Q4 2021 Aurora Mobile Ltd Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile fourth quarter and fiscal year 2021 earnings Conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
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Please be advised that today's conference is being recorded.
Now I'd like to hand, the conference over to your host today.
<unk>. Thank you. Please go ahead Sir.
Thank you Andrew.
Hello, everyone and thank you for joining us today.
Our robust earnings release was distributed earlier today and is available on the IR website.
<unk> Dot C and.
On the call today are Mr. <unk>, <unk>, Chairman and Chief Executive Officer.
Mr Fei Chen President and Mr. Shan Nen Bong Chief Financial Officer.
Following the prepared remarks poultry will be available to answer your questions. During the Q&A session that will follow.
Before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of $19 34.
And as amended.
Find in the U S Private Securities Litigation Reform Act of $19 95.
These forward looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the company's actual results performance or achievements to differ materially from those in your forward looking statements.
Further information regarding these and other risks uncertainties or factors are.
Included in the company's filings with the U S SEC.
The company does not undertake any obligation to update any forward looking statement as a result of new information future events or otherwise, except as required under applicable law.
With that now I'd like to turn the conference over to Mr. <unk>.
Please go ahead.
Thanks, operator.
Good morning, and good evening on the call welcome to Aurora, Mobile's fourth quarter and full year.
Dave on your last earnings call.
Before I comment on our Q4 and full year results I would like to remind everyone that as a quality audience that is available on our IR.
Our website for your reference.
You may refer to that that as we proceed with the call today.
Despite a very challenging operating environment in talking about the one week jewelry multiple pulp RASM outpaced its operation and financial partners.
The conclusion of the fourth quarter marked the first full year of our successful transition into our stock based model, which includes the benefits of phases and vertical applications I am more than delighted to share with you. The atrophy unless we have made with very record high keep it as a result.
So apples to apples comparison numbers.
<unk> is core contribution from the legacy bank of American pages per year.
We enter the fourth quarter, we have a lot of momentum.
I'll keep it a measure it's oscillating et cetera is not a great result.
Which further proof that our strategic decision to franchise fits right into our tops business is a great victory.
Revenue of RMB 101.
102, a median of a 42 year over year.
This marked the highest stock revenue record for the company, surpassing renminbi 100 meter for the for us upon a key milestone for us.
Gross profit was RMB $72 1 million the highest gross profit is Q1 advertiser times up by 23% year over year.
GAAP gross margin was 17, one time too.
Preferred which is more than one two times.
The other way of 56%.
11% a year ago.
Adjusted EBITDA was RMB one on April <unk>, the first ever adjusted EBITDA profitable.
The first couple of quarters since our transition to the pure artificial since Q1 of <unk> one.
EBITDA significantly improved by Renminbi 19 million year over year from.
Next to the Renminbi 17 1 million in Q4.
Net loss was RMB 35.
$6 million significantly narrowed down by 50% below a year ago.
Yes.
The number of paying customers increased to 2760 <unk> from 2016.
Can you say about a year ago up 17% year over year.
Total deferred revenue was up was up our <unk> media for seven consecutive quarters, indicating strength in our SaaS base growth, where we're collecting payments from customers at inception.
H contract period.
Our base remained consistent.
Around 48 days, indicating our disciplined customer quietly checks and credit granting procedures.
<unk> revenue growth.
Last month.
I would tell you we thought it was full year revenue was RMB 400.
37, 3 million, representing a year over year growth of 39% outside of India.
Our revenue guidance range.
Turning into profit profitability is Australia.
And knowledge of our success in growing the top line revenue as well as our disciplined approach to driver.
Option.
For the year.
We are committed to continue to control and optimize operating expenses across all business functions.
Going forward.
If that to further drive operating efficiency in fact, it is a tool.
<unk> without these efforts in pace we are on.
The right path to add to your fleet.
Perfect.
Adjusted EBITDA for <unk>.
Let me now give us.
Updates on our product iterations and technology innovations Rachael ray, but even that are key to driving our long term.
Particular needs and meet the ever evolving needs of our customers.
Absolutely important important tool meaningful product feature.
Our first a feature update was focused on <unk>.
Housing the protection of data informations.
