Q4 2024 Agora Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Agora, Inc. Fourth Quarter and Fiscal Year 2024 Financial Results Conference Call. During the presentation, 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,
Speaker Change: Please press star 1 1 on your telephone. If your question has been answered and you wish to remove yourself from the queue, simply press star 1 1 again.
Please be advised that today's conference is being recorded.
the company's earning results press release.
Speaker Change: Earnings presentation, SEC filings and a replay of today's call can be found on its IR website at investor.agora.io. Joining
Speaker Change: Meet today are Tony Zhao, founder, chairman, and CEO, and Jingbo Wang, the company's CFO. Reconciliations between the company's GAAP and non-GAAP results can be found in its earnings press release.
Speaker Change: During this call, the company will make forward-looking statements about its future financial performance and other future events and trends.
Speaker Change: 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 its business, and 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 perspective.
Speaker Change: and others who have expressed this. Relating to its initial public offering, Agora Inc. has 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. Tony, you may begin.
Tony Zhao: All right, thank you, operator. And welcome everyone to our earnings call. I'll first reveal our operating results from the past quarter.
Tony Zhao: While we faced challenges over the past few years from the pandemic to regulatory changes and macro economic pressures.
Tony Zhao: Pressures, our team's hard work innovation and focus Hyatt brought us back to profitability as we look ahead.
Tony Zhao: 2025.
We remain committed to driving operational efficiency and delivering sustainable profitable growth.
Tony Zhao: Total revenue in the fourth quarter.
Tony Zhao: $34 5 million up 4% year over year, excluding revenues from <unk> and up sell low margin products, mainly Cleveland bio business expansion is currently used cases, such as love shopping and entertainment.
Tony Zhao: As of the end of 2024, we had over 1700.
Tony Zhao: Active customers for Aurora and close to two solid for Shaw, excluding is mark an increase of 2% and 8% respectively compared to one year ago.
Tony Zhao: Let's turn to our business product and technology update for the quarter.
Tony Zhao: The generative AI Revolution is advancing at an incredible pace over the past few months, we've seen groundbreaking developments from the <unk> reserving model one to Google's multimodal multimodal Gemini two.
Tony Zhao: As well as remarkable open source innovations dipstick.
Tony Zhao: This transformation presents extraordinary opportunity for our business our.
Tony Zhao: Our real time engagement technology is uniquely positioned to enable seamless once based interactions between humans and AI models.
Tony Zhao: By moving beyond basic tap tap to multimodal conversations.
Tony Zhao: Other key technology to enable and ensure more intuitive and expressive communications experiences.
Tony Zhao: It also introduces an entirely new use cases, where tax improved simply is not practical or efficient.
Tony Zhao: However, many large long haul models today still lack robust whilst interaction capabilities.
Tony Zhao: For those that do support wasn't traction the experience often fall short with high literally upward pulses and rock interruptions and sensitivity to background noise. This.
Tony Zhao: Which can lead to <unk> frustrating user experience.
Tony Zhao: To address this gap, we supported and contributed to an open source project in our developer community called transforming to exploration now.
Tony Zhao: Or 10.
Tony Zhao: <unk> is an Australian framework that enables developers to rapidly build multimodal AI agent.
Tony Zhao: <unk> immigrated building blocks for speech to tap large luxury modal patched to switch retrieval argument generation.
Tony Zhao: We do understanding and many other useful models.
Tony Zhao: Useful modules, enabling developers to easily create real time loaded as the AI experiences.
Tony Zhao: Essentially this framework can enable any tax based largely on intermodal to deliver a conversational.
Tony Zhao: Worldspace conversational experience.
Tony Zhao: For example at the offer can use 10 to quickly build a was aided combining microsoft's SPT. This six large longer modal and cease audio tactile speech all in a matter of minutes.
Tony Zhao: Since its launch 10 has become the fastest growing pockets with Boeing project of its cat, earning or 4500 key half stars in just a few months.
Tony Zhao: Multiple carriers 10 topped the trending list as the number one patent project.
Tony Zhao: <unk> and remain on the list.
Tony Zhao: On the list for several days.
Speaker Change: Building our success I'm excited to announce the launch of our own conversational AI engine and enterprise grade solution that empowers developer to create interactive voice services with any AI model.
Speaker Change: Whether it's a customer build model deploy on premise or a leading large long as a modal accessed what why our API.
Speaker Change: Our conversational AI engine can make it talk and interact naturally with humans.
Speaker Change: With.
Speaker Change: This solution apart is the ability to integrate easily with new AI models.
Speaker Change: <unk> instance, we integrated with Google Jim lives Multimodal live API within 24 hours after its release in last December.
Speaker Change: Save 24 hour integration was two four bps it in general.
Speaker Change: Our solution is also compatible with many popular SPT and Tds modules.
Speaker Change: But broad compatibility is not only advantage.
Conversational AI engine.
Speaker Change: Ed.
Speaker Change: Elevate the conversation experience in three key areas.
Speaker Change: Conversation dynamics to create natural humanlike interactions.
Speaker Change: Engine intelligently detect and the pulses for user interactions within 350 milliseconds.
Speaker Change: Tourists conversations feel smooth and intuitive.
