Q2 2022 Aurora Mobile Ltd Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to Aurora Mobile's second quarter 2000, So I need your earnings conference call. At this time, all participants are in a listen only mode. After the speakers' scrub.
So I shouldn't there'll be a question and answer session.
Lots of question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your host today Rodney Bracken Stan. Thank you. Please go ahead Sir.
Yeah.
Thank you Amber.
Hello, everyone and thank you for joining us today.
<unk> earnings release was distributed earlier today and is available on the IR website.
Jaguar I don't see it.
On the call today are Mr. Wei don't rule, Chairman and Chief Executive Officer, Mr. Shan Nen Bong Chief Financial Officer.
And Mr. Guang Yang Chen General manager.
Following their prepared remarks, they will be available to answer your questions. During the Q&A session that follows.
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 1934 as amended and as defined in the U S. Private Securities Litigation Reform Act of 90 95.
These forward looking statements are based upon management's current expectations and current market and up everything conditions.
Which are difficult to predict and may cause the company's actual results performance or achievements to differ materially from those in the forward looking statements.
Further information regarding these and other risks uncertainties and factors I included in the company's filings with the U S Securities and Exchange Commission.
The company does not.
Take any obligation to update any forward looking statement as a result of new information future events or otherwise.
As required under applicable law.
With that I would like to turn the concurrence over to Mr. Luo. Please go ahead.
Thanks very much.
Good morning.
Nichol.
Welcome to <unk>.
<unk> second quarter earnings call.
Before I comment on our total results.
We would like to remind everyone that our call.
Our next available on IR website.
Youll may reference to look at that as we proceed with the call today.
Our Q2 results were largely conditioned by the companies from the impact of the widespread researches probably 19.
Several of our businesses well.
Rusty.
Numerous cities shutdown P J.
Tim.
Despite the overall economic slowdown and the resurgence of COVID-19, we have seen it sounds like Capri and obviously starting in July.
That's the way you mentioned.
Q1 this weekend.
Okay.
Necessary steps and any.
<unk> achieved two four activity Jess upscale strengthen our management and obviously no capability to navigate through these tough times.
Continuing.
Fr stock here in the past quarter reshape the off mall operating expenses this quarter implement areas.
Brett study wafer there with your salary costs as we streamline our workforce.
This is important.
Saturday causes that one of our biggest cost components and we need to make sure. We are operating at the optimal level.
It is efficient.
Secondly, we closely and properly look look at every single expense front.
Eastern no technical support to bandwidth for free.
Consistent.
Conscious effort, just search for better tiers or replace new vendors in order to reduce the expense lever where possible.
At this juncture I would like to take a moment to thank all.
Our company for their contribution in this important cost cutting initiative.
Initiate queues.
All these efforts have been positively with Brexit in the Q2 financial performance here are the highlights of our important achievements.
Operating expenses for the past 14 quarters since Q1 of <unk>.
In 19.
B.
87, <unk> thousand meter.
One 7%.
Year over year.
Net loss since Q3 of 2019.
The $24 4 million narrowed down one 7% year over year.
Adjusted EBITDA and <unk>.
Significant any input by 40%.
Year over year.
Highest level of net cash inflow from operating activities in Q4 of 2020.
Total customer number up 79% year over year to 4700 and not.
Our phase III.
The level of around 46 days.
The tough business environment.
Total Q4 revenue was up our renminbi 100 meter for the ninth consecutive quarters.
Let me continue with the deferred revenue streams within the group.
Hey, beneficial basis revenue was down 10% year over year to RMB $55 2 million, which was mainly due to the decrease probative sfas, while our subscription service record stable at 2% year over year.
Growth.
Subsequent.
Susquehanna surface revenue of RMB $48 3 million.
So year over year also squishy surface, which include <unk> analysis that you have mass and others are products and services.
<unk> enterprise to improve.
Operational efficiency demand for our subscription service is relatively strong and less impacted by the general sentiment of the macro economic.
Despite a very tough operating environment during the quarter, we managed to grow our customer base and sign up several well known sizable customers, including China Everbright Bank higher Qingdao.
Tiger broker and China merchant Securities just now too.
One key milestone answer this question, so I think I will.
I'd like to share with you is our overseas business expansion in Q2, our overseas email deliberate surpass those in mainland China.
She is a great test.
Two the quality of our products and services, along with our ability to expand our message out.