New feature.
A lot of iterations internal inflammation can be centrally.
Yes.
At the same time sensitive data are separated into virus apologize data bank to mitigate lease of inflammation and ensure comparison.
And information security of our users and developers.
I can update is where we have increased the.
And.
<unk> of one off that you have a channel.
And that channel, we've got about 80 to manage both upstream and downstream SMS message wherever these new functionalities customers can manager on the mass HSA assigned to the <unk> pathway.
Okay, Reis se with sale and manage the message.
Basketball and users.
Okay.
Message.
We are continually continuing to see customer reception, so destiny, increasing for our EMS product well non customers, who have signed up during the quarter input panel.
It to China International capital co products.
Our Asian, China merchants filings.
And what those securities.
We also want to share with you the latest development regarding our partnership with Huawei Cloud since November Tiger tells you one right.
When we officially launched our Jive edification and other customized survey so I'll probably call recently, we have also launched our.
Product and we also as a J pushed probably part of the basin.
By the end by the end of 2022 we aim to complete the integration of our full product portfolio, including for us.
And link and so on.
Our cooperation with probably call them choice that industry wide.
And Chas.
And possibly come on for our comprehensive and competitive product portfolio and services.
Similarly to the I'm not sure with Huawei.
Entering into a partnership agreement May change, how technology to launch all verification of each of edification on the tank car market place.
Lifestyle trade in pipeline that provides cloud based apps and other service offering.
Separate separate integrator interchange, how hybrid ecosystem diversification will provide and quite good user registration unlocking towards debt security verification and other multi factor authentication.
Hello.
While we will continue to promote in depth cooperation between <unk> and leverage our technology advantage to expand our product offering to empower developers and enterprises to conduct high quality operations.
Sustainable development and effective monetization on the tank car platform earlier this week.
We have entered into a definitive agreement to act.
A majority.
Equity interest in Shanghai, China.
With a leading E mail API platform for consumer marketing and use a century transactional E Mail services.
We are a pioneer in the field of customer engagement I think Karl has a leading position in E mail sending surfaces.
Customers are more and more dependent on flexible omnichannel strategies as the needs for user engagement intensified.
With the addition of Steinhaus email sentential basis, where we have been able to quickly reach our omnichannel customer engagement product offering reached currently in chrome mobile app push notification.
MFS Wechat official accounts Wechat mini programs at <unk> and progress in talk and at a price of oil.
Retail fall can provide customers with industry, leading technology to simplify the Omnichannel communications.
Without having to manage different lenders for each channel.
We will have that joined advantage to provide a reliable and effective customer engagement platform for different industries much closer.
Our paying customer base is also expected to almost double upon completion of these trials session at Suncor has more than have more than 2000 paying customers during the fourth quarter of 2021.
Both parties can benefit from this acquisition.
Promo cost saving opportunities for the combined customer base and have filled.
Our total revenue growth I'm truly looking forward to the one plus one greater than two synergy between the two companies and beauty, where we captured more than actually them altogether.
Now I will turn the call over to Fay, who will discuss <unk> in greater details.
Thanks, Chris.
Let me start the discussion by elaborating on the different revenue streams within the SaaS businesses in the fourth quarter of 2021 our developer services continued to deliver solid results with a 42% year over year growth, which was mainly fueled by a substantial 73 to <unk>.
<unk> year over year growth in value added services.
27% strong growth in our subscription services.
Subscription services revenues were RMB $44 4 million, an increase of 27% year over year, primarily driven by new customer acquisition and a strong growth in the private cloud services.
Our strategy of cross selling various non push subscription products has also been contributing to this significant growth as a result, our revenue contribution over non push notification products increased to 49% from 38% a year ago now I'm pushing the deprecation products.
Which includes private cloud SMS and data verification also achieved a higher output of renminbi for these 3000, resulting in the overall pool for our subscription services, increasing by 8% to RMB 18 2000 <unk>.
With RMB 16, 8000, a year ago.
New and renew the contract of notable customers in the quarter include China Telecom Tesla, China Eastern Airlines and so on.
You added a services within developer services, which include the revenue revenues from JG Alliance services and advertising and SaaS continues to deliver impressive results by achieving a 73% year over year growth to RMB 30 point.