Speaker Change: Second word processing.
Speaker Change: Our selective potential algorithm algorithm enables the AI models to focus solely on the prime speaker, primarily speaker and pocket filter out distractions from irrelevant speakers in the background.
Speaker Change: Additionally, our advanced noise suppression and echo cancellation algorithms and ensure that the AI model receive crystal clear accumulate input necessary for generating high quality responses.
Speaker Change: Lastly, latency.
Speaker Change: Leveraging our global infrastructure the engine response to <unk> in as little as 500 milliseconds.
Speaker Change: Dynamically handling pacte law and minimize delays across different network conditions.
We have been working closely with customers to build in the past conversational AI applications.
Speaker Change: Various use cases.
Speaker Change: Virtual companions and live longer its tutoring to smart Iot devices.
Speaker Change: Virtual shopping assistant and customer support.
Speaker Change: We believe this innovation.
Speaker Change: Tolerate the adoption of conversational AI across industries and become a key driver of our future growth.
Speaker Change: Before I wrap up I want to take a moment to some incredible teams and Aurora and show off our dedication.
Speaker Change: Your dedication and hard work in this fast evolving environment have been no nothing short of inspiring.
Speaker Change: Today, we are pushing the boundary of real time, AI interactions and unlocking new possibilities for human AI communications.
Speaker Change: I'm excited about was what.
What lies ahead.
Speaker Change: Look forward to sharing more updates with you soon.
Jim: Let me turn things over to Jim <unk>, who will review our financial results.
Jim: Yes.
Speaker Change: Thank you Tony.
Jim: Hello, everyone let.
Speaker Change: Let me start by first of all underlying financial results for the fourth quarter of 2024.
Jim: Then I'll discuss our outlook.
Speaker Change: First quarter of 2025.
Speaker Change: Total revenues were $34 5 million in the fourth quarter, excluding revenues from <unk> and the sale of low margin products total revenue increased nine 1% quarter over quarter, and three 6% year over year.
Speaker Change: Yeah.
Speaker Change: Our core revenues were $17 4 million fourth quarter.
Speaker Change: At 10, 8% quarter over quarter, and the increase of 13, 7% year over year.
Speaker Change: The increase was primarily due to business expansion and usage growth in certain verticals such as last shopping.
Speaker Change: Right.
Speaker Change: Sean revenues were RMB 122 points.
Speaker Change: Fourth quarter.
Speaker Change: <unk> revenues from certain.
Speaker Change: Low margin product Simone revenue increased eight 2% quarter over quarter and decreased five 4% year over year.
Speaker Change: Quarter over quarter increase was primarily due to an increase in revenues from digital transformation customers.
Speaker Change: The year over year decrease was primarily due to a slowing demand from social and entertainment verticals.
Speaker Change: Regulation.
Speaker Change: General economic conditions.
Speaker Change: Dollar based net retention rate of 95% and 79% for somewhat excluding revenues from certain industrial products and discontinued business.
Speaker Change: Moving onto causing sensors.
Speaker Change: Loss margin for the fourth quarter was 66, 6%.
Speaker Change: If we exclude cost profit from sort of enough sell product gross margin of continuing business slightly decreased one 1% quarter over quarter.
Speaker Change: One 8% year over year.
Speaker Change: As we mentioned in the last earnings call.
Speaker Change: <unk> and reduced our global workforce in November 2024.
Speaker Change: Operating expenses were 28 5 million in the fourth quarter decreased.
Speaker Change: $4 1 million from $32 6 million in Q2 2024 as the baseline.
Speaker Change: We expect to see additional savings operating expenses in Q1 2025.
Speaker Change: R&D expenses.
Speaker Change: Were $14 eight.
Speaker Change: The $8 million in Q4.
Speaker Change: Nine 3% year over year.
Speaker Change: R&D expenses represented 42, 9% of total revenue in the quarter compared to 45, 3% in Q4 last year.
Speaker Change: Sales and marketing expenses.
Speaker Change: Seven 3 million in Q4.
Speaker Change: Three 1% year over year.
Speaker Change: Sales and marketing expenses represented 21, 1% of total revenue in the quarter compared to 19, 6% in Q4 last year.
Speaker Change: G&A expenses.
Speaker Change: Our $6 4 million in Q4 decreased 18, 4% year over year.
Speaker Change: G&A expenses represented 18, 6% of total revenues in the quarter.
Speaker Change: Paired with 21, 9% in Q4 last year.
Speaker Change: Moving on to the bottom line net income.
Eric: Eric <unk> 2 million in Q4.
Speaker Change: Yes, I think.
Speaker Change: One, 5% net income margin fourth quarter compared to a net loss margin of seven 2% from Q4 last year.
Speaker Change: As Tony just mentioned.
Speaker Change: We achieved a significant milestone this quarter.
Speaker Change: Profitability on a GAAP basis.
Speaker Change: First time in several years.
Speaker Change: This not only demonstrates our ability to deliver our commitments, but also reflect our unwavering focus on creating long term value for our shareholders.
Speaker Change: Okay.
Speaker Change: We remain committed to.
Speaker Change: Riding innovation, optimizing operations and maintaining the financial discipline necessary to ensure our continued success.
