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Agora, Inc. (AGORA), currently trading at $3.79 with a market capitalization of $352 million, reported a solid financial performance for the first quarter of 2025, showcasing a 12% year-over-year revenue growth and achieving profitability for the second consecutive quarter. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, suggesting potential upside opportunity. The company highlighted its strategic investments in conversational AI and product innovations as key drivers for its performance. Despite the absence of specific earnings forecasts or stock market reactions, Agora’s forward-looking guidance suggests continued growth and profitability throughout the year.
Key Takeaways
- Agora achieved a 12% increase in total revenues year-over-year, reaching $33.3 million.
- The company reported a GAAP net profit of $400,000, marking its second consecutive profitable quarter.
- Agora’s core revenues grew by 17.7%, driven by innovations in conversational AI.
- The company maintains a strong cash position with $388 million in cash and equivalents.
Company Performance
Agora’s Q1 2025 performance reflects its successful adaptation to market demands, particularly in the realms of conversational AI and IoT devices. The company maintains a strong gross profit margin of 64.12% and receives a FAIR rating on InvestingPro’s Financial Health Score framework, with particularly strong ratings in price momentum and cash flow metrics. The company reported a total revenue of $33.3 million, a 12% increase from the previous year. This growth is primarily attributed to its core revenue streams, which saw a 17.7% increase year-over-year. Agora’s strategic focus on high-value use cases and technical optimization has enabled it to maintain a robust gross margin of 68%.
Financial Highlights
- Total revenues: $33.3 million (12% YoY growth)
- GAAP net profit: $400,000 (1.2% net income margin)
- Core revenues: $18.6 million (17.7% YoY growth)
- Gross margin: 68%
- Cash and equivalents: $388 million
- Operating cash flow: $17.6 million
Outlook & Guidance
Agora provided a promising outlook for the second quarter of 2025, with revenue guidance set between $33 million and $35 million, representing a projected year-over-year growth of 6.8% to 13.3%. The company anticipates maintaining profitability throughout the year, supported by ongoing innovations and a strategic focus on expanding its market presence in sectors like education, IoT, and customer service.
Executive Commentary
Tony Zhao, CEO of Agora, emphasized the company’s pioneering role in the AI industry, stating, "In this fast-moving AI revolution, their dedication and innovative spirit are what allow us to pioneer the future of human AI interaction." CFO Jingbo Wang highlighted the evolving competitive landscape, noting, "Competition will not be just real-time communication. It will be real-time communication plus conversational AI."
Risks and Challenges
- Market competition: As the landscape shifts towards conversational AI, Agora faces challenges from emerging and established competitors.
- Economic fluctuations: Global economic instability could impact demand in key markets, particularly in Asia.
- Technological advancements: Rapid changes in technology require continuous innovation to maintain a competitive edge.
Agora’s strategic investments in conversational AI and its strong financial performance position the company well for future growth. However, it must navigate the challenges of a competitive and rapidly evolving market landscape. Analyst consensus from InvestingPro shows optimistic targets ranging from $5.00 to $7.10 per share, reflecting confidence in the company’s growth trajectory. Access the comprehensive Pro Research Report for detailed analysis of Agora’s competitive position and growth potential.
Full transcript - Advanced Photonix Inc (API) Q1 2025:
Conference Operator: 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 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 prospectus relating to its initial public offering. Agora, Inc. Remains no obligation to update any forward looking statements the company may make on today’s call. And with that, let me turn it over to Tony. Please go ahead, Tony.
Tony Zhao, Founder, Chairman and CEO, Agora, Inc.: Thanks, operator, and welcome, everyone, to our earnings call. I’ll first review our operating results from the past quarter. I’m very happy to report our second consecutive quarter of GAAP profitability in Q1, driven by double digit revenue growth year over year on a comparable basis and disciplined cost management. This is a great achievement, and I want to thank Agora and Sheng Huang teams for their efforts and dedication. Total revenue in Q1 were $33,300,000 up 12% year over year, excluding revenues from certain end of sales, low margin products, with healthy business expansion and net retention rate recovery from both Agora and Shonong side.