<unk>.
We do see overseas, we do see obviously suspension as one of our next key growth drivers with our suite of.
Products from push notifications to E. Mails I believe we are ready and will cease all receipt growth opportunity with the opportunities in the near future.
Value added services revenue decreased by <unk>.
8% or renminbi, $16 9 million, which is in line with Huawei is that last quarter as the overall AD market has been relatively weak this quarter.
Direct customers contributed more than 60% of <unk> allows revenue stream.
Direct Kevin Brown for a party agency major customer of date, you all ask us at the ultra repeat customer.
Market leaders across many industry verticals key customers in quarter.
T J D and VIP Dot com.
With all the changes and uncertainty surrounding us.
Not Vittorio nor are we sitting on our lora.
We are more committed than ever to further emphasize and fine tune our products and technology as we believe US John has solid foundation can benefit the company in a long time.
Next I would like to update you on our products and particularly innovation.
Since the launch of our AD mediation pet fraud in the beginning of June our to meet <unk> and modern <unk> apps has helped drive our platform for more than 150 apps in the pipeline, we see great potential in our media HFF, one and as we shared on the last call overseas.
Players such as ABB lovie more pop and a resource that we've done similar and proven business models have thrived in this figure that by having better for us to grow and monetize.
Our midyear Asia, PEPFAR and the enablers livestock SDK based SaaS to measuring.
At <unk> such as.
non-GAAP, Tencent Youre outweigh and peso.
And at the same time it can also quickly assess more than.
2017 up 70, other highway demand side platforms.
Our service provider.
It is.
Whereas in the mobile internet industry breakout and uhm.
We believe we are in great position to have more mobile app developers complete the close loop.
Nevada development operation and monetization and <unk>.
Tangible business stuff that.
To enable our customer going Globo to add more overseas messaging channels in August in Augusta, We signed a cooperation agreement with Whatsapp, Delaware There was debating pilot messaging John .
This global cooperation represents a breakthrough in advancing our RAC business and in lodging our business ecosystem under this corporation Whatsapp is now embedded here as one of the Chinas within our RAC messaging cloud solution, which was created to empower Chinese enterprise two <unk>.
In oversea market with Omnichannel intelligent message of basis.
And also we're excited to share some updates from our co product <unk>.
With our recently released our new customer management feature for VIP push customers users of our surface now can easily lead target users and promotional and customized push message to the end user without having to go through the software coating process.
According to <unk> Research report great rate were largely improved when sending the dynamic and customized competitive push messages to end users rather than just the <unk> generic <unk>.
Forecasting message to everyone. This Neal Felicia is another meaningful onto our comprehensive suite of choice.
Along with our smart push function, which caps the developer fund the postal push analytics.
Yes.
So you'll see where you are.
A very productive quarter.
Matt that necessary product improvements and innovations despite a tough business conditions.
We believe with that on the when we have a superior <unk>.
<unk> product that market demand can we continue to strive and come back even stronger after the current slowdown.
I am confident that we are fully equipped and ready for the types of <unk>.
We have that.
I'll now pass the call over to Shannon, who will share more about that.
Vertical applications and other aspect of our performance.
Thanks, Chris.
And now let's move onto vertical application that consist mainly of financial risk management and market intelligence.
Applications revenue decreased by 25% year over year.
Mainly due to the impact of COVID-19, which resulted in a dip in the demand and logistical.
The growth in contract signing.
In the financial risk management segment revenue decreased by 22% year over year to renminbi 12 million, mainly due to one.
The slowdown in economic which resulted in lower demand for our services.
Delays in contract signing several major cities with Lockdown.
We are simply not able to mail or deliver contracts to customers for the execution.
Nevertheless, some X sight.
Stinky.
One customer in the financial vertical such as <unk>.
Suddenly sukkah Moslem cell fate and rebound continue their consumption of our services during the quarter.
As an update in early Q3 of this year, we are final and many other new customer, including but not limited to somehow Shelton setting some high you've seen ciampa Zimbabwean sukkah sure.
Our market intelligence services revenue decreased by 9% enrollment would be $7 3 million and we saw similar trend in market intelligence services as well.
Despite the slowdown in Q2, our teams do manage to find many well known customer including civil.
Hi, Hugh.
And with regard to <unk>.
So far in Q3, we have brought on brought on board. Many key account customers such as Morningstar keep and Steve My lawyer.
