Q2 2021 Aurora Mobile Ltd Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile's second quarter 'twenty 'twenty earnings Conference call. At this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to answer questions during the session.

One on your telephone.

If you're requiring any further assistance please press star zero.

Be advised that today's conference is being recorded I would now like to hand, the call in terms of what you know of course.

Do they sort of any value. This thing. Thank you Pease go ahead Sir.

Thank you all right.

Hi, everyone and thank you for joining us today.

The earnings release was distributed earlier today and as amended by the M D.

Website.

G Guang dong.

Yeah.

On the call today are Mr. Weighed on we will chairman and Chief Executive Officer, Mr. Fei, Chen President and Mr. Shan Nen Bong Chief Financial Officer.

Following their prepared remarks, all three will be available to answer your questions. During the Q&A session that will follow.

Before we begin I'd like to remind you that this comfort around this call contains forward looking statements within the meaning of section 21 E 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 income designs, 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 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. Hu. Please go ahead.

Friday.

Good morning, and good evening, everyone on the call well go onto Aurora Mobile's second quarter, 2000, and talking a lot on this call.

Second quarter, well, we have been operating under the auspices of modal they.

Since the beginning of 2021.

With you delivered a strong result, and I am pleased to kick off this call now to share with you our business progress and keep you think that metric. It's I'll tell you what the in the second quarter of 2021.

Before I comment on our Q2 results I would like to remind everyone that the quarterly earnings deck is available on our IR website for your reference.

You'll may elaborate to that back as we proceed with the call today.

Let's begin with highlights of our key operating and financial performance for the second quarter of 2021.

As a reminder, waste completely S&P pocket marketing at the end of 2020, and obviously, it's not 100% focused on that task.

Waste input developer surface and vertical applications.

Paul effort two efforts of comparison.

<unk> presented here is good contribution from the legacy packing marketing in that period, yes.

In the second quarter.

We continue to apply our company wide focus and efforts to grow our soft spaces and he has to pay off here is a summary of the results for Q2 2021.

The number of paying customers increased to 2006 and plentiful for all 2281 a year ago.

One five per se.

Yeah.

Revenue of RMB $89 million.

Up 44, 34% year over year.

Gross margin was 17, five 7%, which is more than one one a pause comparatively.

1% from a year ago.

Gross profit was RMB 67, 4 million up 43% year over year.

EBITDA was a negative I mean be 14 timeframe.

Substantial implement all parties haven't per sample.

Demonstrating our strong operating leverage.

Revenue from our south facing its continue their strong growth momentum this quarter, mainly due to the 44% growth in profit at the medical services and vertical applications.

That's not that's Po transition into the pure soft business model since the beginning of 2019, what has kept us to deliver two consecutive quarters with gross margin about 75%.

That's an incremental 41% a year ago.

The strong gross profit growth of our tax basis. It was mainly driven by revenue growth of 4% year over year.

Here I would like to take a moment to give an update on our latest product JG unification messaging system say Gee do I, Matt and say Gee video as a service as you state you Abbas.

We continue to see strong market demand for our new products <unk> and <unk> since their respective lunched. The total same contract maybe before you a mass and mass has a record as oppose over I mean before you meet them.

The current and potential customers for this product came from Hawaii and diversified number of industries, including in finance.

Medical and medical and health care media and short video content providers social networks, he called E Commerce pipelines anymore.

For example, we recently partnered with Yo Yo poetry, and online consumer erratic and delivery Powerpoint they start implementing our AI powered <unk> two capital.

I say it wasn't my operations and.

I wouldn't get agents or listen to expand user reach.

Its policy to Europe, I would tell you what the April to replace manual operations, such as sending messages on different pipelines about different channels.

With J J, you I'm, asking antiquated mesangium papillon to reduce cost and increase the operation operational efficiency with.

Brexit, but we're out in management.

Going forward, we will continue to help our customer frontally builder, and essentially where you can upsell existing services.

When we pulled by better and more customized solutions, we are able to create a deeper and closer connections with our customers.

What are the recent Mek will also launch a new public cloud version of <unk>.

Which provides free bags.

So basically for mobile developers mobile developers can use this flavor ocean adequate assess and meaningful trial of TG you I'm at integrated multi channel messaging yourself basis upon richest painful and account without additional cost.

In turn this will be able to have a ought to come wrote these mobile developers into fee paying VIP customers.

For customers, who may have higher requirements for <unk>.

<unk>, China push notification and Europe management, they can upgrade to Adobe IPO Bush's uptake to you on that and enjoy a limited channel management.

I call frequency in EMEA.

And other is closer to the IP services.

As it relates comfortably for we need.

It will continue to push innovation and our R&D efforts.

To meet.

I mean to evolving customer needs and Youll recall requirements, which in turn will continue to drive our business growth.

Our model is to continuously promo innovations.

Our R&D organizations, we shall remains at the top of our priority.

I would like to take a few minutes to share with you the progress of some of our product innovations during the quarter as always out of our revenue will entities.

And focus to stay ahead of it again.

Besides continuous iteration to better for.

And last part of that we recently introduced a smart push version for our J push surfaces reached a deal to do post the push analytical functionalities to the integrated platform.

At the better App developers are now equipped with multiplatform multichannel analysis of the push a message of cycle.

On both the Bedford I'd give a message delivery data, including posting quoting total number of messages sent total messages, which led to our users and crystal race waived the ability to visualize the data from different levels there.

Steadier states, perhaps the identified key issues more accurately and efficiently in real time for pushing message delivery DFS developers can also utilize our DTA.

Joe real races analysis functions to detect the data from the formats HDD more recycle and from there. They can uncover the good cause of acne and deliver the messages.

We have to have all the data post a push of funds and entities and a pull strategy strategy recommendations. These future income better Brewers effectively increase the delivery rates and click through rates of the push message by providing a much more accurate a push strategy based on running in front of the positive results.

We believe that this new functionality will have a better price for a more reliable comprehensive intelligent <unk> and these two cases, we are intend greatly outpaced the better for us improving where we raise of notifications and click through rates of the pushing message.

Now I will turn the call to Fe, who will discuss our Q2 performance in greater detail.

Thank you Chris.

Let me start the discussion on different revenue streams within the SaaS businesses.

In the second quarter 'twenty first.

Revenue from developer services reached RMB $63.0 million.

About 34% and 717% growth.

Our year over year and quarter over quarter basis, respectively.

Year over year revenue growth was fueled by strong growth of 22% in subscription services and 57% growth in value added services.

Subscription and services revenue were RMB 637, 5 million an increase of 22%.

Year over year.

Primarily driven by new customer acquisition.

This year, we continued cross selling various non pushed subscription products such as J verification J S. M. S. M S J analytics et cetera to our customers in an effort to increase our subscription uptake.

Our multiple product lines.

Avid has delivered a solid result, as the revenue contribution of non push notification products increased to 38% from 32% a year ago.

And the non push notification products achieved a higher our pool of RMB 38 point of 1000.

The change in the overall pool for our subscription services, increasing by 5% to RMB 62000, compared with RMB 15, 5000, a year ago, new and renew the contract of notable customers in the quarter include China Everbright Bank you portrayed so.

International.

Ziv superstores and so on.

In this quarter the value added services within developer services, which include revenues from Digi Alliance services and the advertisement fast once again delivered a set of <unk>.

Impressive results, where revenues grew by 57% year over year to RMB $29.0 million from RMB $16.0 million in second quarter, 2020, and about 26% quarter over quarter from RMB $26.0 million in first quarter 'twenty. Thank you Juan.

We continue to see very strong and solid demand for our <unk> Alliance products.

On the supply side of the <unk> Alliance during the quarter, we continued to apply our resources to sign up more in mobile app.

Also growth as traffic pool, the total number of apps within our network exceeded 340 as compared to 280 in the first quarter 2021.

Representing a 23% growth quarter over quarter as a result of apps growth within this traffic pool. The <unk> within our network has increased by 20%.

$180 million from $150 million in the first quarter 'twenty. Thank you Juan.

On the demand side, we continue to see strong demand from mini program developers, who contributed close to 40% of GG Alliance revenue to further expand our market reach and a shortened the go to market process. We haven't used AD agencies to help us cover a broader customer base, while our direct sales team.

<unk> focused on serving large customers.

In second quarter AD agencies contributed more than 50% of <unk> Alliance revenue stream, while the rest came from direct customers.

Major customers of JJ Elias in the quarter consisted of repeat customers the market leaders across many industry verticals. They include but are not limited to Weibo may plan, we've seen already paid hardball to Shanghai.