Our GAAP net profit for the quarter, though still still at a modest base, more than doubled from the previous quarter. As you know, Q1 typically marks our seasonal low point with fewer calendar days and reduced online activity during the New Year holiday period. Considering the seasonal trend and our current business momentum, we’re confident that we will maintain GAAP profitability for the remainder of the year. At the end of Q1, we had more than 1,800 active customers for Algora and close to 2,000 for Shunghwa excluding Ismail, both representing an increase of 5% compared to one year ago. Now let’s turn to our business, product and the technology updates for the quarter.
In March, we announced the general availability of our conversational AI engine in China, enabling developers to create interactive voice experience with any large language model. This product has been refined based on extensive customer feedback during the private and public beta phase. Today, this product is still in the public beta stage for The U. S. And the global markets, and it already delivers industry leading performance on latency, noise suppression, interruption handling and network resilience.
Our conversational AI engine unlocks innovation across multiple verticals and use cases, from virtual companions and shopping assistance to customer service and outbound marketing. Particularly, we believe education is where the conversational AI experience can have a huge impact in boosting student engagement with personalized content and adaptive practice. Imagine an AI teaching assistant that talks in real time, adjusting to each student’s needs and providing truly personalized instructions at scale. We are already seeing this vision come to life. Several ad tech customers, such as Doshen AI in China, are in the advanced stage of developing AI powered language tutoring products with our solution.
In Q1, we also launched our Conversational AI Device Kit, our turnkey IoT module combining our software, cloud service and high performance chips from Becken. This device kit enables device manufacturers to add conversational AI to any IoT devices, from toys and robotics to smart speakers. As a turnkey solution, it can significantly reduce upfront R and D cost and time to market for device manufacturers. For example, our customer RoboPod announced their latest AI companion robot, Fazuzu, at the Mobile World Congress powered by our device kit. Fazuzu listens, senses and the response in real time, creating personalized support and even emotional connections with end users.
We are also making exciting progress on our open source initiatives and developers ecosystem. 10, our sponsored open source project for building real time conversational AI agents continues to gain remarkable traction. With 6,000 gigahertz stars, it is the fastest growing project in its category globally. Leading cloud providers, including AWS and Oracle Cloud are providing support for deploying 10 on their infrastructure. Recently, we launched voice activity detection and 10 detection modules as part of our 10 project, which outperforms our existing open source alternatives, further demonstrating our commitment to the community and the conversational AI ecosystem.
Over the past few months, we have seen a tremendous amount of interest in our conversational AI products and open source projects. Product registrations and inquiries following the product launch have reached record highs and our developer workshops in Beijing, Tokyo and San Francisco have attracted large passionate audience. Today, many customers are working closely with us in proof of concept development. Before I wrap up, I want to give special recognition to our incredible teams at Agora and Shonghwa. In this fast moving AI revolution, their dedication and innovative spirit are what allow us to pioneer the future of human AI interaction.
Each day, we’re not just keeping pace with changes, we are creating it, unlocking new possibilities and shaping a new paradigm. The opportunities ahead are truly exciting and I cannot wait to share our next chapter of progress with all of you. With that, let me turn things over to Junbo, who will review our financial results.
Jingbo Wang, CFO, Agora, Inc.: Thank you, Tony. Hello, everyone. Let me start by first reviewing financial results for the first quarter of twenty twenty five, And then I will discuss outlook for the second quarter. Total revenues for the first quarter reached $33,300,000 exceeding the high end of our guidance range. On a year over year basis and excluding revenues from certain end of sale low margin products, revenue growth accelerated to 12.1%, up from 3.6% in Q4 last year.
