Agora, Inc. (NASDAQ:API) Q1 2021 Earnings Conference Call May 24, 2021 9:00 PM ET Company Participants Fionna Chen - Director, IR Tony Zhao - Founder, Chairman and CEO Jingbo Wang - CFO Conference Call Participants Yang Liu - Morgan Stanley Emerson Chan - BofA Securities Vincent Yu - Needham and Company Bing Duan - Nomura Hua-Chen Wang - Macquarie Operator Good day and thank you for standing by. Welcome to Agora Incorporated First Quarter 2021 Financial Results. At this time, all participants are in a liste ...

[First Quarter 2021 Highlights](index=1&type=section&id=First%20Quarter%202021%20Highlights) 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](index=1&type=chunk) 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](index=2&type=chunk) - As of March 31, 2021, the company held **$876.8 million** in total cash, cash equivalents, and short-term investments[2](index=2&type=chunk) [First Quarter 2021 Financial Results](index=1&type=section&id=First%20Quarter%202021%20Financial%20Results) 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](index=1&type=section&id=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](index=3&type=chunk) [Cost of Revenues](index=1&type=section&id=Cost%20of%20Revenues) 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](index=2&type=section&id=Gross%20Profit%20and%20Gross%20Margin) 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](index=2&type=section&id=Operating%20Expenses) 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](index=8&type=chunk) [(Loss) Income from Operations](index=2&type=section&id=%28Loss%29%20Income%20from%20Operations) 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](index=3&type=section&id=Net%20%28Loss%29%20Income) 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](index=14&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) 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](index=15&type=chunk) - This outlook is subject to change based on uncertainties, including the ongoing impact of the COVID-19 pandemic[15](index=15&type=chunk) [Use of Non-GAAP Financial Measures and Operating Metrics](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures%20and%20Operating%20Metrics) 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](index=4&type=section&id=Explanation%20of%20Non-GAAP%20Measures) 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](index=18&type=chunk) - These measures are not a substitute for GAAP measures and should be read in conjunction with the consolidated financial statements[19](index=19&type=chunk) [Definitions of Key Metrics](index=4&type=section&id=Definitions%20of%20Key%20Metrics) 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](index=20&type=chunk) - **Adjusted EBITDA:** Net income (loss) adjusted for interest, taxes, depreciation, amortization, and other non-recurring or non-cash items[21](index=21&type=chunk) - **Free Cash Flow:** Net cash from operating activities less purchases of property and equipment[22](index=22&type=chunk) - **Active Customer:** An entity generating over **$100** in revenue during the preceding 12 months[25](index=25&type=chunk) - **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](index=26&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) This section presents the company's condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) 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)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) 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](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) 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](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) 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)** |

Financial Position - As of December 31, 2020, cash, cash equivalents, and short-term investments totaled $635.4 million, with cash and cash equivalents at $111.2 million and short-term investments at $524.2 million[552]. - Working capital as of December 31, 2020, was $634.4 million, a significant increase from $111.9 million in 2018[552]. - The company has not declared or paid any dividends since inception and does not plan to do so in the foreseeable future, intending to retain available funds for business expansion[694]. - The company is subject to PRC regulations that require at least 10% of after-tax profits to be set aside for a statutory common reserve fund, which is not distributable as dividends[698]. - The company held Renminbi-denominated cash and cash equivalents of RMB42.7 million, with a potential impact of US$6.5 million from a 10% depreciation of Renminbi against the U.S. dollar[747]. Operating Activities - The company reported a net cash generated from operating activities of $6.6 million in 2020, despite a net loss of $3.1 million, driven by a $9.8 million increase in accounts receivable[558]. - The company has not entered into any off-balance sheet financial guarantees or derivative contracts that could affect its financial position[571]. - The COVID-19 pandemic has introduced significant uncertainties that may adversely affect the company's business and financial condition[569]. Investment Activities - Net cash used in investing activities was $535.1 million in 2020, reflecting significant investments in business growth[557]. - Net cash used in investing activities was US$535.1 million in 2020, primarily due to US$522.7 million in short-term investments and US$12.9 million in capital expenditures[562]. - Capital expenditures increased from US$2.3 million in 2018 to US$12.9 million in 2020, reflecting ongoing investments in servers and network equipment[565]. - The company plans to continue making capital expenditures to support expected business growth[565]. Financing Activities - The company raised a total of $654.0 million in equity capital from its inception in 2013 through December 31, 2020, net of share and option repurchases[555]. - Net cash provided by financing activities was US$533.6 million in 2020, driven by US$483.6 million from the initial public offering and US$50.0 million from Series C+ convertible redeemable preferred shares[564]. - The company raised a total of $110 million through private placements in June 2020, selling 22 million Class A ordinary shares[680]. Employee and Management Information - The company had 842 employees as of December 31, 2020, an increase from 447 in 2019, indicating a growth of approximately 88% year-over-year[667]. - The aggregate cash compensation to directors and executive officers in 2020 was approximately US$1.8 million[590]. - The company has maintained a stable core management team and plans to hire additional employees in research and development and sales and marketing[670]. - The company has not experienced any major labor disputes and maintains a good working relationship with its employees[673]. Shareholder and Equity Plans - Directors and executive officers collectively own 28.3% of the beneficial ownership and 82.6% of the aggregate voting power[674]. - Major shareholders include entities affiliated with Bin (Tony) Zhao, owning 18.0% of beneficial ownership and 80.1% of voting power[674]. - The Global Equity Incentive Plan reserves 16,000,000 ordinary shares for issuance, with potential increases based on ungranted shares from the 2014 Plan and annual increases starting in 2022[594][595]. - The maximum number of shares that may be issued upon the exercise of incentive share options is 200% of the aggregate share number described in the Global Plan[594]. - The Global Plan allows for a total of 3,000,000 ordinary shares available for sale under the Employee Stock Purchase Plan (ESPP) with annual increases starting from the 2022 fiscal year[617]. Corporate Governance - The company is classified as a "controlled company," with the CEO holding a majority of the voting power, which allows for certain exemptions from corporate governance requirements[649]. - The board of directors consists of five members, with four identified as independent directors according to SEC and Nasdaq standards[648]. - The company has established three committees under the board of directors: audit, compensation, and nominating and corporate governance[651]. - The audit committee is responsible for overseeing the financial reporting processes and the audits of the financial statements, ensuring compliance with accounting standards[654]. - The compensation committee reviews and approves the compensation structure for directors and executive officers, ensuring alignment with corporate goals[655]. Regulatory and Compliance Matters - The company has not experienced any significant changes since the date of its audited consolidated financial statements[698]. - The company has the right to defer filing a registration statement for up to 90 days if deemed materially detrimental to shareholders[687]. - The company is obligated to effect no more than two demand registrations, excluding unlimited registrations on Form F-3 or Form S-3[688]. - The company will bear all registration expenses, excluding underwriting discounts and selling commissions[690]. - All awards under the Global Plan are subject to clawback provisions in case of misconduct leading to financial restatements[613][615].

