Aurora Mobile Q2 2024 Earnings Call Transcript

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August 29, 2024

There are 6 speakers on the call.

Operator

Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed earlier today and is available on the IR website at irjiguang.

Operator

Cn. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer Mr. Shan Nen Bong, Chief Financial Officer and Mr. Guangyan Chen, General Manager.

Operator

Following their prepared remarks, they will be available to answer your questions during the Q and A session that follows. Before we begin, I'd like to remind you that this conference call contains forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements.

Operator

Further information regarding these and other risks, uncertainties and or factors are included in the company's filings with the U. S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward looking statement as a result of new information, future events or otherwise, except as required under applicable law. With that, I would now like to turn the conference over to Mr.

Operator

Luo. Please go ahead.

Speaker 1

Thanks, Renee. Greetings to all. Welcome to Aurora Mobile's 2024 Second Quarter Earnings Call. Before I comment on our Q2 results, I would like to remind everyone that the quarterly earnings that is available on our IR website. You may refer to that as we proceed with the call today.

Speaker 1

Following our quarterly ER tradition based on the Q2 numbers, I will call our performance in the 2nd quarter riding on the great growth momentum for the following reasons. Firstly, continuing the great Q1 head start, we record the 4th consecutive quarterly positive adjusted EBITDA. This is an historical achievement for us since our IPO in 2018. Secondly, developer subscription revenue record both 14% growth quarter over quarter and 90% growth year over year. Thirdly, our gross profit record group growth both year over year and quarter over quarter.

Speaker 1

Firstly, our net loss narrowed 95% year over year and 50% quarter over quarter. I'm truly pleased to share this good news and remarkable financial numbers with all of you As we continue to grow our top line while tightly and effectively managing the business, we are very hopeful for hopeful of more great results in the future. Let me expand further. Our total revenue has grown both quarter over quarter and year over year by 23% 8%, respectively, and we have seen great growth trajectory for both the developer services and vertical application business. Overall business, mainly subscription services, value added services and vertical applications record quarter over quarter revenue growth.

Speaker 1

This free business also record year over year increase except value added services. Developer services revenue, which consists of subscription services and value added services, increased by 26% quarter over quarter and 8% year over year. Subscription revenue increased by 90% year over year and 14% quarter over quarter. Value added services revenue grew by 2 45% quarter over quarter and decreased 28% year over year. Subscription services revenue of RMB48.1 million grew strongly by 90% year over year and 14% quarter over quarter.

Speaker 1

The year over year and quarter over quarter revenue growth was mainly driven by increase in ARPU. This was the result of a combination of signing up higher value contracts and completion of private car projects. Another major contributor of this impressive revenue growth was the solid performance of our EngageLab business. The EngageLab recognized revenue grow more than 500% year over year and 69% quarter over quarter. I will elaborate more on our EngageLab business shortly.

Speaker 1

Within subscription revenue, some of the notable new and renewable customers in this quarter include, but not limited to, China Southern Airlines, Tiger Broker, Zhangjiakou, Yinkang and Zhangzhongzhengjun just to Nanofield. Store where online advertisers increased their advertising spending to capture more customers during this period. This revenue trend in Q2 was within our expectations. Next, let me expand more on some very exciting numbers and achievements for our EngageLab business this quarter. Firstly, more and more customers are signing up to purchase our EngageLab products and services.

Speaker 1

The contracted customer numbers has a record of tremendous 75% growth reaching 390. We truly believe our Engage app is a superior product where our reliability and high delivery are addressing global customer needs effectively. We saw many new customers switching to our Engage app platform from competitors due to our product core competency. Secondly, the cumulative signed contract value of Engagea grew by another RMB4.5 million quarter over quarter. Cumulatively, the total contract value signed up to June 30, 2024 amounts to more than RMB41 1,000,000.

Speaker 1

This growth momentum has exceeded our expectations and we plan to seize this growth opportunity with our forecast. Finally, we continue to expand the geographical footprint of our EngageLab products. By June 30, 2024, EngageLab products and services were sold to customers in more than 29 different countries around the world. In Q2 alone, we added 7 additional countries where engagement are available. We are very pleased with the progress of our expansion plan.

