Agora falls as China’s online education regulations hit Q2 revenue

Agora (API) is trading down around 4% as new online education regulations in China negatively impacted the Chinese real-time engagement platform provider’s second-quarter revenue as as a service (TEN-PaaS).

The company’s Q2 GAAP EPS was -$0.27 (vs. -$0.14 Y/Y) and revenue was $41M (vs. $42.3M Y/Y).

Revenue fell primarily due to lower usage in China’s K-12 college tutoring industry. However, the decline was partially offset by the expansion of the company’s global operations and growth in usage in other industries and regions.

The K-12 in-school tutoring segment generated revenue of $1 million in the quarter, compared to $12 million annually.

Revenue from the US and international markets increased 63.2% year-on-year to $18.6 million, representing 45.4% of total revenue.

Interest income was $2.1 million, flat Y/Y.

Net loss was $30.7 million, compared to a net loss of $15.4 million per year.

Adjusted EBITDA was -$15.3 million, compared to -$7.3 million a year ago.

Gross margin was 64.9%, an increase of 3.8% compared to 61.1% in the same period last year.

Agora maintained its FY22 revenue guidance of $176-178 million (vs. consensus of $176.48 million).

Despite a government crackdown that has banned after-school tutoring services by private, for-profit companies, Agora’s reiteration of its FY22 guidance means the company expects revenue to grow by sequentially from $79.6 million in 1H to approximately $97 million in 2H, according to Seeking Alpha Author Bamboo Works.

Agora previously said tutoring services in China once accounted for about a quarter of its revenue, and guidance for FY22 indicates the company is making progress in closing the hole, the author said.