Speaker Change: Now turning to cash flow.
Speaker Change: Operating cash flow was $4 5 million in Q4 compared to $6 7 million last year.
Speaker Change: Free cash flow was $4 3 million compare to six 4 million last year.
Speaker Change: We'll have the balance sheet. We ended Q4 was $363 eight a minute.
Speaker Change: Cash cash equivalents.
Speaker Change: Deposits and financial products issued by banks.
Speaker Change: Net cash inflow in the quarter was mainly due to free cash flow.
Speaker Change: $4 for a minute, which was offset in part by share repurchase.
Speaker Change: One for a minute.
Speaker Change: In support of <unk>.
Speaker Change: Our share repurchase program in February 2022.
Speaker Change: As of end of 2024, we have completed 58% of our.
Speaker Change: $200 million.
Speaker Change: Share repurchase program.
Speaker Change: We are pleased to announce that our board has also.
Speaker Change: Authorized another 12 months extension of our share repurchase program. So February 28 planning 26.
Speaker Change: With our other tax law change.
Speaker Change: This decision reflects support confidence in the Companys long term growth potential.
Speaker Change: And our commitment.
Oliver: Oliver and values for our shareholders.
Speaker Change: Now turning to guidance.
Speaker Change: First quarter of 2025.
Currently expect total revenues to be between 31 and 33 minute <unk>.
Speaker Change: Compared to $29 7 million in the first quarter of 2024.
Speaker Change: If revenues from certain and that's kind of low margin products.
Speaker Change: Got it.
Speaker Change: Looking forward our goal is to maintain sustained profitability through 2025.
Speaker Change: Throughout 2025, driven by strategic initiatives operational efficiency and emerging market opportunities in general.
Speaker Change: This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change.
Speaker Change: In closing.
Speaker Change: Like to express my sincere gratitude to both acquire and strong teams.
Speaker Change: Credible effort.
Speaker Change: Uh huh.
Speaker Change: That's what made these achievements possible.
Speaker Change: Thank you to everyone for attending the call today.
Speaker Change: Let's open it up for questions.
Speaker Change: Yes.
Speaker Change: Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.
Speaker Change: Okay.
Yeah.
Speaker Change: And our first question comes from the line.
Perry Huang from Bank of America Securities. Your question. Please.
Speaker Change: Hi management, Thanks for taking my question I'm asking on behalf of austerity.
Speaker Change: A few questions firstly on the demand side what are the trends.
Speaker Change: Overseas in China, China, China market.
Speaker Change: One other key sectors of our driving driving growth in 2025.
Speaker Change: Secondly on the AI side.
Speaker Change: Duane recently.
Speaker Change: <unk> AI related demand.
Speaker Change: Scenarios.
Speaker Change: The application of our AI related technologies.
Speaker Change: And lastly on the.
Speaker Change: Profitability side, what are the gross profit margin and GAAP profit targets for 2025. Thank you.
Speaker Change: Okay, I'll talk about the demand side on the tennis side, we see.
Speaker Change: <unk>.
Speaker Change: Mostly on the Iot side, and the digital transformation side and of course, the AI comes in with more.
Speaker Change: Activities to.
Speaker Change: To explore the potentials.
Speaker Change: The global market.
Speaker Change: Live commerce creates our economy.
Speaker Change: And.
Speaker Change: Chinese company go overseas.
Speaker Change: The driving force to the growth.
Speaker Change: After our beta launch of our <unk> engine, we have received quite a lot of customers interests actively exploring the opportunity to build with that.
Speaker Change: So that's in general on the.
Speaker Change: Demand side.
Specifically around <unk>, we'll see.
Speaker Change: The growing interest from developers and the customers.
Speaker Change: Particularly with the recent model launches, such as <unk>, and Jim and I and a lot of open source model launch.
Speaker Change: Our conversational AI engine product is a great fit with our plan to build was Egypt was agent for.
Speaker Change: Or was AI based applications.
Speaker Change: We will see some huge.
Speaker Change: Essentials in a couple of use cases.
Speaker Change: Like companionship.
Speaker Change: Apps and in <unk>.
Speaker Change: Both apps and Iot devices.
Speaker Change: Such as a companion robots and <unk>.
Speaker Change: Mark hoist.
Speaker Change: Art choices.
Speaker Change: Louis for children.
Speaker Change: With me I can also be widely applied in education platform, especially for language learning and practicing.
Speaker Change: In enterprise level applications, such as call center or <unk>.
Speaker Change: Customer service.
Speaker Change: There is.
Speaker Change: A clear demand and a lot of experimental activities on.
Speaker Change: On those areas, we actually see many similarities in all major markets.
Speaker Change: In parallel in different market at this moment.
Speaker Change: In general we see a lot of interest in <unk>.
Speaker Change: Pouring all kinds of use cases based on large LNG modal, but our view is the muscle apologies and tours to build agents.
Speaker Change: Far from mature so it will still take a long time for sophisticated agents to be built and launched in long term those agent will be disruptive and crude is huge for us.
Speaker Change: Given the reality that the whole technology community is still actively improving the foundation models infrastructures tours and frameworks to upstream agents.