Speaker 1

We are gaining more customers from new territories or countries quarter over quarter. In addition to the Singapore office that we set up at the beginning of 2024, we are now actively exploring opening local offices into other Southern East Asia markets such as Thailand and Malaysia. This will no doubt help us better serve our overseas customers locally and foster stronger business relations with our local direct customers and ISVs. As a side note, let me also share with you on our overseas expansion effort. As previously mentioned, Shenzhen and I attended Tech Experts in Singapore in person in late May and late May.

Speaker 1

Since then, we have received many invitations to attend similar tech experts in Southeast Asia. From YNOW, we have been invited to attend the tech events as well as 1 in Thailand, 1 in Hong Kong and 2 in Singapore. They are more in the pipeline. We find it very effective for us to expand, chat and share in person with prospect customers during these experts where we can demonstrate our products and answer any questions on the spot. We saw great sales based conversations from the Singapore telecom expert in May.

Speaker 1

Therefore, we will continue to be present at these experts in Southern Eastern Asia, the Gulf region and beyond. With that, I will now pass the call over to Sheng Yen, who will share more about the vertical applications and other aspects of our financial performance for this quarter.

Speaker 2

Thanks, Chris. Next, I'll go over the revenue for vertical application that includes Financial Risk Management and Market Intelligence. Overall, Vertical Application recorded a great quarter where revenue grew by 16% quarter over quarter and 8% year over year. Financial Risk Management had a very good quarter as revenue grew by 34% year over year and 28% quarter over quarter. The 34% year over year revenue growth was mainly due to a strong 30% customer number growth.

Speaker 2

We saw more financial sector customers using our products as the need for risk management and control has been on the rise since the beginning of 2024. This is in line with our expectation. When purchasing services from various vendors like us, financial sector customers will secure and always allow multiple sources of quality data stream to strengthen their risk models. Thus these are not exclusive relationship. Therefore, we can grow this business even with the coexistence of peers in this industry.

Speaker 2

The quarterly revenue recorded growth for this is the 6th consecutive quarter since Q1 of 2023. The customers that we signed up or renewed in Q2 include Ping An Xiaoting, Zhongguan Chongingang, Zhongxing Xiaoting, ZhongAn Bao Xian and many more licensed credit or financial institution throughout China. And Market Intelligence revenue decreased by 27% year over year and 9% quarter over quarter due to the continued weak market demand for Chinese APP data. Nevertheless, in Q2, we signed up a few new and renewed contracts from some of the well known large customers such as ETA and many top tier global hedge fund and investment fund such as 0.72, Broad Peak and SRS Investment. Next, I'll go through some of our key expenses and balance sheet items.

Speaker 2

On to operating expenses, the Q2 operating expenses was at $54,800,000 representing a 15% decrease year over year and 3% increase quarter over quarter. While we have done a great job of cutting expenses over time, we understand some of the expenses will grow occasionally. For example, we are more than happy to see commission paid to our sales and marketing department to grow every quarter because that means that we are meeting or exceeding the revenue targets that we have set for them. Thus, we welcome expenses growth in specific areas which demonstrate healthy business growth. I'll go through the individual OpEx category now.

Speaker 2

For R and D expenses decreased by 22% year over year to RMB23.7 million mainly due to the lower headcount and reduced salary costs and associated share based compensation and a decrease in server depreciation expenses due to our growing clock initiative. Selling and marketing expenses increased by 2% year over year to RMB20.5 million, mainly due to the increase in sales commission in line with higher revenue. G and A expenses decreased by 23% year over year to RMB10.7 million mainly due to the lower share based compensation expenses and professional fee incurred. For the quarter ended June 30, 2024 was another history making quarter for us. We have great revenue growth and tight OpEx spending to be recorded yet another positive adjusted EBITDA.

