Q3 2020 Aurora Mobile Ltd Earnings Call
[music].
Fashion John's question during the session you will need to press star one on your telephone. Please be advised that todays conference is being a cottage and I would now like turn the conference over your host for today Mr.
When they when gets tight. Thank you. Please go ahead sir.
Thank you A. J and.
Hello, everyone and thank you for joining us today on <unk> earnings release was distributed earlier today and is a vineyard and on the website.
GAAP Jaguar and don't see and.
On the call today on Mr weighted on the wall, Chairman and Chief Executive Officer.
Mr Fayed, Chen President and Mr., Shannon and Baum Chief Financial Officer.
Following their prepared remarks old free will be available to answer your questions during the Q and a session and that will hold on.
Before we begin I'd like to remind you that discount for on school and contains forward looking statements and within the meaning of section 20, you on he and the Securities Exchange Act of 90 day. So it was amended and as defined in the U.S. Private Securities Litigation Reform Act of 90 95.
These forward looking statements are based up on managements current expectations and current market and operating conditions.
Which are difficult to predict and May goes the company's actual results performance or achievements to differ materially from ddos and to forward looking statements.
Further information regarding these and other risks and uncertainties and other factors included in the Companys filings with the U.S. Securities and Exchange Commission.
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'd now like to turn the conference over to Mr. Andrew.
Go ahead.
Thanks, and right now.
Good morning and growth.
The need for everyone on the call welcome to highlight and Barbara for deposits without impacting earnings call.
As likely.
And I go back and equally model and we like that we have.
[laughter] I'll that page for your reference.
You made reference for the back at least for the leading the call today and they come and use.
He was both financial and on making sure our patient who knows that we have enough price where these.
And speaking Ali the only highlight our key operating and financial per month for the for the quarter of 2001.
First on the novel for mobile App, Eli thing and a lot of I'll get better for simplicity and.
Lets them and actually the Apis on Asian reached the one on one thing I need and as of September for people thought and Ponzi for all approximately 129 million a year ago.
And I for each October plus save and elegant App came on board I wouldn't volume.
And the for the quarter.
Quarter on quarter with deals and he does great number for for mobile App developers running on.
And we are truly operating yet and cars that guidance track.
Second.
The non-GAAP Mount free I think a unique mobile directly for recover continued to increase.
You want on free 90 day.
And but without and timing for all onetime free for beat in September 2019.
Lastly in the for the quarter on off with other and timing.
For the non-GAAP paying customers increased to 2405 from 2000 and free hunger for well over a year ago.
On production for free southern funding for this or not but.
Please refer to our presentation back up or are there for I'll I'll, let page for.
On the key financial highlights.
I would like to begin live for discussion on the topic for me.
Reaching for funding the development of Italy, and Britain complications they see it.
It's appropriate relative.
For for even better on that day.
And how the underlying toxic and these are permitted and all.
I think you name it for the quarter ending March for the for.
For 2000.
Thank you for the funding for it.
We will money have the SaaS business.
I'll talk and think it's convenient to recognize and practical resolved and gets called are weighted revenue up we're gonna be 60, 65, and six media and.
Our agent growth and we all can Ya and works for the or and then be important non union I.
16% growth for you.
I talk with those lately. The total revenue grew 18% year over year on many due to the strong 19% growth and development. So if they see a positive effect on that be caught in vertical application waste have been impacted by calling on key.
Well nothing that customer demand for wet and cold.
Application and gradually video in Colorado for on the second quarter of the year and revenue from vertical applications have been sequential growth per tool and second quarter [noise].
On a quarter on quarter basis revenue remained relatively stable and and then B 60 and media.
Hi, topic and basically growth.
For the propane has also saw solid growth up 16 for saying Yaki, a third and maybe if I did not meet and for the quarter and deal.
Denver Buddy.
But he is with us and party due to that that business and what happens with the revenue trend.
Also on GAAP basis basic growth margin for this quarter was 75 per cent.
Yup Youre talking year and for the of course.
Right and that pro forma gross margin for Mantech, and Oh, Wow, 60% range going forward.
And the for the quarter.