Travel go et cetera.

Now, let's move on to the discussion of our vertical applications vertical applications revenue, which include our financial risk management market intelligence and item grew by 34% year over year as demand continued to recover from the impact of the pandemic.

With the majority of the revenue growth coming from the financial risk management business.

In the financial risk management segment revenue increased significantly by 42% year over year with the help of the 55% growth in Apple This quarter, we recorded the highest quarterly revenues compared with the results since the beginning of COVID-19 in first quarter of 2020.

We continue to see huge demand for this product from customers such as the banks and the licensed financial institutions.

New and renew the customers include Marshawn consumer finance.

Our financial and a 360 digitech.

Revenue from our market intelligence product increased by single digit year over year. The lack of meaningful growth was due to a few customers delaying customized projects with us due to recent macro environment. However, we continue to see strong renewal with many large corporate customers.

Leading travel go net east media ITE and it's all.

And lastly, while the new product transitioning is still underway.

Item business delivered solid results during the quarter with significant double digit revenue growth.

This was mainly due to the completion of a few large scale one time contracts.

With that I will.

Now I'll pass the call over to Shannon.

Thanks, Rick.

I'll go through some of the key expenses and balance sheet items.

Onto the operating expenses total operating expenses increased by 7% year over year to renminbi $108.0 million.

In particular, R&D expenses increased by 16% to renminbi $57.0 million, mainly due to the increase in staff costs as we continue to invest in our R&D Department.

Bandwidth and cloud expenses to support the business expansion.

Selling and marketing expenses increased by 1% to $27 million.

Mainly due to the increased customer visits and offline marketing promotion activities.

G&A expenses decreased by 4% in renminbi $32.0 million.

Mainly due to year over year reduction of $3.0 million in bad debt provision.

Was the result of our company wide focus on strict financial control measures.

Adjusted EBITA calculated as EBITDA, excluding share based compensation and change in fair value of foreign currency swap contracts.

27% year over year to negative <unk> $16.0 million from negative $21.0 million in Q2 2020.

And this was the best adjusted EBITDA performance since Q1 of 2020.

For the second quarter of 2021, we deliver another set of solid financial results.

For the year over year comparison, the key highlights for the for this quarter include our.

SaaS businesses revenue increased significantly by 34%.

Group gross margin improved from 41% to 75, 7%.

They are a result of Q2 2021.

Gross margin being 100% contributed by high margin software businesses.

Opex, however increased by only 7%.

As a result, our adjusted EBITA improved by 27% which continues.

To demonstrate the scalability of our business model.

And this is the second quarter, where we have delivered solid business results and we are and we are very pleased with the results that we have to achieve and.

And we believe that the group momentum from Q1, and Q2 2021, we continue to bring more strong results in the coming quarters.

Onto the balance sheet I'll start with two key very important kpis that we closely monitor.

Firstly, the AAR turnover days decreased significantly from 59 days in Q2 2020 to 38 days this quarter.

This was similar to the trends in last quarter due to both the shift away from the legacy targeted marketing.

To focus on cloud business and our company wide focus on improving collection.

Secondly, the total deferred revenue balance, which represents cash collected in advance from customer.

For the fifth consecutive quarter has exceeded 100 million renminbi at quarter end.

As of June 30 of 2021, the balance was at 111.5 million.

Next total assets, we're at $649.0 million as of June 30 of 2021.

This includes cash and cash equivalent of $299.0 million the reduction in cash balances over the quarters was mainly due to the redemption of the convertible notes of 35 million U S dollars.

In April 2021.

Accounts receivable of renminbi, $39.0 million prepayments of proving to be $12.0 million fixed assets of <unk> $80.0 million.

And long term investment of $168 million.

Total current liabilities were at.

It might be $265 million as of June 30 of 2021, and this includes short term loan of $650.0 million.

Accounts receivable.

Accounts payable of $20.0 million deferred revenue of $109.0 million accrued liabilities of $96.0 million.

And onto our business outlook.

Our full year, our new four year 2021 revenue guidance is now in the range of renminbi 342 million to be $260 million.

Representing growth of 33% to 40% year over year, compared with last year and our guidance for our full year gross margin remains above 70%.

The update is primarily due to the revised outlook for our <unk> Alliance business.

The use of third party agents.

Develop a service value added service business has caused a change in accounting method for our revenue from gross revenue to net revenue net of any agent rebate under U S. GAAP.

In addition, due to the recent macro environment uncertainties some of our potential JJ Alliance partner has temporarily delayed joining and integrating with our traffic supply network.

Over the long term outlook for the <unk> Alliance remain unchanged and we still expect it to be our main growth driver going forward.

Please note that for a meaningful comparison purposes. The prior year revenue numbers used to calculate the revenue growth percentage exclude revenue from targeted marketing business.

The above outlook is based on the current market conditions and reflects the company's current.

Preliminary estimate of market and operating conditions and customer demand, which are all subject to change.

And lastly, before I conclude I'll give a quick update on the share repurchase plan.

In the quarter ended June 30 of 2021, we did not repurchase any shares as of June 30, offended anyone cumulatively, we have repurchased a total of 921000 since the start of our repurchase program.

And this concludes management prepared remarks, we are happy to take any question now operator. Please proceed.

As a reminder, ladies and gentlemen, it is star followed by the number one on your telephone keypad. If you wish to ask the question. Once again it is star one on your telephone keypad distinguished along with your question.

You can press the pound or how should.

The first question is coming from the line of Jacob Silverman from Alliance Global. Please go ahead.

Okay.

Hi, everyone. Thanks for taking my questions are there any additional details you can give us on why partners are delaying joining and maybe when can we expect customers to stop blamed it systems also around the accounting methodology.

Reported gross margin will that have any impact on our reported gross margin for <unk> lines.

Hey, Jacob this is a phase I will answer the first question <unk> will answer your second question.

So as you know.

Isn't the macro regulatory environment has changed right and.

Because of this it has resulted in temporarily delay integration for some of our potential <unk> partners to join our traffic to supply pool, because many of their app developers.

Hello, many of the App developers in the pipeline and are focusing on getting compliance for their own mobile apps in terms of the.

The privacy issue the debt data collection issue.

Which is required by the government to rectify their own debt issues right. So they would slow down the cooperation with third party partners, including us.

So however, once their compliance work is finished.

Renewed collaboration process.

So that's why we say you know the longer term the outlook for this business.

We remain unchanged and we still expect the <unk> alliance to be the growth driver for <unk> for our business going forward right. Despite the revision actually for this business did your alliance, we still expect this year.

We have a growth close to 100%, which is already very high you know, which is which is a great achievement, we are going to going to have.

And the Shannon we answer the second question.

Jacob on the gross versus net accounting and the impact on the gross margin yes.

Will impact some of the margin downward adjustment based on.

We're expecting to be major because if I look at that.

Example, that we used before $100 versus 106 gross revenue the impact is only 2%. So and so your question is yes, there will be some deterioration in gross margin, but we do not estimate it to be material.

Yeah.

Okay, and then the <unk>.

Delays there most of the end customers and are there any delays on your aims for.

We're getting customers on digi lines.

No theres no delay from all sides.

This offering from the other side from customers right now.

Okay. So it sounds like also.

Yeah go ahead.

No no.

Okay.

Okay.

So it sounds like your relationships with publishers are improving.

After six to 18.

Should we expect that success to continue for maybe Singles' day or you know given the recent regulatory environment, maybe you're really shipping publishing with publishers will improve maybe more in the in the next year in 2022.

I think I think we'll start to see.

The improvement starting from the fourth quarter right.

The regulatory.

Dr fishing for the.

For these for these apps.

Ongoing process, so some of the partners.

They are close to the end of June.

With the with the revise the guidance right. So actually we are going to expect a flat.

<unk> quarter over quarter growth from for the third quarter.

Actually this is a normal.

Almost situation.

If you look at our past year right in 2020 actually we are seeing a flattish seasonality from the third quarter to second quarter right. So because of the slowdown.

<unk> seen that similar similar strategies trend, but if there is no slowdown actually we were expecting.

The higher quarter over quarter growth right. So so that's S.

Since since.

Some of the some of the.

Tire.

And in the pipeline. They finished their work that regulatory work and then they will start to collaboration with US. So we do expect to.

Traffic to continue to grow.

In the fourth quarter and also we do expect the singles day double 11, we will have a positive impact.

