Aurora Mobile Limited (NASDAQ:JG) Q3 2023 Earnings Call Transcript

Aurora Mobile Limited (NASDAQ:JG) Q3 2023 Earnings Call Transcript November 16, 2023

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction will be given at that time. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Rene Vanguestaine. Thank you. Please go ahead, sir.

Rene Vanguestaine: Thank you, Michel. Hello, everyone, and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at ir.jiguang.cn. On the call today are Mr. Shan-Nen Bong, Chief Financial Officer; and Mr. Guangyan Chen, General Manager. [Operator Instructions]. 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. 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'd now like to turn the conference over to Mr. Bong. Please go ahead.

Shan-Nen Bong: Thanks, Rene. Good morning, and good evening, everyone. Welcome to Aurora Mobile's 2023 Third Quarter Earnings Release Call. And for all our callers and listeners today, I wanted to let you know that our CEO, Chris, is on business trip at different time zone, plus is not available to attend the call today. And we -- in Chris absence, I should have the privilege to share with you all on the great quarter that we have this quarter. And before I comment on our Q2 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. I refer to this quarter to be a great quarter for a number of reasons. And here, I would like to categorically go through the great things that we have achieved this quarter.

Firstly, 2 of our business lines recorded sequential revenue growth in each of the 3 quarters of 2023, where developer subscription revenue grew 15% quarter-over-quarter. Vertical Applications revenue grew 6% quarter-over-quarter driven by Financial Risk Management revenue, which grew 11% quarter-over-quarter. Secondly, our gross profit in absolute dollar terms also grew in each of the 3 quarters in 2023. Thirdly, we achieved yet another lowest OpEx in history in this quarter. Last but not least, we achieved adjusted EBITDA positive in this quarter. Therefore, this quarter has been great operationally and financially. And next, I'll spend more time to share with you on various aspects of the business. For our total group revenue, we achieved positive growth of 1% quarter-over-quarter.

Now let me go through our different revenue stream. Developer Service revenue decreased 10% year-over-year, mainly due to the weakness seen in the value-added service, offset by the 12% growth in subscription services. Next is a detailed discussion of each business line. Subscription business revenue was CNY 46.7 million, up 12% year-over-year and 15% quarter-over-quarter. And this was mainly driven by increase in both ARPU and customer numbers year-over-year and quarter-over-quarter. And we are very pleased with the positive trending of this business where the revenue grew in every quarter since Q1 of 2023. As some of the notable new and renewal customers in this quarter include but not limited to City Bank. FAW Volkswagen, FAW Toyota, Italian Bank, German Bank, just to name a few.

Value-Added Service revenue were CNY 4.9 million, decreased by 58% quarter-over-quarter, which was due to the annual 618 online shopping festival in Q2 where advertisers increased their spending. However, no such event in Q2. Next, let me give you some updates on our overseas product EngageLab. We have hit a few key milestones in this quarter that we are very proud of. Firstly, we now have more than 100 customers signed up to purchase our EngageLab product. Secondly, these customers come from 16 different countries and regions, including Hong Kong and Taiwan. And in this quarter alone, we added 4 new countries where our EngageLab is made available to overseas customers. Thirdly, our cumulative signed contract value of EngageLab has exceeded CNY 10 million since the launch of this product in Q3 of 2022.

So our going overseas initiative has clearly been a success. From our side, there are a few initiatives we will undertake to further our EngageLab expansion. This includes: one, we will continue to expand our reach inside each of the 16 countries and regions that we are servicing now, we aim to sign up more customers in this country; two, will expand to other new countries and region every quarter. Now let me recap on the EngageLab product we have. Our EngageLab product allows our customers in different countries and regions to engage with their own customers in an effective yet cost-efficient manner. Our one-stop EngageLab customer engagement platform enables our customers to use any of these following messaging channels, be it app push, web push and e-mail service, SMS service or Whatsapp business API.

Since its launch in Q3 of 2022, we are very pleased with the progress to date. However, the work is not done. We will continue to improve our the service delivery of EngageLab so that we continue to expand across different continents in the near future. Next, I'll go over the revenue for Vertical Application, where it's made up of Financial Risk Management and market intelligence. Vertical Application had another great quarter. Sequentially, the quarterly revenue for Vertical Application has grown in each of the quarter in 2023. In Q3 alone, it grew another 6% quarter-over-quarter, fueled by the strong revenue growth from Financial Risk Management. For Financial Risk Management, revenue grew both year-over-year and quarter-over-quarter. In addition, the revenue recorded sequential growth in each of the 3 quarters in 2023.

