Agora(API) - 2021 Q2 - Quarterly Report

First Quarter 2021 Highlights Agora experienced strong growth in Q1 2021, driven by real-time engagement APIs and emerging use cases like extended reality and metaverse - Agora opened 2021 with strong growth, driven by developers creating new immersive experiences with its real-time engagement APIs, noting the emergence of next-generation use cases like extended reality and metaverse on its platform[1] Q1 2021 Financial Highlights | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $40.2M | $35.6M | +13.1% | | Active Customers | 2,324 | 1,176 | +97.6% | | Net (Loss) Income (GAAP) | ($14.7M) | $3.0M | - | | Non-GAAP Net (Loss) Income | ($4.3M) | $5.7M | - | | Adjusted EBITDA | ($3.7M) | $6.7M | - | | Free Cash Flow | ($8.0M) | ($3.4M) | - | - The Constant Currency Dollar-Based Net Expansion Rate was 131% for the trailing 12-month period ending March 31, 2021, indicating strong revenue growth from existing customers[2] - As of March 31, 2021, the company held $876.8 million in total cash, cash equivalents, and short-term investments[2] First Quarter 2021 Financial Results The company's Q1 2021 financial results show a significant shift from profit to loss, driven by increased costs and operating expenses despite revenue growth Revenues Total revenues increased by 13.1% year-over-year to $40.2 million, primarily driven by increased usage of video and voice products in emerging use cases Total Revenues | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Revenues | $40.2M | $35.6M | - Revenue growth was primarily due to increased usage of video and voice products, particularly from business expansion and growth in interactive lecture halls and audio live casts[3] Cost of Revenues Cost of revenues rose significantly by 52.1% to $16.9 million, attributed to increased bandwidth, co-location costs, and depreciation as the company scaled its business Cost of Revenues | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Cost of Revenues | $16.9M | $11.1M | Gross Profit and Gross Margin Gross profit slightly decreased by 4.5% to $23.4 million, while gross margin contracted by 10.7 percentage points to 58.1%, due to international expansion and capacity costs Gross Profit and Gross Margin | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Gross Profit | $23.4M | $24.5M | | Gross Margin | 58.1% | 68.8% | Operating Expenses Operating expenses surged by 86.8% to $39.7 million, driven by increased personnel costs, higher share-based compensation, and acquisition-related expenses Operating Expenses | Expense Category | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Research & Development | $25.2M | $11.7M | +115.7% | | Sales & Marketing | $8.7M | $6.0M | +45.5% | | General & Administrative | $5.7M | $3.5M | +61.4% | | Total Operating Expenses | $39.7M | $21.2M | +86.8% | - A significant driver for the increase in R&D expenses was $4.0 million in acquisition-related expenses[8] (Loss) Income from Operations The company reported a loss from operations of $16.0 million, a sharp reversal from a prior-year income, reflecting higher costs and operating expenses (Loss) Income from Operations | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | (Loss) Income from Operations | ($16.0M) | $3.3M | Net (Loss) Income Agora recorded a net loss of $14.7 million, compared to a net income of $3.0 million in Q1 2020, with net loss per ADS at $0.14 Net (Loss) Income | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net (Loss) Income | ($14.7M) | $3.0M | | Net Loss per ADS | ($0.14) | ($1.21) | - The net loss attributable to ordinary shareholders was $14.7 million, a significant improvement from a loss of $36.4 million in Q1 2020, primarily impacted by preferred share accretion before the IPO[14] Financial Outlook Agora maintained its full fiscal year 2021 revenue guidance between $178 million and $182 million, subject to ongoing uncertainties like the COVID-19 pandemic - Agora maintained its full fiscal year 2021 guidance, with total revenues estimated between $178 million and $182 million[15] - This outlook is subject to change based on uncertainties, including the ongoing impact of the COVID-19 pandemic[15] Use of Non-GAAP Financial Measures and Operating Metrics This section explains the company's use of non-GAAP financial measures and operating metrics to provide a clearer view of underlying business performance Explanation of Non-GAAP Measures Agora uses non-GAAP measures like Non-GAAP Net Income, Adjusted EBITDA, and Free Cash Flow to evaluate ongoing operating results by excluding non-cash or non-recurring items - Non-GAAP measures are used internally for financial analysis and are considered useful for investors in comparing Agora's performance with industry peers[18] - These measures are not a substitute for GAAP measures and should be read in conjunction with the consolidated financial statements[19] Definitions of Key Metrics The company defines key non-GAAP and operating metrics, including Non-GAAP Net Income, Adjusted EBITDA, Free Cash Flow, Active Customers, and Constant Currency Dollar-Based Net Expansion Rate, to assess business performance - Non-GAAP Net Income (Loss): Net income (loss) excluding share-based compensation, acquisition-related expenses, and amortization of acquired intangible assets[20] - Adjusted EBITDA: Net income (loss) adjusted for interest, taxes, depreciation, amortization, and other non-recurring or non-cash items[21] - Free Cash Flow: Net cash from operating activities less purchases of property and equipment[22] - Active Customer: An entity generating over $100 in revenue during the preceding 12 months[25] - Constant Currency Dollar-Based Net Expansion Rate: Measures the change in revenue from a consistent cohort of customers over a trailing 12-month period, adjusted for currency fluctuations[26] Financial Statements This section presents the company's condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements Condensed Consolidated Balance Sheets The balance sheet shows a significant increase in total assets to over $1.01 billion, primarily due to a rise in cash, cash equivalents, and short-term investments, alongside growth in liabilities and shareholders' equity Condensed Consolidated Balance Sheets (in millions) | Balance Sheet | As of Mar 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,010.9 | $692.9 | | Cash, cash equivalents & short-term investments | $876.8 | $635.4 | | Total Liabilities | $114.4 | $36.4 | | Total Shareholders' Equity | $896.5 | $656.5 | Condensed Consolidated Statements of Comprehensive Income (Loss) The income statement for Q1 2021 details a transition from net income to a net loss, driven by increased cost of revenues and operating expenses outpacing revenue growth Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | Income Statement | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Total Revenues | $40.2 | $35.6 | | Gross Profit | $23.4 | $24.5 | | (Loss) income from operations | ($16.0) | $3.3 | | Net (loss) income | ($14.7) | $3.0 | Condensed Consolidated Statements of Cash Flows For Q1 2021, net cash used in operating activities was $2.7 million, investing activities used $150.3 million, and financing activities provided $251.0 million, resulting in a net increase in cash Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2.7) | ($0.9) | | Net cash used in investing activities | ($150.3) | ($2.5) | | Net cash provided by financing activities | $251.0 | $49.8 | Reconciliation of GAAP to Non-GAAP Measures This section reconciles GAAP figures to non-GAAP metrics, showing how a GAAP net loss of $14.7 million was adjusted to a non-GAAP net loss of $4.3 million for Q1 2021 Reconciliation to Non-GAAP Net Loss (in millions) | Reconciliation to Non-GAAP Net Loss | Q1 2021 | | :--- | :--- | | GAAP net (loss) income | ($14.7) | | Share-based compensation expense | $6.1 | | Acquisition related expenses | $4.1 | | Non-GAAP net (loss) income | ($4.3) | Reconciliation to Adjusted EBITDA (in millions) | Reconciliation to Adjusted EBITDA | Q1 2021 | | :--- | :--- | | Net (loss) income | ($14.7) | | Adjustments (Taxes, Interest, D&A, etc.) | $4.9 | | Share-based compensation & Acquisition expenses | $10.2 | | Adjusted EBITDA | ($3.7) |