Good day and thank you for standing by. Welcome to the Agora, Inc. Second Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this 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, Jingbo 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 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 its business in which the company discussed in detail in its filings with the SEC, including today's press release and the risk factors of other information contained in the final prospectus relating to the initial public offering. Agora, Inc. remains no obligation to update any forward-looking statements the company may make on today's call. With that, let me turn the call over to Tony. Hi, Tony.

Hey, thanks Ferriter, and welcome everyone to our earnings call. Let me begin with a review of our operating results for the quarter. I'm pleased to report another quarter of accelerating top line growth, as well as our seventh consecutive quarter of gap profitability. Total revenues for the second quarter of 2016 reached $40.4 million, an increase of 18% year-over-year. This performance reflects both the continued strength of our core real-time engagement business and the growing contribution from our conversational AI products as more customers move from proof of concept to commercial production. Our gap net profit for the quarter was $2.2 million, up 50% year-over-year, which demonstrates improved operating leverage and disciplined cost management and many more. Our most important progress this quarter occurred in call center across the globe. We are seeing strong momentum in adoption of our voice AI agents. Trained on the best sales and customer service playbooks, these agents deliver consistent, high-quality performance across every conversation. They do not experience fatigue, lose focus, all vary in performance based on workload or time of day. They also maintain time and steady interactions even during challenging calls. Further, customers are now seeing substantial cost savings from deploying our voice AI agents. Indeed, we're beginning to see them match or even surpass human performance in an increasing number of tasks. in achieving target business outcomes. The first example is outbound marketing and buyer interest capture. Our voice AI agents are now being used to initiate calls, qualifying leads, collect information, and schedule meetings with prospect customers. At a similar conversion rate with human reps, our voice AI agents also all perform in two other important areas, the volume of calls they can handle and the unique economics they deliver. The second example is marketing. Thirdly, our voice AI agents can conduct in-depth interviews for consumer insights and product feedbacks. While capturing structured data throughout each conversation, the high concurrency of our and many more. This solution compresses the time it takes to conduct large-scale service that traditionally takes weeks or days into just a few hours. Marketing and serving are only two examples of how voice AI agents can reshape call centers worldwide. We see similar opportunities in financial services outreach, gaming user acquisition and retention. that collection and many other areas. We are already working with customers across these sectors and we expect several of them to move from proof of concept to large-scale deployment in the coming quarters. At the same time, we continue to invest in our developer ecosystem. This quarter, we launched Agora Skills and Agora CLI. Agora Skills package our platform knowledge so that AI coding assistants, including Call Code, Cursor, or Codex, can work with our latest SDKs and best practices when building real-time engagement or conversational AI applications. The Agora CLI complements this with a simple command line interface for coding agents to do their work. These tools make it easier for both human developers and AI coding agents to build and deploy real-time engagement applications with us. We are also continuing to strengthen our technology ecosystem through strategic partnerships. This quarter, we announced a partnership with Gradium, a leading voice AI platform recently founded by the research team behind Moshi and Hibiki, two speech models with strong recognition in the open source community. Through our partnership, developers can enable Gradient TDS within our conversational AI engine through a simple configuration without introducing additional latency hops. Looking ahead, we will first remain later focused on accelerating the transition of our conversational AI solutions from pilot to production across use cases. Each use case will present its own set of challenges, but each will also help us refine our technology. We believe that continued improvements in our solutions will unlock additional demand and drive the industry's shift towards AI-led workflows in call centers. Second, we will continue to invest in our real-time infrastructure. Our software-defined real-time network, or SDRTN, has long been a foundational advantage for us. As we expand into human to AI interactions, the importance of this infrastructure does not diminish On the contrary, it becomes more critical because smooth conversations require ultra-low latency inference and transmission. We are confident that our investment in real-time inference and the communication infrastructure will serve as a decisive factor in our ability to compete and succeed in the conversational AI arena. And third, We will continue to strengthen our partner ecosystem and build up developer man-share. On October 23rd and 24th, we will host our iconic annual conference, IRTE, or Intelligent Real-Time Engagement in Beijing. We look forward to bringing together developers, partners, enterprises and industry leaders to explore the next phase of real-time engagement and conversational AI. In summary, we believe the center of gravity in the AI industry is increasingly shifting from modal capabilities towards infrastructure and harness layer required to operate voice AI agents reliably at scale. At the intersection of real-time engagement AI, and global infrastructure. We believe Agora is uniquely positioned to help enterprises make this transition and create sustainable long-term value for both our customers and shareholders. Before I conclude, I would like to thank our customers, developers, partners, and shareholders for their continued trust and support. and our global Agora and Shenglong teams for their dedication and innovation. With that, let me turn it over to Jingbo who will reveal our financial results.