2 million from RMB, 17, 4 million in fourth quarter 2020.
Since we first started our value added services in fourth quarter 2019.
Revenue has exponentially grown by eight two times and reached a new historical high this quarter.
On the supply side of the <unk> Alliance during the quarter, we continue to grow the traffic of pool as it is a vital part of our strategy to increase opportunities for monetization channels.
Total number of apps within our natural exceeded 470 apps compared to 394 in third quarter, 'twenty, 'twenty, one representing a 21% growth quarter over quarter and the total number with you within the network has also steadily increased to around $190 million for this quarter.
On the demand side mini program developers and the re targeting related demand continued to dominant by contributing over 80% of <unk> Alliance revenues in fourth quarter 'twenty 'twenty. One in terms of industrial vertical we have had an increasingly strong demand from finance E Commerce.
In Internet services.
During the quarter at agencies contributed more than 40% of DG Alliance revenue stream, while the rest came from direct to customers major customers of JJ Alliance consisted of repeat customers and the market leaders across many industry verticals. They include.
It's not limited to cobalt Kingdom, Tencent music RTP UC browser now let's move on to.
Political applications that mainly cover financial risk management and market intelligence. These.
These revenues grew steadily by 11% year over year with the highest growth contribution.
Coming from the financial risk management business again in the financial risk management segment revenues increased by 18% year over year with a solid 43% growth in output.
The second.
The record high quarterly revenue has been the most meaningful achievement since first quarter 2020, showing that the out of the adverse impact of the pandemic on our financial risk management business segment is substantially behind us.
We anticipate a favorable macro environment to support the business and we will continue to grow in 2022 during the quarter, we acquired a new key account customers and they continue to retain mainly existing customers.
Some of our new and renewed the customers include Marcia on consumer finance.
Telecom best buy <unk> company limited and <unk>.
We bank.
Our market intelligence product line.
Has made big progress by signing a number of new and well known key account, okay. Operator customers during fourth quarter 2021 included Baidu, Amazon, who et cetera.
Our new product <unk> launched a couple of quarters ago has been extensively used by investors and the brands to attract traffic index for offline retail shops and has gained the traction during the quarter by signing a number of notable investment customers.
We expect this product to be our new growth driver from the product perspective going forward. We are continuing to grow the EIOPA business by having a wider coverage of key corporate customers as well as cross selling branded products with that I will now pass the call over to Shannon.
Thanks Fay.
Over some of the key expenses and balance sheet items.
Lets talk about operating expenses.
As a result of our continuous efforts to efficiently manage operating expenses in.
In Q4, 2021, opex decreased by 13% year over year to $92 5 million.
In particular <unk>.
<unk> expenses increased by $11 million to be $45 million, mainly due to <unk>.
<unk> 5 million increase in cost to support the expansion of the <unk> businesses.
Selling and marketing expenses increased by 48% to let me be $33 2 million, mainly due to the increase in sales Commission and the expansion of our sales organization.
R&D has been G&A expenses decreased by 67% to $14 four.
4 million, mainly due to a year over year reduction of $11 million in bad debt provision due to our proactive and strict financial control measures.
Reduction of $11 million and long lived asset impairment due to onetime costs foregoing projecting.
Projecting the same quarter last year.
$5 9 million decrease in staff related compensation.
Also during the quarter, we streamlined our workforce in an effort to further improve our operating overall operating efficiency and to ensure opex maintained at a healthy level we.
We will continue to optimize our organization.
And finally to our opex level, while assessing stably grow our revenue.
Adjusted EBITA calculated as EBITDA, excluding share based compensation reduction enforced charges.
Impairment of long lived assets impairment of long term investment and change in fair value of foreign currency swap contracts.
Outside of significant breakthrough and delivered the first positive quarter since 2020.
<unk> be $1 8 million, we significantly improved by $19 million year over year from negative $17 1 million in Q4 2020.
For the fourth quarter of 2021, we have delivered a set of excellent financial results, which includes the following highlights.
Revenue of our SaaS business increased significantly significantly by 32% our gross margin improved from 56, 7% to 71, 2%.