Two <unk> business from the demand side. So that's why our full year guidance actually already reflected the quarter over quarter growth from the fourth quarter to quarter.

Okay, and then switching gears.

And how does video as a service <unk> been progressing in recent months recent months such as the pace of new sign ups.

Yeah, so actually for the Vas and <unk>.

Yes right.

Basically these two products due to product Oh, when I when I look at it look at there's a number of the contracts spanning progress.

The recent data shows is close to.

$400, a $4 million 4 million contract value has already been defined.

Sign up right, which is which is actually last quarter. When you were having the call. It was like a $2 million so actually already already doubled already doubled. So so we are continue to make.

<unk> progress.

In these two products and <unk>.

Actually for the for the contracts that we just signed up actually without with.

The framers actually.

Meaningful big customers such as China.

Security right.

With these these.

Household name.

As our.

New customer we can use as a case study to continue to push through the <unk>.

Similar customers in the industry right. So we do expect.

New business to continue to gain momentum.

In the following quarter before the year end.

And one last one for me.

Maybe it's a further.

Monetize video as a service are you considering offering maybe any AD placements and sharing capabilities in combination with the subscription that you're already offering.

Yeah.

We thought about this right.

I think I think that's likely to very different defensive business model.

And currently what we are offering is a true fast model right. We actually it's a subscription fee we charge a subscription fee, which is pretty much a pure module right. It's a software type of margin, but once we once we offer like as a.

Okay.

Kind of like.

Similar to two strategic alliance business model, which which will.

Certainly.

We will we will need to pay the media the media fee and also as well as actually we need to pay the bandwidth cost right. So the margin will be.

Dramatically lower than current <unk> business model, so for the time being we actually opt not to choose this way of monetizing and Oh, we want to we want to continue to focus on focus on the subscription based model of FERC before.

Before before.

Once we have.

<unk> message.

A good size.

This subscription model then we can think about it later on.

Chris do you have anything to add.

We have also.

This is.

Actually two different directions.

So first of all we want to focusing on some.

Vertical industry for example financial industries at the bank.

Those are the apps that they have.

Okay, what's your budget to invest in this loss our content, but they are not leading to any advertisement.

Fin del apps.

So.

In this case they are willing to pay.

Based on the model.

So.

But for some.

Hum.

Like Turkey.

Hum.

<unk> companies.

Those companies they monetize by the advertisement so in decades.

Probably like to revenue.

So the charter revenue share model.

In the first case.

In aerospace, we want to focus on a static basis, a modal and because the bank and the financial industry. They have huge budget and.

Very similar to what we've done in pasta push services.

Alright, thanks, so much everyone.

Thank you. The next question is coming from Ryan Roberts from Davis. Please go ahead.

Oh, Hi, good evening management, thanks for the thanks for the update a.

A couple of questions from my side I'm kind of the first.

First one.

It's really you talked a bit about the supply side J D lines.

Some of the apps are undergoing rectification and so on so forth.

Kind of slowing down their integration with you guys what about demand what.

What are you seeing there it sounds like Youre correct you use you have about 180.

M, which is a nice step up from last quarter from Q1, rather and your target for the year in I thought it was around $160. It seemed like you guys are doing well and do you use which would make me think that you have.

Some pretty solid revenue generation capability point of view, what's happening on the demand side of that first.

Okay.

Hey, Ryan this is Fay so actually from the demand side, it's never an issue right. Because you know that's always customers who want to.

Acquire new users more new users and also in large internet companies they want to they want to wake up their dominant existing older users right. So our size of this business.

For the time being.

Kevin.

With the expectation of the third quarter fourth quarter revenue.

It's going to be close to $100 million right revenue. So this is a still relatively small versus compared to the to the huge huge market size of this.

For the advertising mobile advertising industry right. So so so that's why.

And also for Q.

For holiday July serviced actually this is a completely new media format, which which doesn't really compete directly with the existing.

Service providers, right, so, which which serve to our advantage. So we see all of the pent up demand and and the bottleneck has always been and will be.

The supply side right. So that's why that's why.

We need to we need to.

Wait a little bit.

Until the the macro regulatory process has been has settled then we can we can renew the growth.

And then Don can talk.

A little bit about the AD loads I think that was one of the things one of them a little while you could turn the monetization.

What's the current AD load looking like Youre your lines.

Yeah, so even though there is still about 50% right exposure divided by.

The.

The denominator is basically <unk> right. So at a node hasnt really been our focus yet hasnt been our focus yet we want to continue to to acquire as much traffic as much of the U S.

But before we do the fine tuning of the AD load and suddenly we.

Working on it okay from the product perspective.

We actually launched the SSP to zero, which will offer the functionality that for the year, you will be able to offer multiple exposure right and that the products launched in the in July and.

It has been actually has been in trial process with a few a few apps and the result actually is.

Pretty encouraging.

For the same to you.

Able to increase the AD load basically by 75% right. So we also have already established a migration plan to migrate our existing apps in our network into this SSP to zero. So we will start with the smaller youth first.

And then when they become stable and achieve the results that we wanted and we move on to those asset with greater to use so.

So we expect that such migration process to be ongoing and our continuous efforts and we hope to.

To be able to finish the majority of the migration before the end of fourth quarter. So so this.

In addition, <unk>.

<unk> two to the organic.

Traffic acquisition you acquisition.

This will help the total exposure.

So we tend to average in the coming quarter Thats why already.

We already built into the assumption for.

For the for the traffic to continue to grow in the fourth quarter, because the fourth quarter.

Correct.

Seasonal quarter over quarter growth of JJ life.

And kind of Blue Sky scenario, what's your what's your AD load target in Q4.

I think it maybe increased bye bye.

10%.

So you're going to increase from 50% to 55 or 50, 50% yes.

50, 555% to 60%.

Somewhere in that range, yes.

Okay.

Okay understood. Okay helpful. Thanks, and then maybe another question because I think you were talking a bit about the kind of kind of cross selling and progress. There I'm wondering if you guys have any analysis I'm kind of a on a customer cohort kind of basis.

For kind of your bad business.

That's what we kind of expect to see deliver some explosive growth as we've talked about in the past.

Subscription growth is nice, but bass is really kind of where you think there's a lot more capability and more potential there.

You have any data you can share.

Yet.

Terms of how many.

The average revenue kind of recurring revenue rate might be kind of the.

Some of those typical SaaS metrics.

I think that the.

Some other companies that you're wherever following can you share some of those updates or some of those data points. If you have them.

Yeah, Yeah, we do actually we do have those those metrics right because as fast you know kind of like a matrix.

We actually have segment.

Our subscription.

Subscription based customers into into two buckets right why is the key customers.

Which as you know.

The top 50.

<unk> hundred Internet companies.

Based on based on the <unk> right. So for for these customers.

Customers actually when we look at the.

Okay.

The customer retention.

Dollar based actually.

India, Okay net dollar retention okay.

Over the past several years.

<unk>.

In the range of our launch of defense to 170%, which is a very sticky okay.

For the second second the buckets basically at those those customers.

More like SMB smaller type of customer for these type of customers as you know in China every year actually everyday.

Coming to go right for that.

Smaller ones they tend to.

By nature.

Cannot they cannot survive after a certain period of time of operation. So this <unk> segment.

Of customers when we look at it and they are actually they are in the range of around 70%, 70% or so so this is a this is a natural.

E.

If it's.

It's a very difficult.

Two kind of like the increased <unk>.

For these type of customer unless unless you know we don't want to deal with these customers right. So that's sort of a sort of.

The concentration.

That's helpful to hear that the cadence of kind of a 120 of hidden sticky.

And then maybe kind.

Adjacent to that you mentioned kind of a realignment of the sales process, a little bit having internal staff focus on case, and having agency everyone else, where do you kind of kind of draw that line with respect to kind of the wechat mini programs is that gonna be agents holding handling that business for you or alternatively, you're going to continue that.

And is there a potential at some point, where these <unk>.

Inside of it kind of sells itself.

I realize signing J D lines customers for supply.

A very labor intensive thing, but eventually ultimately there must be kind of a.

Kind of a targeted site, where you know.

Rising client can kind of purchase inventory.

Exposure themselves right.

Make a lot of this much.

A much more scalable.

Yes.

Actually you know currently.

From the revenue perspective provide revenue sprint already over 50% of Azure lines revenue actually are coming from the AD agencies.

Most of these AD agencies, they will do their customer acquisition basically.

At a customer magazine themself, and then even you know.

A lot of them they will do that through the advertisement actually operation themselves as well so actually we only of the platform for them to work on right. So so for.

