Agora, which like Twilio provides programming interfaces (APIs) that let developers add voice, video and messaging features to their websites and apps, opened for trading on Friday morning at $43.25, 116% above its $20 IPO price. And as of the time of this article, shares are trading at $46.85, up 134%.
At current levels, Agora, which trades under the symbol API, is worth $5.2 billion after accounting for outstanding shares and stock options. That’s equal to a whopping 81 times 2019 revenue of $64.4 million. For comparison, Twilio, which is up about 120% on the year, trades for 26 times 2019 revenue of $1.13 billion.
Agora raised $350 million through its offering via the sale of 20 million American depositary shares (ADSs). Underwriters have an option (likely to be picked up) to purchase another 2.625 million shares to cover overallotments.
Agora’s main executive offices are located in China, and the company counts a number of Chinese tech companies as clients and considers Chinese tech giant Tencent (TCEHY) a rival. However, it also has a large U.S. subsidiary (known as Agora Lab) that’s based out of Silicon Valley.
Contributing to Agora’s high multiples: With the COVID-19 pandemic driving major increases in voice/video calling and messaging activity, Agora’s revenue growth has accelerated sharply in recent months. Whereas revenue rose 47% in 2019, it grew 166% annually in Q1 2020 to $35.6 million. Active customers -- defined as customers that produced more than $100 in revenue over the prior 12 months -- totaled 1,176 at the end of March, up from 1,041 at the end of December and 678 a year earlier, according to Agora's IPO prospectus.
A $6.2 million net loss was reported for 2019, but $3 million in net income was reported for Q1. Free cash flow -- a metric that can be lumpy on a quarterly basis -- was negative $4.1 million for 2019 and negative $3.4 million for Q1.
Like many other tech companies that have gone public in recent years, Agora has a dual-class share structure: Its Class B shares, all of which are owned by CEO Tony Zhao, have 20 times the voting power of its Class A shares. As a result, Zhao’s shares give him more than 80% of all voting rights.
The warm reception and rich multiples granted to Agora is one more example of Wall Street’s current enthusiasm for high-growth software companies. That in turn might bode well for other software firms looking to go public, such as banking software provider nCino and (reportedly) online storefront software provider/Shopify (SHOP) - Get Shopify, Inc. Class A Report rival BigCommerce.