There are a result of our.
Q4 2020.
Gross margin being 100% contributed by high margin <unk> business.
Opex decreased by 13% due to effective and stringent cost control measures.
As a result adjusted EBITDA.
And rich positive renminbi one.
<unk> 4 million, which marks the first adjusted EBITA profitable quarter since the beginning of 2020, when we commenced the transition into the SaaS business model.
This demonstrates that we have the right cost structure profitability is highly achievable as we move.
And continue to scale, our SaaS businesses.
Onto the balance sheet I'll start with two key kpis important kpis that we closely monitor.
Firstly, our turnover remained.
It remains stable.
This quarter compared to 37 days a year ago.
Disciplined accounting policy and cost and cash collecting efforts ensure timely collection of pulse.
We are very pleased with.
<unk> remained fairly consistent quarter over quarter.
Secondly, the total deferred revenue balance, which represents cash collected in our bonds from customer has exceeded $100 million.
Quarter end for seven consecutive quarters.
As of December 31, 2021, the balance was at 124 million up from $119 million in Q2, 2021 .
Next.
Total assets were fine.
95 million as of December 31, 2021. This includes <unk>.
Cash and cash equivalent of two 4 million.
Accounts receivable of 43 million prepayments of 12 million fixed assets of 62 million long term investment of $142 million.
Total current liabilities were at 373 million as of December 31, 2021. These include short term loan of $150 million.
Accounts receivable accounts payable 18 million deferred revenue of 120 million accrued liabilities of $85 million.
Business outlook.
And based on the current available information the company sees the full year 2022 revenue guidance to be in the range of <unk>.
45 million to $455 million, representing a growth of 22% to 27% year over year compared to 2021 results.
The growth outlook is based on the current market conditions and reflects the company's current and preliminary estimates of the market and operating conditions and customer demands, 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 December 31, 2021 we did not repurchase any shares.
December 31st 2021, cumulatively, we have repurchased a total of 921000 eds.
Since the start of our program.
And this concludes management prepared remarks, we will have.
Peter.
Operator. Please proceed.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
If your question has been answered or you wish to remove yourself from the queue you May press the pound key.
Once again to ask a question please press star one.
And I'm showing we have a question from the line of Brian Kiss Linger with Alliance global.
Hi, guys.
Good morning, or good evening sorry.
Nice results can you talk about the announcement for verification services with Huawei cloud what are the dynamics to generate revenue from Madison can you help us understand.
When it will begin generating revenue and maybe some targets for this business that we should evaluated.
Yes.
Hey, Brian This is Fei so actually.
This is collaboration.
We've always thought it started actually last quarter right. So so actually in last quarter.
The call we've already mentioned that actually already started to generate revenues, although the revenue is not.
The other big Okay.
Yes.
Sure.
In the tens of thousands right.
It does have.
Contribution to our.
To our to our developer services revenue.
And going forward not only this J verification product. This is just the first product we are actually in the process of adding.
The whole suite of our product portfolio into our cloud.
Like the U S.
Right you name it so hopefully by the end of this year, we will be able to upload.
And the guests certify that biopharma and for all of our product offerings and this year, we think our goal is to not to.
Two.
To have an ambitious goal to have to have the.
Our relationship has started and generates generate.
So the amount of revenue, it's not going to be that it should be in a few a few million dollars renminbi.
Okay. Okay, and then last quarter, you spoke about JD alliance installations.
Starting to improve but they were dealing with the personal information protection wise can you update is this no longer.
The challenge is it's still a challenge just talk about how the rate of installations kind of youre seeing versus a quarter ago.
Yes.
Actually the regulation photo is largely behind us in the in the fourth quarter. So everything comes back to normal and.
As we talk about disclosed in the in the prepared remarks right.
Over 20% of.
Growth in number of apps joining joining this app pool right. So we do see is to see things come back to normal and we.
We do expect the <unk>.
And to continue.
In the following quarter and as you can see actually the revenue also also.
Exhibits.
This trend right. The revenue had had had a big sequential double digit growth.
<unk>, which typically is the refraction.
Okay.
More and more apps coming into joining our <unk> work as well as.
In last call. We also mentioned.