I'll now go through some of the key expenses and balance sheet items.
Onto operating expenses.
As Chris mentioned earlier on we have viewed as some of the best results since Q1 of 2021.
When we completed our transition to pure source model as a result of our effective control initiative.
Operating expenses decreased by an impressive 17% year over year to <unk> $87 7 million and that is the lowest opex since Q1 of 2019.
All three components within the Opex category have recorded year over year reduction.
In particular.
R&D expenses decreased 25% to really be $40 8 million, mainly due to lower head count that reduced salary cost and associated share based compensation.
Selling and marketing expenses decreased 14% to RMB $23 3 million, mainly due to the decrease in marketing expenses this quarter.
G&A expenses decreased 1% to <unk> $23 6 million, mainly due to lower salary cost.
Our adjusted EBITDA improved 40% year over year, and 2% quarter over quarter, respectively to negative.
<unk>.
Although this was another very challenging quarter, our decision and company wide effort to tightly control and reduce expenses.
Clearly paid off this.
This positive impact has been reflected in the financial statement.
And I would like to share with you the following.
We have record the lowest opex in the past 14 quarters since Q1 will spin even 2019.
<unk> net loss since Q3 of 2019 at negative $23 4 million.
Adjusted EBITA.
Negative 8 million improved by 40% year over year, we have the highest level of net cash flow cash inflow from operating activities since Q4 2020.
And we have the lowest adjusting operating essences, which represented a cash component of Opex since Q1 of 2021.
Now onto balance sheet.
I'll share two very important kpis that we closely monitor.
Firstly, the AAR turnover days has maintained stable at 46 days this quarter compared to 46 days last quarter.
Disciplined accounting policy and cash collection efforts ensure timely collection of our payoffs.
Secondly, the total revenue deferred revenue balance, which represents cash collected in advance from customer exceeded <unk> hundred million at quarter end.
For the ninth consecutive quarter.
On June 30 of 2022, the total deferred revenue was a historical high of $137 7 million.
Next total assets.
Bromine piece.
$8 7 million as of June 30 of 2022. This includes cash and cash equivalent of RMB.
Maybe 112 million accounts.
Accounts receivable of $75 1 million.
Prepayments and other current assets of $34 2 million fixed assets of 49 million long term investment of 140 million.
<unk> of $37 8 million intangible assets of 26 million.
Total current liabilities were $2 seven.
Accounts.
<unk> payable at <unk>.
$19 2 million deferred revenue at 1% to nine point <unk>.
7 million accrued liabilities of $78 2 million every repay the short term loan of $150 million in April .
Next onto business outlook.
Although we are still facing uncertainty from the pandemic.
Going into Q3, we are seeing some exciting growth from our business lines.
Our cost management initiatives continue to produce positive results.
I want to share with you.
Based on our current information.
We anticipate the developer service subscription service revenue of Q3 2022 to achieve close to double digit growth.
Both quarter over quarter and year over year.
For what.
<unk> revenue, we are also expecting solid quarter over quarter growth.
Yeah.
For value added services.
I have mentioned earlier.
The overall market will take time to stabilize before revenue can return to historical level.
Yes.
And we have to anticipate improving revenue and conscious cost spending barring any unforeseen events. We are looking to achieve a breakeven adjusted EBITDA balance for Q4 of 2022.
And please note that the above outlook is based on our current market condition and reflects the company's current and preliminary estimate of the 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 'twenty, two we did not repurchase any shares.
As of June 30 of 2022 cumulatively.
We have repurchased a total of 92 1000 eds since the start of our program.
And this concludes management prepared remarks, and we're happy to take the question now.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
To ask a question.
You will need to press star one one on your telephone please standby, while we compile the question and answer roster.
Once again Thats Star one one for questions. Our first question comes from the line of Bryan Keane Slinger from Alliance Global Partners. Please ask your question Brian .
Great. Thanks for taking my question first can you talk about on the subscription side with the Lockdowns.
Have you been able to deliver and get renewals for agreement Shine.
I see I see you've increased sequentially subscription revenue.
But still below the fourth quarter, so I'm curious.
Date on that and maybe talk about churn and how that's changed.
Changed given the market conditions.
Yes, Brian It is Shannon if you compare to Q4, we did have a few of the protocol projects that were completed so in comparison to Q2 numbers was a bit low.
