Q2 2020 Aurora Mobile Ltd Earnings Call

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Ladies and gentlemen, today's conference call. This you to begin shortly.

Such time, you're likely to remain I'm usually code. Please continue just 10, but we think U.P. patients. Once again today's conference call is due to begin shortly.

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Ladies and gentlemen, thank you for stunning Bob.

Well by the second quarter 20 drink earnings conference call.

I'm only had been didn't listen only mode outdoor speakers there will be gretchen.

Great and doing the section you will need to good start wondering intuition <unk> right, but they just being too crowded.

I would not like did and the confidence out your host today Mr. Rene Randall fine. Thank you. Please go ahead Sir.

Thank you Ajay.

Hello, everyone and thank you for joining us today.

Oh I lost earnings release was distributed earlier today and is available on the website.

Oh, Gee why don't see and.

On the gold today I'm, just so we don't rule, Chairman and Chief Executive Officer, Ms., Stephanie Chen President and Mr.. Some then Baum Chief Financial Officer.

Following their prepared remarks old pre we'd be available to answer your questions. During the Q into assertion that will follow.

Before we begin I'd like to remind you that this conference call contains forward looking statements within the meaning of section 21. He I'm just Securities Exchange Act of 19. So do you saw as amended and as defined in the U.S. Private Securities Litigation Reform Act of 90 95.

These forward looking statements are based upon managements current expectations and current market and up everything conditions, which are difficult to predict then make cools the company's actual results performance or achievements to differ materially from goes into forward looking statements.

Further information regarding these and other risks uncertainties and other factors I included in the company's filings with the U.S.C.C.

The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise, except as required under applicable law.

With that I like to turn the countering score over to Mr. Liu. Please go ahead.

Thanks, operator.

Well money and go even need wailea well into cold.

Welcome to among other I'm over second quarter 2000 times earnings call.

Vibrating mesh shale, we maybe let that whatever but.

We have a hobby lobby at a clarity on this back onto I'll I'll that page under Webcasts and presentations section.

Robert.

You may refer to that as we've been pretty weak Nicole today.

Since the end of 2019 at the highlight getting all that said earnings call. We took out and we should do to further strengthen our call competitors.

I'm creates presale data I wish I think you could see system.

Membership basis and vertical applications.

But that's what I resolved as of today.

Later in this call they Shannon I myself, there tends to elaborate more on diesel from different angles.

Let's begin Ali building highlights for our operating and financial performance for the second quarter ups with other parties.

First the number for mobile apps and utilizing these wonderful I'll give it a recently.

Our German actually went up installation.

Reached a lot of onetime items again as opportunities with other tiny from approximately 1.2 non media that's true.

These represent an average of 18000, new App coming on board every month.

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[laughter] committed to PK studies has increased by 50% to 40 plus it yes as of June 2000 time, he from content. The classic fleet and enjoyed another 19 eighties, many articles vote to focus in Brazil, I'll get back, but the thing I'll, let subscription based with members of the season and delight.

Okay. That's edification, that's the case.

Right.

Well, thank you Robert directly to recover continued to increase.

Richard One was placed on one quickly he has enjoyed with other time he from one quarter likely be to enjoy the other night.

That's sitting in the second quarter of southern tide.

Reasonable Hayden customers increased to 2000 and.

On to a logistics from 2000 and 211 a yoga.

I try to kill two birds with other times, you'll find there's enough.

Thank you referenced we'll I'll put the patient that well financial highlights [noise].

Our strategic focus to try to our topic.

Rich in accordance with Atlas, if they did and vertical applications.

Then the reiki, though.

Significantly turn investment in this quarter.

It's been it's just a record the impressive revenue up we're going to maybe [laughter].

[laughter] plus Eileen.

But the 5% growth for both Yup Yup Yup and I'll call. It a at gross profit approximately 50 50 partner aiming at.

What do you play for said you know over here and 39%.