Speaker 2

With this, we are now have 4 straight consecutive quarters of positive adjusted EBITDA. And trust me, this is not an easy achievement, especially as the overall economy has been relatively soft. I have to attribute this to the great go overseas initiative that we have undertaken since 2023. The Engaged led business expansion has no doubt proved to be a great revenue growth driver. Onto the balance sheet.

Speaker 2

I'll share 2 of the other important KPIs as well that we closely monitor. We continue to maintain a healthy AR turnover days level at 43 days, which are 4 days reduction compared to Q1 of 2024. We are very pleased with this lower AR turnover days number. We continue to work hard to ensure we collect cash actively from customers and at the same time mitigating the risk of bad and doubtful debts. Secondly, one of the key financial KPI for tracking the performance of SaaS company is the total deferred revenue, which represent cash collected in advance from customer for future contract performance, which remain high at RMB135,100,000 and this is the 10 consecutive quarters where our deferred revenue has exceeded $130,000,000 Next, total assets were $335,100,000 This includes cash and cash equivalents of $92,700,000 accounts receivable of $43,100,000 prepayments and other current assets of $20,800,000 fixed assets of $1,100,000 long term investment of 100 and $13,200,000 goodwill of $37,800,000 and intangible assets of $15,800,000 resulting from the St.

Speaker 2

Cloud acquisition in March 2022. And total current liabilities were at $228,200,000 This includes accounts payable of $26,600,000 current operating liabilities of $2,800,000 deferred revenue of $135,100,000 accrued liabilities of 60,700,000 Now let me take a few minutes to recap what Chris has said at the beginning of this call where he used the term riding on a great growth momentum description. In this quarter, our developer subscription services revenue recorded solid growth both year over year and quarter over quarter. Financial Risk Management revenue also grew steadily by more than 30% year over year and 28% quarter over quarter. Our gross profit grew both year over year and quarter over quarter.

Speaker 2

We are making history again here where we recorded 4 consecutive quarters of positive adjusted EBITDA. Last but not least, our EngageLab business recorded customer growth of more than 75% quarter over quarter and cumulative contract value grew more than $4,500,000 between the quarters to more than 31,000,000 With the above, I believe we have delivered a set of impressive quarterly financial results for all our shareholders. As we continue to pursue our overseas expansion and diligently execute our plan, I look forward to sharing more exciting quarter quarterly financial results in the near future. Lastly, but before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended June 30, 2024, we repurchased 12,000 ADS.

Speaker 2

Cumulatively, we have repurchased a total of 217,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. I will be happy to take your question now. Operator, please proceed.

Speaker 3

Thank Your first question comes from the line of Calvin Wong from Spieseo Capital. Please go ahead. Your line is open.

Speaker 4

Good evening, management, and thank you for taking my question. And first of all, congrats for delivering another set of great results. I would like to have 2, if I may. If we look at this quarter's result, we find that, okay, revenue has grown substantially, OpEx at a very good level and then positive adjusted EBITDA for the 4th consecutive quarter. So two simple questions for the management.

Speaker 4

1, what have contributed to these set of good numbers? And 2, any guidance on the Q3 numbers?

Speaker 2

Okay. Thanks, Gavin. Let me take questions. Yes, we believe we have done a great job for our investors and our shareholders. If looking at just purely on the 4 consecutive quarters of positive adjusted EBITDA that we have managed to record, And if I may, in the name of in the game of tennis, this is considered to be a grand slam for making 4 in a row.

Speaker 2

But of course, the actual work was done of plan and started long before 4 quarters ago, and we are now delivering the good results. And if I look at the this set of numbers from high level like 5,000 feet level, there are 2 goods that this good Q2 results is attributable to 2 factors. 1 is we organically grow our business 2, we are operating our business efficiently in the current environment. As mentioned during the call earlier, 3 of our business lines, namely subscription revenue, value added services and vertical application recorded good and solid revenue growth quarter over quarter. And more importantly, I think our core business, namely the subscription business, which contributed approximately 60% of our group's revenue grew both quarterly both quarter over quarter and year over year due to the increase in customers' number and ARPU.