Speaker Change: Expect current AI adoption to be faster in existing mature used cases, where was AI agent could be used to only replace or supplement of whole customer experience.
Speaker Change: That kind of.
Speaker Change: Experience.
Speaker Change: Much higher chance to success.
Speaker Change: And especially those.
Speaker Change: Replacement focus on replacing some of the humor functions.
Speaker Change: So to improve the productivity or increase the efficiency, rather than creating whole new use case or whole user experience.
Speaker Change: That's.
Speaker Change: Got some more.
Speaker Change: Successful past we have seen.
Speaker Change: On the whole.
Speaker Change: Experiment of new AI based use case.
Speaker Change: We are working closely with a group of customers in the POC.
Speaker Change: Yossi stage and hope we can see some application launch in the coming months.
Speaker Change: Sure.
Speaker Change: Gross profit and.
Speaker Change: Net profit.
Speaker Change: I'll look so in terms of gross margin.
Speaker Change: I expect it.
Speaker Change: Montana cost level around 67%.
Speaker Change: As we saw in the fourth quarter, we think Thats a right balance between <unk>.
Speaker Change: Profitability and also a competitor.
Speaker Change: Pressure.
Speaker Change: Peer competitors.
Speaker Change: So in terms of the Oppenheimer I'll start with revenue right. So if you look at our revenue guidance for Q1.
Speaker Change: At the midpoint it implies year on year growth rate of seven 7%.
Speaker Change: And our plants doesn't need to maintain.
Speaker Change: This close rate throughout the year.
Speaker Change: Here if not accelerate.
Speaker Change: And on the other hand.
Speaker Change: Don't expect any significant increase.
Speaker Change: In terms of operating expenses, so as a result.
Speaker Change: Uh huh.
Speaker Change: When do you expect to see a stronger growth.
Speaker Change: On the bottom line compared to the top line.
Speaker Change: Yeah.
Speaker Change: Thanks management. Thank you.
Speaker Change: Thank you and our next question comes from the line of <unk> Zhao from C. ICC. Your question. Please.
Speaker Change: Good morning, Tony and Tim block, Thanks for taking my questions and congratulations.
Speaker Change: For the.
Speaker Change: GAAP profitable quarter and I got two questions here first is that O I.
Speaker Change: I noticed that agora groundbreaking for Q reached 13, 7%.
Speaker Change: Yes.
Speaker Change: And could you give more color on the strong recovery rate and should we expect the growth momentum to continue in 2025.
Speaker Change: And second question is.
Speaker Change: About the impact.
Speaker Change: Pat.
Speaker Change: We see that <unk> has significantly boosted adoption in both enterprise side and also consumer side.
Speaker Change: Do you view the demand for them.
Speaker Change: Voice and multimodal interaction Inc.
Speaker Change: Next two years and reached an air lease will be.
Speaker Change: Alright hyped.
Speaker Change: Gordon Shan Shan Wang Q.
Speaker Change: Okay fine.
Speaker Change: In the next two years. Thank you.
Speaker Change: I'll take the first question so yes of course.
Oliver: Oliver the international Australia in the fourth quarter.
Speaker Change: Got it.
Speaker Change: Out of time.
Speaker Change: Past, so it was driven really by it.
Speaker Change: Expansion.
Speaker Change: Sure.
Speaker Change: Some novel use cases for example live commerce.
Speaker Change: Let's talk about the medical centers.
Speaker Change: The floor.
Speaker Change: Two years ago <unk> Commerce was.
Speaker Change: Zero.
Speaker Change: It was another revenue contributor for us and in less than two years grow too.
Speaker Change: More than 10% revenue globally, and close to 20% of revenue for Corona.
Speaker Change: It is still growing.
And we believe it's still in the early stage of that.
Speaker Change: Video based shopping experience Andrew page last shopping experience.
Speaker Change: In the U S and other western markets.
Speaker Change: Video based shopping he's already everywhere.
Speaker Change: Actually in China auto shopping functionality.
Speaker Change: But in the western markets.
Speaker Change: You don't really see that in some.
Speaker Change: Newer generation.
Speaker Change: Yeah.
Speaker Change: Not in the mainstream.
Speaker Change: E Commerce apps, so I believe.
Speaker Change: So as to allow me to go.
Speaker Change: In addition to that.
Speaker Change: We have a cratering economy is time based.
Speaker Change: So networks, which we don't really see that money in China.
Speaker Change: But uh huh.
Speaker Change: Any interesting use case.
Speaker Change: That testing for a while.
Speaker Change: And passion.
Speaker Change: Uh huh.
Speaker Change: Some customer west.
Speaker Change: West Chinese background operating particularly in westar.
Speaker Change: Okay.
Speaker Change: Such as ourselves.
Speaker Change: Asian markets.
Speaker Change: They have also done.
Speaker Change: Third growth in past quarter. So overall, we still we are still optimistic about that.
Speaker Change: Their core business.
Speaker Change: And certainly hope to see.
Speaker Change: Gross.
Speaker Change: Yes.
Speaker Change: I can add more on the.
Speaker Change: Of course areas for both sides.
Speaker Change: Sorry.
Speaker Change: The youth.
