Aurora Mobile Limited (NASDAQ:JG) Q4 2023 Earnings Call Transcript
Aurora Mobile Limited (NASDAQ:JG) Q4 2023 Earnings Call Transcript March 12, 2024
Aurora Mobile Limited isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Christian Arnell. Thank you. Please go ahead, sir.
Christian Arnell: Thank you. Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed earlier today and is available on its IR website at ir.jiguang.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. Following their prepared remarks, they will be available to answer your questions during the Q&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. Further information regarding these and other risks, uncertainties and/or factors are included in the Company's filings with the U.S. SEC. 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'd now like to turn the conference call over to Mr. Luo. Please go ahead.
Weidong Luo: Thanks, Christian. Good morning and good evening, everyone. Welcome to Aurora Mobile's 2023 fourth quarter earnings call. Before I comment on our Q4 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website. You may refer to the deck as we proceed with the call today. Overall, if I were to give a comment for the performance of this quarter, the appropriate discussion for this quarter is growth, growth and growth. The reasons are as follows. Firstly, we have a record, for the first history, consecutive quarters of positive adjusted EBITDA. Secondly, our total revenue grew every single quarter in 2023. Thirdly, Developer Subscription revenue also recorded sequential revenue growth in all quarters of 2023.
Fourthly, our gross profit also grew in every quarter of 2023. Last but not least, our overseas product, EngageLab, continue to expand globally and recorded great results this quarter. Next, let me shed more light on the business and revenues. For our total group revenue, we achieved a steep growth of 5% quarter-over-quarter, driven mainly by the growth in Developer Services revenue. Now let me go through our different revenue streams. Developer Services revenue, which consists of subscription services and value-add services, decreased to 1% year-over-year but grew 8% quarter-over-quarter, mainly due to the weakness in the value-added services, offset by the 5% growth in subscription services. Next is the detailed discussion of each business line.
Subscription services revenues were RMB48.8 million, up 5% over year-over-year and quarter-over-quarter. This was mainly driven by increase in ARPU both year-over-year and quarter-over-quarter. Within the year 2023, the Subscription Services revenue grew sequentially in all four quarters, mainly due to the steady increase in ARPU throughout the year. In Q4 2023, our team has completed a handful of private deployment purchase for many customers. I'm very encouraged by this trend and believe more good results will come. Some of the notable new and renewable customers in this quarter include but not limited to [indescribable], China Telecom, China Pacific Insurance, Everbright Bank credit card center and [indescribable] just to name a few. Value-added services revenues were RMB6.8 million decreased 60% year-over-year but increased by 38% quarter-over-quarter, which was due to the annual single day and Double 12 online shopping festival in Q4, where advertisers increased their spending and more budget allocation to us.
However, no such event in Q3. Next, I would like to share with you on some exciting news and great achievements we did have in Q4 for our EngageLab business. Firstly, by the end of 2023, we had more than 170 customers signed up to purchase our EngageLab products. This we saw a tremendous 70% growth between the quarters. Secondly, the commercial contract value of EngageLab has RMB15 million, representing a great 50% growth between the quarters. Thirdly, our EngageLab customers are from 17 different countries around the world. As we show in our Q3 earnings graph, we aim to grow this business every quarter, and we did it. We achieved great milestones between the quarters for EngageLab business. I'm very proud of the hard work that the team has putting over the past quarter in order to record such an impressive customer number and contract value growth.
This is by no means an easy task consists during the top overseas market environment and the uncertainty causing the air. We continue to see strong demand for our EngageLab products overseas. Our EngageLab product is a non-store customer engagement platform, enabling our customers to use any of the following messaging channels, app push, web push, e-mail services, SMS service, WhatsApp and WhatsApp business API. Based on the feedback we received the key major advantage of our EngageLab product is it allows our customers in different countries and regions to engage their own customers in an effective yet cost-efficient manner. We aim to ensure we stay ahead again by continuing to fine-tune our products on a regular basis. More importantly, for us to meet and achieve our goal, customers -- expect our global customers' expectations.
With that, I will now pass the call over to Shan-Nen, who will share more about the vertical applications and other aspects of our financial performance for this quarter.
Shan-Nen Bong: Thanks, Chris. Next, I'll go over the revenue for Vertical Applications where it is made up of financial risk management and market intelligence. Vertical Applications had a tough quarter, where revenue recorded single-digit decline both year-over-year and quarter-over-quarter. However, for financial risk management, revenue grew 17% year-over-year and stayed pretty much stable quarter-over-quarter. The 17% year-over-year revenue growth was positively impacted by a 26% customer number growth. In particular, one good trend that we have observed is that the fact that customer number has recorded sequential growth in every quarter of 2023. The Q4 customers that we have signed up include but not limited to Meituan, 360 Finance, [indiscernible] and many other licensed financial institutions throughout China.