But having said that the lockdown has lesser impact on sufficient business because the majority of them are renewed.
And renewal contract might not have the impact resulting from the logistical options that we talked about early on that we are not able to deliver the contracts so far our subscription business.
The thing we are on the right track and based on the numbers it did.
Show it that way so.
Fairly comfortable with the sufficient business at this stage.
So you are still not able to deliver that means that what you were saying I know you said Atlanta corridor or you are able to dose those agreements.
Yes, we are for subscription business, that's why the revenue shown up a year over year and quarter over quarter growth.
Okay.
And then.
Guess, what im a little bit confused on is that the market conditions are still challenged.
From an economic standpoint, and we hear from a corporate standpoint, a little bit here in China, obviously, so talk about what the drivers to growth are.
You mentioned, a couple of double digit growth sequentially.
How have you been able to do that and talk about from a demand perspective, given those conditions you know how it has changed.
David I think we can fuel.
As we look at this if you look at the value added services or the financial risk management.
More closely tied with the overall economy. So if you look at the AD spending I am sure you have read lengths and everybody else in China facing the problem that advertisers are not spending.
It used to be so this is very much tied to the economy on the other hand, if you look at our subsea business.
It is a less less impacted by business because of the fact that.
Economic slowing down.
I need to spend less on push so those are less resilient to the impact of the economy. So that's why we are trying to say is we do see good growth coming from the sub business.
Because there is less impacted by the economy.
Got it Okay, and then maybe touch on certain cloud what was its contribution in the quarter.
Which which which of your business segments is that reported and how is that.
<unk> been performing in the current conditions.
As reported revenue is under such business. So it is under subscription.
And is contributing about <unk> <unk>.
$5 6 million renminbi.
<unk> per quarter.
<unk>.
Numbers is growing is growing I guess for the fact that we are able to cross sell some of our customers to buy the business.
So business and secondly, as we have mentioned.
Our overseas E mail delivery has surpassed China. So there's a huge demand for their services for <unk> cloud services.
So the idea of doing pretty well.
Yes.
And lastly, a good job with the operating expenses.
Yes.
About the level of experience that we should see going forward, where we see a further.
Further declines as maybe some of them were done mid quarter or how should we think about opex going forward.
Yeah.
I think we are pretty much at that level I do not foresee any <unk>.
Despite going forward, if anything can be maintained at that level or lower.
Okay.
Alright, thank you.
Yeah.
Great. Thank you.
Question comes from the line of Kevin Wong from Speaker capital. Please ask your question Calvin.
Okay.
Good evening.
Thank you for taking my question I have one question I noticed that since last earnings call. The company has taken a number of bathrooms on going global such as they say releasing the overseas messaging cloud and establish cooperation with most of that so can management share more on.
The company's overseas strategy.
And maybe give us some highlights in the company's overseas business development overall.
Yeah.
Sure sure.
Thanks for your question.
And Youre right, we have been taking steps to expand our overseas business.
During Q2, and you'll see if you look at it.
Since the beginning of June we have released our a couple of things that we are doing right now.
In beginning of June we have released our overseas messaging cloud solution to serve Chinese enterprise.
International expansion and this is the one.
One of the growth driver for majority of the Chinese company. These days.
And also by integrating our multiple messaging products, such as J push SMS E Mail <unk>.
And other messaging product.
Overseas messaging pop solution focuses on the integration emanation of multiple channels. So therefore, the user they will be able to use.
Our product.
More efficiently.
And also our overseas channel.
Our solution has.
That's already integrated the platform such as Whatsapp that Chris talked about earlier on.
We have that we're looking to even to incorporate.
Others, such as Facebook messenger or take part going forward.
And also with this we are helping the Chinese enterprise.
Hu <unk> international expansion to Blu build closer and more efficient connection with their users overseas.
And this company.
Yeah.
This company is sticking overseas expansion phase, where different market conditions and evolving data compliance network environment and software ecosystem. Therefore, I think we are in the right space to help them.
To access overseas and two that we are able to seize the opportunity to have our overseas group revenue too.
Yes.
So it is my restaurants to your question.
Okay very clear things.
As a reminder to ask a question. Please press star one one on your telephone.
Okay.
Thank you there are no further questions I will now turn the conference back to Rene for closing remarks.
Thank you Amber.
Thank you everyone for joining our call Tonight.