Financial Data and Key Metrics Changes - In Q4 2020, the company reported revenue of $33.3 million, representing a 74% year-over-year increase [6][16] - For the full year 2020, total revenue was $134 million, which is a 107% year-over-year growth [7][16] - The company powered over 500 billion minutes of real-time engagements in 2020 [16] Business Line Data and Key Metrics Changes - The number of registered apps reached over 270,000 by the end of December 2020, adding nearly 9,000 apps per month in Q4 [6] - Active customers increased to nearly 2,100, up 101% year-over-year [6] Market Data and Key Metrics Changes - Revenue from non-China markets was close to 30% in Q4 2020, significantly higher than one year ago [36] - Monthly developer registrations outside China were almost three times higher than one year ago [37] Company Strategy and Development Direction - The company is focusing on expanding its product offerings and optimizing technology to support innovative use cases [7][11] - Recent acquisitions of Easemob and Netless are aimed at enhancing the API portfolio and supporting developers [13][46] - The company is investing heavily in R&D to strengthen technology leadership and broaden its API portfolio [19] Management Comments on Operating Environment and Future Outlook - Management noted that the COVID-19 pandemic has created unprecedented challenges but also accelerated demand for real-time engagement solutions [6] - The company expects total revenues for fiscal year 2021 to be in the range of $178 million to $182 million, representing approximately 35% year-over-year growth at the midpoint [22] Other Important Information - Non-GAAP gross margin for Q4 was 60.5%, which is lower than the previous year due to international expansion and higher infrastructure costs [18] - The company received SOC 2 Type 1 certification, indicating a commitment to security and compliance [14] Q&A Session Summary Question: Revenue upside from audio live broadcast use cases - Management indicated that while there is a significant pickup in usage, the revenue contribution from audio live cast is not expected to be substantial due to lower pricing compared to video [23][25] Question: Easemob revenue contribution in 2021 guidance - Easemob is expected to contribute around $10 million in revenue for the full year 2021 [25] Question: Gross margin outlook - Management anticipates short-term pressure on gross margin due to international expansion and higher infrastructure costs, but expects recovery in a few quarters [25][26] Question: Customer acquisition in overseas markets - Active revenue from non-China markets was close to 30% in Q4, with strong developer sign-ups [36][37] Question: Technology leadership in audio use cases - Management emphasized that audio quality is critical, and the company has proprietary technology that enhances audio experience [40][41] Question: Acquisition of Easemob and new business cases - The acquisition is aimed at providing a more complete solution to customers, integrating instant messaging with existing video and voice functionalities [45][46] Question: Other revenues growth - Other revenues were primarily due to one enterprise customer structured as a license, but this is not expected to represent a new business line [49][50]

Agora, Inc. (NASDAQ:API) Q2 2020 Earnings Conference Call August 17, 2020 9:00 PM ET Company Participants Fionna Chen - Director, IR Tony Zhao - Founder, Chairman & CEO Jingbo Wang - CFO Conference Call Participants Emerson Chan - Bank of America Yang Liu - Morgan Stanley Richard Valera - Needham Operator Ladies and gentlemen, thank you for standing by. And welcome to Agora, Inc. Second Quarter 2020 Financial Results. At this time, all participants are in a listen-only mode. After the speakers' presentation ...