Thanks Tony. Hello everyone. Let me start by first reviewing financial results for the second quarter of 2026. Then I will discuss outlook for the third quarter. Total revenue for the second quarter reached 40.4 million. above the high end of the guidance range and representing 18% year-over-year growth. This marks our third consecutive quarter of accelerating growth driven by continued expansion of our real-time engagement services across sectors such as e-commerce, as well as growing customer adoption of our conversational AI solutions. Our dollar-based net retention rate and others. In the first quarter, the gross profit for the first quarter was 104%, compared to 94% in the second quarter of 2025. This represents a meaningful improvement and moves us back above 100%. Gross profit for the first quarter was 25.7 million, representing 12.5% increase year-over-year. Gross margin was 63.7%, compared to 66.8% in the same period last year. and 63.4% in the first quarter of 2026. On a year-over-year basis, the decline was primarily due to product mix change, as conversational wire products continued to see growing usage during the quarter, but it remained at a subscale stage. On the sequential basis, the increase was mainly driven by technical optimization. Turning to expenses, R&D expenses were 15.4 million in Q2, up 10.2% year-over-year. R&D expenses represented 38.1% of total revenue in the quarter, compared to 14.8% in the same period last year. The increase was primarily due to our continued investment in conversational air products. Total marketing expenses were 6.4 million in Q2, down 1.5% year-over-year. Sales and marketing expenses represented 15.9% of total revenues in the quarter compared to 19% in the same period last year. The decrease was primarily due to disciplined expense management. General elements trade expenses were 5.5 million Inc. 9.5% year-over-year. GNV expenses represented 13.5% of total revenue in the quarter compared to 17.6% in the same period last year. The decrease was primarily due to a lower allowance for highly expected credit loss as customer credit conditions and collection outcomes improved. According to operating results, we recorded gap operating loss of one million in the second quarter, compared to a loss of 3.1 million in the same period last year. Since continued improvement in operating leverage, based on our current business momentum, our goal is to achieve quarterly gap operating profitability by the end of this year. Moving on to the bottom line, we've delivered net income of 2.2 million in Q2, up 50.3% year-over-year, and representing a net income margin of 5.4%. Now turning to cash flow. Operating cash flow was negative 2.1 million in Q2, compared to negative 0.4 million in the second quarter of 2025. Moving on to balance sheet, we admit Q2 with $361.7 million in cash, cash equivalents, bank deposits, and financial products issued by banks. The decrease in our cash balance was mainly due to annual bonus payment as well as share repurchase during the quarter. During Q2, we repurchased approximately $1 million ADS for approximately $3.7 million. As of June 30, 2026, We had repurchased approximately 44.6 million ADS in total for approximately $159.9 million under the current share repurchase program. As of June 30, 2026, we had 83.8 million ADS outstanding compared to 87.3 million ADS at the end of 2025. The current share repurchase program will expire at the end of February 2027. Now turning to guidance. Based on currently available information, we expect the revenue for the third quarter of 2096 to be between $41 and $42 million, representing year-over-year growth of 15.8% to 18.6%. Let's all look. reflect our current and preliminary views on the market and operational conditions, which are subject to change. In closing, this was another strong quarter for us, both in terms of revenue growth and profitability. At the same time, we are increasingly encouraged by the usage momentum and commercial potential in conversation and will continue to invest with discipline to support our long-term growth. Thank you all for joining today's call. Let's open it up for questions.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile our Q&A roster. Our first question is going to come from the line of Harry Zhao with B of A Securities. Your line is open. Please go ahead.

Hi. Thanks, Benjamin, for taking my questions. And congratulations on the strong results and guidance. I have three questions. The first one is regarding the demand. How's the demand trend in overseas and domestic market? And what are the keys of sectors driving the growth? The second one is regarding AI. We're happy to see that the call center application scenarios growing really fast and what are the other potential scenarios that could drive meaningful conversational AI demand growth and what will be the revenue contribution from conversational AI by end of the year and the gross margin trend. And lastly about the competition, could not even share the latest competitive landscape in overseas markets against our major competitors. Thank you.

