GlobeNewswire Inc | Nov 16, 2020 05:00PM EST

November 16, 2020

SANTA CLARA, Calif., Nov. 16, 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 third quarter ended September 30, 2020.

Agora is empowering software developers around the world to bring contextual video engagement to more and more online activities, such as taking a class or exam, attending a virtual event, meeting new friends and competing in a game. Such innovations are far beyond traditional video conferencing and still have a long way to go, said Tony Zhao, founder, chairman and CEO of Agora. Our performance in this quarter demonstrates the steady adoption of contextual video engagement across industries and we will continue to invest in the depth and breadth of our platform to better serve developers.

Third Quarter 2020 Highlights

-- Total revenues for the quarter were $30.8 million, an increase of 80.8% from $17.1 million in the third quarter of 2019. -- Active Customers as of September 30, 2020 were 1,815, an increase of 95.4% from 929 as of September 30, 2019. -- Constant Currency Dollar-Based Net Expansion Rate was 187.9% for the trailing 12-month period ended September 30, 2020. -- Net loss for the quarter was $2.9 million, compared to net loss of $1.1 million in the third quarter of 2019. After excluding share-based compensation expense, non-GAAP net loss for the quarter was $0.4 million, compared to the non-GAAP net loss of $0.3 million in the third quarter of 2019. Adjusted EBITDA for the quarter was negative $0.1 million, compared to $0.2 million in the third quarter of 2019. -- Total cash, cash equivalents and short-term investments as of September 30, 2020 was $635.4 million. -- Net cash used in operating activities for the quarter was $1.9 million, compared to $0.1 million in the third quarter of 2019. Free cash flow for the quarter was negative $5.1 million, compared to negative $1.3 million in the third quarter of 2019.

Third Quarter 2020 Financial Results

RevenuesTotal revenues were $30.8 million in the third quarter of 2020, an increase of 80.8% from $17.1 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 RevenuesCost of revenues was $11.6 million in the third quarter of 2020, an increase of 120.7% from $5.2 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 MarginGross profit was $19.3 million in the third quarter of 2020, an increase of 63.1% from $11.8 million in the same period last year. Gross margin was 62.5% in the third quarter of 2020, a decrease of 6.7% from 69.2% in the same period last year, primarily due to international expansion to regions with higher infrastructure costs.

Operating ExpensesOperating expenses were $23.2 million in the third quarter of 2020, an increase of 78.3% from $13.0 million in the same period last year.

-- Research and development expenses were $12.4 million in the third quarter of 2020, an increase of 89% from $6.6 million in the same period last year, primarily due to increased personnel costs as we continue to build our research and development team, including an increase in share-based compensation from $0.2 million in the third quarter of 2019 to $0.9 million in the third quarter of 2020. -- Sales and marketing expenses were $6.4 million in the third quarter of 2020, an increase of 33.4% from $4.8 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 $4.4 million in the third quarter of 2020, an increase of 165.4% from $1.7 million in the same period last year, primarily due to increased personnel costs as we continue to build our team and professional services expenses, including an increase in share-based compensation from $0.3 million in the third quarter of 2019 to $1.1 million in the third quarter of 2020.

Other Operating IncomeOther operating income was $181 thousand in the third quarter of 2020, compared to $58 thousand in the same period last year, primarily due to additional value added tax deductions.

Loss from OperationsLoss from operations was $3.8 million in the third quarter of 2020, compared to loss from operations of $1.2 million in the same period last year.

Interest and Investment IncomeInterest and investment income were $960 thousand in the third quarter of 2020, an increase of 266.4% from $262 thousand in the same period last year, primarily due to an increase in the average balance of cash and cash equivalents and an increase in short-term investments purchased due to our initial public offering and concurrent private placement.

Income Taxes Income taxes were $74 thousand in the third quarter of 2020, a decrease of 71.8% from $0.3 million in the same period last year, primarily due to decrease in pre-tax income generated by our subsidiaries.

Net LossNet loss was $2.9 million in the third quarter of 2020, compared to net loss of $1.1 million in the same period last year.

Net loss attributable to ordinary shareholdersNet loss attributable to ordinary shareholders for the quarter was $2.9 million, compared to net loss attributable to ordinary shareholders of $18.8 million in the same period last year.

Net loss per American Depositary ShareNet loss per American Depositary Share (ADS)1 was $0.03, compared to net loss of $0.65 per ADS in the same period last year.