Speaker Change: Use cases of AI enabled conversational AI enabled countrywide into two calibrating display service agent for efficiency and saving time and companionship is basically for entertainment and.
Speaker Change: Maybe spend peoples.
Speaker Change: More time on.
Speaker Change: Having a better emotional support or other social demands.
Speaker Change: We seek companionship apps is one of active especially with Iot devices and.
Speaker Change: Education use cases also the tons, we already see rail volumes start to grow on that but we see huge potential.
Speaker Change: On the road in the next two years to continue to grow.
Speaker Change: Sure.
Speaker Change: Do you have set aside on combination.
Speaker Change: Yes.
Speaker Change: Having a clearer.
Speaker Change: <unk> two is to grow into volume in the next two years.
Speaker Change: Customer service and call Center.
Speaker Change: Transform a lot of the initial.
Speaker Change: Initial volume.
Speaker Change: Of course first two.
Speaker Change: Agent enabled.
Speaker Change: Use case.
Speaker Change: Some other use cases, including.
Speaker Change: For efficiency side.
Speaker Change: How can people to run all type of co pilot and those copilot all have a chance to turning to conversational user.
Interruptions or interface.
So those are the areas.
Speaker Change: He might have.
Good tenants and of course.
Speaker Change: Community development also keep.
Speaker Change: Some strong push like the open.
Speaker Change: Open source community gain a stronger power and the price is definitely the price of such a large number to model.
Speaker Change: <unk>.
Speaker Change: Kind of keep talking quite quickly.
Speaker Change: Hoping for us to enable those truck rolls.
Speaker Change:
Speaker Change: On the overall.
Speaker Change: Overall overall, China side.
Speaker Change: You certainly can't repeat the second question.
Speaker Change: The second question is about deep seek them because the company has.
When you say complete.
Speaker Change: Adoption of AI.
Speaker Change: Enterprise back end consumer so I don't know.
Speaker Change: When they make a ground has xinhua one I want to find some trains.
And which kind of key business focus.
Speaker Change: Okay.
Speaker Change: And the next two years.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: For <unk> sake.
Speaker Change: As I mentioned, just now a little bit.
Speaker Change: It definitely gave a strong push to the whole.
Speaker Change: Community and agent builders' supplies.
Speaker Change: Supply is a high kind of intelligence and low cost model and open source.
Speaker Change: Model.
Speaker Change: Of.
Speaker Change: On the demand side.
Speaker Change:
Speaker Change: So.
Speaker Change: Yeah.
Speaker Change: Not just on the cost side and <unk> side, but also on.
Speaker Change: <unk> intelligence side.
Speaker Change: Enhance the quality of the of the language modal collaborators. So that will enable is enduring a lot. So we're seeing it in building to be the new boss Board.
Speaker Change: Growing fast technology innovations around building agent is quite active.
Speaker Change: So again more to offer attention and we are a part of it.
Speaker Change: Especially enabling was.
Speaker Change: Conversational experiences for our agents.
Speaker Change: <unk>.
Speaker Change: In the next two years multimodal or was conversational.
Speaker Change: AI experience will start to.
Speaker Change: Grow into more practical use cases multimodal understanding.
Speaker Change: It will also help enrich the par.
Speaker Change: <unk>.
The kind of the the reach of such use cases.
Speaker Change: With interactions will be much more efficient compared to currently on like path based interactions and will likely to become a critical capability of agents.
Speaker Change:
Speaker Change: As a multimodal capability it is continuing to evolve.
There are more new use cases to be unlocked.
Speaker Change: <unk>.
Speaker Change: On framework side.
Speaker Change: I think there will be more evolution around multi agent collaborations agent oxygenation to help to offers agents building activities.
Speaker Change: This will enable multi agent coordination and big data exchange.
Speaker Change: The way for more complex.
Speaker Change: Interactive use case, among human users and AI agents.
Speaker Change: So.
Speaker Change: Those are all.
Speaker Change: No.
Speaker Change:
Speaker Change: Factors, that's going to accelerate the growth of agent.
Speaker Change: Agent.
Speaker Change: In the next two years.
Thanks, Tony and simple alright, that's very helpful.
Speaker Change: Thank you and once again, if you have a question at this time. Please press star one on your telephone.
Speaker Change: Okay.
Speaker Change: Thank you everyone for attending the company's call today as a reminder, the recording in the earnings release will be available on the company's website at Investor Dot Corp.
Speaker Change: Oh and if there are.
Speaker Change: Any questions. Please feel free to email the company. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Okay.
Speaker Change: [music].
Speaker Change: Yes.
[music].
Speaker Change: [music].
Speaker Change: [music].
Speaker Change: Good day and thank you for standing by welcome to the Ora, Inc. Fourth quarter and fiscal year 2024 financial results conference call. During the presentation. 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.
Speaker Change: Please press star one on your telephone if your question has been answered and you wish to remove yourself from the queue simply press Star. One again, please be advised that today's conference is being recorded the company's earnings results press release.
Speaker Change: Earnings presentation S E C filings and a replay of today's call can be found on its IR website at Investor Dot Gora Dot I O. Joining me today are Tony Zhao founder, Chairman and CEO and Jim Boldt, Wang the company's C F.
Speaker Change: 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.