For this set of agencies actually already it's very kind of like the automatic and it doesn't really require our internal internal.

The labor or whatever resource right. So so going forward. We expect that these at AT&T, you know kind of like a net revenue pilot continue to grow because we our direct salesforce.

<unk> mission is to serve a few.

Very large customers such as Weibo right such as that.

<unk> seen these are these are very large customers right now and these are customers that we need to deal with them directly because they have.

Actually maybe in a more complicated.

Our argument on humans right.

So for majority of the customers we will go next to.

The agencies to do it so that scalability is not it's not an issue in our opinion, we never budget.

We will build a very massive and operation team and.

Okay.

We don't need to do that is not in our strategy.

So could we see potentially see some of the.

The sales and marketing spend kind of come down a bit.

Or is that.

Was that might be not in the cards.

Yes, it's our goal to actually to continue to generate leverage in the in the expense line items right. So suddenly.

The first marketing needs to go down as a percentage of total revenue.

I think I think.

<unk>.

For this kitchen alliance business.

Do you think of the language is pretty high.

We will continue to go up okay, and while we need to do is actually waqar is actually to get the leverage for for the for the subscription business subscription business actually had the revenue is still not in the ideal range yet okay. So that's why we.

Going forward actually we are.

Actually going to.

<unk> actually already building sort of the key customer kind of like a sales team, which does not exist before and in this case they were still.

The industry verticals.

Politically vertical by vertical and so.

Companies like kind of emergency committee right, that's kind of a customer right now.

And they can generate $1 billion revenue also right. So so this is a.

The field efficiency efficiency will come from Ryan Levine.

Large customers right.

And so so so this is an ongoing process.

And and and not only on the on the sales marketing and also our R&D. We will continue to drive the efficiency. We are we're continuing to optimize our resource utilization rate, we will continue to allocate resources into the human resource into.

Into new product innovation, Okay, and also we are kind of back you know the results.

Originally.

Before we get into the older products right legacy product push products right. So that's sort of ongoing process. We are currently currently implemented so I think going forward.

We should have continued to see operating leverage.

Okay.

Couple of two last quick ones very quick from me on the number side of things.

Just kind of curious what did you could you remind us what that other income line is on the P&L and also for the prior share buybacks what was the average buyback price and then I'm done.

Okay.

Take a look.

So other income is mainly on the volume guidance that we get the subsidies we give them the.

So just.

Got it okay.

And roughly speaking what was the prior buyback as well.

Yes.

Maybe.

And it will get back to you because we have not been repurchasing debt for at least four quarters. So I don't have the numbers readily available.

Okay.

You can follow up offline.

Okay. Thanks, so much guys appreciate it.

Thank you thank you Mike.

Once again.

Star followed by one on your telephone keypad.

We have the next question.

Once again, ladies and gentlemen, it is star followed by the number one on your telephone keypad. If you wish to ask a question. Please note there might be a slight pause as we relates to questions.

Yeah.

Once again it is star followed by one to ask a question.

So we have the next question from Thomas Yeah. The personnel investment. Please go ahead.

Hello, Joe.

Good morning.

You're only allowed to do.

Diluted younger Lindsay for the diesel and if you don't want to go.

I mentioned that kind of stuff that doesn't get us.

Partner instead of the diesel engine behind it.

Thank you Randy.

With that many that you werent amortizing.

Hey, guys good morning.

To.

So the subject of abuse of combo out but.

The problem with it though in Atlanta, I know you're dealing with there.

Notwithstanding that goes within EMEA were suggest that Minerva business, particularly on the bone.

Hum.

Sometimes it's Amit.

Okay. Thank you.

Okay.

<unk>.

They will then at times it may will see Johan <unk>.

Which I think was up a deepwater.

Okay.

Something like <unk>.

Eagle gathering.

In essence, the one element do you want them all the time in summer.

He was a director one actually does that make you weren't irma.

I mean that is a truly.

Excellent.

So does that mean.

So take it away at the overall attitude afterwards.

I was just sort of what kind of that mandate.

At that time, we kind of hit that kind of deals that sounds great.

Yes.

Let me just ask you Ken Hunter would know what those sound like kind of wonder if I can comment it took a long long time.

Okay.

What is going to come on that.

Okay.

No manner.

Got it in Thailand, and Laos Russell Jenna.

One woman.

<unk> Hong Kong IPO, so any soldiers annual taobao.

Kind of how it kind of hover Hong Kong, notably the judgment encounter whatnot modules anyway. So it's not about the fact that he has a biomarker and intangibles noncash other callout on the gate to getting out how about Mexico.

So I think you'll see a tick up.

Congratulations on a much easily get into those higher the country, Amy <unk> with us.

And when she wants and Joshua again, the global cloud now Meanwhile, Ana Jos.

In light of the <unk>.

Taken $80 a ton.

The ATP is on the Canadian GAAP in buses one is Russia.

Okay.

It puts us well ahead of others enrollment.

No my comment on <unk> dot.

Take upon Lauderdale Santo bank deals with EMEA.

In addition, the financial hurdle in.

Let me kind of like a one off as well autonomous I was why not kind of on the Oakland golf tick tick tick tick <unk> oncology Katrina.

So <unk> I think of the ASO it's unchanged.

That's fine.

Okay, and then Michael here it sounds like you hit that going to be.

Honestly with that guidance.

Great.

Uh huh.

Understand that you've got the acute.

Got it.

He was with <unk>.

Well I'm going to need to accomplish this very neutral below I'm missing that you use.

Yeah.

The challenge that many of the Q.

Japan in volume.

I'll make a few hours.

Uh huh.

Two I believe you said that come back in China.

Kind of Europe.

Uh huh.

But some of them will move to negotiate Oracle chosen.

Hey, guys.

Uh-huh maturity information to go on this essential charter <unk> joins us with that.

Yeah.

Uh huh.

Okay. Thank you.

Yeah.

Thank you once again, ladies and gentlemen, you just star followed by one to ask a question.

Yeah.

We have the next question.

Do you have the next question is coming from the line of Ryan Roberts from neighbors. Please go ahead.

I actually had a follow up from the.

The previous caller, because I had an interesting point about kind of maybe user experience and a potential add overload.

Cooperate with a couple of different platforms.

If an app developer cooperated multiple platforms that could lead to a kind of a.

Deterioration experience, if you're showing and add an intensive chosen AD and so on and so on.

Is there is there any.

It's gonna be AD load and kind of overall performance.

Curious is there any kind of way you can you can monitor that from a kind of a user experience perspective going to be add developer probably oh, that's probably more of a concern for them, but then again if you are.

You were kind of providing some of the.

Advertising service for them I would wonder if you have a maybe an element of concern there because that could impact our Hawaii.

I think from your advertising clients, if the inventories maybe saturated.

I'm just kind of curious how you guys approach that that problem.

Yes.

So actually the beauty of this product is the user experience.

<unk> is actually not it's never an issue for us.

Sure.

For the time being right because first of all for the analog country is very low it's actually for you today only generates we only show Europe five.

Alright, so versus the typical.

Funding or any any.

Media.

Feed feed feed.

They are going to show like a 10 to 20 right. So this is immaterial compared to the traditional way of showing ads and and.

Even though we increased the ad load.

By 100%, which is one exposure for the year Europe.

Which is still still very very limited and second of all we've actually.

Have down a few a few.

Alex's with with the developer to analyze whether our this new format has any impact to user behavior, such as you know whether whether we our costs.

Increased number of users to two to delete the app right. So we have done all this sort of.

Allison actually you know.

We never we were never able to find any evidence that links to users.

The leasing of the App because of because of.

Uh huh.

Develop a used our <unk> alliance.

In our product and.

And in some in some cases actually also improve that theyre actually the user retention.

Richard.

Very very very surprising to us as well. So so net net basically that's no negative user user experience and we never received any user complaints as well since we launched it.

Just a product.

Yeah actually upon our basically ways of variety.

Pass throughs to for the MTO better price. So basically we can do our appetite.

For some years for Aqua users that will show that our advertisements and another group a June showed any advertisement so basically.

Later in our result.

Those two they take they have no difference of these two groups of users.

No statistical difference got it got it okay. Okay alright.

I'm good thank you.

Okay.

Once again, ladies and gentlemen, it is Sean.

Wanted to ask a question.

We have no further questions at this moment I would like to hand, the conference back to our host Mr Magazine Disequilibrium.

Thank you all right.