Financial Outlook

Based on currently available information, Agora expects that the estimated total revenues for the full fiscal year ending December 31, 2020 remain to be between $125 million and $130 million. This forecast reflects the Companys 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 the financial results at 5 p.m. Pacific Time / 8:00 p.m. Eastern Time on the same day. Details for the conference call are as follows:Event title: Agora, Inc. 3Q 2020 Financial ResultsConference ID: 3351435Direct Event online registration: http://apac.directeventreg.com/registration/event/3351435Please register in advance of the conference using the link provided above. Upon registering, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID.A digital recording of the conference call will be available for replay two hours after the calls completion (dial-in number: US 18554525696, International +61 2 81990299; same conference ID as shown above).Please visit Agoras investor relations website at https://investor.agora.io/investor-relations on November 16, 2020 to view the earnings release and accompanying slides prior to the conference call.

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 Agoras 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 Agoras consolidated financial statements prepared in accordance with GAAP. A reconciliation of Agoras 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 Agoras 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 and investment 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 Agoras 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 Agoras current expectations and involve risks and uncertainties. Agoras 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; Agoras ability to manage its growth and expand its operations; the continued impact of the COVID-19 pandemic on global markets and Agoras business, operations and customers; Agoras ability to attract new developers and convert them into customers; Agoras ability to retain existing customers and expand their usage of Agoras platform and products; Agoras 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; Agoras fluctuating operating results; competition; the effect of broader technological and market trends on Agoras 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

Agoras mission is to make real-time engagement ubiquitous, allowing everyone to interact with anyone, in any application, anytime and anywhere. Agoras 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.

Investor ContactFionna Cheninvestor@agora.io

Media ContactSuzanne Nguyenpress@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 September December 30, 31, 2020 2019Assets Current assets: Cash and cash equivalents 409,782 105,603 Short-term investments 225,584 - Accounts receivable, net 28,921 16,248 Prepayments and other current assets 5,725 1,381 Total current assets 670,012 123,232 Property and equipment, net 12,755 6,282 Deferred tax assets 876 836 Other non-current assets 1,036 809 Total assets 684,679 131,159 Liabilities, mezzanine equity and shareholders' equity (deficit)Current liabilities: Accounts payable 4,558 4,088 Advances from customers 1,132 921 Taxes payable 2,792 2,493 Accrued expenses and other current liabilities 20,123 10,979 Total current liabilities 28,605 18,481 Total liabilities 28,605 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 813,670 - Accumulated other comprehensive loss 128 (988 )Accumulated deficit (157,765 ) (126,316 )Total shareholders' equity (deficit) 656,074 (127,292 )Total liabilities, mezzanine equity and shareholders? 684,679 131,159 equity (deficit)

Agora, Inc.Condensed Consolidated Statements of Comprehensive Income (Loss)(Unaudited, in US$ thousands, except share and per ADS amounts) Three Month Ended Nine Month Ended September 30, September 30, 2020 2019 2020 2019Real-timeengagement 30,620 16,936 99,738 45,085 service revenuesOther revenues 227 125 573 239 Total revenues 30,847 17,061 100,311 45,324 Cost of revenues 11,583 5,248 34,042 13,983 Gross profit 19,264 11,813 66,269 31,341 Operating expenses:Research and 12,449 6,588 35,056 16,495 developmentSales and 6,372 4,778 18,287 13,851 marketingGeneral and 4,401 1,658 11,342 4,756 administrativeTotal operating 23,222 13,024 64,685 35,102 expensesOther operating 181 58 974 77 incomeIncome (loss) (3,777 ) (1,153 ) 2,558 (3,684 )from operationsExchange gain (34 ) 40 (34 ) 53 Interest andinvestment 960 262 1,177 386 incomeIncome (loss)before income (2,851 ) (851 ) 3,701 (3,245 )taxesIncome taxes (74 ) (262 ) (633 ) (590 )Net income (2,925 ) (1,113 ) 3,068 (3,835 )(loss)Less: cumulativeundeclareddividends on - (2,490 ) (6,715 ) (7,471 )convertibleredeemablepreferred sharesLess: accretionon convertibleredeemable - (15,246 ) (193,466 ) (33,974 )preferred sharesto redemptionvalueNet lossattributable to (2,925 ) (18,849 ) (197,113 ) (45,280 )ordinaryshareholdersOthercomprehensive loss:Foreign currencytranslation 1,587 (602 ) 1,117 (686 )adjustmentsTotalcomprehensiveloss (1,338 ) (19,451 ) (195,996 ) (45,966 )attributable toordinaryshareholders Net loss per ADSattributable toordinary (0.03 ) (0.65 ) (3.55 ) (1.58 )shareholders,basic anddiluted Weighted-averageshares used incomputing netloss per ADSattributable to 407,297,929 116,512,788 222,127,507 114,878,676 ordinaryshareholders,basic anddiluted Share-basedcompensation expensesincluded in:Cost of revenues 31 21 99 60 Research anddevelopment 894 169 1,565 1,290 expensesSales andmarketing 434 370 1,336 1,281 expensesGeneral andadministrative 1,117 260 2,574 775 expenses