Speaker 2

As mentioned by Chris earlier, our English Lear business has been the start of the quarter. In Q2, the book revenue has grown for more than 500% year over year, driven by a 300% growth in customers' number. Our value added service, on the other hand, benefited from the spike in the demand due to the 6/18 online e commerce festival. And I mentioned that the Financial Risk Management also had a great quarter. And this is the we recorded a consecutive growth for the past 5 quarters and this was mainly due to the steady trend of more financials sector customers are buying our services as a key input to their risk model.

Speaker 2

As for the OpEx, yes, we are continuing to manage our business well. Revenue grew by 23% quarter over quarter, while OpEx only grew by 5% quarter over quarter. And this is a trend we would like to see. So long as we so long as our revenue is growing at a much faster pace than our OpEx, I think the profitability will show up in the books sooner or later. But our job is not done.

Speaker 2

I think we still strive to make expansion overseas as the main growth driver by signing up more overseas customers and getting customers to renew at a higher contract value. At the same time, we shall continue meaningfully to spend every single dollar to ensure operationally efficient. And for the second question you have on the Q3 forecast, I think we shall not get ahead of ourselves. I think what we have done is we have proven to the public quarter over quarters again over again that our execution capability and how we can stick closely to our strategy and deliver financial results. Therefore, short of giving out promises, what I would say is, we'll continue to follow our proven strategy to grow our business overseas and domestically.

Speaker 2

And hope this answers your question, Kevin. Very clear. Thanks.

Speaker 3

Thank you. We will take our next question. Your next question comes from the line of Jackson from Galangi Research. Please go ahead. Your line is open.

Speaker 5

Congratulations on a strong quarter. I'm Jack Sun from Gelongi Research. I've got a question on EngageLab. EngageLab recorded a strong quarter in terms of customer number and the country value. What will be the outlook for EngageLab in the next few quarters?

Speaker 5

Thanks.

Speaker 2

Thanks, Jack. Let me take this question. Yes, thanks for your interest in EnglishLab. I'm pretty sure that a lot of investors and our shareholders are keen to find out more. And you're right to point out that we have great numbers in the past 3 or 4 quarters for EnglishLab in terms of both customer number and contract value.

Speaker 2

Before I go to the outlook that you were looking for, maybe I should do a revisit of the current EngageLab business landscape. Let me spend a few minutes here. Currently, our EngageSure business is growing every quarter for the following reasons. I think 1, we have a great suite of products and services that help our customers to engage with their own users in an efficient and cost effective manner. And 2, we have a competitive advantage of sending notification to certain brand of Chinese mobile devices that our U.

Speaker 2

S. Competitor are not able to. 3, we have multiple channel engagement solution that effectively cover all user engagement scenario such as app push, web push. We have SMS, we have e mails, we have OTP and we have WhatsApp Business API. And with the above, I think we are addressing the needs of our customers and that is key because customers are only willing and likely to buy our services because we meet or exceed their expectation on user engagement.

Speaker 2

And in addition, I think we are getting new customers and businesses through both Chinese companies venturing overseas and local companies in their respective countries. We do see great opportunities for us to expand and grow every quarter. Based on our research, the overseas market demand, which is also we can call it as PAM, total addressable market for EnglishLab or notification business is huge. And we intend to grab this good portion of the market in the Southeast Asia. As for my answer to your question, what I would say is, we are very hopeful for this business to have continued growth every single quarter in the near future.

Speaker 2

I guess we're first getting more additional headcount in salesperson in Singapore and Malaysia, we can reach out to more customers overseas. Therefore, I'm very confident that our sales team in overseas market will sign up more customer in the near future. And Jack, I hope this answers your question.

Speaker 5

Yes, that's very clear. Thank you a lot. Have a good one. Thanks.

Speaker 3

Thank you. There seems to be no further questions at this time. I'll now hand the call back to Rene Vanguestaine for closing remarks.

Operator

Thank you, Heidi. Thank you everyone for joining our call tonight. If you have any further questions or comments, please don't hesitate to reach out to the IR team. This concludes the call. Have a good night.

Operator

Thank you

Speaker 3

all. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Aurora Mobile Q2 2024
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