Agora (NASDAQ:API) Exceeds Q3 Expectations, Gross Margin Improves

Adam Hejl /
2021/11/15 7:29 pm EST

Communications infrastructure platform Agora (NASDAQ:API) reported Q3 FY2021 results that beat analyst expectations, with revenue up 46% year on year to $45 million. Agora made a GAAP loss of $21 million, down on its loss of $2.92 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) Q3 FY2021 Highlights:

  • Revenue: $45 million vs analyst estimates of $39.6 million (13.5% beat)
  • EPS (GAAP): -$0.19
  • The company lifted revenue guidance for the full year, from $160 million to $164 million at the midpoint, a 2.5% increase
  • Free cash flow was negative $15.6 million, compared to negative free cash flow of $11.5 million in previous quarter
  • Net Revenue Retention Rate: 104%, down from 110% previous quarter
  • Customers: 2,564, up from 2,449 in previous quarter
  • Gross Margin (GAAP): 65.1%, up from 62.4% same quarter last year

“We delivered another quarter of strong revenue growth, underpinned by the continued adoption of our real-time engagement platform by developers,” said Tony Zhao, founder, chairman and CEO of Agora.

Founded in 2014 by former engineers at WebEx and based in China, Agora (NASDAQ:API) 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 very strong over the last year, growing from quarterly revenue of $30.8 million, to $45 million.

Agora Total Revenue

And unsurprisingly, this was another great quarter for Agora with revenue up 46% year on year. On top of that, revenue increased $2.7 million quarter on quarter, a very strong improvement on the $2.1 million increase in Q2 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 16.4% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Agora. 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 2,564 customers at the end of the quarter, an increase of 115 on last quarter. That's in line with the customer growth we have seen last quarter but a bit below what we have typically seen over the last year, suggesting that sales momentum may be slowing a little.

Agora Customers

Key Takeaways from Agora's Q3 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 a market capitalization of $3.05 billion and more than $767.4 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by how strongly Agora outperformed analysts’ revenue expectations this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was less good to see the deterioration in revenue retention rate. Overall, we think this was still a good quarter, that should leave shareholders feeling positive. The company is so far flat on the results and currently trades at $26.3 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 actionable report which you can read here, it's free.

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