Well, even though the overall Nike remain to try to get by the impact I'll, probably not asking them.

In building on the plate and momentum from the first quarter give that unless something is what it was again to highlight other partner, we've even gradual improvement you recognize that net reminbi 45, plus 8% <unk> 45, plus aimed at your revenue Lucky, but I'm not sure basis.

A new historical high in terms of quarterly revenue.

Its revenue includes all subscriptions and better at this are busy.

The offering them in Oklahoma, and I, just 10% and 46% revenue well year over year and called off quota respectively. The backlog increased low operating costs Emerson numbers.

Equally compressed knew what the growth across all day, probably benefits somebody's just overcoming be lucky, but he said you 5% prototype mood at least represented 142% and 50% year over year and put on hold up world respectively.

Well it's essential.

We continue to see more customer sign up to our say all develop or something.

During your customer inquiries by I'm not limited to Tesla stop on China, Pentecostal, China, Everbright Bank Patrick Carpenter.

King I hope it's behind us.

Getting calm and play about.

Subsequent to this revenue was renminbi much plus 7 million a significant increase of 52%.

Hi, Marine driven by increases.

In both the number of customers by the department that Apple watch in person.

They will do something which include revenue overall advertisements on she bought my last services.

I will also likely another quarter operating practices in south.

Revenue overall value added services also resulted in another look well when I plan to focus them quarter on quarter over quarter BARDA, maybe they are Columbian in kilowatts, southern tightening or maybe.

50 me then it gets harder.

We know that both the opco and customer numbers, well by more than it's different than present a quarter.

He kept them I'll I'll like we're certainly just in the quarter included three ball with large and we'll take off and semi deal and safety.

Let's start off premise was primarily driven by white adoption.

Such statements by making progress maybe comment.

Yeah, I would like to provide sounds like insulin additional insight on the contribution of the legacy talking about cutting BC.

In the second quarter I came up increasing its only cogent their debt phenomenon, but then if I put that okay revenue and what's appropriate respectively.

Yes, it was down significantly from 61 per se revenue contribution and to leverage than gross profit contribution in a lot for corporate.

As we must towards getting into other legacy.

Increasing their budget visit is that it would be losing it even if it's an going forward.

Now I read as opposed to say, who will discuss the tools will permit the free because that I'm living reticle applications anybody that.

Thank you Chris.

The combined to revenues from vertical applications, including market intelligence financial risk management, and the eyes increased by 16% from Renminbi 17.8 million in the fourth quarter of this year two renminbi 20.7 billion this quarter.

Revenues from our intelligence products grew by 15% quarter over quarter, mainly fueled by growth in the number of customers.

Recently, we launched another product and I have many programs version that allows customers to obtain insight into different analytics of many programs in China.

During the quarter, new Investor and the pharma customers include the many long haul and also a hedge funds.

And the new copy the customers include bye-bye. Meanwhile, Chalmette.

Agriculture Bank of China et cetera.

For the financial risk management segment revenue increased by 26% quarter over quarter. This is due to the quarter over quarter recovery in demand for all products in the financial sector as a market recovers from the growing not virus.

And it's in his 6% growth revenue was mainly fueled by the improvement ARPU, which indicates husband that are using our service mall in the quarter.

And then lastly, our either business.

Also showed signs of recovery from the impact of the growing up Iris as trucking mall and the tourist sites reopened during the second quarter. In addition, you saw an increase of demand for all our eyes on product in the coffee developments that sector during the quarter.

With that I'll now pass the call to Shannon.

Thanks.

Since could that be where were you talk about all the topline numbers what this quarter I'll go through some of other piano items.

Despite a tougher than expected business environment in the second quarter 2020, we managed to grow gross profit gross margin to historic high of 41% compared with 33%.

Sequentially in a significant increase from 26% doing the same period last year.

This record highs, 41% gross margin in Q2 Twentytwenty.