We continue to extensively for viral and industry verticals, focusing on happy and mobile App developers that weve operations and growth and monetization by leveraging our purpose and efficient secure and labor services and great operation not on that day.
You know and the quota way losses on West all.
What was the operation and up on.
Rough on mall App developers have and then two equal user engagement and retention and conversion as.
As well and I feel great efficiency leverage apartment average and use acquisition towards two for Adobe and their operations.
Recently, we also saw our strategy cooperation agreements and wait for meeting pipelines across all greater Bahrain he on industry verticals.
As for finance Fisher, and wed rather and on the tours can mean.
Fresh food and Commons and why not education for driver user growth and traffic and growing it was I speak with.
For example, we have already adopted and as we've seen and then.
They got that on trying to lie mostly weather.
Hi, Mike Mckee Medias again.
Fresh.
And 17 Joy.
And I go round on companies.
No I was going to produce April real he's got that you'll pay per per month in great detail.
Thanks, Chris.
Let me start the discussion on different revenue streams within the SAP business.
Since the first quarter of a friendship and developed for services was once again, just GAAP performer for the third consecutive quarter for the quarter ended September Thirtyth Twentytwenty, we recorded on the 43.7 million in revenue for develop and services, which represented and.
On your 9% to growth on a year over year basis.
The significant for revenue growth for you and develop conservative was fueled by the 26 for fans and the 58.
Since growth income number and the ARPU respectively.
For subscription and services.
Continued for the mall Cup and the tiny on to our suite of given up the services and.
New and every New York and customers include my other.
And act on that China mobile phone on Cobre Panama.
And the high all subscription services revenue was RMB 30.2 million a significant increase of 38% year over year, primarily driven by the increases in both the number of customers buy.
By 23% and ARPU by a 12%.
Value added services, which includes revenue from GE Alliance services and advertisements that have also recorded another strong quarter why.
Why on subscription and services satisfy app developers, our crews and on me.
Oh, Gee Alliance services, how apps developer with their use a topic for monetization need and.
For the aftermarket become incrementally comparative and the user growth and become segment and the quarterly debt the urgent need for after developer who monetize existing user base.
On to survive.
Our two day Alliance services come to the market, that's a very right time, who exactly so this and monetization purpose.
That exactly tremendous growth potential and good business there.
Revenue from value added services was RMB 13.5 million and this quarter compared to a zero revenue from that and quarter a year ago on the supply side recently, we have signed up a few keiro app with over 10 million views in China, such as the wife I am on the key and others.
Joining our g. aligned topic and network. The total number of the are you willing on network has already exceeded hundreds and millions for third quarter, reaching major milestones since we launched as opposed to let's say a year ago debt.
Awesome and of these killer App has proven the great value and the market acceptance of our duty alive product too.
To help the mobile app to further monetize their half topic.
On the demand side me program development.
It becomes a larger for topic the consumer of digit alliance.
The increase in the extension of the mini program ecosystem Muni program developers on no longer satisfied with the Ltd. The traffic and supply such as though those living wage had and the day urgent need for additional had similar topic for me that huge user acquisition for me.
Good day, Elias massive traffic, a reversal and the innovative advertising format.
Effectively meet the user acquisition.
Careful whether it's from the supply side on the demand side baby alive and gifts as who will comment on that.
This business, who have become a growth engine to drive our overall growth in the foreseeable future.
Yeah, I would like to provide a brief update on the legacy progress for the marketing and business.
In the third quarter of Quincy prints and pattern to the marketing business continues to wind down according to plan.
It's only contributed to put the percentage of revenue down from 49 percentage of revenue and the second quarter of 2020.
And up 4% of total growth profit now from 5% of Cotwo growth growth profit in the second quarter of 2020.
As previously mentioned, we will wind down and the president and by end of this year and therefore, starting from the first quarter of 2021 on the revenue booked wherever you on different than the past business, which includes the only develop its of interest and the vertical application [noise].
Now, let's move on to the discussion on vertical application for combined the revenue from vertical applications, including mocking Allergan and it's a risk management and eyes on increased by 6% from Lilly and B 20.7 million in the second quarter of Who's here too on B 21.9 million revenue.