If you have any further questions or comments, please don't hesitate to reach out to the IR team.
This concludes the call have a good night, thank you very much.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
Okay.
Yeah.
Okay.
Yes.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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The conference will begin shortly.
Raise your hand during Q&A.
You can dial star one one.
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Ladies and gentlemen, thank you for standing by and welcome to Aurora Mobile's second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
To ask a question. During this session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your host today Rodney Bracken Stan. Thank you. Please go ahead Sir.
Yes.
Thank you Amber.
Hello, everyone and thank you for joining us today.
<unk> earnings release was distributed earlier today and is available on the IR website.
G Guang don't see any.
On the call today are Mr. Wei don't rule, Chairman and Chief Executive Officer, Mr. Shan Nen Bong Chief Financial Officer.
And Mr. Guang Yang Chen General manager.
Following their prepared remarks, there will be available to answer your questions. During the Q&A session that follows.
Before we begin I would like to remind you that this concurrent call contains forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 19 before <unk>.
As amended and as defined in the U S. Private Securities Litigation Reform Act of 90 95.
These forward looking statements are based upon management's current expectations on the current market and operating conditions, which.
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 had to ask.
You take any obligation to update any forward looking statements as a result of new information future events or otherwise.
As required under applicable law.
With that I would like to turn the concurrence over to Mr. Raul. Please go ahead.
Okay.
Yes.
Thanks very much.
Good morning.
Well Nicole.
Welcome to <unk> second quarter earnings call.
Before I comment on our total results.
We would like to remind everyone that our call today on this deck is available on our IR website you.
Youll made reference to that that as we proceed with the call today.
Our Q2 results were largely condition by the companies from the impact of the widespread researches or COVID-19.
Several of our businesses.
Our rest of the day effective as numerous cities, what's dropdown between April and June .
Despite the overall economic slowdown and a resurgence of COVID-19, we have seen some recovery in obviously starting in July.
Okay.
As Lee mentioned on our Q1 earnings call Waco, Tex and unnecessary steps and initiatives to four activity address of scale and strengthen our management and obviously no capability to navigate through these tough times.
Continuing.
Fr stock here in the past quarter ratio of more operating expenses this quarter implement areas.
<unk> wait.
Further we feel salary costs as we streamline our workforce.
As important as that.
You'll recall that one of our biggest cost components and we need to make sure we are operating at optimal level.
The greatest efficiency.
Secondly, we closely.
Roughly look look at every single expense.
Frank Eastern no technical support to bandwidth Rafi Waco, Matt consist of us.
Conscious effort, just search for better tiers or replace new vendors in order to reduce the expense lever where possible.
At this juncture I would like to take a moment to thank all.
Our company for their contribution in this important cost cutting initiative.
Initiate in Qs.
These efforts have been positively with Brexit in the Q2 financial performance here are the highlights of our important achievements.
<unk> operating expenses for the past reporting quarter since Q1 of <unk>.
In 19.
<unk>.
$87 7 million.
One 7%.
Year over year.
Net loss in Q3 of 2019.
The $24 4 million narrow down one 7% year over year.
Adjusted EBITDA in excess of 11 million significantly important by 40% year over.
<unk>.
Hi.
Net cash inflow from operating activities in Q4 of <unk>.
Total customer number.
79% year over year to 4700.
And.
Our phase III.
Healthy level of around 46 days.
By the top business environment.
Total Q4 revenue was up our MB 100 meter for the ninth consecutive quarters.
Let me continue with the different revenue streams within the group.
<unk> revenue was down 10% year over year to RMB $55 2 million video with many due to the decrease romito SFA as well our subscription service record stable thing.
Yield growth.
Subsequent.
Tuscaloosa surface revenue of RMB $803 million.
Up 2% year over year.
Our suspicion is surface, which include <unk>, and then you add Matt and the others.
So if this is better for us enterprise to improve down operate operation efficiency.
<unk> for our subscription service is relatively strong and less impacted by the general sentiment of the macro economic.
Despite a very tough operating environment during the quarter, we managed to grow our customer base and sign up several well known sizable customers, including China Everbright Bank higher Qingdao.
Tiger broker and China merchant Securities just now too.
One key milestone and ask questions I would like to share with you is our overseas business expansion.
Two our overseas E mail delivery.
So Pos.
Those in mainland China.
