Agora (NASDAQ:API) Reports Sales Below Analyst Estimates In Q3 Earnings, Stock Drops

Radek Strnad /
2022/11/22 3:46 am EST

Communications infrastructure platform Agora (NASDAQ:API) missed analyst expectations in Q3 FY2022 quarter, with revenue down 8.99% year on year to $40.9 million. Guidance for the full year also missed analyst expectations with revenues guided to $161 million at the midpoint. Agora made a GAAP loss of $27.6 million, down on its loss of $21 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 FY2022 Highlights:

  • Revenue: $40.9 million vs analyst estimates of $44.4 million (7.83% miss)
  • EPS: -$0.25 vs analyst expectations of -$0.20 (27% miss)
  • The company dropped revenue guidance for the full year, from $177 million to $161 million at the midpoint, a 9.03% decrease
  • Free cash flow was negative $9.91 million, compared to negative free cash flow of $24.2 million in previous quarter
  • Net Revenue Retention Rate: 84%, down from 95% previous quarter
  • Customers: 2,987, up from 2,877 in previous quarter
  • Gross Margin (GAAP): 59.4%, down from 65.1% same quarter last year

“We delivered robust operational results this quarter despite a very challenging global macroeconomic environment,” 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 mediocre over the last two years, growing from quarterly revenue of $30.8 million in Q3 FY2020, to $40.9 million.

Agora Total Revenue

But this quarter Agora's revenue was down 8.99% year on year, which might be a disappointment to some shareholders.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 25.7% 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

You can see below that Agora reported 2,987 customers at the end of the quarter, an increase of 110 on last quarter. That is a little slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

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 $388.1 million and more than $483.4 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We struggled to find many strong positives in these results. On the other hand, it was unfortunate to see that Agora's revenue guidance for the full year missed analysts' expectations and revenue growth was quite weak. Overall, it seems to us that this was a complicated quarter for Agora. The company is down 7.92% on the results and currently trades at $3.08 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.