From a marketing and product remain relatively stable at between the quarters for.
Revenue this quarter was again equally contributed by both the investment and phone and the corporate decline no corporate include the P. on bank Bawi ISO and the softened.
For the financial risk management segment revenue increased by 6% quarter over quarter. As this business continues to recover from the impact of Coke and 19.
We are seeing quarter over quarter and increased the demand and for all products in the financial sector.
Mainly by banks and the license the financial institution with.
With that particularly for John ARPU growth of 17% and.
Lastly, our eyes on business has shown solid growth of 29, because [noise] force over quota shares and by a 60% improvement in Apple as trying to recover from cooking on King we do see increase the demand for our location based intelligence products across different industry verticals.
With that and I'll pass the call to send them.
Thanks for that.
And as Chris and pay or just on talk about on the top line numbers for this quarter I'll go through some of the other piano and balance sheet items.
We are pleased that the increased contribution percentage wise year over year and quarter over quarter by developers for this and what the implication and push for gross margin for this quarter, two and all time high.
This historic high gross margin was 46 for 47% in Q threes and you can be it's a result of our commitment and success and investing growing and executing well on calls the developed for the service and what the application Didnt.
On to the operating expenses total operating expenses decreased by 14% year over year to renminbi 96.2 million in particular.
R&D expenses increased by 5% on revenue.
45.6 million, mainly due to increased.
Depreciation and.
Expenses.
Selling and marketing expenses decreased by 8% to really be 58 million.
Mainly due to reduction and better.
And result in lower headcount and less marketing expenses due to coffee at night and day restriction.
During the day offensive decreased by 36% to really be 24.1 million and me.
Mainly due to a reduction in bad debt provision that we made specific provision for one customer losses, most us materially provision was needed for this quarter.
I believe for healthier gross margin trajectory along with the good control over operating expenses, we continue into the next quarter and beyond.
Usually layer solid foundation for us to for the improved financial performance in the future.
On through the balance sheet item.
This solid operating and financial results bench and also reflected on our balance sheet.
We have more stringent credit quality and collection efforts accounts receivable turnover days have decreased significantly from 84 days in Q2 net bentonite into 45 days in Q2, two and due to income.
The deferred revenue balance, which represent cash collected and have been from customer and increased by 29% year over year to 100 million hundred and 10 million and the.
That's on September 30, or 32 and you.
Our operating cash flow has now been positive for two consecutive quarters. This cash into this quarter or moderate and really be 30 million.
In addition, our cash and cash equivalents restricted cash and shop and investment balance what was at a healthy level. Let me be 437 million us on September 30 of 32 and D.
But we believe we are in a very solid financial position to flow to invest in and expand on high margin SaaS business going forward.
So like I said, we're going to be 800 by 59 million as of September.
But the EPS and you can see this includes cash and cash equivalents of 437 million and mentioned above accounts and will really be 42 million prepayments on 40 million.
And that 90 million that maybe long term investment for 210 million and.
For the current liabilities for 453 million as of September Thirtyth.
Include accounts payable of 60 million, you said revenue of 110 million.
Let me diesel and maybe 5 million and convertible notes of 232 million.
Beginning from this quarter, we were sub for Whiting the quarterly softness this revenue guidance.
For the fourth quarter of 32, and the company expects the SaaS business revenue to be between Renminbi 74 million to 78 million.
Presenting quarter over quarter Brocal Fortunately.
Net income.
This Q4 bus business revenue outlook is based on the credit market conditions and reflect the company's Ireland and preliminary estimates for market and operating conditions and customer demand, which on the whole subject to change.
Lastly, before I comment on.
Ill give a quick update on the share repurchase plan.
In the quarter ended September 30, or because you continue we did not repurchase any share as of September 30 of belief and the cumulatively, we have repurchased a total of 921000 adss.
And just spot on program.
And this concludes managements prepared remarks.
We are happy to take a question now operator.
Please proceed.
Certainly ladies.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one and your telephone keypad and wait for your name to be announced.