This demonstrates a clear pickup in our business momentum. Our core revenues reached $18,600,000 in Q1, growing 17.7% year over year and 6.9% sequentially. This sustained performance reflects our successful market expansion and growing adoption, particularly in high potential verticals such as live shopping and entertainment, where usage continues to grow. Shunlong revenues reached RMB105.5 million in Q1. Excluding certain end of sales low margin products, Shenglong revenues grew 6.7% year over year and declined 13.7% sequentially.
The year over year growth reflects continued business expansion and adoption in key verticals such as entertainment and IoT. While the sequential decline is mainly due to normal seasonality, with Q4 historically seeing peak demand for digital transformation projects and Q1 experiencing softer activity from social and education customers due to holidays. Our base net retention rate is 96% for Agora and 85% for Shinwa, Both improved from previous quarters. Moving on to cost expenses. Gross margin for the first quarter was 68%.
If we exclude gross profit from certain end of sale products, gross margin of continuing business increased 0.6% year over year and 1.4% quarter over quarter. As we mentioned in previous earnings calls, we restructured and reduced our global workforce in November 2024. As a result, operating expenses decreased $6,100,000 from $32,600,000 in Q2 twenty twenty four as a baseline and reached $26,500,000 in the first quarter. R and D expenses were $14,000,000 in Q1, decreased 22.7% year over year. R and D expenses represented 42.1% of total revenues in the quarter compared to 54.5% in Q1 last year.
Sales and marketing expenses were $6,200,000 in Q1, decreased 8.5% year over year. Sales and marketing expenses represented 18.7% of total revenues in the quarter compared to 20.5 in Q1 last year. G and A expenses were $6,200,000 in Q1, decreased 25.6% year over year. G and A expenses represented 18.8% of total revenues in the quarter compared to 25.2% in Q1 last year. Moving on to the bottom line, we delivered net income of $400,000 in Q1, representing a 1.2% net income margin.
This represents a substantial turnaround from the 28.7% net loss margin in Q1 last year and marks our second consecutive quarter of GAAP profitability. With our current business momentum and visibility, we anticipate maintaining profitability throughout 2025. Now turning to cash flow. Operating cash flow was $17,600,000 in Q1 compared to negative $6,500,000 last year. The positive cash flow included 17,800,000.0 in interest proceeds from maturity of bank deposits and financial products issued by banks.
Moving on to balance sheet, we ended Q1 with $388,000,000 in cash, cash equivalents, bank deposits and financial products issued by banks. Net cash inflow in the quarter was mainly due to operating cash flow of $17,600,000 and release of $3,500,000 in restricted cash, which was offset in part by share repurchase of $1,200,000 Since our board approved the share repurchase program in February 2022, we have repurchased 116,400,000.0 worth of shares through 03/31/2025. So far in Q2, we have already bought back over $8,000,000 worth of shares. We remain committed to creating shareholder value through this program while preserving the financial flexibility needed to invest in future growth opportunities. Now turning to guidance.
For the second quarter of twenty twenty five, we currently expect total revenues to be between 33,000,000 and $35,000,000 compared to $30,900,000 in the second quarter of twenty twenty four, representing year over year growth rate of 6.8% to 13.3% if revenues from certain end of sale low margin products are excluded. This all reflects our current and preliminary views on the market and operational conditions which are subject to change. In closing, I want to take a moment to recognize the exceptional work of the Agora and Shunwang teams. Your dedication and execution have made these outstanding results possible. This quarter, we are proud to have delivered revenue above expectations, achieved consecutive GAAP profitability and maintained a robust financial position.
Thank you all for joining in today’s call. We appreciate your ongoing support. Let’s open it up for questions.
Conference Operator: Thank you. We will now begin the question and answer session. Our first question comes from the line of David Li from Bank of America Securities. Please ask your question, David.
David Li, Analyst, Bank of America Securities: Hi, management. Thanks, Tony and Jinpu for the introduction and for the results. Firstly, congrats on the strong results in 1Q and the solid guidance. And I have two questions here. Number one is about the AI demand.
As the Latin language model is getting more powerful, we see more human machine interaction. What are the key areas you see more AI application? I think you mentioned, like, a convenient toys and and some ad AI devices as well. So what could be the future growth drivers in in the area of AI? That’s number one.
And number two quest number two question is regarding the breakdown for China and the overseas business, And how do we see the demand trend in future by volume or by the and by the ASP trend? Thank you.
Tony Zhao, Founder, Chairman and CEO, Agora, Inc.: I’ll talk about AI. You know, first of all, AI agent has been the biggest, topic among tech communities this year. However, we will focus on the conversational AI side, which is more directly related to our business. What we see is several key use cases that are most active. You know, first is education use cases, you know, especially around the longer learning and practice side as I just mentioned in the script in my opening remark.
And also IoT side, especially a lot of effort trying to build conversational toys that can really talk to kids or users with meaningful content. And also, there’s clear demand around kind of call center services, where there’s outbound calling for marketing or other purpose, and also customer service in cost center use cases. Those are the most clear verticals or use cases, you know, in our recent engagement with our developers.
Jingbo Wang, CFO, Agora, Inc.: Thank you, Tony. I’ll talk about the demand trend. So in The US and global market, as you can see, growth rate has is now in this quarter about 18% or close to 20% already. So we have seen growing adoption amount actually, not just our customers. More importantly, we are seeing growing adoption among consumers for live video based shopping and entertainment apps, especially in North America and Europe.
These apps we have seen become really dominant in China for some time, but now we are finally seeing them gaining traction in North America and Europe as well. So that’s one of the most important growth driver in this quarter for us. And secondly, for Asian customers, we are finally seeing some demand recovery, including India for both education and entertainment use cases. So overall, U. Global market, we see pretty solid demand and we think there’s still a lot of potential for further penetration.
And also in terms of the pricing, with the exception of certain Asian markets, overall the pricing has been quite stable in more developed markets. So in China, also growth rate hasn’t come to the level we see in US and global markets. But as you can see for the Shunghwa business in Q1 year over year it also delivered 6.7% year over year growth. So overall the demand is recovering. So on several fronts, the social and entertainment fronts we see that regulation is more stable now.
So there’s less regulatory impact as we saw last year and the year before. Education demand is also recovering in a quite healthy manner. And IoT and digital transformation, we have been seeing pretty strong demand in the past two years. Pricing wise, also still it’s a very competitive market compared to last year and the year before. Pricing pressure is also more moderate in this year.
So overall it looks more positive than previous years.
David Li, Analyst, Bank of America Securities: Thank you, Tony and Jimbo. Thank you.
Conference Operator: Thank you. Our next question comes from the line of Tianlei Wang from CICC. Please ask your question, Tianlei.
Tianlei Wang, Analyst, CICC: Hi. This is Wang Tianlei from CICC, and thank you for taking my questions. So my first question is regarding your overseas e commerce business. So in the past, we have seen the live shopping and interactive features becoming increasingly popular in ecommerce, especially in the emerging market. So could you please provide more details on your current attractions and the strategy enabling overseas ecommerce platforms or the application?
And my second question focuses on the AI landscape. So could you elaborate on any shifts that you have observed in the downstream demand for AI powered real time interaction capabilities? Thank you.
Tony Zhao, Founder, Chairman and CEO, Agora, Inc.: Okay. So live commerce use case, we are deep diving into the use case and continue to maximizing the penetration into the space. There’s clear demand and we see a lot of value creation potentials for us deliver to our customers. And we are continuing to gain new customers while the existing customers’ volume is stable growing. You know, one side of the effort is trying to improve the video quality, which will give shoppers online shopping, you know, participant better experience in live shopping use case.
A lot of the customers are actually very local live shopping platforms, so there’s literally almost no impact by the recent tariff war. About AI, now again, we will continue to focus on conversational AI, which is really directly related to our business. The recent interest in building conversational AI agent is very clear. And a lot of our customers who are in the POC stage of their development is getting close to product launch. Now the key for our growth in terms of service volume are eventually the value create for the customer base is really depending on a product that has already find a product market fit.
And the key to that is all those customers’ product actually did a lot of deep dive into the vertical use case and leverage and build a good product by finding out enough know how in that vertical use case, so that the customer experience is smooth and compelling enough. And that process is why a lot of the customers have been working with us for a while, but still before it can really achieve a paramount feat, it will take some time.
Conference Operator: Do you have any follow-up questions, Chen Lei?
Tianlei Wang, Analyst, CICC: No. That’s it. Thank you for those comprehensive answer. That was really helpful. Cheers.
Conference Operator: Thank you. As a reminder, before we take our next question, it is star one one for questions. Our next question comes from the line of Bing Duan from Nomura. Please go ahead, Bing.
Bing Duan, Analyst, Nomura: Hi. Thank you, Tony and Kim Guo for giving me the opportunity to ask questions. I have two. First is also about AI. So how do we think about the timing for the massive adoption of conversational AI as we think that currently there are still some pricing premium compared to the non AI applications.
So when do we see this tipping point for the massive adoptions? And I think a second question is about the competition landscape in China and how do we think about the pricing trends for the overall business and the impact on the gross margins? Thank you.
Tony Zhao, Founder, Chairman and CEO, Agora, Inc.: All right. On the tipping point, I mean, I actually talked about a few use cases or verticals that are most active in our work with customers and developers. I want to point out further that even within each and every of those use cases, it’s not one category of product. Like let’s say, for call center use case, each type of our call center service for actually a different industry have different know hows. And so that the product market fit will happen gradually for each industry’s specific cost center use cases.
So it will achieve product market fit one by one down the road, really depend on how those product, like I said, finding out all the necessary know hows, so to build up a smooth user experience. And the tipping point really relies on the maturity of product market fit of those specific use case. And once it’s matured and having a market fit, the volume for that specific product will grow significantly. And it will naturally expand to all similar product providers in the same sector or in the same use case, which will again grow our volume. So that’s the thing.
However, I do want to mention that the maturity of such product, it’s not decided by us. It’s really decided by the
Jingbo Wang, CFO, Agora, Inc.: each
Tony Zhao, Founder, Chairman and CEO, Agora, Inc.: individual vertical use cases for their industry know hows and product designs or even launching approach will decide whether the product is going to be successful or not and whether the product market fit is reached or still need more work. So that’s the thing. I cannot really give a specific timing for how those products will mature and start to grow exponentially. However, what I want to say is it’s not going to be one product. And it’s not going to be even 10 or 20 product, it’s going to be hundreds of different product and gradually reaching the tipping point.
That’s my view.
Jingbo Wang, CFO, Agora, Inc.: Okay. I’ll take the question on the competitive landscape. So I think you mentioned China. Yes, China has been a very competitive market. In fact, all the major cloud providers have, at some point, competed in this market and really, really hard.
But now only one is still remaining, really. The others are just staying here but with no meaningful market share. So that shows how competitive the market is. But I think in the past few years, the clear trend is consolidation. Now there are less and less there have been less and less players.
But today, really just three. And as conversational AI become more and more important, we believe the competition will not be just real time communication. It will be real time communication plus conversational AI. And we have invested heavily on this new area. We cannot say the same for our competitors.
So we hopefully that will give us stronger competitive position in the future. And in terms of margin, yes, the competition is more fierce in China and margin is slightly lower in China compared to the global and U. S. Markets. But for us, we first of all, we on we tend to focus on the higher value use cases which tend to have higher margins.
And secondly, we continue to do a lot of technical optimization on the cost end and that’s why we have been able to maintain a relatively stable gross margin as you have seen in our earnings. So that will continue to be our strategy going forward.
Bing Duan, Analyst, Nomura: Thank you, Tony. Thank you, Kimbo.
Conference Operator: Thank you. Right. There are no further questions. 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 email the company. And so with that, we conclude the program today. You may now disconnect your lines.
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