NEWS WRAP: Agora posts first non-GAAP profit in more than three years

Despite achieving the profit milestone, the real time engagement technology provider forecast its revenue would continue to decline in the current quarter

By Teri Yu

Agora Inc. (API.US), a real-time engagement technology provider, on Monday reported its first quarterly adjusted profit in more than three years on strong cost controls, as its revenue continued to decline due to economic weakness in its home China market and in developing markets among its international clients.

The return to non-GAAP profitability fuelled a 19% jump in Agora’s stock on Tuesday, following the release of its fourth-quarter earnings report after markets closed the previous day.

Agora’s revenue fell 10.2% year-on-year in the quarter to $36 million, moderating from a 14.6% revenue decline in the previous quarter. Its revenue for the year fell 11.9% to $141.5 million. The company said it expects its revenue to keep declining in this year’s first quarter. It forecast it would report between $32 million and $34 million for the quarter, whose midpoint would be down about 9% from the $36.4 million it reported a year earlier.

Within the company’s latest total, fourth-quarter revenue for its domestic Shengwang business fell 13.9% year-on-year to 148.3 million yuan ($20.7 million), continuing a trend dating back to a government crackdown on China’s private education sector that was previously one of its leading customers. Its international Agora business, which also began contracting in the second quarter of last year, fell 3.2% during the quarter to $15.3 million, as it blamed a “decrease in usage from certain customers in emerging markets due to their tightening financing conditions.”

Despite the year-on-year declines, the company highlighted that its revenue grew sequentially from the second quarter onwards to the fourth, marking a third consecutive quarter of growth on that basis.

The company’s net loss for the quarter fell sharply to $2.6 million from a $35.1 million loss a year earlier. And the company reported its first non-GAAP profit in several years during the period, which typically excludes certain items such as expenses related to share-based compensation and acquisitions.

“We ended 2023 with strong financial results in the fourth quarter as we delivered sequential quarterly revenue growth and a non-GAAP net income of $1.4 million, achieving quarterly profitability on the non-GAAP basis for the first in more than three years,” said founding chairman and CEO Tony Zhao.

Both Agora and its Shengwang China business recorded increases in their active customers, which rose 18.4% and 11.8%, respectively, to a total 5,827 customers at the end of 2023 versus a year earlier.

Under the company’s $200 million share repurchase program, Agora returned approximately $104.3 million to shareholders and reduced its share count by more than 18%. The company said it will extend the program for another 12 months, given its confidence with its growth prospect.

Agora was best known as the software provider to the famous social app Clubhouse three years ago. But Clubhouse’s buzz didn’t last, and as the voice-based chat service quickly faded so did Agora’s investor appeal.

Agora’s founder Tony Zhao was a founding engineer at Webex, the popular web conference service that later became a Cisco subsidiary. His strong credentials in real-time engagement has been driving the growth of Agora since its debut.

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