It is a great Testament to the quality of our products and services, along with our ability to expand our basis.
Sure.
We do see overseas.
Obviously as you mentioned as one of our next key growth drivers with our suite of.
Products from push notification to E. Mails I believe we are ready and we'll see the oversea growth opportunity with opportunities in the near future.
<unk> revenue decreased by <unk>.
8% or renminbi, $16 9 million, which is in line with Huawei, especially the last quarter as the overall AD market has been relatively weak this quarter.
Direct customers contributed more than 60% of <unk> revenue stream.
Direct Kevin from for our Party agency major customer for <unk>, because it's the off repeat customer.
Market leaders across many industry verticals key customers in quarter.
T J D and VIP Dot com.
Oh, the challenges and uncertainty surrounding us.
Not Vittorio nor are we sitting on our lora.
We are more committed than ever to further emphasize and obtain our products and technology as we believe US John has solid foundation can benefit the company in a long time.
Next I would like to update you on our products in particular I think innovation.
Since the launch of our AD mediation, Pat Brian in the beginning of June our two meter NPA use and modern trenching apps has helped drive our platform for more than 150 apps in the pipeline.
See great potential in our App.
Media Asia pipeline and as we showed on the latter Karl receives a risky players such as ABB Levy.
And our results will be similar and proven business model.
Indeed.
Further by stepping up the better for us to grow and monetize.
Our Lithia Asia, therefore in the enablers livestock SDK based SaaS to mastering.
Praful I thought she has.
Tencent <unk> and peso.
And as I said in time it can also quickly assess more than <unk>.
<unk> thousand 17 up 70, other highway demand side platforms.
As a service provider.
Extensive experience in the mobile internet industry breakout the niche.
We believe we are in great position to have more mobile app developer is complete the close loop of Nevada development operation and monetization and achieve sustainable basis stuff that.
To enable our customer going global as well as lower royalty messaging channels.
We signed a cooperation agreement with Whatsapp, Delaware, There was debating pilot messaging John .
This global operation represents a breakthrough in advancing our RAC business and in lodging our business ecosystem.
Under this corporation Whatsapp is now embed as one of the Chinas within our RAC messaging caused erosion.
<unk> was created to empower Chinese enterprise to spanking oversea market with Omnichannel intelligent messaging services.
I also have two shale some updates from our co product <unk>.
With our recently released our new customer management feature for VIP push customers gives us of our surface now can easily let target users.
Promotional and customized push message to their end user without having to go through the software coding process.
According to <unk> Research report.
We're largely improve when sending the dynamic and customized campaign push messages to end users rather than just does that mean, the <unk> generic <unk>.
<unk> message to everyone is Neil Felicia is another meaningful at onto our comprehensive suite of.
Sure.
Along with our smart post function, which caps the developer fund plus the push on that.
As you'll see we were very productive at this quarter.
Matt that necessary product improvements and innovations.
The tops business condition.
We have been able to add on the when we have superior.
Superior products that market demand can we continue to strive and come back.
Even stronger after the current slowdown.
I am confident that we are fully equipped and ready for the title.
With that I will now pass the call over to Shannon, who will share more about the vertical applications and other aspects of our performance.
Thanks, Chris.
Now, let's move onto a particular application that consist mainly of financial risk management and market intelligence.
What's a good application revenue decreased by 25% year over year.
Mainly due to the impact of COVID-19, which resulted in a dip in the demand and logistics.
Optical in contract signing.
In the financial risk management segment revenue decreased by 22% year over year to renminbi 12 million, mainly due to one.
The slowdown in economic which resulted in lower demand for our services.
To delays in contract signing several.
Several major cities was locked down.
Currently not able to mail or deliver contracts to customers for the execution.
Nevertheless, some X sight some existing key talent.
<unk> customer in the financial vertical such as.
Suddenly sukkah Marcel himself and we continued.
Consumption of our services during the quarter.
As an update in early Q3 of this year, we have signed up many other new customer, including but not limited to somehow Johnson jumping some high using chunghwa.
Using policy and soccer sure.
Our market intelligence services revenue decreased by 9% enrollment be $7 3 million and we saw similar trend in market intelligence services as well.
That's why the slowdown in Q2, our teams do management find many well known customer including civil.
Hi, Hugh.
And with regard.
So far in Q3, we have brought on brought onboard many key customers such as Morningstar keep and Steve My lawyer.