Speaker Change: 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 its business and which the company discussed it.
Speaker Change: 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 Agoura, Inc. Has no obligation to update any forward looking statements. The company may make on today's call.
Tony Zhao: With that let me turn the call over to Tony Tony You May begin.
Speaker Change: Alright, thank you operator and well.
Speaker Change: Welcome everyone to our earnings call. Our first Blue Mill work, we're picking results from the past quarter.
Speaker Change: This quarter, we achieved GAAP profitability significantly.
Speaker Change: Significant milestone for our company.
Speaker Change: Success is a result of strong revenue growth from new use cases and disciplined cost management.
Speaker Change: While we faced challenges over the past few years from the pandemic to regulatory changes in macro economic pressures our team's hard work.
And the focus Hyatt brought us back to profitability.
Speaker Change: As we look.
Speaker Change: 2025.
Speaker Change: We remain committed to driving operational efficiency and deliver sustainable profitable growth.
Speaker Change: Total revenue in the fourth quarter were $34 5 million up 4% year over year, excluding revenues from sort of end up still low margin products, mainly Cleveland bio business expansion in certain use cases, such as love shopping.
Speaker Change: Attainment.
Speaker Change: As of the end of 2024, we had over 1700.
Speaker Change: Two customers for Agora and close to two solid four show up excluding is mall and an increase of 2% and 8% respectively compared to one year ago.
Speaker Change: Let's turn to our business product and technology update for the quarter.
Speaker Change: Generating AI Revolution is one thing.
Speaker Change: Both periods over the past few months, we've seen groundbreaking developments from reserving model one to Google's multimodal multimodal Gemini two downhole as well as remarkable open source innovations like.
Speaker Change: <unk>.
Speaker Change: This transformation.
Does extraordinary opportunity for our business.
Speaker Change: Our real time engagement technology is uniquely positioned to enable seamless once based interactions between humans and AI models.
Speaker Change: By moving beyond basic tap tap to multimodal conversations.
Speaker Change: Other key technology to enable and ensure more intuitive and expressive communication experiences.
Speaker Change: It also introduces an entirely new use cases, where perhaps improve simply is not practical or efficient.
Speaker Change: However, many large language models today still lack robust was interaction capabilities.
Speaker Change: For those that do support wasn't Thompson the experience often fall short with high literally upward pulses.
Speaker Change: Rock interruptions and sensitivity to background noise. This week.
Speaker Change: Which can lead to frustrating user experience.
Speaker Change: To address this gap.
Speaker Change: Supported and contributed to an open source project in our developer community called transforming to a person.
Speaker Change: Okay.
Speaker Change: <unk> is an Australian framework that enables developers to rapidly build multimodal AI agents.
Speaker Change: <unk> integrated building blocks for speech to tap a large luxury models paths to switch repeatable argument generation.
Speaker Change: We do understanding and many other useful models.
Speaker Change: Youthful modules, enabling developers to easily create real time loaded as the AI experiences.
This framework can enable any tax base larger longer model to deliver a conversational.
Speaker Change: Worldspace a conversational experience.
Speaker Change: For example, a developer can use 10 to quickly build the world's agent combine the Microsoft SPT.
Speaker Change: Large loans or modal and <unk> capital speech, all in a matter of minutes.
Speaker Change: Since its launch 10 has become the fast growing pockets with Boeing project of its cat, earning over 4500, <unk> industrial a few months.
Speaker Change: Multiple occasions 10 popped the trending list as the number one patent project Hum.
And remain on the list of on the list for several days.
Speaker Change: Building our success I am excited to announce the launch of our own conversational AI engine.
Speaker Change: And enterprise grade solution that empowers developer to create interactive was concerned with.
Speaker Change: With any AI model.
Speaker Change: Whether it's a customer build model deploy on premise or a leading large long as a modal accessed what why our API.
Speaker Change: Our conversational AI engine can make it pop and indirect naturally with humans.
Speaker Change: With this solution apart is the ability to integrate easily with new AI models.
Speaker Change: For instance, we're integrated with Google Jim lives Multimodal API within 24 hours after its release in last December.
Speaker Change: The same planning for our integration was two four bps it in January.
Speaker Change: Our solution is also compatible with many popular SPT and Tds modules.
Speaker Change: But broad compatibility is not only advantage our conversational AI engine I will lead.
Speaker Change: Elevates the conversational experience in three key areas.
Speaker Change: First conversation dynamics to create natural humanlike interactions the engine intelligently the tax and the pulses for user interactions within 350 milliseconds.
Speaker Change: Sure his conversations feel smooth and intuitive.
Speaker Change: Second word processing.
Speaker Change: Our selective potential algorithm algorithm enables the AI models to focus solely on the private speaker, primarily speaker and pocket filter out disruptions from irrelevant sneakers in the background.
Speaker Change: Finally, our advanced noise suppression and echo calculations algorithms and ensure that the AI model receive crystal clear humour inputs local authority for generating high quality responses.
Speaker Change: Lastly, latency.
Speaker Change: Leveraging our global infrastructure the engine respond to inquiries in as little as 500 milliseconds.
Speaker Change: Dynamically handling pacte law and minimize delays across different network conditions.