Thank you everyone for joining our call Tonight. If you have any further question and comments. Please don't hesitate to reach out to the IR team. This concludes the call Goodbye.

Thank you, ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile's second quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation.

A question and answer session to answer questions during the session.

The star one on your telephone.

Requiring any further assistance please press star zero.

Today's conference is being recorded I would now like to hand the content.

Your host today, So let me put it this thing. Thank you. Please go ahead Sir.

Thank you all right.

Hello, everyone and thank you for joining us today.

<unk> earnings release was distributed earlier today and is available on the website I amped up G Guang dong.

And.

On the call today are Mr weighed on we will.

Chairman and Chief Executive Officer, Mr. Fei, Chen President and Mr. Shan Nen Bong Chief Financial Officer.

Following their prepared remarks, all three will be available to answer your question during the Q&A session that will follow.

Before we begin I'd like to remind you that the discomfort last call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 1934 as amended and as defined in the U S. Private Securities Litigation Reform Act of 1995.

Yes.

These forward looking statements are based upon management's current expectations and current market and operating income Duchenne, 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 or factors.

<unk> 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. Hu. Please go ahead.

Thanks Renee.

Good morning, and good evening, everyone on the call.

They have gone to Aurora Mobile's second quarter, 2000, and talking about on this call.

This is the second quarter of well, we have been operating under the <unk> business model.

At the beginning of 2021.

Where do you delivered strong results and I am pleased to kick off this call now to share with you, albeit it's cold wet and keep you think that metric. It's I'll tell you what the in the second quarter of 2021.

Before I comment on our total results.

I would like to remind everyone that the quality audience that is available on our IR website for your reference.

You may referenced will that back as we proceed with the call today.

Let's begin with highlights of our key operating and financial performance for the second quarter of 2021.

As a reminder, waste completely SMB.

<unk> marketing at the end of 2020, and obviously it is not 100% focused on the task that they say it's at.

At least in co developer surface and vertical applications.

For FY two efforts a comparison.

The numbers presented here exclude contributions from the legacy impact of marketing in that period, yes.

In the second quarter.

We continue to apply our companywide focus and effort to core all SaaS basis, and he has to pay off here is a summary of the strong results for Q2 2021.

The number of kept paying customers increased to 2040 for all 2281 a year ago.

Five per say Europe year over year.

Revenue of RMB $89 million.

Up 44, 34% year over year.

<unk> gross margin was 17, five 7%, which is more than one one times compared with 41% from a year ago.

Gross profit what does that mean, the 57.4 million up 43% year over year.

Adjusted EBITDA was a negative <unk>.

13 timeframe need a substantial improvement of 7%.

Demonstrating our strong operating leverage.

Revenue from our south facing its continued their strong growth momentum this quarter, mainly due to the 44% growth impulses, Nevada herself.

And vertical applications.

That's not that's potent fixed rent into the pure SaaS business model since the beginning of 2019, what has kept us to deliver two consecutive quarters with gross margins above 75%.

That's an incremental 1% a year ago.

The strong gross profit.

Both of our South basis was mainly driven by revenue growth of plus 4% year over year.

Here I would like to take a moment to give an update on our latest product JG unification messaging system say Gee do I, Matt and say Gee video as a service is a state you Abbas.

We continue to see strong market demand for our new products <unk> and <unk> since their respective launch the total time content video for you or Matt and Mark has a record as opposed to over I mean before you made at the.

Current and potential customers for this product came from Hawaii and diversified number of industries, including in finance.

Medical and medical and health care media and short video content providers social network. He called E Commerce specialized anymore.

For example, we recently partnered with Yo Yo powertrain and online consumer erratic and delivery tariff one they start implementing our AI powered <unk> camera, you might say listen my operations and drive emptied agents are also to expand user reach.

For his partnership through Europe, I would tell you was able to replace manual operations.

Sending messages on different pipelines about different China.

With J J, you I'm as antiquated mesangium purport to reduce cost and increase the operation operational efficiency with Brexit Boral team management.

Going forward, we will continue to have our customer jointly built essentially bedroom chan of their existing installed base as.

When we pull by better and more customized solutions, we are able to create a deeper and closer connections with our customers.

Well there isn't any care will also launch a new public cloud version of a U M S.

<unk> provides a free bag.

So basically for mobile developers mobile developers can use these flavors and as a quick access and meaningful trial <unk> integrated multi channel messaging yourself basis upon our richest painful and account without additional cost.

In turn this will be able to help us to come royalties mobile developers into fee paying VIP customers.

For customers that may have higher requirements for.

Multi China push notification and Europe management, they can upgrade to their VIP version of the <unk> enjoy a limited channel management.

I call frequency in EMEA and other exclusively IP services.

As we discussed before we need to continue to push innovation in our R&D efforts in order to meet.

The evolving customer needs and newly cloud requirements, which in turn will continue to drive our business growth.

Our model is to continuously promo innovations.

Our R&D organizations, which remains at the top of our priority.

I would like to take a few minutes to share with you the progress of some of our product innovation during the quarter as a result of our revenue will entities.

Alright, and focus to stay ahead of it again.

Besides continuous iteration develop.

For you on that and lots of products. We recently introduced smart push version for our <unk> surfaces, which add yellow deal close to push analytical functionalities to the integrated platform.

That's actually a better price are now equipped with multiplatform multichannel analysis of the push a message of cycle based on both your Bedford I'd give a message of delivery data, including posting coding total number of messages sent to the messages, which led to our users and grateful race, we have the ability to visualize the data from different level.

This steady state, perhaps you remember identified key issues more accurately and efficiently in real time for pushing message delivery DFS developers can also utilize it.

<unk> no analysis functions to detect the data from the formats HDD more recycle and from there. They can uncover the good cause of acne and deliver the messages.

We have to have all the data post a push of funds and entities and a pull strategy strategy recommendations.

These future, okay, and kept adding better brewers effectively increase the delivery rate and click through rates of their push message by providing a much more accurate a push strategy based on running in front of the positive results.

We're pretty good at this neoplasm that if you will have a better approach for a more reliable comprehensive intelligent, Turkey and these two cases, where engine greatly assay developers improving delivery rate of notifications and click through rates of the pushing message.

Now I will turn the call to Fe, who will discuss our Q2 performance in greater detail. Thank.

Thank you, Chris let me start the discussion on different revenue streams within the SaaS businesses.

In the second quarter turnkey first.

Revenue from developer services reached RMB, $63.0 million, a robust, 34% and 717% growth.

Our year over year, and a quarter over quarter basis, respectively.

The year over year revenue growth was fueled by strong growth of 22% in subscription services and 57% growth in value added services.

Subscription and services revenue were RMB 637, 5 million an increase of 22%.

Year over year.

Primarily driven by new customer acquisition.

In addition, we continued cross selling various non pushed subscription products such as do verification J S. M. S. M S J analytics et cetera to our customers in efforts to increase our subscription uptake.

There are multiple product lines.

This effort has delivered solid results as the revenue contribution of non push notification products increased to 38% from 32% a year ago.

In the non push notification products achieved a higher a pool of RMB 38, 1000, there's all a change in the overall our pool for our subscription services, increasing by 5% to RMB 16, 2000, compared with RMB 15, 5000, a year ago.

And they renew the contract of notable customers in the quarter include China Everbright Bank you portrayed so we arent international you won't wait to superstores.

Superstores and so on.

In this quarter value added services within developer services, which includes revenues from <unk> Alliance services and the advertisement fast once again delivered a set of impressive results where revenue grew by 57% year over year to RMB $29.0 million from RMB.

<unk> 1 million in second quarter, 2020, and about 26% quarter over quarter from RMB $26.0 million in first quarter 2021.

We continue to see very strong and a solid demand for our <unk> Alliance products.

On the supply side of the <unk> Alliance during the quarter, we continued to apply our resources to sign up more in mobile apps.

So growth is traffic a pool the total number of apps within our network exceeded 340 as compared to 280 in the first quarter 2021.

Representing a 23% growth quarter over quarter.

As a result of apps growth within this traffic pool, the <unk> within our network has increased by 20% to $180 million from $150 million in the first quarter 'twenty. Thank you Juan.

On the demand side, we continue to see strong demand from mini program developers, who contributed close to 40% of DG Alliance revenue to further expand our market reach in the short term. The go to market process. We haven't used AD agencies to help us cover a broader customer base, while our direct sales.

Our team focused on serving large customers.

In second quarter AD agencies contributed more than 50% of <unk> Alliance revenue stream, while the rest came from direct customers.