I'll now go through some of the key expenses and balance sheet items.
Onto operating expenses.
As Chris mentioned earlier on we are viewed as some of the best results since Q1 of 2021.
When we completed our transition to a pure model as a result of our effective control initiative.
Operating expenses decreased by an impressive 17% year over year to $87 7 million and that is the lowest opex since Q1 of 2019.
All three components within the Opex category have recorded year over year reduction.
In particular.
R&D expenses decreased 35% to RMB $48 million, mainly due to lower head count that reduced energy costs and associated share based compensation.
Selling and marketing expenses decreased 14% to be $23 3 million.
Mainly due to the decrease in marketing expenses this quarter.
G&A expenses decreased 1% or will it be $23 6 million, mainly due to lower salary cost.
Our adjusted EBITDA improved 40% year over year, and 2% quarter over quarter, respectively to negative $8 million.
Although this was another very challenging quarter, our decision and company wide effort to tightly control and reduce expenses.
Clearly paid off this.
This positive impact has been reflected in the financial statement.
And I would like to share with you the following.
We have record the lowest opex in the past 14 quarters since Q1 of 2019.
Net loss since Q3 of 2019 at negative three.
$3 4 million adjusted EBITA.
Negative 8 million improved by 40% year over year.
We have the highest level of net cash flow cash inflow from operating activities since Q4 2020.
And we have the lowest adjusting operating expenses.
Presenting the cash component of Opex since Q1 of 2021.
Now onto our balance sheet.
I'll share two very important kpis that we closely monitor.
Firstly, the AI will turn of what this mean.
<unk> stable at 46 days this quarter compared to <unk>.
<unk> thousand six days last quarter.
Disciplined accounting policy and cash collection efforts ensure timely collection of our Geos.
Secondly, the total deferred revenue balance, which represents cash collected in advance from customer exceeded RMB $100 million at quarter end.
For the ninth consecutive quarter.
June 30 of 2022, the total deferred revenue was a historical high of $137 7 million.
Next total assets.
Bromine.
$8 7 million at June 30 of 2022, this includes cash and cash equivalent of <unk>.
Maybe 112 million accounts.
Accounts receivable of $75 1 million.
Prepayments and other current assets of $34 2 million fixed assets of 49 million long term investment of 140 million goodwill.
<unk> of $37 8 million intangible assets of 26 million.
Total current liabilities were 227.
Accounts receivable accounts payable.
Payable.
$19 2 million.
Revenue at 1% to nine seven.
7 million.
Ladies of $78 2 million every repay the short term loan of $150 million in April .
Next onto business outlook.
Although we are still facing uncertainty from the pandemic.
Going into Q3, we are seeing some exciting growth from our business lines.
Our cost management initiative continues to produce positive results.
I want to share with you.
Based on our current information, we anticipate the developer service subscription service revenue of Q3 2022 to achieve close to double digit growth.
Both quarter over quarter and year over year.
For one thing.
Application revenue, we are also expecting solid quarter over quarter growth.
Yes.
For value added services, which we have mentioned earlier.
Overall market will take time to stabilize before revenue can return to historical level.
And we have to anticipate improving revenue and conscious cost spending borrowing any unforeseen events.
Looking to achieve a breakeven adjusted EBITA balance for Q4 of 2022.
And please note that the above outlook is based on the current market condition and reflects the company's current and preliminary estimate of the 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 'twenty two.
Did not repurchase any shares.
As of June 30 of 2022 cumulatively.
We have repurchased a total of 92 1000 eds since the start of our program.
And this concludes management prepared remarks, and we're happy to take the question now.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
To ask a question.
You will need to press star one one on your telephone please standby, while we compile the question and answer roster.
Once again Thats Star 114 question.
Our first question comes from the line of Bryan Keane Slinger from Alliance Global Partners. Please ask your question Brian .
Great. Thanks for taking my question first can you talk about on the subscription side with the Lockdowns.
Have you been able to deliver and get renewals for agreement Shine.
I see.
I see you've increased sequentially subscription revenue.
But still below the fourth quarter, so I'm curious.
Date on that and maybe talk about churn and how that's changed.
Changed given the market conditions.
Yes, Brian It is Shannon if you compare to Q4, we did have a few of the projects that were completed so in comparison to Q2 numbers was a bit low.