Okay, in terms of demand, I will talk about the RTE side and Tony can talk about the AI side. So, on the RTE side, actually things haven't changed that much. Overall, what we see this quarter in both China and U.S. international markets are largely the same as the last quarter. So, in China, thanks to a more stable operating environment, So demand from social, entertainment, and education customers continue to recover. So things are looking pretty stable here. On the US and international side, demand from live shopping, financial services, gaming use cases continue to grow. So demand looks healthy on the R&D side.

Yes, and on AI side, I think it's fair to say our region has been validated and reinforce on a daily basis with rapid development and continued improvement we achieve on the ground. In call centers, as I mentioned in the remarks, we are agents matching and sometimes even surpass human rest on certain tasks with solid, measurable business outcomes for the enterprise customers. This is just the beginning of a very, very long run. and I believe we will witness the transition from human-causing arrests to war-U.I. agents around the world, just like how the Large Language Model has reshaped the software engineering. This is actually a very good thing for people and the society because it will free people from a very tedious and stressful line of work, keep talking to different persons for hours about the same task and keeps the conversation strictly professional is very exhausting and emotionally draining.

Yep. So in terms of the use case for conversational AI, I can talk about two verticals, right, called cost and error and the companionship devices. But Tony already talked about a lot, covered a lot on the cost and error. But I want to highlight one point. When we talk about cost and error, It's not a single use case. It's a collection of many, many use cases, each with different features and different domain knowledge. And when we talk about these use cases, actually, in terms of the difficulty for replacement by both AI agents, actually they form a spectrum from the easy one on the left-hand side to the hard one on the right-hand side. and now we are only beginning to explore a few use cases on the lesson side, such as open marketing survey. But these are the low high influence. As we continue to refine our solutions and accumulate more experience working with our customers, we will convert more and more use cases from impossible to proof of concept to real-world production. So it has a very long runway. It's not a single-use case we can conquer in one quarter or in one year. It's going to be a multi-year process. And secondly, on the compassion-initiative device, we talked about our customer, RoboPoint, in the past. In this quarter, they actually expanded into new markets in Japan and other countries, and the initial market feedback has been quite encouraging. We also partnered with several chip makers to make our solution compatible with more chips, because these are not mobile phone chips. These are very specialized LTE chips. And this will make our solution available on a wide range of smart devices, including robots. So overall, we are still targeting 5% revenue contribution from conversational by the end of this year.

Okay, so about competition, especially on conversational AI. Conversational AI has several distinct technology layers, from the agent layer that off-streets and optimizes the call center, the call experience, to a model layer that includes large-dominant models and voice models, such as ASR or TTS. And finally, the infra layer, such as telecom APIs and cloud. Different layers, different players attack this market from different angles. For example, Trader would leverage its strengths in telecom APIs and phone numbers from their CCaaS business. And we are focused on the voice models, audio pre-processing and post-processing, low latency cloud infrastructure and agent layer. to deliver the best possible call experience. Given the huge potential of the conversational AI market, it is natural to have competition. In fact, a lot of the technology in conversational AI involves audio processing, such as handling noise, echoes, or packet loss. Obviously, we have a lot of experience in those areas, which can hugely improve conversational AI experience. so we remain confident about our position in this market. Yes, very helpful. Thanks Tony and Jingbo. Congratulations again on the results. Thank you.

Thank you and one moment for our next question. Our next question comes from the line of Yushu with China Security Co. Your line is open. Please go ahead.

Thank you for taking my question and congrats on another strong project. My first question regards to Combo AI. Could you please update on Combo AI revenue progress and its projected contribution to full-year revenue? My second question is the conversion cycle for AI use cases. Could you disclose the current backlog for these AI use cases or maybe just customer accounts? And how would you view the trend for AI revenue for the coming quarters, maybe next year?