If you wish to cancel your request please British pound for how she.
Once again, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be now and thank you.
We have the first question on the line are front and drop its lease coverage.
Hi, good evening, Thanks for taking the question and congratulations on the kind of building up the SAP and if that.
The continued progress up that's great to see and and also thank you very much for the improved transparency I like to applaud that I think that's that's very meaningful and helpful for the market to understand more on with what's going on with the business.
Thank you for that and so my question really actually and sports is going to come SAS business and one of things, we think about and I talked about in the past is kinda because the growth trajectory and as we get more to a pure sack business kind of in Q1.
And next year I, just want to kind of maybe getting a bit more discussion on kind of I guess, the the growth trajectory and so I look at the SAS business kinda from sequentially I'm. The revenue is going to you know kind of flattish and I realize year over year, obviously, its free and three significant but looking at the the sequential it looks less and less so.
True through Q3, and I want to get a sense and looking kind of into into Q4, and maybe you know obviously this and looking for some growth there, but maybe.
On a kind of a bigger picture view and a 21, what do we what should we be looking for and just kind of for the growth drivers and it sounds like maybe a push alliances definitely and interesting area, but also on the kinda give us your sense of what you're looking to to see the capex the growth driver to or for the year.
Brad.
Yes.
Hey, Ryan Hi, this is a bad debt for so if your body and regarding the tops business performance in the second quarter right. We are seeing a flattish performance you know sequentially. That's the major reason is Ah you know on that.
That's a and actually when you compare compared to compare the value added and service actually that's a slightly either be a decline in the in the third quarter compared for the second quarter right. So in the earnings back actually on the pitch. It to I explained so what is the reason behind it it's mainly because in the second quarter.
You know we benefit from you know on.
A couple of customers, who had a strong E commerce E commerce kind of like a you know demand due to a 618 on promotion activities and this also E. Commerce was particularly strong and also a in a in the in the <unk> in the second quarter and that's a you know sort of because we just.
Starting with the business and.
And at the end of last last year right. So like a second quarter is still in the in the process for ramping up so the ER and so that basically the customers and the advertising husband is actually and down not you know a very diversified customer base right. So we haven't given and get the customers. So if for a single customer who.
Outperform you might you know skewed to the performance they love it so on that and that's why you and see you know actually the second quarter was a seemingly.
Uh Huh has a better performance and identity for the quarter, but since the third quarter actually we have and I think diversified our customer base, and a and a and and that's a good diversification and you're still going on in the in the fourth quarter.
So you you also noted our Oh guidance for the for the fourth quarter ice and spots business youre going to see a sequential growth of 13% and 19%. That's also that's actually the frac, our our expectation for the value add and the service, which will have a strong.
Quarter over quarter growth momentum.
And because of that we are able to you know guide guidance is ER and this the sequential sequential growth. Okay. So I hope that cash address your questions.
And then maybe for the kind of draw out and maybe and and I take on board maybe for a little early but just because we were thinking about the transition kind of away from talk and marketing, which is going to be done by the end of this year and and were looking kind of it and a pure SaaS model next year should we be looking for the growth driver there and that war.
And the back on.
Segment, which is effectively I guess, the kind of the Oh, the push alliances that is that kind of where we should be seeing a kind of a lot of growth says that that extends that picks up or alternatively, maybe if you could just share some thoughts on again, where you see kind of explosive growth.
Flowing through the next day or the next year be great.
Yeah, so so [noise].
No I'm actually and then we had a number of discussions before so actually its a growth driver shortly well be happy the value add to the service right and because of the nature of the excess supply and the demand it's mainly mainly on the on the supply side as well as the weekend and enough supply you know.
We have a mall app, joining our our traffic and network and.
You know and generates more D.A., you and you know for us and we will be able to drive the tribes and revenue growth rapidly so and so internally and we also have a very high expectations for the growth trajectory for next year for this business and and we believe it will achieve you know triple digit.
Growth compared to this year for this year in total in total for for this and for this business line, it's it's roughly roughly.