Speaker Change: We have been working closely with customers to build in the past conversational AI applications across various use cases.
From virtual companions and live longer its tutoring to smart Iot devices.
Speaker Change: So shopping assistant and customer support.
Speaker Change: We believe this innovation will accelerate the adoption of conversational AI across industries and become a key driver of our future growth.
Speaker Change: Before I wrap up I want to take a moment to some incredible teams and Aurora and so on our dedication.
Speaker Change: Your dedication and hard work in this fast evolving environment have been no nothing short of inspiring.
Speaker Change: Today, we are pushing the boundary of real time, AI interruptions, and unlocking new possibilities for human AI communication.
Speaker Change: I'm excited about.
Speaker Change: What lies ahead.
Speaker Change: Look forward to sharing more updates with you soon.
Speaker Change: With that let me turn things over to Jim who will review our financial results.
Jim: Thank you Tony Hello, everyone let.
Jim: Let me start by first of all with <unk> financial results for the fourth quarter of 2024.
Jim: Then.
Jim: Discuss outlook for the first quarter of 2025.
Jim: Total revenues were $34 5 million in the fourth quarter, excluding revenues from <unk> and the sale of low margin products total revenue increased nine 1% quarter over quarter, and three 6% year over year.
Jim: Our core revenues were $17 4 million in the fourth quarter, an increase of 10, 8% quarter over quarter and an increase of 13, 7% year over year.
Jim: The increase was primarily due to business expansion and usage growth in certain verticals, such as less shopping and entertainment.
Jim: So on revenues.
Jim: RMB 1.2 points in the.
Jim: The fourth quarter.
Jim: Clothing revenues from certain.
Jim: Low margin products so.
Jim: <unk> revenue increased eight 2% quarter over quarter and decreased five 4% year over year.
Jim: Quarter over quarter increase was primarily due to an increase in revenues from digital transformation customers.
Jim: The year over year decrease was primarily due to slowing demand from social and entertainment verticals.
Jim: Relation.
Jim: Economic conditions.
Jim: Dollar based net retention rate and 95% of Cora and 79% for Shlomo.
Jim: Excluding revenues from certain industrial products and discontinued business.
Jim: Moving onto causing sensors.
Jim: Gross margin for the fourth quarter.
66, 6%.
Jim: If we exclude cost profit from certain industrial products.
Jim: Martin of continuing business slightly decreased one 1%.
Jim: Quarter over quarter, and one 8% year over year.
Jim: As we mentioned in the last earnings call.
Jim: Structured.
Jim: Used our global workforce in November 2024.
Jim: Operating expenses.
Jim: 28, five minutes in the fourth quarter.
Jim: Great.
Jim: $4 1 million.
Jim: $32 6 million in Q2 2024 as the baseline.
Jim: We expect to see additional savings.
Jim: Operating expenses in Q1 2025.
Jim: R&D expenses.
$14 eight.
Jim: The $8 million in Q4.
Jim: Nine 3% year over year.
Jim: R&D expenses represented 42, 9% of total revenue in the quarter compared to 45, 3% in Q4 last year.
Jim: Sales and marketing expenses.
Jim: Seven 3 million in Q4.
Jim: Increased three 1% year over year.
Jim: Sales and marketing expenses represented 21, 1% of total revenue in the quarter compared to 19, 6% in Q4 of last year.
Jim: G&A expenses.
Jim: Our $6 4 million in Q4 decreased 18, 4% year over year.
Jim: G&A expenses represented 18, 6% of total revenues in the quarter.
Jim: Paired with 21, 9% in Q4 last year.
Jim: Moving on to the bottom line net income was <unk> 2 million in Q4 translating to.
Jim: One, 5% net income margin plus quarter.
Jim: Compared to a net loss margin of seven 2% from Q4 last year.
Tony Zhao: As Tony just mentioned we.
Jim: We achieved a significant milestone this quarter.
Tony Zhao: <unk> ability on GAAP basis.
Jim: First time in several years.
Tony Zhao: This not only demonstrates our ability to deliver.
Tony Zhao: Lever up commitments, but also reflect our unwavering focus on creating long term value for our shareholders.
Tony Zhao: Okay.
Tony Zhao: We remain committed to driving innovation optimizing operations and maintaining the financial discipline.
Tony Zhao: Sorry to ensure continued success.
Tony Zhao: Now turning to cash flow.
Operating cash flow was $4 5 million in Q4 compared to $6 7 million last year.
Tony Zhao: Free cash flow was.
Tony Zhao: For ceramic comparator $6 4 million last year.
Tony Zhao: We'll have the balance sheet.
Tony Zhao: Q4 was 363 point estimate.
Tony Zhao: Cash cash equivalents bank deposits and financial products issued by banks.
Tony Zhao: Net cash inflow in the quarter was mainly due to a free cash flow.
Tony Zhao: $4 for a minute, which was offset in part by share repurchase.
Tony Zhao: $1 4 million.
Tony Zhao: In support of <unk>.
Tony Zhao: Proof of our share repurchase program in February 2022.
Tony Zhao: And our partners.
Tony Zhao: 124, we have completed 58%.
Tony Zhao: 200 million share repurchase program.