But having said that the lockdown has lesser impact on sufficient business because the majority of them are renewed.
And renew our contract might not have the impact resulting from the logistical options growth that we talked about early on that we are not able to deliver the contracts so far our subscription business.
The thing we are on the right track and based on the numbers.
Choice that way so.
Fairly comfortable with the sufficient business at this stage.
So you are still not able to deliver that means that what you are saying I know you said that last quarter are you are able to dose those agreements.
Yes, we are for subscription business, that's why the revenue shown up a year over year and quarter over quarter growth.
Okay.
And then.
Guess, what im a little bit confused.
The market conditions are still challenged.
From an economic standpoint, and we hear from a corporate standpoint, a little bit too in China, obviously, so talk about what the drivers to growth are.
You mentioned, a couple of double digit growth sequentially.
How have you been able to do that and talk about from a demand perspective, given those conditions, how it has changed.
David I think you'd have.
Two as well.
Look at this if you look at the value added services or the financial risk management. Those are more closely tied with the overall economy. So if you look at the AD spending I am sure you have read lengths and.
Everybody else in China facing the problem that advertisers are not spending.
It used to be so this is very much tied to the economy on the other hand, if you look at our subsea business.
It is a less less impacted by business because of the fact that.
The economy is slowing down.
I need to spend less on push so those are less resilient to the impact of the economy. So that's why we are trying to say is we still see good growth coming from the sub business.
Because there is less impacted by the economy.
Got it Okay, and then maybe touch on Zen cloud what was its contribution in the quarter.
Which which.
Which of your business segments is that reported and how is that.
<unk> been performing in the current conditions.
As reported revenue is under such business. So it was under subscription.
And is contributing about.
$5 million to $6 million.
Per quarter.
<unk>.
Numbers is growing is growing I guess for the fact that we are able to cross sell some of our customers to buy a business by business and secondly, as we have mentioned.
Our overseas email delivery has surpassed China. So there's a huge demand for their services for <unk> cloud services.
So the idea of doing pretty well.
Yes.
And lastly.
Good job with the operating expenses.
Yes.
About the level of expenses, we should see going forward, where we see.
Further declines in maybe some of them were done mid quarter or how should we think about opex going forward.
I think we are pretty much at that level I do not foresee any.
Spike going forward, if anything there will be maintained at a level or lower.
Okay alright, thank you.
Okay.
Great. Thank you next question comes from the line of Kevin Wong from Speaker capital. Please ask your question Calvin.
Okay.
Good evening.
Thank you for taking my question I have one question I noticed that since last earnings call. The company has taken a number of bathrooms on going global.
Can you say, releasing the overseas messaging cloud and establish cooperation with more slab. So can management share more on the company's overseas strategy and maybe give us some highlights in the company's overseas business development overall.
Sure sure. Thanks for the question and.
And Youre right, we have been taking steps to expand our overseas business.
During Q2.
You'll see if you look at it since.
Since the beginning of June we have.
Released our.
Couple of things that we are doing right now.
In the beginning of June we have released our overseas messaging cloud solution to serve Chinese enterprises.
International expansion and this is the.
One of the growth driver for majority of the Chinese company. These days.
And also by integrating our multiple messaging products, such as J push SMS E mail.
And other messaging product.
Overseas messaging Pos solution focuses on the integration and management of multiple channels. So therefore, the user they will be able to use.
Our product more.
Efficiently.
And also our overseas channel.
Our solution has.
Hey, great good platform such as Whatsapp.
Could you talk about early on and we have that we're looking to even to incorporate.
As such as Facebook Messenger I'll take talk going forward.
And also with this we are helping the Chinese enterprise.
<unk> international expansion to Blu build closer and more efficient connection we've got users overseas.
And this company.
Sure.
This company is sticking overseas expansion phase.
Market conditions and evolving data compliance.
Ironman and software ecosystem. Therefore, I think we are in the right space to help them.
Two central West and two that we are able to seize the opportunity to have our overseas group revenue too.
Yes.
So it is my restaurants to your question.
Okay very clear trends.
As a reminder to ask a question. Please press star one one on your telephone.
Okay.
Thank you there are no further questions I will now turn the conference back to Rene for closing remarks.
Thank you Amber.
Everyone for joining our call Tonight.
If you have any further questions or comments, please don't hesitate to reach out to the IR team. This.
This concludes the call have a good night, thank you very much.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.