About somewhere between 50 million to 60 minutes, but next year. We are where we are looking at you know our triple digit growth for fall for this oh for the business is mainly we have a very strong pipeline of the of the of the traffic a of the app for who who's going to join on network and we kept on.
On our recently announced now for the.
Actually the addition of my wife I'm on for key right, so whether or not but he is in the country in the initial stage of ramping up and you had done and I'd be included in the 100 million and you know idea you I and we announced that in the in the prepared remarks, so while I'm on for T. as you know.
He itself alone generated you know close to 100 million share or do you like so so that actually you know on argued and kind of like the you know the supply the pipeline gives us a very strong confidence and we are able to give a you know what your for digital growth for on for next year for for this business right for the for the on the other side.
And it's like a subscription and if it's going to and as I mentioned before and you know, it's going to follow and traditional fast kind of like a growth trajectory you know for these who oh.
30% to 40% the issue and a growth mainly driven by the increasing number of a customer as well as we are we are introducing new functionalities of our product offering so which can help the ARPU as well so so and so basically that's a function of both.
Both of these Ah Ah you know a improvement and for the for the for the <unk> and.
For the vertical applications actually on you've already seen the sequential recovery in the second quarter and the third quarter compared to first quarter right foot Costco, we we we've hit the bottom, but now we on recovering from the bottom. So so so on a sequential basis you continue to see the growth from this business.
But oh coming and going back to the same level as as we experienced last year you may take you know.
For more for tourists a couple more quarters, yeah. So so that's the overall and other assets and the three major business lines. The trends you know that the and and the trend and we are seeing and and the Columbia and to offer.
Okay. Thank you.
And then just wanted one kind of housekeeping thing I think.
Remarks, and we were discussing GPM you expect that to stay around 60% is that right that reset.
So Ryan can you repeat it didn't get you.
And sorry during during your prepared remarks, I think we're discussing the gross profit margin and you said kind of on a normalized basis.
And should I think you said, 60% 60 day.
Yeah, I get that correctly, yeah, yeah, Ryan actually actually if you see the pro forma for our.
You know the the gross margin and meaning just for looking at the fastest and it's right. So over the past for years actually it's always very stable between 70% to 80%, it's like a bouncing around that 75% right. So so it seems the top up and next year for the first quarter, because we know it.
Longer have pack and marketing so so our our you know the corporate and.
Gross margin will be so we are basically coming on different and from the SAP business right and so you can expect growth margin not to be above 70% and since the beginning.
For next year.
Yeah That'd be my question is the Delta there and 75 cents and Canada is a low and.
Okay, and then and maybe what kind of one last thing I'm just.
Just come to the box it all back so and for being what it is obviously the revenue growth were talking on Hsas, and obviously sounds very attractive and and it can be stronger gross margin and additionally point to and kind of a more and more exposed and kind of growth profile, but then if you look at opex.
I noticed that you guys have kept that pretty tight and kudos for doing that kind of day. During this year, especially kind of challenging as conditions and then I'm wondering kind of once once you transition you know kind of in into Q1 21.
You should be looking for a change and kind of the cost structure as your become mortgage strength bass business or kind of maybe how should we be thinking about and those costs, which ultimately on obviously drive for.
For profitability as we move into 21.
Yeah. So in terms of cost structure actually we are not going to dramatically change to tend to the cost structure and you know next year compared to this year right. We don't have a you know a slightly increase you know as normal because because every year you know the and probably expecting you know for the amount of debt.
For the salary increase right. So we will keep keep the increase the winning we didn't guide range within that range, but certainly we are also you know trying to continuously high a better talent and ER and I try to try to basically optimize and.
And to work force right. So removed you know and Ah.
Non performer.
So.
In my model actually I I would expect you know on me about 10% to 15% increase of Opex compared to this year.
And 20, Panama, Okay and.
Okay, and then I think that.
Okay.
On my side actually net.
Sorry sneak in one last one on on.
On the balance sheet and it looks.
Yeah, again, they need and receivables and what you guys have been talking about last year. When you began the transition of less working capital and what that looks like that's that's definitely playing out as we see a up and down.
And just kind of curious again and moving.
On the SAS and more to the SAP era, I, suppose and she setting and that continue to change and I suspect and.