Thank you. I'll take this question. So we already talked a lot about the use cases. First of all, I want to explain that it actually takes quite some time for a use case to really ramp up from the start of the POC to the point where the AI agents can deliver consistent performance and can be deployed at scale. It usually takes several months. And I talk about there are many, many use cases we need to attack them one by one. Also, we can do a few in parallel, still it's going to be a gradual process. So as I mentioned earlier, we're targeting 5% revenue contribution by the end of the year. So basically, our goal is in Q4, or in term of the run rate, AR run rate, we want to achieve 5% by the end of the year. Obviously, that means for the full year of 2026, It's not going to be 5%. It's going to be smaller than that. But if we achieve 5% by the end of the year, and given the strong pipeline we already have on hand, which will only become bigger by the end of the year, we believe there will be still significant room for growth next year. So we remain quite optimistic about how we are looking in this market.

Thank you, and one moment for our next question.

Our next question comes from the line of Zhongxuan Yang with CITIC Securities. Your line is open, please go ahead.

Okay, so thanks for taking my question. I just have one question regarding to our AI business. So have we ever given a guidance on the long term for about three to five years for the AI penetration rate for our total revenue and also for the gross margin guidance.

Thank you.

All right, I'll take the question. In the end, the call center market will have three segments. First is the easiest tasks, such as simple notifications. This will be handled by NLP-based technology, which has no real intelligence but can understand simple keywords from human. The second would be the hardest task or most important tasks such as handling complaints from high value customers or emergency situation which will continue to be handled by human. Even if AI agent is technically able to handle the task, in some cases only human can take certain responsibilities such as in a 911 call. The third would be everything else in the middle of the previous two. Those will be handled by WCAG agents with real intelligence. It's hard to say exactly how big this part will be, but it will be a significant portion of the entire market.

So Tony talked about the cost of the entire market, which is a huge market. there are literally close to 20 million people working in Costner today in the world and as Tony said there will be three categories in the future and probably the middle category will be the biggest and that will be handled by the agents so even taking a small part of the market that would be a transformational for our company so at this point it's hard to give a a clear number as this market is still at a very, very early stage. And the overall penetration of AI agents is still very low, so it's hard to say exactly how big this will become, but it certainly will be transformational for us. And in terms of the gross margin, today the gross margin is not high for us. We talked about that last quarter. It's crossing the Maximum Positive Line. It's still around there. But it's not because fundamentally, any fundamental reason. It's because one, we are subscale. The volume is small and the volume happens at different geographies. So at each single geography, the volume is even smaller. So it's subscale. And secondly, we haven't really focused that much on Z. technical optimization. Right now all the optimization is more focused on the experience, not the cost. So once we have a larger scale and also be more focused on the technical optimization on cost, we believe in the end the gross margin will be similar to, if not higher, than what we have right now in the RTE business.

Great, it's right there. No more questions.

Thank you. And as a reminder, if you would like to ask a question at this time, please press star 11 on your telephone. Our next question comes from the line of Tristan Yang with Double Line Capital. Your line is open. Please go ahead.

Hey, nice results today. Tony, regarding your announcement to purchase the additional $20 million of shares on the open market, I'm wondering how much have you purchased to date and then what evaluation do you believe appropriately reflects Agoura's intrinsic value? And then given your existing ownership stake, have you considered taking the company private or returning additional capital to shareholders through a special dividend or an accelerated buyback program? Thank you.

Let me answer this question because it's more quite technical. Tony has not started due to certain blackout and legal restrictions. But once these are cleared, he will start the repurchase. So he's an insider, and he has previous purchases in the beginning of this year. So there are certain legal restrictions. So as to the $20 million, that has not started yet. We have returned, up to this point, about $160 million of capital back to the shareholders to share repurchase. And that compares to about $400 million to $150 million of market cap of the company, which is substantial and probably among the most substantial among any public company in the world. So we will continue to do that. But at this point, we have not considered a special dividend, which we might consider in the future, but not as present.

I think my purchase will start in like two, three weeks, right?

September. Yeah, such to certain conditions. Okay.

Got it. I don't think... I don't think we will consider taking the company off the market. We will want to keep communicating with the market and for ourselves focus on business operation and improve our overall technical and operation stress. We feel very confident that the future of our direction has a very big potential and we think By focusing on our business operations and technical advancement, we will be able to make a lot of value for our customers, our shareholders, and our employees. Got it. Very clear. Thank you.

Showing no further questions, this will conclude today's Q&A session. Thank you, everybody. for attending the company's call today. As a reminder, a recording and the earnings release will be available on the company's website at investor.agora.io. And if you have any questions, please feel free to email the company. Thank you. You may now disconnect. Everyone, have a great day.