generally the lower season for the business. If you look at our numbers in the past few years, revenue generally debilitated in Q1 sequentially compared to Q4. That's due to both seasonality. As I mentioned, in some of the regions where we operate as well as the Chinese New Year is a low season for social apps and for education apparently, so usage will drop during that holiday. And also for digital transformation businesses, a lot of the projects tend to be -- we tend to book those revenues towards the end of the year. So Q1 is also a low season. Compared to last year, obviously, we have been trying to Internet regulatory changes, tighten up environment in Q2. So last year, Q1 was a relatively higher base. So that's on Q1 guidance. In terms of full year 2024, obviously, there remains a lot of uncertainties around the world, including the macroeconomic environment, funding environment and so on, so I will give you my estimate. So we expect our revenue to grow on a year-on-year basis starting from Q2. And our goal is to reach double-digit revenue growth in Q4 year-on-year. And regardless of revenue growth, we do not expect expenses will grow this year compared to the most recent base. So it's going to be a pretty stable cost base with moderate revenue growth. So if you run the numbers, hopefully, we'll be able to get closer to profitability and even improve the profitability towards the second half of the year. But as for Q1, it will be challenging to achieve profitability in Q1 given the revenue debt. That's the first question.

Yes. About talking China Internet companies going overseas, I think, we are in a very strong unique position to help them because on one side, we do have a strong and very influential customer base in China Internet industry. A lot of them were actively planning going overseas or expanding in global market. While we help them, we can leverage a lot of our existing partnership and customer base knowledge and the market knowledge with our global practice with local customer base and market already. And we have been helping people with all those knowledge and know-hows already, and those are the unique advantages we could help to help them to grow into a bigger global market.

And in terms of revenue split, we don't think it will change very significantly. However, we'll do -- we are a little bit more optimistic about Agora business, given especially the resilience we are seeing in the U.S. market and other developed market and also some of the emerging use cases we see there. And also, Tony mentioned Twilio exit. They also give us additional room to grow in those markets, so we expect some moderate increase in terms of the percentage of revenue contribution coming from the Agora business as we move along in 2024.

About the Vision Pro, the revenue model is going to -- similar to what we do. We are still going to be -- enable use case system customers by selling API-based capabilities, although with increased offerings from our overall product portfolio, we might have a more diverse pricing model with all the different products we are selling into. But overall, it will tie to consumer usage of Vision Pro. And in mid-term to long-term, we do see the powerful impact where Vision Pro can enable a lot more attractive use -- new use cases or make some new use cases more viable for more meaningful for consumer or business use cases, where we would be able to support both persona-based social interactions or business collaborations in that platform. So -- and we also anticipate a lot of other ASR devices. We're catching up -- we play catch up with Vision Pro so to make this capability to be available more widely for customers and consumers.

Thank you. Can I follow up with one quick question? One, Jingbo, mentioned the OpEx will be flattish. Do you mean that flattish versus 2023 full year or flattish versus the last quarter in 2023 because over the past year, the sequential quarterly OpEx has been on a downward trend? So I would like to clarify whether it's a year-on-year or based on first quarter? Thank you.

The base will be fourth quarter. Would probably not be exactly the same. It may fluctuate a little bit, but it will not be significantly higher from the base in Q4.

Got it. Thank you.

And I show our next question comes from the line of Harry [ph] Zhuang from Bank of America. Please go ahead.

Thanks management for taking my questions. I also have three questions. The first one is the demand outlook. Could management see more color on the non-outlook competition landscape and price trend in both overseas and domestic market? And the second question is, what does [indiscernible 0:28:40] with potential impact on business from the over AI's video generator and so on. And the third question is on the potential market share gain. I mentioned -- I said that after Twilio exit in the market, the company could potentially contribute share and how will Agora since this opportunity? And what is the current acceptance from the customers transitioning from Twilio service to our service? Thank you.

All right. I'll take those questions. First of all, in terms of the market and competitive landscape we see in U.S. and international markets, we do see strong growth momentum in media and entertainment sector and telehealth verticals. Live shopping, IoT particularly in developed market, those are the areas that we see a strong growth momentum. Price-wise, we see more pressure in emerging markets, where it's impacted by macro environment, including the currency exchange rate, et cetera. Price has been healthy and stable in developed markets, U.S. and European market. Twilio. About Twilio's exit, our -- what we're seeing in terms of competition, Twilio's assets is only a sign of competitors leaving the market. It's not just Twilio. There are other start-up competitors who are struggling and downsizing of their operations. We expect we will be gaining market share with those changes. In China market, we see growth potentials in going overseas all the -- especially Internet companies based in China now looking heavily in going overseas by expansion. And although -- also digital transformation is still having a clear trend to grow. And also, IoT side of the customer base are seeing more actively growth. Overall usage in both markets, we're actually seeing still growing despite all the regulatory and macro changes, which is the foundation of overall customer value growth and revenue growth. Price-wise, in China market generally drops about 10% over the last few years and often happen in the beginning of the year. This put some pressure to our Q1 results. Together with a seasonality issue, like Chinese New Year activity and change of consumer behavior change, our gross margin -- but our gross margin remains quite healthy. In terms of competitive landscape, it's largely unchanged in China market during the past quarter. Well, there are…

Thank you very much. This is all clear. Thank you.

[Operator Instructions] And I show our next question comes from the line of Bing Duan from Nomura. Please go ahead.

Hi. Thank you management for the opportunity to ask a question. Just one follow-up question from me about the Twilio's exits in programmable video product segment. So can you share more color about the reason behind this? Is this more because of the competition, the fears or competition or because of the demand is not growing strongly in the U.S. market? And about we offer two-months free customers switch from Twilio, how do we think that would affect our user growth and top line growth in the next one or two quarters? Thank you.

I do think Twilio's exit is mainly because of the fierce of competition in this area because as we repeatedly stated, this area is a very tech-savvy sectors where all the offerings require a lot of investment in technology and product. Some competitors' products only build on top of a PC open source projects or a simple rather lean, layer of technology add-ons, which can only serve a fraction part of the demand for our RTE use cases which, of course, limited their capability to expand and grow in this area. And especially for a company like Twilio, they might want to be more focused on their mainstream business. We see that's the main reason. There could be a reason that COVID demand is also fading away. But as I mentioned in earlier statement, we -- while the COVID demand is fading away, we do see there are growth very active use cases growth in developed market in global market. So I would rather just put that as another factor in their leaving. In terms of our offerings, I do think the two-month free offer for a lot of small, mid-sized customers is a very important reason for them to consider and make them easier to decide to jump on our platform. We do have some other strengths and collaborations or work with rather large customer base, which our team is focusing on to help them to migrate to our platform.

Thank you very much.

[Operator Instructions] I'm showing no further questions in the queue. This concludes our Q&A session. Thank you, everybody, for attending the company's call today. As a reminder, the recording and 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, and have a good day.

Thank you. By-bye.

Thank you.