The following two initiatives that we undertook and second we executed well.

One we continue to focus and invest into good luck.

And but the good education as we previously shit the gross margin for what they were supposed to visit and but the application has been individual 70% to 76% for the past five.

Second the sheep away into why didn't all of our legacy pocket that marketing business, which generally had low single digit gross margin.

As a percentage of revenue.

The service and but the good application accounted for 51% during the quarter.

Significantly increased from 17% during that same period last year.

Pocketed marketing one denahan accounted for 49% of total revenue during the quarter down from 82% doing the same period last year.

On gross profit contribution developer service and but the good application accounted for 95% of cross pocket.

There were pockets of marketing, which accounted for only 5% of cross bucket do the portal.

I'll now recap how much if any for the first half of Twentytwenty, one we have successfully transition or business to a soft nature high margin business.

Our SaaS business machine, because both the developers movies and but the good application with the majority off our revenue more than 51% and a profit to be contributed by this business.

Second our SaaS business has actually been.

Significant growth trajectory, we've stated treat the 10 year over year and that to treat with 35% auto with what the growth.

The most impressive Walker group or develop a services right, but we recorded a 157% year over year group in the point, though.

We have recorded a new all time record high gross margin were 40, 41% into second quarter.

We expect that all SaaS business wishing because both the developer service and but the application. We continue to underpin the foundation of our business and provide solid revenue growth gross margin going forward.

Next onto the operating expenses total operating expenses increased by 4% year over year to 89.8 million repeat.

In particular.

The incentive staying relatively flat at 46 million selling and marketing expenses decreased by 12%.

Junaid expenses increased by 37%.

Based on the solid financial results delivered and contributed in Q1 in Q2, often due to NB, My Ohio and stable gross margin develop a service empathic application.

Believed that we have now.

We now have the right strategy in case, you further improve our business and our financial performance going forward. This is evidenced by the full in Q1.

One.

Hi, Yes, with initial revenue contribution from developers services and what the capitation.

To continue improvement year over year end quarter over quarter in gross margin.

Three opex going at a much slower pace than revenue and gross profit.

For all via live resulted in a 40% improvement in our adjusted EBITDA, where it was a negative 18.3 million during the quarter compared to negative 30 million was 30.3 million in the last quarter.

Onto the balance sheet has been so the assets were maybe 879 million as of June 30, Twentytwenty. This includes cash and cash equivalent of 416 million.

Probably still goes off 66 million prepayments of 44 fixed assets 100 million lumped them investment of 213 million.

No problem library liabilities was 438 million.

This includes cost and accounts payable of 16 million deferred revenue of 98 million accrued liabilities of 85 million and political most of 239 million.

Lastly, before I conclude I'll give an update on the share repurchase plan.

In a quarter ended June Thirtyth Twentytwenty, we did not repurchase any shares as of June Thirtyth, two independent cumulatively, we have repurchased a total 951000. It is too soon to start off or repurchase program.

And just completely managements prepared remarks, we're happy to take the call now operator.

Please proceed.

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Secondly.

Ladies and gentlemen, we will now begin the question and all discussion if you're already asked a question. Please press star one of your telephone keypad and retreat named could be announced.

If you wish to cancel their recruits leased respond or Heskey star followed by a one to ask your question. Thank you.

Once again, if you wish to ask your question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request at least respond.

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Good question comes from line ups Ryan Roberts. Please go ahead.

Hi, guys. Thanks.

During the quarter at a couple of quick.

I hope you can now.

First first thing is it sort of good sense of the.

Cost line near kind of the sales and marketing article one of the advantages of shifting to the new SAS billing was to kind of.

Let the customer relationships to manage so to speak kind of working with the larger platforms. In apps you mentioned earlier I want to get a sense of what's happening on the sales marketing line there how does this quarter.

And maybe kind of is more more broadly what's happening on the other kind of fixed Vicki spends less.