A financial analyst poring over market data, projecting the company's futur investments.

It was positively impacted by customer number growth of 18% year-over-year and 27% quarter-over-quarter. The addition of new customers' numbers signify that we are gaining more customers and as the things customers are renewing their services because this is important as it pave way for us to achieve revenue growth in the near future. This Q3 customers include, but not limited to [Indiscernible], [Indiscernible], [Indiscernible] and other more licensed financial institution throughout China. As for Market Intelligence, the revenue decreased 4% quarter-over-quarter due to the relatively quiet investment sentiment towards Chinese ADRs. Plus the demand for China-based APP data has also decreased accordingly. Nevertheless, we still managed to sign up some well-known large customers such as Mercedes, [Indiscernible] [Indiscernible] and other global hedge funds and overseas investment funds.

I'll now go through some of the key expenses and balance sheet items. On to operating expenses, I'm again, we're pleased to share with you that in Q3 2023, we have yet another record low quarterly OpEx at CNY 60 million. The Q OpEx was down 25% year-over-year and 6% quarter-over-quarter. As I mentioned in the previous quarter, maintaining low level of OpEx is of critical importance to us. And this was the main reason why we are able to record lowest quarterly net loss since IPO and return adjusted EBITDA positive in this quarter. Let's now go to the individual OpEx category. In particular, R&D expenses decreased 14% year-over-year to CNY 32.8 million, mainly due to the lower headcount that reduced salary cost and associated compensation and a decrease in server depreciation expenses due to our own growing cloud initiatives.

Selling and marketing expenses decreased by 10% year-over-year to CNY 21.8 million, mainly due to the decrease in salary costs resulted from head count reduction as we further make adjustment to operate at the optimal level. G&A expenses decreased by 69% year-over-year to CNY 5.4 million. This was mainly due to the onetime gain on disposal of fixed assets recognized in this quarter. Even if this one-off item is excluded, the G&A expenses still decreased by 37%, mainly due to the overall continuous effort to streamline expenses across the board. As I mentioned earlier, as a result of our focus to drive OpEx at optimal level, the adjusted EBITDA has recorded a positive CNY 4.5 million in this quarter. In plain English, it simply means that the group is making more than it is spending with surplus to keep in this quarter.

And this is a great result for which I'm very proud of that what the team has done throughout the organization from a frontline sales team who have been going all out to acquire new customer and sign up new contracts, to the support team and the back office will diligently control our expenses. Next on to the balance sheet. I'll share 2 very important KPIs that we closely monitor. We continue to maintain a healthy AR turnover lease at 40 days, and this is relatively consistent year-over-year and quarter-over-quarter. We pride ourselves in achieving such a low AR turnover this comparing to the peers in the same industry. Secondly, one of the key financial KPIs for tracking the performance of SaaS companies is the total deferred revenue, which represents cash collected in advance from customer for future contract performance, which continued to be a high balance of CNY 130.6 million.

And this is the seventh consecutive quarter where our deferred revenue balance has exceeded CNY 130 million. And both our onshore and overseas customers are continuing to purchase and renew our services. More importantly, we are collecting cash in advance from customers. Next, total assets were at CNY 359.5 million as of September 30, 2023. This includes cash and cash equivalents of CNY 98.4 million accounts receivable of CNY 31.3 million, prepayments and other current assets at CNY 23.7 million. Fixed assets of CNY 1.9 million, long-term investment CNY 134.9 million, Goodwill at CNY 37.8 million and intangible assets of CNY 19.5 million. Total current liabilities were CNY 233.2 million as of September 30, 2023. This includes short-term loan of CNY 5 million, accounts receivable of CNY 20.2 million.

Current operating liability of CNY 6.4 million, deferred revenue of CNY 130.6 million, accrued liabilities of CNY 71 million. Next, allow me to take 1 minute to recap 4 key achievements that we have had in this quarter that I would like that all of you to take away from this earnings call today. In this quarter: one, our Developer Service subscription and Financial Risk Management businesses recorded 3 consecutive revenue growth; two, we have more than 100 Engage less paying customer from 16 countries and region around the globe with cumulative signed contract value exceeded CNY 10 million; three, we have the highest quarterly gross profit and lowest quarterly OpEx in 2023; four, we have turned adjusted EBITDA positive. Lastly, before I conclude, I'll give a quick update on our share repurchase plan.

In the quarter ended September 30, 2023, we have repurchased 854,000 ADS. Cumulatively, we have repurchased a total of 2.69 million ADS since the start of our program. And this concludes management's prepared remarks. We'll be happy to take questions now. Operator, please proceed.

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