Actually the AD load is also another factor right. So in the quarter. We also increase the ad load.
<unk>.
Both effects actually contributed.
The growth the sequential growth of the revenue for <unk> life.
And I'm sure I'm wrong, but Zen cloud sounds like.
And marketing platform.
More so talk about how cloud is different than your targeted marketing business that you exited.
And the strategic fit for your company now its different.
<unk> is not a hockey.
Thanks, Chris.
<unk>.
Okay.
Cingal is not talking marketing company.
Thanks, Heidi E Mail API platform.
Very similar to tank rate, which added <unk> three.
Three years ago.
Ill.
Kate company, mostly.
As customary to commodity like.
Right.
Our bank.
Hotel.
<unk>.
Even touch will be company legacy one is also they are customers. So.
Sure.
8-K.
We are using their API towards an email notifications to our customers and I get the <unk>.
And the bank to use their API to send the email notifications stood at at credit card customers.
So that so if not.
Okay marketing company is a SaaS company Ajay.
Yes.
Can you give us.
A little bit about the financial profile of the company, maybe what our trailing 12 months revenues, what's the growth rate and margin profile.
Okay.
At the margin profile is very similar to our margins.
I think it was over 70% so over 70% and also it's a profitable company, so actually which is a good thing right.
Already generate profit and at the annual revenue for the company.
Around.
20% to 30 minutes. So we expect we expect in 2022.
Because the deal is going to be closed before the end of March right. So so we are at three.
Three quarters of that revenue to our to our financials. So we expect to generate.
$90 million around Cindy minimal revenue from this company after the acquisition.
And what about the purchase prices of cash is it stock how did you value of this company.
Yes, Brian .
At this stage we are not.
I have the liberty to disclose more I think when the when the document is done and dusted.
The science, so we will make some press release on that we've got.
Okay.
All of the numbers questions if I.
If I look at the gross margin, while it's above your guidance, it's a bit below each of the last three quarters. So talk about is it a mix is it some other trend in pricing just talked about.
How fourth quarter compare to the last the first nine months of 2021 and what were the factors.
Hey, Brian I think it's both.
I think that the mix probably play a bigger role.
As you know.
<unk> actually carriers smaller lower margin than the rest of the developer subscription business right. So developer subscription business gross margin is like.
Over 75%.
But did you did you Elias usually it's like around.
60.
<unk>.
So as we continue to grow.
<unk> Alliance business line, when Digitalized contribute a bigger portion of the total revenue you should have.
Expect to see the overall gross margin to dip a little bit.
Yes.
I think so over 70%.
Total total gross margin going forward is not it's not a realistic due to the reasons I just mentioned right.
So for this year I am sure you why do you want to know what the gross margin target should be I think anywhere.
<unk> 65 to 70.
Gross margin, we are trying to trying to maintain.
And.
And another reason.
Because.
<unk>.
When we get more traffic.
Into our network so the deals.
Conduct it case by case basis right. So for some some.
Apple developer it might command a higher revenue share so in that instance.
We will have.
<unk>.
Lower gross margin.
For compared to other either.
Traffic contribute contributor right. So so.
<unk> gross margin.
Not static.
It's very dynamic, but overall I think from what we are seeing I think in that 60%.
Is that reasonable its a reasonable number.
Great last question, just a housekeeping item.
I understand your EBITDA.
Where do I find in the income statement severance charges and the impairment of long lived assets what line items are those under.
Included.
Yes.
Yeah, Brian the severance will be under Opex operating expenses and depends on the associated employees, whether it be R&D sales and marketing G&A, So thats of sovereigns and in terms of impairment.
Be under other losses.
After lockdown from operating.
Yes exactly okay.
Just wanted to be clear. Thank you so much.
Thank you.
Thank you.
As a reminder, if you have a question. Please press star one on your telephone.
Our next question comes from the line of Brian Roberts with <unk> capital.
Good evening management, Thanks for taking the question minus pretty simple.
So looking at the Q4 results.
I think maybe even better than the market expected.
Fantastic I wanted to ask about kind.
The current run rate because.
Oh, yes.
And of course, that's kind of the.
Other kind of cost cutting happened in during Q4.