Tony Zhao: We are pleased to announce that our board has also authorized another 12 months extension of our share repurchase program. So February 28 planning 26.
Tony Zhao: I'll address once all other tax law change.
Tony Zhao: This decision reflects the board's confidence in the Companys long term growth potential and are committed to.
Tony Zhao: Delivering value for shareholders.
Tony Zhao: Now turning to guidance.
Tony Zhao: First quarter of 2025.
Tony Zhao: Currently expect total revenues to be between 31 and 33 minute <unk>.
Tony Zhao: Compared to $29 7 million in fair.
Tony Zhao: First quarter of 2024.
Tony Zhao: If revenues from certain low margin products are excluded.
Tony Zhao: Looking forward our goal is to maintain sustained profitability through 2025.
Tony Zhao: Throughout 2025, driven by strategic initiatives operational efficiency.
Tony Zhao: Emerging market opportunities in general.
Tony Zhao: This outlook reflects our current and preliminary views on the market and operational conditions, which are subject to change.
Tony Zhao: In closing I'd like to express my sincere gratitude to both acquire and strong teams.
Tony Zhao: Credible effort.
Tony Zhao: Uh huh.
Tony Zhao: That's what made these achievements possible.
Tony Zhao: Thank you to everyone for attending the call today.
Tony Zhao: Let's open it up for questions.
Tony Zhao: Yes.
Speaker Change: Certainly ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.
Tony Zhao: Yeah.
Tony Zhao: Yeah.
Tony Zhao: And our first question comes from the line.
Speaker Change: Perry Huang from Bank of America Securities. Your question. Please.
Speaker Change: Hi management, Thanks for taking my question I'm asking on behalf of austerity.
Speaker Change: A few questions firstly on the demand side what are the trends.
Speaker Change: Overseas in China, China, China market and what are the key sectors are all driving driving growth in 2025.
Speaker Change: Secondly on the AI side.
<unk> recently.
Speaker Change: The AI related demand.
Speaker Change: I mean, what scenarios.
And the application of our AI related technologies and lastly on the.
Speaker Change: Profitability side, what are the gross profit margin and GAAP profit targets for 2025. Thank you.
Speaker Change: Okay, I'll talk about the demand side on satisfying.
Speaker Change: Yes.
Speaker Change: Mostly on the Iot side on the digital transformation side and of course, the AI comes in with more.
Speaker Change: Activities to.
Speaker Change: To explore the potentials.
Speaker Change: Global market, we see live commerce creates our economy.
Speaker Change: And.
Speaker Change: Chinese company go overseas.
Speaker Change: Driving force to the growth.
Speaker Change: After our beta launch of our constitutionally engine, we have received quite a lot of customers' interests are actively exploring the opportunity to build with that.
Speaker Change: So that's in general on the <unk>.
Speaker Change: Demand side.
Speaker Change: Specifically around <unk>.
Speaker Change: The growing interest from developers and customers.
Speaker Change: Particularly with the recent model launches, such as <unk>, and Jim and I and a lot of open source model launch.
Speaker Change: Our conversational AI engine product is a great fit with <unk> to build was Egypt was agent for <unk>.
Speaker Change: Or or was AI based applications.
Speaker Change: We see some huge.
Speaker Change: <unk> in a couple of use cases.
Like companionship.
Speaker Change: And in both apps and Iot devices, such as a companion robots and smart hoist smart choices.
Julian: For Julian.
Julian: With me I can also be widely applied in education platform, especially for language learning and practicing.
Julian: In enterprise level positions, such as call center or <unk>.
Julian: Customer service there is.
Julian: A clear demand and a lot of experimental activities.
Julian: On those areas, we actually see many similarities in all major markets. So it happens in parallel in different market at this moment in.
Julian: In general we see a lot of interest in <unk>.
All kinds of use cases based on large LNG modal, but our view is the muscle allergies and tours to build agents.
Julian: Far from mature so it will still take a long time for sophisticated agents to be built and launched in long term those agent will be disruptive and crude is huge for us.
Julian: Given the reality that the whole technology community is still actively improving the foundation models infrastructures tours and frameworks to upstream agents.
We expect current AI adoption to be faster in existing mature used cases, where was AI agent could be used to replace the supplement of whole customer experience.
Julian: That that kind of.
Julian: Experience.
Julian: Much higher chance to success.
Julian: Especially those.
Julian: Replacement focus on replacing some of the human functions.
Julian: So to improve the productivity or increase the efficiency, rather than creating whole new use case or holding user experience.
Julian: That's a that's a more.
Julian: Successful past, we are seeing in the <unk>.
Julian: Hole.
Julian: Experiment of new AI based use case.
Julian: We are working closely with a group of customers in the POC.
Julian: Plc stage and hope we can see some application launch in the coming months.
Julian: Sure.
Julian: Gross profit and.
Julian: Net profit.
I'll look so in terms of cost.
Julian: Gross margin was.
I expect it.
Julian: Montana cost level for around 67%.
Julian: As we saw in the <unk>.
Julian: Fourth quarter, we think that's the right balance between <unk>.
Julian: Profitability and also a competitor.
Julian: Pressure.
Julian: Peer competitors.