Agora (NASDAQ:API) Q2: Full Year Guidance Drops And Shares Follow

Adam Hejl /
2021/08/09 6:19 pm EDT
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Communications infrastructure platform Agora (NASDAQ:API) beat analyst expectations in Q2 FY2021 quarter, with revenue up 24.8% year on year to $42.3 million. Agora made a GAAP loss of $15.3 million, down on its profit of $3 million, in the same quarter last year.

Is now the time to buy Agora? Access our full analysis of the earnings results here, it's free.

Agora (API) Q2 FY2021 Highlights:

  • Revenue: $42.3 million vs analyst estimates of $41.2 million (2.56% beat)
  • EPS (GAAP): -$0.14
  • The company dropped revenue guidance for the full year, from $180 million to $160 million at the midpoint, a 11.1% decrease
  • Free cash flow was negative -$11.54 million, compared to negative free cash flow of -$7.98 million in previous quarter
  • Net Revenue Retention Rate: 110%, down from 131% previous quarter
  • Customers: 2,449, up from 2,324 in previous quarter
  • Gross Margin (GAAP): 61%, up from 58.1% previous quarter

“We have been a public company for one year now. Looking back at the past year, we are very proud to have helped people around the world stay connected during this challenging period. Together with developers on our platform, we are changing the way people work and study, and how people play and live their lives,” said Tony Zhao, founder, chairman and CEO of Agora.

Founded in 2014 by former engineers at WebEx and based in China, Agora provides a cloud platform that makes it easy for developers to integrate real-time audio and video functionalities in their apps.

The demand for audio and video functionality inside apps is growing, and making tools for developers is a good business to be in.

Sales Growth

As you can see below, Agora's revenue growth has been impressive over the last year, growing from quarterly revenue of $33.9 million, to $42.3 million.

Agora Total Revenue

This quarter, Agora's quarterly revenue was once again up a very solid 24.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $2.1 million in Q2, compared to $6.97 million in Q1 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Analysts covering the company are expecting the revenues to grow 38% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Agora reported 2,449 customers at the end of the quarter, an increase of 125 on last quarter. That is a bit slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Agora Customers

Key Takeaways from Agora's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Agora’s balance sheet, but we note that with market capitalisation of $3.41 billion and more than $826.6 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were very impressed by the strong improvements in Agora’s gross margin this quarter. And we were also excited to see it that it outperformed analysts' revenue expectations. On the other hand, it was less good to see the deterioration in revenue retention rate, there was a slowdown in customer growth and most importantly, the company dropped revenue guidance for the full year. Zooming out, we think this was a mixed quarter. The company is down -3.66% on the results and currently trades at $28.49 per share.

Should you invest in Agora right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.