To ask about.
Current quarterly run rate.
What kind of Opex because it seems like.
There's been some cost cutting and I don't know if that was in.
And the early part of the quarter last part of the quarter, but looking forward.
It seems like there's kind of some.
Hmm.
Lots of calls.
In the stack here I don't want to get a sense of what that is.
Hey, Ryan. So this is so you want to know what our cost structure look like going forward right.
That's correct because I reckon in December maybe looks very different than October .
Yes so.
If you recall.
Last call I, specifically mentioned that the company was conducting a number of cost cutting initiatives right now trying to optimize our business operation.
From the labor perspective, but also from.
The ITT results effective right. So as you can see actually in the quarter, we have made very meaningful progress okay and.
We also finished finished budgeting process for the coming year, and we identified the areas, which we can eliminate redundancies and inefficiencies. So so net net after all of these assessments. So we believe for the Opex for <unk> 2022 .
You will now see any growth in <unk>, you should see some decline compared to compared to last year. So currently we are estimating anywhere between 10% to 15% reduction of Opex for 2022.
So the goal actually for 2022 is yes.
With the current revenue guidance right.
Also with this cost structure maintain a disciplined approach to achieve this cost structure and we are very confident that we will be able to achieve the full year adjusted EBITDA profitable for the whole year and so so we've done a sensitivity analysis and even consider some very.
Worst case scenario I think we are able to achieve that.
I think it makes that kind of.
Frankly, that's the clarity.
I'm curious like.
<unk>.
Just given the history.
Cash burn.
Give us a sense of like what what someone's assumptions are behind that.
Getting to non non.
non-GAAP .
EBITDA profitability.
What are your some of your major functions.
There are some major assumption to get to.
Yes, so so so basically basically took.
To get to EBITDA positive right.
Basically.
Like I said.
The cost control cost measure is we've done a thorough analysis on the consequential cost measure right and the biggest cost element to actually two parts. One is labor in a second.
It resource right. So actual results we already identified a number of areas that we can continue to.
To eliminate unnecessary spending okay. So this work has been done has been committed by the by the head of IR Department, Okay, So which should be able to for the <unk>.
It should be but we shouldnt be able to safe safe anywhere between 10% to 15% compared to last year and also in terms of in terms of.
The.
The labor the labor.
On the on the labor costs right. So so throughout the fourth quarter.
Last year, we have done.
I already have done the organizational restructuring.
We kind of like eliminated the performance low performance and price, which which.
Made our basically the total.
Number of employees.
Anywhere between around.
Around electric and percent reduction, so which which we are.
Set a new base for the <unk>.
Cost right and.
Also in terms of in terms of the variable cost. So this is a fixed cost for the labor and also thats a variable cost.
Variable costs of the Labour Party.
Julie.
Okay.
Sided basically determined by the by the performance right. So so basically.
<unk>.
We can achieve our internally is that <unk>.
<unk> targets.
They will get get for example at two months of salary as a bonus at the year end.
If you if they cannot.
If we are not able to deliver satisfied.
Our financial targets are 100% then.
And that's kind of like a tiered structure.
Significantly reduced the bonus up on this part of the variable cost right. So by designing this juncture, we are trying to incentivize everybody.
Yes.
Aligned with the company that go to two to achieve 100%.
100% of our financial targets.
Got it alright. Thanks.
Maybe just kind of drilling down a bit.
In that analysis is kind of a scenario scenario kind of.
Computation that you do.
What are you expecting revenue wise and kind of it sounds like an overall envelope.
The high and low.
Do you guys expect.
The revenue.
Yes.
To reach EBITDA positive you're going to have some assumptions about revenue high revenue low.
You can do so.
Curious, yes, yes, yes.
Okay. Okay. So so assuming assuming very little revenue growth okay.
You could assume assume.
Less than 10% of revenue growth under the current cost structure, and then we will be able to achieve adjusted EBITDA positive.
Yes.
That's all thank you very much.
[laughter].
Thank you.
Once again, if you have a question please press star one.
And I'm showing no further questions so with that I'll hand, the call back over to Rene <unk> for any closing remarks.
Thank you Andrew.
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 concludes the call have a good night, thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
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