As for market intelligence, the revenue decreased 40% year-over-year and 10% quarter-over-quarter due to the continued great demand for Chinese-based app data as the investment sentiment towards Chinese ADR still remains lackluster. Nevertheless, amidst this slow market condition, we still managed to sign up some well-known large customers such as Baidu, Ite, Taobao, 58 and many top-tier global hedge fund and investment funds. I'll now go through some of the key expenses and balance sheet items. On to operating expenses. The Q4 operating expenses was at RMB61.2 million, representing 36% decrease year-over-year but slightly increased 2% quarter-over-quarter. Overall, we are very pleased with our expense control and monitoring efforts between the years.
In summary, our Q4 OpEx has decreased year-over-year by RMB34.2 million. This is a testament of our commitment to wisely spend every single penny. And if you look at the OpEx on an annual basis, it has decreased by RMB108 million between the years, representing a 30% decrease year-over-year. This again show the management determination to effectively execute its cost-saving plans as previously announced. I think at this stage, the Company is well managed and ready to -- is ready for the next growth phase cycle. With this relatively low OpEx to run the business, so long as we execute top line growth fairly well, I believe the group result will come sooner rather than later. Next, I'll go to the individual OpEx categories. In particular, R&D expenses decreased by 23% year-over-year to RMB27.1 million mainly due to lower headcount and reduced salary costs and associated share-based compensation and a decrease in server depreciation expenses due to the growing cloud initiative.
Selling and marketing expenses decreased by 10% year-over-year to RMB22.1 million, mainly due to a decrease in salary costs resulted from headcount reduction as we further make adjustment to operate at the optimal level. G&A expense decreased by 66% year-over-year to RMB12.1 million, mainly due to onetime noncash impairment loss of RMB32 million recognized in last year Q4 of 2022. Further streamlining of the headcount also contributed to the decrease in salary costs between the years. And for the quarter ended 12/31 '23, the adjusted EBITDA which is calculated as an EBITDA excluding share-based compensation, reduction in force charges, the impairment of long-term investment and change in fair value of foreign currency contracts, we recorded another positive adjusted EBITDA in this quarter.
And this is a historical event where we have consecutive quarters of positive adjusted EBITDA. On to the balance sheet. I'll share two very important KPIs that we closely monitor. We continue to maintain a healthy AR turnover days at 38 days which is a two days improvement quarter-over-quarter. These two shortened days is very important as they let us collect cash from customer added even shorter period of time. We believe this 38 days turnover is leading the industry in terms of collection days. Secondly, one of the key financial KPIs that we track for performance of SaaS company is the total revenue, which represents cash collected in advance of customer for future contract performance continue to be the high balance of RMB141.5 million. This is the eighth consecutive quarter where our deferred revenue balance has exceeded RMB130 million.
This is very important as we are collecting more cash in the advance from customer and this greatly improve our cash flow, at the same time, mitigate risk of bad debt. On the cash flow, we have another great quarter in Q4 of 2023, where we recorded net operating cash inflow of RMB11 million and total cash inflow of RMB16.6 million. And this was a combination of our sales team actively collecting cash from customers, and we tightly control our cash spending. Next, total assets were at RMB349.1 million as of December 31. This includes cash and cash equivalent of RMB115 million, accounts receivable of RMB34.3 million, prepayments and other current assets of RMB20.2 million, fixed assets of RMB1.4 million, long-term investment of RMB112.9 million, goodwill of RMB37.8 million and intangible assets of RMB17.9 million resulted from the SendCloud acquisition in March 2022.
Total current liabilities were RMB241.3 million as of December 31, 2023. This includes accounts payable of RMB21.1 million, current operating lease liability of RMB4 million, deferred revenue of RMB141.5 million, accrued liabilities of RMB74.7 million. At this juncture, let me take a few minutes here to summarize the growth quarter that Chris has mentioned earlier. In Q4 of 2023, our total revenue and Developer Subscription revenue grew in every single quarter of 2023. Gross profit has also recorded sequential growth in all quarters of 2023. And for the first time in the history, we have consecutive quarters of positive adjusted EBITDA. Total annual operating assets decreased by RMB108 million between the years. And our EngageLab product operating globally, signing up more and more customers and contract every quarter.
We have done many things right in this quarter and the result has shown as such. We are very pleased with the Q4 execution efforts and numbers. Nevertheless, we will not sit on our laurels. We will continue to execute our plan and deliver the goods. Lastly, before I conclude, I'll give an update on the share repurchase plan. In the quarter ended December 31, 2023, we have repurchased 53,000 ADS. Cumulatively, we have repurchased a total of 188,000 ADS since the start of our repurchase program. And this concludes management's prepared remarks. We're happy to take your questions now, Christian?
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