Agora (NASDAQ:API) Exceeds Q4 Expectations But Stock Drops

Radek Strnad /
2022/02/22 6:18 pm EST
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Communications infrastructure platform Agora (NASDAQ:API) reported Q4 FY2021 results that beat analyst expectations, with revenue up 21.4% year on year to $40.3 million. On the other hand, guidance for the full year missed analyst expectations with revenues guided to $177 million at the midpoint, or 1.98% below analyst estimates. Agora made a GAAP loss of $21.1 million, down on its loss of $6.18 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) Q4 FY2021 Highlights:

  • Revenue: $40.3 million vs analyst estimates of $37.9 million (6.41% beat)
  • EPS (GAAP): -$0.19
  • Management's revenue guidance for upcoming financial year 2022 is $177 million at the midpoint, missing analyst estimates by 1.98% and predicting 5.36% growth (vs 26.3% in FY2021)
  • Free cash flow of $2.91 million, up from negative free cash flow of $15.6 million in previous quarter
  • Net Revenue Retention Rate: 104%, in line with previous quarter
  • Customers: 2,670, up from 2,564 in previous quarter
  • Gross Margin (GAAP): 62.9%, up from 60.4% same quarter last year
  • Agora announced a share repurchase program under which it may repurchase up to US$200 million of its Class A ordinary shares

“We closed the year with strong fourth-quarter results. The adoption of the Agora real-time engagement platform continues to grow, with our SDKs now installed globally in more applications than any of our competitors,” 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 first shift towards voice communication over the internet (VOIP), rather than traditional phone networks, happened when the enterprises started replacing business phones with the cheaper VOIP technology. Today, the rise of the consumer internet has increased the need for two way audio and video functionality in applications, driving demand for software tools and platforms that enable this utility.

Sales Growth

As you can see below, Agora's revenue growth has been strong over the last year, growing from quarterly revenue of $33.2 million, to $40.3 million.

Agora Total Revenue

This quarter, Agora's quarterly revenue was once again up a very solid 21.4% year on year. But the revenue actually decreased by $4.65 million in Q4, compared to $2.7 million increase in Q3 2021.

For the upcoming financial year management expects revenue to be $177 million at the midpoint, growing 5.36% compared to 26.3% increase in FY2021.

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 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Agora reported 2,670 customers at the end of the quarter, an increase of 106 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 Q4 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 $1.03 billion and more than $755.3 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We liked to see that Agora beat analysts’ revenue expectations pretty strongly this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Agora's revenue guidance for the full year miss analyst's expectations it indicates quite a significant slowdown in growth. Overall, this quarter's results could have been better. The company is down 5.59% on the results and currently trades at $9.45 per share.

Agora may have had a tough quarter, but does that actually create an opportunity to invest 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.