Agora (NASDAQ:API) Q1: Beats On Revenue But Stock Drops

Adam Hejl /
2022/05/23 6:54 pm EDT
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Communications infrastructure platform Agora (NASDAQ:API) announced better-than-expected results in the Q1 FY2022 quarter, with revenue down 4.07% year on year to $38.5 million. Guidance for the full year was in line with analyst expectations with revenues guided to $177 million at the midpoint. Agora made a GAAP loss of $26.9 million, down on its loss of $14.6 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) Q1 FY2022 Highlights:

  • Revenue: $38.5 million vs analyst estimates of $27.3 million (4.27% beat)
  • EPS (GAAP): -$0.24
  • The company reconfirmed revenue guidance for the full year, at $177 million at the midpoint
  • Free cash flow was negative $17 million, down from positive free cash flow of $2.91 million in previous quarter
  • Net Revenue Retention Rate: 95%, down from 104% previous quarter
  • Customers: 2,706, up from 2,670 in previous quarter
  • Gross Margin (GAAP): 62.3%, up from 58.1% same quarter last year

“We delivered robust results in the first quarter as we navigated through a complex and fast-evolving market environment. Strong revenue growth momentum continued in markets such as Middle East, Southeast Asia and Europe as developers increasingly choose our platform to create immersive real-time engagement experiences,” 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 has declined over the last year, from quarterly revenue of $40.2 million, to $38.5 million.

Agora Total Revenue

Ahead of the earnings results the analysts covering the company were estimating sales to grow 11.3% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

Agora reported 2,706 customers at the end of the quarter, an increase of 36 on last quarter. That is a little 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 Q1 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 $776.3 million and more than $717.5 million in cash, the company has the capacity to continue to prioritise growth over profitability. 

It was good to see Agora outperform Wall St’s revenue expectations this quarter. That feature of these results really stood out as a positive. On the other hand, it was less good to see that the revenue growth was quite weak and the revenue retention rate deteriorated. Overall, this quarter's results were not the best we've seen from Agora. The company is down 6.24% on the results and currently trades at $6.31 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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