Agora, Inc. — FY2020 Form 20-F Summary
Period: Fiscal year ended December 31, 2020. This is an annual report, not a quarterly filing; it does not provide a clear standalone Q4 income statement or cash flow. Financial statements are audited and prepared under U.S. GAAP.
Business context
Agora provides usage-based real-time engagement platform-as-a-service (RTE-PaaS), enabling developers to embed video, voice, messaging and related functions in applications. It operates through subsidiaries and PRC variable interest entities (VIEs). The company reported 2,095 active customers at year-end, up from 1,041 in 2019, and powered more than 500 billion minutes of engagement during 2020. Revenue was concentrated in the PRC: $107.1 million of 2020 revenue, versus $10.0 million in the United States and $16.5 million in other markets.
Key financial metrics
| Metric (US$ unless stated) | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $133.6 million | $64.4 million |
| Gross profit / gross margin | $86.4 million / 64.7% | $44.0 million / 68.3% |
| Operating loss | $5.2 million | $6.1 million |
| Net loss | $3.1 million | $6.2 million |
| Net loss attributable to ordinary shareholders | $203.3 million | $66.9 million |
| Adjusted EBITDA (non-GAAP) | $11.2 million | $0.03 million |
| Cash from operating activities | $6.6 million | $0.7 million |
| Free cash flow (non-GAAP) | $(6.3) million | $(4.1) million |
| Cash and cash equivalents | $111.2 million | $105.6 million |
| Short-term investments | $524.2 million | — |
| Working capital | $634.4 million | $104.8 million |
| Total liabilities | $36.4 million | $18.5 million |
Revenue grew 107.3%, primarily from increased usage of video and voice products, including education and social applications. Gross margin fell 3.6 percentage points, with management citing international expansion into higher-cost regions and capacity build-out. R&D expense rose 109.5% to $49.5 million; sales and marketing rose 32.5% to $25.7 million; and general and administrative expense rose 150.9% to $18.0 million. These included higher staffing and share-based compensation costs. Share-based compensation totaled $12.0 million in 2020.
The ordinary-shareholder loss substantially exceeded the company’s $3.1 million consolidated net loss because of $193.5 million of noncash accretion on redeemable preferred shares and $6.7 million of cumulative preferred dividends. All preferred shares converted to ordinary shares upon the June 2020 IPO. Basic and diluted loss per ordinary share was $0.76; the filing also reports a $3.02 loss per ADS, with each ADS representing four Class A shares.
Cash, capital and debt
Operating cash flow was positive, but free cash flow remained negative after $12.9 million of capital expenditure, mainly for servers and network equipment. Investing cash outflow was $535.1 million, principally reflecting $522.7 million of short-term investment purchases. Financing cash inflow was $533.6 million, including $483.6 million net proceeds from the IPO and concurrent private placement and $50.0 million from Series C+ preferred shares. Management said existing cash and cash equivalents were expected to meet anticipated needs for at least 12 months from issuance of the financial statements. The filing reports no debt or material capital lease obligations.
Agora acquired Netless, an interactive whiteboard provider, in November 2020 for approximately $4.0 million in cash and shares. The filing reports no material pending litigation and no dividends paid or planned for the foreseeable future.
Outlook, commentary and material risks
- Management said it did not expect the exceptional revenue growth of the first half of 2020 to continue at the same level. COVID-19 drove higher online usage, while easing restrictions could reduce that uplift. The pandemic also contributed to infrastructure cost pressures and delayed customer payments and collections.
- No numerical revenue, earnings or margin guidance is provided. The company intends to continue investing in product development, infrastructure, sales and marketing, customer support and international expansion; management cautions that these investments may not produce expected results.
- Customer usage drives revenue, and most customers lack long-term commitments. The top ten customers represented 37.4% of 2020 revenue. Customer concentration, changing use-case popularity, competition and pricing pressure could affect growth and margins.
- The PRC business relies on VIE contractual arrangements rather than direct ownership. Their enforceability and treatment under evolving PRC foreign-investment, internet and telecommunications rules are uncertain; regulatory action could disrupt operations or revenue access.
- Other significant risks include data privacy and cybersecurity regulation, service reliability and bandwidth capacity, China-U.S. relations, foreign-exchange and cash-transfer restrictions, and potential U.S. ADS trading consequences if the PCAOB cannot inspect the China-based auditor.
- The company disclosed an unremediated material weakness in internal control over financial reporting as of December 31, 2020, related to insufficient U.S. GAAP and SEC reporting expertise and formalized procedures. Management also concluded disclosure controls were not effective.
- Subsequent to year-end, Agora announced a $54 million Easemob acquisition, closed in Q1 2021, and completed a $250 million private placement in February 2021. These are post-period events, not FY2020 operating results.
Important facts for investors to verify
- Reconcile the reported ordinary-share loss with the much larger loss attributable to ordinary shareholders, particularly the preferred-share accretion and dividend treatment.
- Review cash conversion and working-capital trends, including the rise in accounts receivable to $27.8 million and the negative free cash flow.
- Assess whether gross margins can stabilize as infrastructure capacity and international operations expand, and whether customer usage growth persists after pandemic-driven changes.
- Track remediation of the disclosed material weakness and the effectiveness of financial reporting controls.
- Examine the VIE structure, required PRC licenses and regulatory developments, as well as auditor-inspection and potential ADS trading risks.
- Verify period-end share counts: the cover page’s Class A share figure does not appear to match the audited balance sheet’s Class A share count. Clarify the discrepancy and dilution from equity awards and subsequent financing.