Agora(API) - 2023 Q4 - Annual Report

Financial & Operational Highlights Agora achieved sequential revenue growth in Q3 2023, significantly reducing adjusted EBITDA loss and operating cash outflow through disciplined cost control, and is strategically integrating generative AI - The company delivered sequential revenue growth and reduced adjusted EBITDA loss and operating cash outflow to the lowest levels in over two years due to cost discipline[2] - Agora is strategically positioning itself to enable interactions between human users and AI models through video and audio, targeting use cases like AI companions, social games, and AI tutors[2] Q3 2023 Key Metrics vs. Q3 2022 | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $35.0M | $41.0M | -14.6% | | Agora Active Customers | 1,664 | 1,319 | +26.2% | | Shengwang Active Customers | 4,034 | 3,796 | +6.3% | | Agora Dollar-Based Net Retention | 98% | N/A | N/A | | Shengwang Dollar-Based Net Retention | 89% | N/A | N/A | Q3 2023 Profitability and Cash Flow vs. Q3 2022 | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net Loss | $22.5M | $27.7M | | Non-GAAP Net Loss | $15.6M | $17.6M | | Adjusted EBITDA | -$4.4M | -$16.4M | | Net Cash Used in Operating Activities | $3.0M | $8.8M | | Free Cash Flow | -$3.2M | -$9.9M | Detailed Financial Results Total revenues declined 14.6% YoY to $35.0 million in Q3 2023, yet gross margin improved and operating expenses significantly decreased, narrowing the loss from operations despite an investment loss Revenues Total revenues decreased 14.6% to $35.0 million in Q3 2023, with both Agora and Shengwang segments experiencing declines due to market pressures and business disposal Q3 2023 Revenue Breakdown (YoY) | Segment | Q3 2023 Revenue | Q3 2022 Revenue | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Total | $35.0M | $41.0M | -14.6% | - | | Agora | $15.3M | $16.8M | -8.9% | Decrease in usage and pricing in emerging markets | | Shengwang | $19.7M (RMB141.2M) | $24.2M (RMB165.3M) | -14.6% | Macroeconomic slowdown, regulations, and disposal of CEC business | Profitability Analysis Gross margin improved to 64.0% in Q3 2023, and operating expenses significantly decreased, narrowing the loss from operations despite a substantial investment loss contributing to a $22.5 million net loss Q3 2023 Gross Profit and Margin (YoY) | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $22.4M | $24.3M | -7.9% | | Gross Margin | 64.0% | 59.4% | +4.6% | Q3 2023 Operating Expenses (YoY) | Expense Category | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Total Operating Expenses | $36.9M | $55.6M | -33.7% | | Research and development | $20.0M | $29.8M | -32.7% | | Sales and marketing | $7.8M | $14.6M | -46.7% | | General and administrative | $9.1M | $11.3M | -19.4% | Q3 2023 Loss Summary (YoY) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Loss from Operations | $13.9M | $28.9M | | Investment Loss | $13.4M | $0.0M (not material) | | Net Loss | $22.5M | $27.7M | | Net Loss per ADS | $0.23 | $0.25 | Corporate Developments Agora actively repurchased shares, utilizing 47% of its $200 million program, and announced a board change with Mr. Sheng (Shawn) Zhong replacing Mr. Tuck Lye Koh Share Repurchase Program Agora repurchased 17.0 million shares for $12.3 million in Q3 2023, bringing total repurchases to 99.7 million shares for $94.3 million, utilizing 47% of the $200 million program Share Repurchase Program Status as of Sep 30, 2023 | Metric | Value | | :--- | :--- | | Shares Repurchased in Q3 2023 | 17.0M (4.3M ADSs) | | Cost of Q3 2023 Repurchases | $12.3M | | Total Shares Repurchased to Date | 99.7M (24.9M ADSs) | | Total Cost to Date | $94.3M | | Program Utilization | 47% of $200M | | Program Expiration | End of February 2024 | Change to Board of Directors Mr. Tuck Lye Koh resigned from the Board of Directors and was replaced by Mr. Sheng (Shawn) Zhong, the company's Chief Technology Officer and Chief Scientist - Mr. Tuck Lye Koh resigned from the board of directors[13] - Mr. Sheng (Shawn) Zhong, the company's Chief Technology Officer and Chief Scientist, was appointed as a new director[13][14] Business Outlook Agora projects Q4 2023 total revenues to be between $35.5 million and $37.5 million, based on current market and operational conditions Q4 2023 Revenue Guidance | Metric | Range | | :--- | :--- | | Total Revenues | $35.5M - $37.5M | Financial Statements Unaudited financial statements for Q3 2023 show decreased total assets to $666.7 million, a narrowed net loss of $22.5 million, and improved net cash used in operating activities to $3.0 million Condensed Consolidated Balance Sheets As of September 30, 2023, total assets decreased to $666.7 million, primarily due to lower cash, while total liabilities also decreased to $58.2 million, resulting in $608.5 million in shareholders' equity Key Balance Sheet Items (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash, cash equivalents, bank deposits & financial products | $373,444 | $401,256 | | Total Assets | $666,674 | $800,715 | | Total Liabilities | $58,173 | $72,455 | | Total Shareholders' Equity | $608,501 | $728,260 | Condensed Consolidated Statements of Comprehensive Loss Q3 2023 total revenues were $35.0 million with a net loss of $22.5 million, or $0.23 per ADS, an improvement from the prior year due to reduced operating expenses Q3 Income Statement Summary (in thousands, except per ADS data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Total Revenues | $35,016 | $40,988 | | Gross Profit | $22,422 | $24,349 | | Loss from Operations | $(13,857) | $(28,921) | | Net Loss | $(22,513) | $(27,699) | | Net Loss per ADS | $(0.23) | $(0.25) | Condensed Consolidated Statements of Cash Flows Q3 2023 saw improved net cash used in operating activities to $3.0 million, net cash provided by investing activities of $5.7 million, and increased net cash used in financing activities to $12.4 million Q3 Cash Flow Summary (in thousands) | Cash Flow Activity | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,033) | $(8,833) | | Net cash provided by (used in) investing activities | $5,677 | $(105,377) | | Net cash used in financing activities | $(12,388) | $(2,992) | | Net decrease in cash | $(9,691) | $(120,031) | Non-GAAP Financial Measures & Metrics Agora uses non-GAAP measures to assess operational performance, showing improved Q3 2023 Non-GAAP net loss of $15.6 million, Adjusted EBITDA of negative $4.4 million, and free cash flow outflow of $3.2 million Reconciliation of GAAP to Non-GAAP Measures Non-GAAP reconciliation shows significant improvement in Q3 2023, with non-GAAP net loss narrowing to $15.6 million, Adjusted EBITDA loss reduced to $4.4 million, and free cash flow outflow decreasing to $3.2 million Q3 Non-GAAP Reconciliation Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | GAAP Net Loss | $(22,513) | $(27,699) | | Non-GAAP Net Loss | $(15,565) | $(17,595) | | Adjusted EBITDA | $(4,448) | $(16,399) | | Free Cash Flow | $(3,239) | $(9,918) | Operating Metrics Definitions Key operating metrics are defined, including 'Active Customer' as an entity generating over $100 in 12 months, and 'Dollar-Based Net Retention Rate' measuring cohort revenue changes over two 12-month periods - An Active Customer is defined as an organization or individual from whom the company generated more than $100 of revenue during the preceding 12 months[24] - Dollar-Based Net Retention Rate is calculated for a trailing 12-month period by dividing revenue from a customer cohort in the current period by the revenue from the same cohort in the prior period[25]