Major customers of digit lives in the quarter consisted of repeat customers the market leaders across many industry verticals. They include but are not limited to Weibo Maitland, we've seen already paid top I'll touch on that.

Travel go et cetera.

Now, let's move on to the discussion of vertical applications vertical applications revenue, which includes our financial risk management market intelligence and Idaho grew by 34% year over year as demand continued to recover from the impact of the pandemic.

With the majority of the revenue growth coming from the financial risk management business.

In the financial risk management segment revenue increased significantly by 42% year over year with the help of the 55% growth in Apple This quarter, we recorded the highest quarterly revenues compared with the results since the beginning of COVID-19 in first quarter of 2020.

We continue to see a huge demand for this product from customers such as the banks and the licensed financial institutions.

New and renew the customers include Marshawn consumer finance push on my financial and 360 digitech.

Revenue from our market intelligence product increased by single digit year over year. The lack of meaningful growth was due to a few customers delaying customized projects with us due to recent macro environment.

However, we continue to see strong renewal with many large corporate customers.

Trevor go net piece media ITE and it's all.

And lastly, while the new product transitioning is still underway.

<unk> business delivered solid results during the quarter with significant double digit revenue growth.

This was mainly due to the completion of a few large scale onetime contract.

With that I will.

I'll pass the call over to Shannon.

Thanks, Rick.

Ill go through some of the key expenses and balance sheet items.

Onto the operating expenses total operating expenses increased by 7% year over year to renminbi $108.0 million in particular, R&D expenses increased by 16% to renminbi $57.0 million, mainly due to the increase in staff costs as we continue to invest in our R&D Department.

Bandwidth and cloud expenses to support the business expansion.

Selling and marketing expenses increased by 1% to $27 million.

Mainly due to the increased customer visits and offline marketing promotion activities.

G&A expenses decreased by 4% in Renminbi is $32.0 million.

Mainly due to year over year reduction of $3.0 million in bad debt provision, which was a result of our company wide focus on strict financial control measures.

Adjusted EBITA calculated as EBITDA, excluding share based compensation and change in fair value of foreign currency swap contracts improved 27% year over year to negative <unk> $16.0 million from negative renminbi $21.0 million in Q2 2020.

And this was the best adjusted EBITDA performance since Q1 of 2020.

For the second quarter of 2021, we deliver another set of solid financial results.

For the year over year comparison, the key highlights for the for this quarter include.

Our SaaS businesses revenue increased significantly by 34%.

Group gross margin improved from 41% to 75, 7%, but there are a result of Q2 2021.

Gross margin being 100% contributed by high margin software businesses.

Opex, however increased by only 7%.

As a result, our adjusted EBITDA improved by 27% which continues.

To demonstrate the scalability of our business model.

And this is the second quarter, where we have delivered solid business results and we are and we are very pleased with the results that we have to achieve.

And we believe that the group momentum from Q1, and Q2 2021, we continue to bring more strong results in the coming quarters.

Onto the balance sheet I'll start with two key very important kpis that we closely monitor.

Firstly, the all turnover days decreased significantly from 59 days in Q2 2020 to 38 days this quarter.

This was similar to the trends in last quarter due to both the shift away from the legacy targeted marketing.

To focus on <unk> business, and our company wide focus on improving collection.

Secondly, the total deferred revenue balance, which represents cash collected in advance from customer.

For our fifth consecutive quarter has exceeded 100 million renminbi at quarter end.

As of June 30 of 2021, the balance was at 111.5 million.

Next total assets, we're at $649.0 million renminbi as of June 30 of 2021.

This includes cash and cash equivalent of $299.0 million the reduction in cash balances over the quarters was mainly due to the redemption of the convertible notes of 35 million U S dollars.

In April 2021.

Accounts receivable of renminbi, $39.0 million prepayments of proving to be $12.0 million fixed assets of <unk> $80.0 million.

And long term investment of $168 million.

Total current liabilities were at.

Will it be $265 million as of June 32021, and this include short term loan of $255.0 million.

Receivable cost.

Cost payable of $20.0 million deferred revenue of $109.0 million accrued liabilities of $96.0 million.

And onto business outlook.

Our full year, our new full year 2021 revenue guidance is now in the range of between $42 million to be $360 million.

Representing growth of 33% to 40% year over year, compared with last year and our guidance for our full year gross margin remains above 70%.

The update is primarily due to the revised outlook for our <unk> business.

The use of third party agents.

Develop a service value added service business has caused the change in accounting method for our revenue from gross revenue to net revenue net of any <unk> under U S. GAAP.

In addition, due to the recent macro environment uncertainties some of our potential <unk> license partner has temporarily delayed joining and integrating with our traffic supply network.

Over the long term outlook for the <unk> Alliance remain unchanged and we are still expected to be our main growth driver going forward.

Please note that for a meaningful comparison purposes. So prior year revenue numbers used to calculate the revenue growth percentage exclude revenue from targeted marketing business.

The above outlook is based on the current market conditions and reflects the company's current.

Preliminary estimate of market and operating conditions and customer demand, which are all subject to change.

And lastly, before I conclude I'll give a quick update on the share repurchase plan.

<unk> ended June 30 of 2021, we did not repurchase any shares as of June 30, offended anyone cumulatively, we have repurchased a total of 921000 eds since the start of our repurchase program.

And this concludes management prepared remarks, we are happy to take any.

The question now operator. Please proceed.

As a reminder, ladies and gentlemen, it is star followed by the number one on your telephone keypad.

You asked the question once again it is star one on your telephone keypad. If you wish to ask the question if you wish to cancel it.

Great.

Bound or how should be.

The first question is coming from the line of Jacob Silverman from Alliance Global. Please go ahead.

Okay.

Hi, everyone. Thanks for taking my questions are there any additional details you can give us on why partners are delaying joining and maybe when can we expect customers to stop doing that.

So around the accounting methodology.

Reported gross margin or will that have any impact on our reported gross margin for <unk> lines.

Hey, Jacob this is a phase I will answer the first question <unk> will answer your second question.

So as you know.

The macro and regulatory environment has changed right and.

Because of this it has a resulted a temporarily delay integration for some of our potential Doj Alliance partners to join our traffic of supply pool, because many of their app developers.

Hello, mainly of the App developers in the pipeline and are focusing on getting compliance for their own mobile apps in terms of the.

Okay.

The privacy issue the data collection issue.

Which is required by the government to rectify their own debt issues right. So they will slow down the cooperation with third party partners, including us.

So however, once their compliance work is finished.

The new the collaboration process.

So that's why we say you know the longer term the outlook for this business.

We will remain unchanged and we still expect the digi Elias to be the growth driver for our business going forward right. Despite the revision actually for this business did your alliance, we still expect to this year.

We have a growth close to 100%, which is already very high you know, which is which is a great achievement, we are going to go into half.

And Shannon we answer the second question.

Jacob on the gross versus net accounting and the impact on the gross margin yes.

Will impact some of the margin downward adjustment bulk affecting to be major because if I look at the example that we used before $100 versus 106 gross revenue the impact is only 2%. So also.

Yes, there will be some deterioration in gross margin, but we do not need to be material.

Yeah.

Okay, and then the delays there mostly in customers and are there any delays on your EMS for getting customers on digi lines.

No theres no delay from all sides.

This offer from the other side from customers right now.

Okay. So it sounds like also.

Yeah go ahead.

No no.

Hum.

Okay.

So it sounds like your relationships with publishers are improving.

After 618 should we expect that success to continue for maybe Singles' day or you know given the recent regulatory environment, maybe your relationship with publishers with publishers will improve maybe more in the in the next year in 2022.

I think I think we are starting to see the improvement starting from the fourth quarter right.

The regulatory decision for <unk>.

For these for these apps.

It's ongoing process so some of the partners.

Yeah, so through the end of June.

In the.

With the with our revised guidance right. So actually we are going to expect.

Flattish quarter over quarter growth from for the third quarter.

Actually this is a normal.

Normal situation.

If you look at our past year in 2020 actually we are seeing a flattish seasonality from the third quarter to second quarter right. So because of the slowdown.

And assuming a similar flattish trend, but if thats no slow down actually we were expecting.

Quarter over quarter growth right, so so but.

Since since.

Once some of the some of the.

Our supplier.

And in the pipeline. They finished their work than revenue through work and then they will start to collaboration with US. So we do expect.

To traffic to continue to grow.

In the fourth quarter and also we do expect the singles day double 11, we will have a positive impact.