You mentioned before that for revenues for losses and to be paid for and.
Kind of business.
The positive.
And curious how we should be looking at the and the balance sheet and.
Continues to kind of volume.
The new model, maybe on Shannon and maybe that's one for you.
Yes, right and I Wouldnt read losses.
See any deterioration awful balance should accomplish and once we switch to stop business, probably as you know the majority of our SaaS business customer.
On the prepaid mobile.
So we do not expect to see huge interest in our because we switched from I got on the old business and new business on the contrary, we do expect to see deferred revenue to increase we should we have demonstrated for the past two quarters has been increasing.
On the whole reported simply because affect net understaffed business, we do collect money in a bunch on customers.
So I don't see we I do not expect us to him and he.
Moving forward yeah. So so currently I creation, and we believe we still have to tag and marketing business involved for right. So you know off the top and mapping business is completely gone you know.
As you know, it's not gonna marketing and has a longer a on so what that business is gone and you know.
For our 45 days of Ace ER and in we achieved in the so called for Us and keeps on T. and we think that there's still room for improvement. So we are aiming to you know get anywhere between 30 to 40, I think you know and that's a that's a good.
Our days, we are trying to manage okay. So that's our target.
Got you, Yes, you said I didn't mean to indicate and there's a deterioration that's all the always coming right and it's not that there is a and.
Actually we are considering it for you improved [laughter].
That makes that makes a lot of and okay. On so that's all for me guys.
Thanks appreciate the color. Thanks again.
Yes, Thank you I.
Thank you.
Once again, if you wish to ask a question.
Please press star one on your telephone keypad and wait for your name to be announced.
You wish to cancel your request leased for spot.
She is.
Star followed by one Josh corrected and thank you.
Once again, if you wish to ask a question. Please press star one on your telephone keypad and.
And your name to getting on just.
And there are no for the questions I would like to and the coal.
Sorry, we have Oh flow again from Ryan Roberts. Please go ahead.
And if I got you so maybe one more on the on the buyback I noticed kind of and release you mentioned there has been no buyback activity kind of in Q3 wondering if you can maybe give us and update.
Kind of a maybe post.
Post Q3 and is this.
And like you, maybe give us a sense and with me.
Kind of capital allocation, maybe as you kind.
And as you get some of the I.
I guess balance sheet for those and the can both effectively taking care of and simple soon how are you thinking about the capital allocation as.
He kind of into the more cash generative hsas and kind of model.
Hi, Tim.
Just for him.
[noise] [noise] yeah. So so so right so actually you know on.
And with the assistance you got right right, we are expecting more as they by day and and Uh Huh quickly we might reach the breakeven point and the ones and we have enough cash actually and we certainly you know and if I had to organic growth. We were to think about you know and are now.
And then acquisition right to acquire some.
And some non you know the upcoming for all kind of like a proven product in the in the marketplace right or with a small team, but they have a good product for those those fabs and soccer players on what they are missing is if they don't have a sales force. They don't have the customer base right.
So we have a very robust seen on sales infrastructure. We have the system you know to two to two and to deliver and those innovative products and into the market right. So and so I think and we really should actively actively leverage and our advantage and to you know to two.
And to basically on you know two two and to look for Opportunistically, such kind of opportunities and so by doing so we can.
We can accelerate.
X. I recall growth trajectory yeah.
Yeah, Thanks, and and in any kind of any kind of color discussion maybe on on the buyback.
Okay sagging.
Hi that no I don't think there's any immediate plan to buyback and that's not just because it has to say we were trying to get more and shouldn't himself and grow for SaaS business. So there is no immediate plan to repurchase right now.
Okay. Okay. Thank you.
Thank you.
Thank you.
And there are no for the questions I would like to hand, the call back to really.
Thank you and Jay [laughter]. 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 IR team. This.
This concludes jikun and have a good night and thank you again.
Goodbye.
Hi.
Thank you, ladies and gentlemen, and that concludes the countries for today. Thank you should participating you may own disconnect and Q.
[music].
[music].
[music].
And.
[music].
And.
[music].