Q1 2023 Aurora Mobile Limited Earnings Call

Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome to Aurora Mobile first quarter 2023 earnings conference call. At this time, all participants are in the listen only mode. After the speakers presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone.

Speaker 3: Please be advised that today's conference is being recorded. I would now like to hand over to your host today, Christian Anil. Thank you. Please go ahead, sir. Thank you, operator. Hello, everyone, and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at IR.gguang.cn or through Newswire services.

Speaker 3: Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E 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 conditions.

Speaker 3: 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.

Speaker 3: Further information regarding these and other risks, uncertainties, and or factors are included in the company's filings with the US SEC.

Speaker 3: 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 would now like to turn the conference over to Mr. Ruel. Please go ahead.

Speaker 4: Thanks, Christian.

Speaker 4: Good morning and good evening everyone.

Speaker 4: Welcome to Aurora Mobiles 2023 First-Corder Earnings Call.

Speaker 4: Before I comment on our Q1 results, I would like to remind everyone that the quarterly on this deck is available on our website.

Speaker 4: You may refer to the deck as we proceed with the call today.

Speaker 4: Despite the challenging macro environment, we successfully concluded the first quarter of 2023, with business and social activities slowly recovering during COVID-19, following a shift in COVID policy towards the end of 2022.

Speaker 4: Some of our businesses will impact to varied degrees. However, we are pleased to report that so far in Q2 we have witnessed good momentum in revenue growth especially from developer services.

Speaker 4: Although the external macro environment was rocky during the first quarter.

Speaker 4: We have not stopped making our organization more efficient.

Speaker 4: We carry on with our strict cost management strategy and cultural tyrants threaten our management structure and as a result, our overall expenses should have continued to drop year over year and quarter over quarter.

Speaker 4: We believe these efforts will help us improve our financial performance in the long run.

Speaker 4: which will also give us the space in a difficult environment to execute on our ambition.

Speaker 4: Here are some key financial results that I am proud to share. ROYCE net loss since 2019 Q3 at RMB 15.2 million. ROYCE adjusted operating expenses since IPO at RMB 57.4 million. ROYCE operating expenses since IPO at RMB 64.8 million.

Speaker 4: Gross margin bet to 70%.

Speaker 4: AR-20 number days at 39th days. The full revenue balance has been higher than maybe 100m for over...

Speaker 4: to where it's consecutive.

Speaker 4: actions, cultures

Speaker 4: Total customer number remains stable and...

Speaker 4: 4,527 are 1% year-over-year.

Speaker 4: How effective cost optimization continue to yearn?

Speaker 4: Noticeable financial results with the lowest net loss since 2019 Q3 at RMB 15.2 million and adjust operating expenses at or historically low since IPO of RMB 57.4 million.

Speaker 4: We also maintain a very healthy growth margin of 70%.

Speaker 4: Now let me go through our different revenue streams. Developer services revenue decreased 24% year-over-year, mainly due to the weakness in value-added services, and the growth in subscription services.

Speaker 4: Some questions, some things around you. What do I mean be?

Speaker 4: 37.5 million, up 9% year-over-year, mainly viewed by increasing output. Subscription surfaces as our core business include J-Push, Unmediting, UMS and other products. And despite the external, comforting macro environment, we saw many well-known clients, including Banoormic, not limited to...

Speaker 4: Guangdong Bank, Shunfeng, Sapa and BID. Going into Q2, we expect a major recovery in subscription services, and we hope we will see double digital growth on a Q-of-Q basis.

Speaker 4: Value-added surfaces revenue will remain at 8.0 million, decreased by 69% year-over-year, which was a result of a great advertising demand. Repeated advertising related revenue will continue to be impact by the uncertainty, uncertainty and volatile macroeconomic environment.

Speaker 4: Moving on to our products and services, we have seen strong growth potential and interest in the EngageLab platform that we launched during Q4 last year. We have implemented various improvements to older products under EngageLab. Recently, EngageLab has established a reliable network of data centers in multiple regions.

Speaker 4: around the world to ensure that customers can choose the storage location that best suits their business needs.

Speaker 4: These data centers meet the highest security centers and standards and have positive or rigorous fortifications and audit process.

Speaker 4: With the rapid growth in global data exchange, RSE customers...

Speaker 4: increasing data security and comparison requirements.

Speaker 4: help increasing data security and compliance requirements. Thank you for your attention.

Speaker 4: EngageLab has now added a more data center option for overseas customers to deploy the push notification product, everything pushed and were pushed.

Speaker 4: This includes China, Hong Kong, Germany, Frankfurt, US, California, Japan, Tokyo.

Speaker 4: South Korea, Seoul, UAE, