Agora, Inc. Reports Second Quarter 2020 Financial Results

Rhea-AI Summary

Agora, Inc. (NASDAQ: API) reported substantial growth in its Q2 2020 financial results, with total revenues soaring 128% year-over-year to $33.9 million. The company achieved GAAP profitability and positive free cash flow of $3.6 million, marking a significant turnaround from a net loss of $2.0 million in Q2 2019. Active customers increased by 85.5%, reaching 1,486. However, net loss attributable to ordinary shareholders was $157.8 million. Agora expects total revenues for 2020 to range between $125 million and $130 million.

Positive

• Total revenues increased by 128% year-over-year to $33.9 million.
• GAAP net income of $3.0 million compared to a net loss of $2.0 million in Q2 2019.
• Positive free cash flow of $3.6 million, up from a negative $6.6 million in Q2 2019.
• Active customers increased by 85.5%, reaching 1,486.
• Constant Currency Dollar-Based Net Expansion Rate of 183.2%.

Negative

• Net loss attributable to ordinary shareholders was $157.8 million.
• Gross margin decreased to 66.4%, down from 69.2% due to higher infrastructure costs.

SANTA CLARA, Calif., Aug. 17, 2020 (GLOBE NEWSWIRE) -- Agora, Inc. (NASDAQ: API) (“Agora”), a pioneer and leading platform for real-time engagement APIs, today announced its financial results for the second quarter ended June 30, 2020.

“We delivered strong results in our first quarter as a public company, with total revenues up 128% year-over-year. Our efficient and scalable business model focused on developers also contributed to positive GAAP profitability and free cash flow in the quarter,” said Tony Zhao, founder, chairman and CEO of Agora. “Developers around the world continue to use Agora’s real-time engagement APIs to build immersive experiences for their end users and enable meaningful human connections. The successful completion of our IPO in June will provide additional brand visibility and capital to drive our growth as we strive to fulfill our mission of making real-time engagement ubiquitous.”

Second Quarter 2020 Highlights

• Total revenues for the quarter were $33.9 million, an increase of 127.5% from $14.9 million in the second quarter of 2019.
• Active Customers as of June 30, 2020 were 1,486, an increase of 85.5% from 801 as of June 30, 2019.
• Constant Currency Dollar-Based Net Expansion Rate was 183.2% for the trailing 12-month period ended June 30, 2020.
• Net income for the quarter was $3.0 million, compared to net loss of $2.0 million in the second quarter of 2019. After excluding share-based compensation expense, non-GAAP net income for the quarter was $4.7 million, compared to the non-GAAP net loss of $0.3 million in the second quarter of 2019. Adjusted EBITDA for the quarter was $5.7 million, compared to $0.1 million in the second quarter of 2019.
• Cash and cash equivalents as of June 30, 2020 was $640.9 million, including $485.6 million in net proceeds from the IPO and the concurrent private placement, after deducting underwriting discounts and commissions and other offering expenses payable by Agora.
• Net cash generated from operating activities for the quarter was $7.5 million, compared to net cash used in operating activities of $4.9 million in the second quarter of 2019. Free cash flow for the quarter was positive $3.6 million, compared to negative $6.6 million in the second quarter of 2019.

Second Quarter 2020 Financial Results

Revenues
Total revenues were $33.9 million in the second quarter of 2020, an increase of 127.5% from $14.9 million in the same period last year, primarily due to increased usage of our video and voice products as result of our business expansion.

Cost of Revenues
Cost of revenues was $11.4 million in the second quarter of 2020, an increase of 148.2% from $4.6 million in the same period last year, primarily due to increase in bandwidth and co-location costs as we continued to scale our business.

Gross Profit and Gross Margin
Gross profit was $22.5 million in the second quarter of 2020, an increase of 118.3% from $10.3 million in the same period last year. Gross margin was 66.4% in the second quarter of 2020, a decrease of 2.8% from 69.2% in the same period last year, primarily due to international expansion to regions with higher infrastructure costs.

Operating Expenses
Operating expenses were $20.2 million in the second quarter of 2020, an increase of 64.3% from $12.3 million in the same period last year.

• Research and development expenses were $10.9 million in the second quarter of 2020, an increase of 91.3% from $5.7 million in the same period last year, primarily due to increased personnel costs as we continue to build our research and development team.
• Sales and marketing expenses were $5.9 million in the second quarter of 2020, an increase of 16.7% from $5.1 million in the same period last year, primarily due to increased personnel costs as we continue to build our team and advertising expenses.
• General and administrative expenses were $3.4 million in the second quarter of 2020, an increase of 121.2% from $1.5 million in the same period last year, primarily due to increased personnel costs as we continue to build our team and professional services expenses.

Other Operating Income
Other operating income was $770 thousand in the second quarter of 2020, compared to $14 thousand in the same period last year, primarily due to additional value added tax deductions and income tax refund.

Income/(Loss) from Operations
Income from operations was $3.1 million in the second quarter of 2020, compared to loss from operations of $2.0 million in the same period last year.

Interest Income
Interest income was $120 thousand in the second quarter of 2020, an increase of 48.1% from $81 thousand in the same period last year, primarily due to an increase in the average balance of cash and cash equivalents.

Income Taxes
Income taxes were $0.2 million in the second quarter of 2020, an increase of 39.7% from $0.1 million in the same period last year, primarily due to increase in pre-tax income generated by our subsidiaries.

Net Income/(Loss)
Net income was $3.0 million in the second quarter of 2020, compared to net loss of $2.0 million in the same period last year.

Net loss attributable to ordinary shareholders
Net loss attributable to ordinary shareholders for the quarter was $157.8 million, compared to net loss attributable to ordinary shareholders of $13.0 million in the same period last year, primarily due to accretion of preferred shares to redemption value.

Net loss per American Depositary Share
Net loss per American Depositary Share (“ADS”)¹ was $4.60, compared to net loss of $0.45 per ADS in the same period last year.

Financial Outlook

Based on currently available information, Agora expects total revenues for the full fiscal year ending December 31, 2020 to be between $125 million and $130 million. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, and the outlook ranges for full year 2020 reflect a number of assumptions that are subject to change based on uncertainties related to the impact of the COVID-19 pandemic.

Earnings Call

Agora will host a conference call to discuss its financial results and outlook at 6 p.m. Pacific Time / 9 p.m. Eastern Time on the same day. Details for the conference call are as follows:
Event title: Agora, Inc. 2Q 2020 Financial Results
Conference ID: 3363465
Direct Event online registration: http://apac.directeventreg.com/registration/event/3363465
Please register in advance of the conference using the link provided above. Upon registering, you will be provided with participant dial-in numbers, a Direct Event passcode and a unique registrant ID.
Please visit Agora’s investor relations website at https://investor.agora.io/investor-relations on August 17, 2020 to view the earnings release and accompanying slides prior to the conference call.
A digital recording of the conference call will be available for replay approximately two hours after the call’s completion (dial-in number: US 18554525696, International +61 2 81990299; same conference ID as shown above) and remain up for approximately one week.

Use of Non-GAAP Financial Measures

Agora has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Agora uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Agora’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures. Besides free cash flow (as defined below), each of these non-GAAP financial measures represents the corresponding GAAP financial measure before share-based compensation expenses. We believe that such non-GAAP financial measures help identify underlying trends in our business that could otherwise be distorted by the effect of such share-based compensation expenses that we include in cost of revenues, total operating expenses and net income (loss). We believe that all such non-GAAP financial measures also provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Agora’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of Agora’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the tables captioned “Reconciliation of GAAP to Non-GAAP Measures” included at the end of this press release, and investors are encouraged to review the reconciliation.

Definitions of Agora’s non-GAAP financial measures included in this press release are presented below.

Non-GAAP Net Income (Loss)

Agora defines non-GAAP net income (loss) as net income (loss) adjusted to exclude share-based compensation expense.

Adjusted EBITDA

Agora defines Adjusted EBITDA as net income (loss) before exchange gain (loss), interest income, income taxes, depreciation and amortization, and adjusted to exclude the effects of share-based compensation expense.

Free Cash Flow

Agora defines free cash flow as net cash provided by operating activities less purchases of property and equipment. Agora considers free cash flow to be a liquidity measure that provides useful information to management and investors regarding net cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow the business.

Operating Metrics

Agora also uses other operating metrics included in this press release and defined below to assess the performance of its business.

Active Customers

Agora defines an active customer at the end of any particular period as an organization or individual developer from which Agora generated more than $100 of revenue during the preceding 12 months. Agora counts customers based on unique customer account identifiers. Generally, one software application uses the same customer account identifier throughout its life cycle while one account may be used for multiple applications.

Constant Currency Dollar-Based Net Expansion Rate

Agora calculates Dollar-Based Net Expansion Rate for a trailing 12-month period by first identifying all customers in the prior 12-month period, and then calculating the quotient from dividing the revenue generated from such customers in the trailing 12-month period by the revenue generated from the same group of customers in the prior 12-month period. Constant Currency Dollar-Based Net Expansion Rate is calculated the same way as Dollar-Based Net Expansion Rate but using fixed exchange rates based on the daily average exchange rates prevailing during the prior 12-month period to remove the impact of foreign currency translations. Agora believes Constant Currency Dollar-Based Net Expansion Rate facilitates operating performance comparisons on a period-to-period basis as Agora does not consider the impact of foreign currency fluctuations to be indicative of its core operating performance.

Safe Harbor Statements

This press release contains ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this press release are forward-looking statements, including but not limited to statements regarding Agora’s financial outlook, beliefs and expectations. Forward-looking statements include statements containing words such as “expect,” “anticipate,” “believe,” “project,” “will” and similar expressions intended to identify forward-looking statements. Among other things, the Financial Outlook in this announcement contain forward-looking statements. These forward-looking statements are based on Agora’s current expectations and involve risks and uncertainties. Agora’s actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to the growth of the RTE-PaaS market; Agora’s ability to manage its growth and expand its operations; the continued impact of the COVID-19 pandemic on global markets and Agora’s business, operations and customers; Agora’s ability to attract new developers and convert them into customers; Agora’s ability to retain existing customers and expand their usage of Agora’s platform and products; Agora’s ability to drive popularity of existing use cases and enable new use cases, including through quality enhancements and introduction of new products, features and functionalities; Agora’s fluctuating operating results; competition; the effect of broader technological and market trends on Agora’s business and prospects; general economic conditions and their impact on customer and end-user demand; and other risks and uncertainties included under the caption “Risk Factors” and elsewhere in our filings with the Securities and Exchange Commission, including, without limitation, the final prospectus related to the IPO filed with the SEC on June 26, 2020. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Agora undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

About Agora

Agora’s mission is to make real-time engagement ubiquitous, allowing everyone to interact with anyone, in any application, anytime and anywhere. Agora’s platform provides developers simple, flexible and powerful application programming interfaces, or APIs, to embed real-time video and voice engagement experiences into their applications.

For more information, please visit: www.agora.io.

---

¹ One ADS represents four Class A ordinary shares.

Agora, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in US$ thousands)

	As of		As of
	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	640,854		105,603
Accounts receivable, net	27,940		16,248
Prepayments and other current assets	4,484		1,381
Total current assets	673,278		123,232
Property and equipment, net	11,093		6,282
Deferred tax assets	824		836
Other non-current assets	492		809
Total assets	685,687		131,159
Liabilities, mezzanine equity and shareholders' equity (deficit)
Current liabilities:
Accounts payable	5,839		4,088
Advances from customers	957		921
Taxes payable	2,059		2,493
Accrued expenses and other current liabilities	21,896		10,979
Total current liabilities	30,751		18,481
Total liabilities	30,751		18,481
Mezzanine equity	-		239,970
Shareholders' equity (deficit):
Ordinary shares	-		12
Class A ordinary shares	33		-
Class B ordinary shares	8		-
Additional paid-in-capital	811,194		-
Accumulated other comprehensive loss	(1,459)		(988)
Accumulated deficit	(154,840)		(126,316)
Total shareholders' equity (deficit)	654,936		(127,292)
Total liabilities, mezzanine equity and shareholders’ equity (deficit)	685,687		131,159

Agora, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in US$ thousands, except share and per ADS amounts)

	Three Month Ended			Six Month Ended
	June 30,			June 30,
	2020	2019		2020	2019
Real-time engagement service revenues	33,672	14,863		69,118	28,150
Other revenues	232	38		346	113
Total revenues	33,904	14,901		69,464	28,263
Cost of revenues	11,377	4,584		22,459	8,736
Gross profit	22,527	10,317		47,005	19,527
Operating expenses:
Research and development	10,919	5,708		22,607	9,908
Sales and marketing	5,913	5,067		11,915	9,073
General and administrative	3,396	1,535		6,941	3,097
Total operating expenses	20,228	12,310		41,463	22,078
Other operating income	770	14		793	19
Income (loss) from operations	3,069	(1,979)		6,335	(2,532)
Exchange gain	7	31		-	13
Interest income	120	81		217	124
Income (loss) before income taxes	3,196	(1,867)		6,552	(2,395)
Income taxes	(190)	(136)		(559)	(326)
Net income (loss)	3,006	(2,003)		5,993	(2,721)
Less: cumulative undeclared dividends on convertible redeemable preferred shares	(3,316)	(2,490)		(6,715)	(4,980)
Less: accretion on convertible redeemable preferred shares to redemption value	(157,502)	(8,550)		(193,466)	(18,729)
Net loss attributable to ordinary shareholders	(157,812)	(13,043)		(194,188)	(26,430)
Other comprehensive loss:
Foreign currency translation adjustments	31	(405)		(470)	(84)
Total comprehensive loss attributable to ordinary shareholders	(157,781)	(13,448)		(194,658)	(26,514)
Net loss per ADS attributable to ordinary shareholders, basic and diluted	(4.60)	(0.45)		(6.04)	(0.93)
Weighted-average shares used in computing net loss per ADS attributable to ordinary shareholders, basic and diluted	137,167,618	114,842,026		128,524,877	114,048,078

Agora, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in US$ thousands)

	Three Month Ended			Six Month Ended
	June 30,			June 30,
	2020	2019		2020	2019
Cash flows from operating activities:
Net income (loss)	3,006	(2,003)		5,993	(2,721)
Adjustments to reconcile net income (loss) to net cash generated from (used in) operating activities:
Share-based compensation expense	1,651	809		3,098	1,739
Depreciation of property and equipment	1,005	429		1,750	771
Changes in assets and liabilities:
Accounts receivable	3,320	(2,141)		(12,126)	(1,006)
Prepayments and other current assets	(980)	(307)		(3,146)	68
Other non-current assets	(17)	32		2	17
Accounts payable	(3,236)	(1,315)		1,552	(85)
Advances from customers	184	560		46	426
Taxes payable	(631)	112		(399)	95
Accrued expenses and other current liabilities	3,149	(1,110)		9,761	(619)
Net cash generated from (used in) operating activities	7,451	(4,934)		6,531	(1,315)
Cash flows from investing activities:
Purchase of short-term investments	-	(2,935)		-	(9,605)
Proceeds from sale and maturity of short-term investments	-	6,604		-	8,086
Purchase of property and equipment	(3,825)	(1,645)		(6,321)	(2,409)
Net cash generated from (used in) investing activities	(3,825)	2,024		(6,321)	(3,928)
Cash flows from financing activities:
Proceeds from issuance of Series C+ convertible redeemable preferred shares, net of the issuance costs of nil	-	-		50,000	-
Proceeds from the IPO and concurrent private placement, net of underwriter discounts and commissions and other offering costs paid	485,555	-		485,324	-
Net cash provided by financing activities	485,555	-		535,324	-
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	20	(212)		(283)	(18)
Net increase (decrease) in cash, cash equivalents and restricted cash	489,201	(3,122)		535,251	(5,261)
Cash, cash equivalents and restricted cash at beginning of period *	151,733	106,459		105,683	108,598
Cash, cash equivalents and restricted cash at end of period **	640,934	103,337		640,934	103,337
Supplemental disclosure of cash flow information:
Income taxes paid	724	411		724	411
Non-cash financing and investing activities:
Accretion to redemption value of convertible redeemable preferred shares	157,502	8,550		193,466	18,729
Payables for property and equipment	921	130		921	130
Payables for deferred initial public offering cost	1,690	-		1,690	-
* includes restricted cash balance	80	80		80	80
** includes restricted cash balance	80	80		80	80

Agora, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited, in US$ thousands, except share and per ADS amounts)

	Three Month Ended			Six Month Ended
	June 30,			June 30,
	2020	2019		2020	2019
GAAP net income (loss)	3,006	(2,003)		5,993	(2,721)
Add:
Share-based compensation expense	1,651	1,656		3,098	2,586
Non-GAAP net income (loss)	4,657	(347)		9,091	(135)
Net income (loss)	3,006	(2,003)		5,993	(2,721)
Excluding:
Exchange rate gains	7	31		-	13
Interest income	120	81		217	124
Income taxes	(190)	(136)		(559)	(326)
Depreciation and amortization expense	1,005	429		1,750	771
Share-based compensation expense	1,651	1,656		3,098	2,586
Adjusted EBITDA	5,725	106		11,183	825
Net cash generated from (used in) operating activities	7,451	(4,934)		6,531	(1,315)
Purchase of property and equipment	(3,825)	(1,645)		(6,321)	(2,409)
Free Cash Flow	3,626	(6,579)		210	(3,724)
Net cash generated from (used in) investing activities	(3,825)	2,024		(6,321)	(3,928)
Net cash provided by financing activities	485,555	-		535,324	-

FAQ

What were the revenue figures for Agora in Q2 2020?

Agora reported total revenues of $33.9 million for Q2 2020, a 128% year-over-year increase.

What is the net income for Agora in Q2 2020?

Agora achieved a net income of $3.0 million in Q2 2020, compared to a net loss of $2.0 million in Q2 2019.

What is Agora's earnings outlook for 2020?

Agora expects total revenues for the full fiscal year 2020 to be between $125 million and $130 million.

How many active customers did Agora have by June 30, 2020?

As of June 30, 2020, Agora had 1,486 active customers, representing an 85.5% increase from the previous year.

What was Agora's EBITDA for Q2 2020?

Agora reported adjusted EBITDA of $5.7 million for Q2 2020, compared to $0.1 million in the same period last year.