So Brian just to recap you. All your question is relating to certain marketing expenses for water right.

Yeah Yeah.

Yeah, I guess, because as you know our business majority of fills in another thing is really didn't lose there was not marketing so the slight increases in in connection with the increase in.

Revenue for any given the personal business and the yeah. The sub business for their local service and well do that and but the good application. So those are majority tied to the increase in that particular business.

Okay, but I guess kind of as we look forward here.

Right.

Obviously, we again with the the business model of having kind of customers to managing corral. It seems like there should be leverage there for that for that I'm. Not mean luck there should be leveraged across all kind of me I mean cost lines, there, but just looks like I'm going to what the transition we haven't really seen much of that yet I know I know the kind of sales marketing come down.

A little bit kind of why or why but not very much and I just was expecting kind of as you turn down the salesforce too.

Managed to let the count.

That should improve a bit more I'm sort of curious why we're not seeing that.

No I don't believe that was the case because.

We would you need to have alone.

Let's turn to BTD developers. So this segment of the business right. So those are the thing that tied to the as much selling expenses. So we do not feel when we do not expect to see a deep in selling and marketing expenses, while we grow and develop the service. So he doesn't go that way.

Okay. So it sounds like I guess I get head count is gonna stay roughly flat with the misunderstood the previous conference call. When you were mentioning selling to directly to platforms working directly with platforms was less manpower intensive than.

And having your direct targeted marketing business I must admit that.

Okay and.

And then just kind of.

Maybe kind of sticking with the kind of cost kinda talk for a second I thought working capital came down quite a bit I'm trying to get a sense of as you kind of go forward is that a level.

To to normalize out what kind of maybe there's some more improvement there or any kind of color you can share on the capital intensity of the new business model appreciate it.

Sure.

Probably we do not disclose the cash flow for this quarter, but are you looking maybe we don't know I suppose statement for this quarter. We did have a cash inflow operating cash into more than 50 million.

Let me be and this is by far the best quarter. There we have in terms of cash inflow.

At the operating level, so that any thoughts on site.

Looking at the investment that we are required to make no. We do not expect to have a huge investment in satellite so goes on.

Some other fixed capex anymore, I guess, the only reason why the working capital this quarter it looks a bit.

Smaller is because the fact that we reclassified the convertible notes from long term.

Invest long term viability to shop, and because we are required to potentially repaid a convertible notes by next April so it's an accounting that we will adjust the.

The classification of the CB.

Right Okay.

So in terms of operating net income.

Cash flow, we're comfortable with where we are ambitious effect that we are moving to SaaS business. We are no longer required to do what we did for the <unk> for targeted marketing, where we prepaid and media, where we have to give credit to all the marketing.

Customer so this.

This does is good for us operationally in terms of cash flow in terms of gross margin. So we will become comfortable with where we are right now.

Got it yet I was referring more.

Came down significantly so you kind of structure, maybe some tables, a little bit that with the cash flows going to driver.

That's all the movement.

I'm, just gonna get a sense of or the overall working capital status and South where you are is about kind of where you want to be the level of wrapping that you're doing.

Which makes sense okay.

I appreciate it.

Thank you.

Once again, if you wish to asked a question. Please press star one on your telephone keypad and greatly named could be down.

If you wish you can celebrate Chris leased respond to rehash ski It star followed by one to ask your question. Thank you.

Once again to ask your question. Please press star one any telephone keypad and wait FINAME could be announced thank you.

Is there no further questions I would like to end the call it back to ready for any closing remarks.

Yes.

Right now or what do you for any closing remarks.

Yes. Thank you Ajay Thank you everyone for joining our call Tonight.

If you have any further questions and comments, please don't hesitate to reach out to the I don't see.

This concludes the coal made a good night. Thank you all.

Thank you. Thank you.

Ladies and gentlemen that does conclude your conference for today. Thank you for participating.

You may all disconnect now thank you.

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