Two <unk> business from the demand side. So that's why our full year guidance actually already reflected the quarter over quarter growth from the fourth quarter to third quarter.

Okay, and then switching gears.

Okay.

Video as a service in Europe, that's been progressing in recent months recent months such as the pace of new sign ups.

Yeah, so actually for the vast and Gms right.

These two products due to products.

When I when I looked at looked at as a number of the contracts spanning progress actually the recent data shows is close to.

$400, a $4 million 4 million contract value has already been.

You can sign up right, which is which is actually last quarter. When you were having the call. It was like a $2 million. So actually already already doubled already doubled. So so we are continuing to make major progress in these two products and.

Actually for the for the contracts that we just signed up actually without with.

Famous actually.

Meaningful big customers, such as China merchant Securities right.

So with this this.

A household name.

As our.

As our.

New customer we can use as a case study to continue to push too.

Similar customers in the industry right. So we do expect.

These two business to continue to gain momentum.

In the following quarter before the year end.

And one last one for me.

So maybe it's a further.

Monetize video as a service are you considering offering maybe any AD placements AD sharing capabilities in combination with the subscription that you're already offering.

Yeah.

Actually we thought about this right.

I think I think that's an accurate two very different defensive business model.

And currently what we are offering is a true SaaS model right. We actually it's a subscription fee we charge a subscription fee, which is pretty much a pure module right.

Software type of margin, but once we once we offer.

As a.

As I kind of like SMB.

Similar to strategic Alliance business model, which which will.

Certainly.

We will need to paid.

The media the media fee and also as well as actually we need to pay the bandwidth cost right. So the margin will be.

<unk> dramatically lower than current <unk> business model. So for the time being we actually opt not to choose this way of monetizing and.

We want to we will continue to focus our focus on the subscription based model of FERC before.

Before before.

Once we you know.

<unk> message.

A good size.

As a subscription model than we kind of think about that later on.

Chris do you have anything to add.

This is.

Actually two different directions.

So first of all we want to focusing on some.

For the coal industry for example financial industries at the bank.

Those apps they have.

They have huge budget to invest in this loss are content update are not leading to any advertisement.

Dale apps.

So.

So in this case they are willing to pay.

Based on our model.

So our.

But for some.

<unk>.

Like Turkey.

Hum.

Internet companies.

Those companies they monetize by the advertisement so in decades, we are part of the like to revenue.

So the charter revenue share model.

In the first gate.

In aerospace, we want up focus on the <unk> model and because the banks and financial industry, they have huge budget and.

We are very similar to what we said in pasta push services.

Alright, thanks, so much everyone.

Okay.

Thank you Peter.

This is coming from Ryan Roberts from Vegas. Please go ahead.

Oh, Hi, good evening management, thanks for the thanks for the update.

A couple of questions from my side I'm kind of the first.

First one is.

It's really you talked a bit about the supply side Judy Alliance.

Some of the apps are undergoing rectification so on so forth.

You know kind of slowing down their integration with you guys what about the demand what.

What are you seeing there because it sounds like your current you use you about 180.

Which is a nice step up from last quarter from Q1, rather and your target for the year and I thought it was around 160. So it seemed like you guys are doing well and do you use which would make me think that you have.

Some pretty solid revenue generation capability by 20 year, what's happening on the demand side of that first.

Okay.

Hey, Ryan this is Fay so actually from the demand side, it's never an issue right. Because you know that's always customers who want to.

Acquire new users more new users and also in large internet companies they want to they want to wake up their dominant existing older users right. So our size of this business.

For the time being.

Kevin.

With the expectation of the third quarter fourth quarter revenue.

It's going to be close to $100 million revenue. So this is a still relatively small versus compared to the to the huge huge market size of this.

For the advertising mobile advertising industry right. So so so that's why.

And also for four hour day July service actually this is a completely new media format, which which doesn't really compete directly with the existing.

Service providers, right, so, which which serves to our advantage.

So we see all this pent up demand and and the bottleneck has always been and will be.

The supply side right. So that's why that's why.

We need to we need to.

Wait a little bit.

Until the the macro regulatory process has been has settled then we can we can renew the growth.

Right right and then Don can.

Talk to me a little bit about the AD loads I think it was.

One of the things one of the other little dial you could turn for monetization.

The current AD load looking like there.

Lines.

Yeah, so even though there is still about 50% right.

Divided by.

The.

The denominator is.

Basically that <unk> right.

So at a node hasnt really been our focus yet hasnt been our focus yet.

We want to continue to to acquire as much traffic as much into Europe as.

As possible before we do the fine tuning of the AD load and suddenly we.

Working on it okay from the product perspective.

We actually launched the SSP 2.0, which will offer the functionality that for the year, you will be able to offer multiple exposure right and that the products launched in the in July and has been actually has been in trial process.

A few if you app and the result actually is pretty encouraging for the same to you we are able to increase the AD load basically by 25%.

So we also have already established a migration plan to migrate our existing asking on network.

This SSP 2.0 so.

We will start.

With the smaller youth first and when they become stable and achieve the results that we wanted then we'll move on to those ads with greater ease of use. So we expect that such an aggregate migration process to be ongoing and our continuous efforts and we hope to.

To be able to finish the majority of the migration before the end of fourth quarter. So so this.

In addition.

<unk> two to the organic.

On traffic acquisition view acquisition.

This will help the total exposure.

So we can leverage.

In the coming quarter, that's why already.

We already built in the assumption.

For the for the traffic to continue to grow in the fourth quarter because fourth quarter.

<unk>.

Seasonal quarter over quarter growth of JJ language.

And kind of Blue Sky scenario, what's your what's your AD load target in Q4.

I think it maybe increased bye bye.

10%.

So you're going to increase from 50% to 55 or 50, 50% 50, 50, 555% to 60%.

Somewhere in that range, yes.

Okay. Okay understood. Okay. That's helpful. Thanks, and then maybe another question because I think you were talking a bit about the kind of cross selling and progress. There I'm wondering if you guys have any analysis kind of about on a customer cohort kind of basis.

For kind of your best business, because that's what we kind of expect to see deliver some explosive growth as we've talked about in the past a lot subscription growth is nice, but bass is really kind of where you think there's a lot more capability and more potential there.

Do you have any data you can share yet on terms in terms of how many.

The average revenue kind of recurring revenue rate might be kind of the.

You know because of some of those typical SaaS metrics I think that the.

Maybe some other companies that you're wherever following can you share some of those updates or some of those data points. If you have them.

Yeah, Yeah, we do actually.

We do have those those metrics right typically fast fast kind of like a matrix. So we actually have segments, our our subscription business.

From basic customers into into two buckets right why is the key customers, which as you know.

The top five.

<unk> hundred Internet companies.

Based on the <unk> right so for.

For these customers.

Customers actually when we look at the.

Okay.

The customer retention.

Dollar based actually.

India, Okay net dollar retention okay.

Over the past several years.

<unk>.

In the range of launch of defense to 120%, which is a very sticky okay and.

For the second second bucket basically at those those customers.

More like SMB or smaller type of customer for these type of customers as you know in China every year actually everyday.

The apps coming to go right for that.

Smaller ones they tend to.

By nature.

Cannot they cannot survive after a certain period of.

So at the time of our operation. So this <unk> segment.

Of customers when we look at it and they are actually they are in the range of around 70%, 70% or so so this is this is a natural.

<unk>.

If it's.

It's a very difficult.

Two kind of like the increased <unk>.

For these type of customer unless unless you know we don't want to deal with these customers right. So that's sort of a sort of a.

On the current infiltration.

That's helpful to hear that the case or kind of a 100 point I hit a sticky once that's good.

Kind of adjacent to that you mentioned kind of a realignment of the sales process, a little bit having internal staff to focus on case and having agents do everyone else.

Where do you kind of draw that line with respect to kind of the wechat mini programs is that gonna be agents holding handling that business for you or alternatively, you're going to continue that in house and is there a potential at some point where these.

Inside of it kind of sells itself.

I realize signing J D lines customers for supply is maybe.

Labor intensive thing, but eventually ultimately they must be kind of a.

Kind of a targeted site, where you know an advertising clients can purchase inventory yourself.

Exposure themselves right.

A lot of this much more scalable.

Yes.

So actually you know currently.

From the revenue perspective revenue sprint already over 50% of Azure lines revenue actually are coming from the AD agencies.

Most of these AD agencies, they will do their customer acquisition basically.

At a customer magazine themself and then even.

A lot of them they will do the do the advertisements actually operation.