Agora, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited, in US$ thousands) Three Month Ended Nine Month Ended September 30, September 30, 2020 2019 2020 2019Cash flows from operating activities:Net income (loss) (2,925 ) (1,113 ) 3,068 (3,835 )Adjustments to reconcile netincome (loss) to net cash generated from (used in)operating activities:Share-based compensation 2,476 820 5,574 2,558 expenseDepreciation of property and 1,196 520 2,946 1,291 equipmentChange in the fair value of (33 ) - (33 ) - short-term investmentsChanges in assets and liabilities:Accounts receivable (7 ) (614 ) (12,133 ) (1,619 )Prepayments and other current (1,084 ) 15 (4,230 ) 83 assetsOther non-current assets (601 ) (31 ) (599 ) (14 )Accounts payable (661 ) (239 ) 891 (324 )Advances from customers 138 36 184 462 Taxes payable 664 477 265 571 Accrued expenses and other (1,097 ) 75 8,664 (544 )current liabilitiesNet cash generated from (used (1,934 ) (54 ) 4,597 (1,371 )in) operating activitiesCash flows from investing activities:Purchase of short-term (225,143 ) (4,294 ) (225,143 ) (13,899 )investmentsProceeds from sale andmaturity of short-term - 2,862 - 10,949 investmentsPurchase of property and (3,210 ) (1,213 ) (9,531 ) (3,622 )equipmentNet cash generated from (used (228,353 ) (2,645 ) (234,674 ) (6,572 )in) investing activitiesCash flows from financing activities:Proceeds from issuance ofSeries C+ convertibleredeemable preferred shares, - - 50,000 - net of the issuance costs ofnilProceeds from the IPO andconcurrent private placement,net of underwriter discounts (1,419 ) - 483,905 - and commissions and otheroffering costs paidNet cash provided by financing (1,419 ) - 533,905 - activitiesEffect of foreign exchangerate changes on cash, cash 634 (299 ) 351 (316 )equivalents and restrictedcashNet increase (decrease) incash, cash equivalents and (231,072 ) (2,998 ) 304,179 (8,259 )restricted cashCash, cash equivalents andrestricted cash at beginning 640,934 103,337 105,683 108,598 of period *Cash, cash equivalents andrestricted cash at end of 409,862 100,339 409,862 100,339 period **Supplemental disclosure of cash flow information:Income taxes paid 18 - 742 411 Non-cash financing and investing activities:Accretion to redemption valueof convertible redeemable - 15,246 193,466 33,974 preferred sharesPayables for property and 173 341 173 341 equipmentPayables for deferred initial 277 - 277 - public offering cost * includes restricted cash 80 80 80 80 balance** includes restricted cash 80 80 80 80 balance

Agora, Inc.Reconciliation of GAAP to Non-GAAP Measures(Unaudited, in US$ thousands, except share and per ADS amounts) Three Month Ended Nine Month Ended September 30, September 30, 2020 2019 2020 2019GAAP net income (loss) (2,925 ) (1,113 ) 3,068 (3,835 )Add: Share-based compensation expense 2,476 820 5,574 3,405 Non-GAAP net income (loss) (449 ) (293 ) 8,642 (430 ) Net income (loss) (2,925 ) (1,113 ) 3,068 (3,835 )Excluding: Exchange rate gains (loss) (34 ) 40 (34 ) 53 Interest and investment income 960 262 1,177 386 Income taxes (74 ) (262 ) (633 ) (590 )Depreciation and amortization 1,196 520 2,946 1,291 expenseShare-based compensation expense 2,476 820 5,574 3,405 Adjusted EBITDA (105 ) 187 11,078 1,012 Net cash generated from (used (1,934 ) (54 ) 4,597 (1,371 )in) operating activitiesPurchase of property and (3,210 ) (1,213 ) (9,531 ) (3,622 )equipmentFree Cash Flow (5,144 ) (1,267 ) (4,934 ) (4,993 )Net cash generated from (used (228,353 ) (2,645 ) (234,674 ) (6,572 )in) investing activitiesNet cash provided by financing (1,419 ) - 533,905 - activities