Agora, Inc. annual report, Q4 FY2021

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Agora, Inc. — FY2021 Form 20-F Summary

Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone Q4 filing; the supplied filing text does not provide a clear set of Q4-only financial results. Figures below are in U.S. dollars unless noted.

Business context

Agora provides usage-based real-time engagement platform-as-a-service (RTE-PaaS), including video, voice, messaging and related tools for developers. It reported more than 405,000 registered applications, 2,670 active customers excluding Easemob, and more than 675 billion minutes of engagement powered in 2021. Its China operations rely substantially on variable interest entities (VIEs), which Agora consolidates but does not own.

Financial and operating performance

  • Revenue: $168.0 million, up 25.8% from $133.6 million in 2020. RTE service revenue was $159.9 million; other revenue was $8.0 million.
  • Profitability: Gross profit was $104.0 million, with a 61.9% gross margin versus 64.7% in 2020. Operating loss widened to $80.7 million from $5.2 million; net loss was $72.4 million versus $3.1 million. Net loss per share was $0.16.
  • Expenses: R&D rose 123.6% to $110.7 million; sales and marketing rose 79.9% to $46.3 million; general and administrative expense rose 68.4% to $30.3 million. Share-based compensation increased to $31.5 million from $12.0 million.
  • Cash flow: Operating cash flow was negative $20.0 million, compared with positive $6.6 million in 2020. Free cash flow, a non-GAAP measure, was negative $32.2 million, versus negative $6.3 million. Capital expenditures were $12.2 million.
  • Liquidity and obligations: Cash and cash equivalents were $285.7 million and short-term investments were $469.6 million, totaling $755.3 million. Working capital was $723.9 million. Total liabilities were $78.7 million; the filing does not identify material borrowings. Lease and purchase commitments totaled $8.5 million, including $7.8 million of operating leases.
  • Funding and investments: Financing cash flow included $250.0 million net proceeds from a February 2021 private placement. Investing cash flow included $50.6 million net cash paid for acquisitions and $48.8 million of long-term investment purchases.
  • Customer expansion: Constant-currency dollar-based net expansion rate, excluding Easemob, was 104%, down from 179% in 2020. Top ten customers represented 29.8% of revenue, down from 37.4%.

Material changes and unusual items

  • Revenue growth reflected increased usage of video and voice products, international expansion, a broader product portfolio and emerging use cases. China generated $117.9 million of revenue; the United States $17.3 million; other markets $32.8 million.
  • Gross margin fell 2.8 percentage points, which management attributed to standard pricing across regions, expansion into higher-cost international markets and infrastructure capacity added ahead of anticipated usage.
  • Operating expenses rose sharply, including substantial R&D investment and higher employee and share-based compensation costs. Adjusted EBITDA, a non-GAAP measure, turned to negative $33.3 million from positive $11.2 million.
  • Agora acquired Easemob on February 28, 2021 for $53.4 million in cash consideration. The acquisition added $53.1 million of goodwill and $8.2 million of identifiable intangible assets; $4.6 million of consideration remained payable at year-end. The company also reported a $1.7 million investment loss, including impairment.
  • The company adopted the expected-credit-loss accounting standard in 2021; its allowance for credit losses rose to $6.3 million from $1.5 million. The audit identified Easemob purchase-price valuation and expected-credit-loss valuation as critical audit matters.

Outlook, risks and contingencies

  • Management expects continued investment in R&D, sales and marketing, infrastructure and international expansion. It expects existing cash and cash equivalents to cover anticipated needs for at least 12 months, while cautioning that liquidity assumptions could prove incorrect. The filing provides no numeric revenue or earnings guidance.
  • In February 2022, after year-end, the board authorized a share repurchase program of up to $200 million over 12 months. No dividends have been paid, and Agora expects to retain funds for the business.
  • Key risks include the enforceability and regulatory treatment of the VIE structure; evolving PRC rules on cybersecurity, data privacy, cross-border data and overseas listings; licensing requirements; customer usage, concentration and competition; and the ability to sustain growth while controlling costs.
  • The PCAOB had identified Agora’s China-based auditor as unable to be inspected fully. The filing warned of possible U.S. trading restrictions under the HFCAA, potentially as early as 2023 if proposed legislative changes took effect.
  • COVID-19 supported online usage but also created infrastructure-cost and demand uncertainty; management noted that usage growth had moderated as restrictions eased. The filing reported no material litigation contingencies for 2019–2021.
  • Management and the auditor concluded internal control over financial reporting was effective at year-end 2021; previously reported material weaknesses were described as remediated. Easemob, representing about 1% of assets and 8% of revenue, was excluded from that controls assessment.

Most important facts for investors to verify

  • How the 2021 operating loss and negative operating cash flow evolve, and whether expense growth produces durable revenue growth.
  • Whether gross margin stabilizes as international activity and network capacity expand.
  • Customer retention, usage expansion and customer concentration, including the slowdown in expansion rate.
  • Actual cash availability and transferability across the group, given PRC restrictions, statutory reserves and the VIE structure.
  • Easemob integration, acquisition-related goodwill and intangible-asset assumptions, and collectability of receivables.
  • Developments in PRC cybersecurity, data, licensing and overseas-listing regulation, and whether the auditor becomes inspectable under PCAOB requirements.
  • Execution and funding of the announced buyback, and any resulting impact on liquidity and share count.