Introducing API

Agora, Inc., ticker symbol API, provides Real-Time Engagement Platform-as-a-Service (RTE-PaaS) in the People’s Republic of China, the United States, and internationally. Its RTE-PaaS offers developers with software tools to embed real-time video, voice, and messaging functionalities into applications. The company’s enterprise-grade products include Real-Time Video, Real-Time Voice, Live Interactive Video and Audio Streaming, Real-Time Messaging, Real-Time Recording, Real-Time Streaming Acceleration, and various use case products that serves as building blocks for developers to embed the respective functions in applications. Its real-time engagement products are delivered through its Software-Defined Real-Time Network, which is a virtual network overlay on top of the public internet. The company offers its solutions in the areas of social, education, entertainment, gaming, enterprise, financial Services, healthcare, and Internet of Things, as well as provides customer support services. Agora, Inc. was founded in 2013 and is headquartered in Shanghai, China.

API IPOed on June 30, 2020. It released its first ER today after the market close:

  • $34M rev (+128% YoY) vs $27M consensus (24% beat)
  • ~1.5k customers (+86% YoY)
  • 183% net retention Exploding head
  • 66% GM
  • 11% FCF Margin
  • It has a pay back period of ~ 10 Months

Here is what I don’t understand - is this a red flag?
Net loss attributable to ordinary shareholders for the quarter was $157.8 million, compared to net loss attributable to ordinary shareholders of $13.0 million in the same period last year, primarily due to accretion of preferred shares to redemption value. Net loss per American Depositary Share (“ADS”)1 was $4.60, compared to net loss of $0.45 per ADS in the same period last year.

It’s Chinese Company, so, some may feel uncomfortable.

It dropped about 10% after hours. I bought some shares and will see what happens tomorrow.

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Link to ER:
https://finance.yahoo.com/news/agora-inc-reports-second-quar…

API sounds like a much smaller, Chinese version of TWLO. I will let you report back on your experiences with it, as I am one of those who is not inclined to invest in Chinese companies, especially smaller ones, due to transparency and reporting issues. But, I wish you great success!

Tiptree, Fool One guide

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I agree with the sentiment about investing in China especially when the entire company’s business is about getting customers to deeply integrate their communications infrastructure. Who is going to sign up for that exposure? Zoom routed some video through China ONE TIME, by accident, and it hurt them.

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Howdy all,

Before today’s earnings call, the info I had showed that less than 9% of their revenue came from the United States. So, similar to TikTok’s revenue concentration not being a deal break for LTBH with FSLY, US exposure is a plus, not a risk for Agora. Additionally, the revenue concentration concerns for Agora after their IPO have lessened - none of their customers now account for more than 10% of revenue. Agora doesn’t need the United States in order to maintain its growth. In this day and age, being a Chinese company providing services to Asian companies is not a competitive disadvantage, and certainly not a mark in the negative column when choosing over competitors (TWLO)

The main driver for growth with API is the boom in live stream shopping, which is a trend foreign to the US consumer. Live stream shopping is accelerating ecommerce and boosting sales. I have seen ecommerce sales boosts attributed to live streaming range from 60% to over 100% normal volumes. A google search will bring back all sorts of examples.

Tech Buzz China podcast #70 goes pretty in depth to what live streaming is doing for Chinese e-commerce
https://open.spotify.com/episode/4RQWSccqGAbBDrWEMJNEeC?si=2…

Understanding that this is not a fad, but a generational shift in consumer behavior took a lot of reading because it’s not a part of the American consumer experience. However, it is being increasingly adopted in Europe, is pushing into Latin America, and is already a fast growing trend in South East Asia. Ecommerce companies will adopt live-streaming in order to achieve the kind of growth that Alibaba and PDD are experiencing in China.

Furthermore, API enhances New Oriental Education’s (a successful Fool pick) tele-education offering. API is also behind a plethora of dating live streaming services. API also powers live stream video for mobile gaming.

Assuming that API Agora is not a fraudulent company, it looks like a meta play on the increase in ecommerce, gaming, online dating, and distanced education: any live stream video which can be enhanced with interactive features is a $$ opportunity. Episode 54 of Tech Buzz China podcast dives deep into the ‘fan economy’ and the amount of money moving around non-ecommerce live streaming is also confusingly large. I think this company is worth a deeper dive by people smarter than I.

Thanks to everone on this board for all you have done and continue to do for my portfolio!

Livestreaming expanding into Latin America: https://labs.ebanx.com/en/articles/business/aliexpress-strat…

Live streaming expanding into SE asia: https://www.thedrum.com/news/2019/06/07/e-commerce-live-stre…

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128% rev growth sounds great, but they are only pulling in 34 million per quarter. I’m not as impressed as I would be if they were doing double that.

Considering the usual discount attributed to Chinese tech companies (for the reasons already outlined) the valuation seems stretched.

Presuming continued growth going forward this year the P/S is still around 25 to 28.

This seems too expensive to look at further when considering potential risks of Chinese companies and the small revenue base.

However thank you for bringing it to our attention and I will be keeping it on my radar. If they manage to continue their growth going forward with larger numbers then it could well be an interesting proposition.

I am invested in some Chinese companies (unlike many on this board) and that is despite having been burnt by the Luckin fraud.

I personally think that the discount given to Chinese companies will gradually fade over the coming decade as China becomes a more and more important economic force. The valuations may never quite be at the level of US companies (though as a Baidu shareholder I would love their valuation metrics to be similar to Google’s) but the discount seems very steep at the moment.

Thank you again for bringing this to our attention.

Will

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