As well so actually we only off the platform for them to work on right. So.

For this set of agencies actually already it's very kind of like the automatic and it doesn't really require our internal internal.

The labor or whatever and resource right. So so going forward. We expect that these at AT&T, you know kind of like a net revenue pilot continue to grow the profit we our direct salesforce.

<unk> mission is to serve a few.

Very large customers such as Weibo right such as we've seen. These are these are very large customers right. This has meant that we need to deal with them directly because they have.

Actually maybe in a pretty more complicated.

First argument right. So so for majority of the customers. We will go next to.

The agencies to do it so that scalability is not it's not an issue.

In our opinion, we never budget, where we are.

We will build a very massive AD operations team and.

How does it look for us okay.

We don't need to do that is not in our strategy.

So could we see potentially see some of the some of the sales and marketing spend kind of come come down a bit.

Or is that not.

That might be not in the cards.

Yes. It is our goal to actually to continue to.

<unk> leverage in the in the expense.

Items right so suddenly.

The first marketing needs to go down as a percentage of total revenue.

I think I think.

For this kitchen alliance business.

We think that the language was pretty high.

We are continuing to go up okay, and while we need to do is actually waqar is actually to get the leverage for for the for the subscription business subscription business actually had revenue still not in the ideal range yet okay. So that's why we.

Going forward actually we are.

Actually going to have actually already building sort of a key customer kind of Microsoft team, which does not use us to before and these key customers.

No.

Industry verticals.

Vertical to vertical by vertical and so.

Companies like kind of emergency committee right, that's kind of a cost driver.

And they can generate $1 billion revenue also right. So so this is as well.

Efficiency efficiency will come from Ryan by soybean.

Large customers right and so so so this is an ongoing process.

And then not only on the on the sales marketing and also our R&D. We will continue to drive the efficiency. Okay. We are we're continuing to optimize our resource utilization rate. We are continue to reallocate resources into the human resource into it.

Into new product innovation, Okay, and also we are coming back.

The results in.

Originally.

It gets into the older products right legacy product push products right. So that's sort of ongoing process. We are currently implementing so I think going forward.

We should have continued to see our operating leverage.

Okay.

A couple of two last quick ones very quick from me on the numbers side of things.

I'm curious what did you could you remind us what that other income line is on the P&L and also for the prior share buybacks what was the average buyback price and then I'm done.

Okay.

Take a look.

So the other income is really on the government grants.

We get the subsidies we give them.

So just a moment.

Got it okay.

And roughly speaking.

Higher buybacks.

Yes.

Yeah.

I need to get back to you because we have not been repurchasing debt for at least four quarters. So I don't have the numbers readily available.

Okay.

Can follow up offline.

Okay. Thanks, very much guys appreciate it.

Thank you. Thank you.

Once again.

Followed by one on your telephone keypad.

Sure.

We have the next question.

Once again, ladies and gentlemen, it is star followed by the number one on your telephone keypad. If you wish to ask a question. Please note there might be a slight pause as we relate to the questions.

Once again it is star followed by one to ask a question.

So we have the next question from Thomas Jeff The personnel investment. Please go ahead.

Hello.

Good morning.

So that's the only around Covid.

And then sort of we were down in the linkage to the diesel and if you don't want to go out and.

Simon said that that doesn't get us.

We will partner to the diesel engine behind it.

Thank you Randy.

With that many that you werent amortizing dominate CRM.

Many times you know why because you get to <unk>.

Judy.

It sounds that disabuse of public cloud.

Can you talk about what are the OEM figure out what they're doing.

It sounds like I don't actually know.

<unk>.

Sounds good thanks, Buena instead of what Gary said.

<unk> two times of damage from here.

Sure.

Okay. Thank you.

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The woman that sounds familiar with <unk>.

Which I think was up a deepwater.

Okay.

It sounds like you guys. It was neither a diesel gallon.

Is this the only element do you want them all the time in summer.

I'm.

He was a director one actually does that make you weren't irma.

I mean that is truly outstanding.

Jonathan in Western Europe, So does that mean.

Take it away at the overall attitude afterwards.

I was just sort of what kind of that mandate.

At this time.

I'm in New York.

Yes.

But it.

She can't Hunter would know what those sound that kind of Q1.

Okay.

I would just pointed up on GAAP.

So what does it look.

So I just wanted to come on that.

Uh huh.

No manner.

Okay got Asia, Thailand, Laos, There's also China.

One woman <unk>, Hong Kong IPO, so any thoughts about that.

Kind of how it kind of hover Hong Kong, because I, just won't encounter whatnot Mitchell senior maintenance.

And he has a biomarker and intangibles that shop at home on the guidance with yet another major go.

So I think the CLA.

Congratulations on a much using <unk> <unk> as well if you get us all in Chiba and Josh as well as again, they don't want cloud now Meanwhile, Ana Jos.

In light of the <unk>.

Taken $80.

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Okay.

So out of our <unk>.

My comment on <unk>.

Take up a lot of deals and deals with ammonia kind of weighed on consumer finance Oracle as well.

In America, we got one of those one and autonomous is whether or not kind of on the upland golf tick tick tick tick <unk> oncology contingent.

They say economy with EDC and should go on either the ASO it's unchanged.

How much.

Okay, and then Michael here it sounds like if you hit that going to be honest with that guidance.

Yeah.

I understand that it used to be.

Got it.

Uh huh.

He was with <unk>.

Nico Congress this very useful below I'm missing that you use.

Sure.

The filing.

So would you say that.

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Now I'll make a few hours.

Sometimes it back.

Since that time.

Thank you.

Since then we will move to negotiate Oracle chosen it themselves.

Uh Huh maturity information to go on this essential charters within them she joins us with that.

Yeah.

Uh huh.

Okay. Thank you.

Okay.

Thank you once again, ladies and gentlemen, it is star followed by one to ask a question.

We have the next question.

Do you have the next question is coming from the line of Ryan Roberts from <unk>. Please go ahead.

Oh, Hi, I had a follow up from the.

The previous caller, because I had an interesting point about kind of maybe user experience and a potential add overload.

Cooperate with a couple of different platforms.

If an app developer cooperative multiple platforms that could lead to a kind of a.

Deterioration of experience, if youre, showing an AD an intensive chosen AD and so on and so on.

Is there is there any when you're looking at is gonna be AD load and kind of overall performance I'm. Just I'm curious is there any kind of way you can you can monitor that from a kind of a user experience perspective, it's going to be.

Developer probably a.

And that's probably more of a concern for them, but then again if you're you've.

Providing some of the.

Advertising service for them I would wonder if you have a maybe an element of concern there because that could impact our Hawaii.

I think from your advertising clients, if the inventories may be saturated.

I'm just kind of curious how you guys approach that that problem.

Yes.

So actually the beauty of this product is the user experience.

<unk> is actually not it's never an issue for us.

Sure.

For us for that Havent been right because first of all for the AD load country is very low it's actually put you a day only generates we only show Europe five.

Alright, so versus the typical.

Funding or any any.

The media.

Feed feed feed.

They are going to show like a 10 to 20 right. So this is immaterial compared to the traditional way of showing ads and.

Even though we increased the ad load.

By 100%, which is one exposure.

Which is still still very very.

Limited and second of all we actually.

Have down a few a few.

<unk> with with the developer to analyze whether our this new format has any impact to user behavior, such as you know whether whether we our costs.

Increased number of users to two to delete the app right. So we havent done all these sort of.

That's it actually.

We never we were never able to find any evidence that links to users.

Addition of the App because of because of.

The App developer used our <unk> alliance.

Product and.

And in some cases actually also improve they are actually the user retention.

Richard.

Very very surprising to us as well so net net basically that's no negative user user experience.

We never received any user complaints as well since we launched it is.

Just a product.

Yeah actually product life basically lays out for why the.

<unk> <unk> two for the <unk>. So basically we can do our AB test.

For some used for users that will show that our advertisements and another group a don't show any advertisement so basically.

Data in our result.

Those tool.

I have no difference of these two groups of users.

Yeah, No no statistical difference got it got it okay. Okay alright.

Alright, she said when its all I'm good thank you.

Okay.

Once again, ladies and gentlemen, it is star followed by one to ask a question.

We have no further questions at this moment I would like to hand, the conference back to our host Mr. Magazines, you think Melissa.

Thank you all right.

Thank you everyone for joining our call Tonight. If you have any further question and comments. Please don't hesitate to reach out to <unk>. This concludes the call goodbye.

Thank you, ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.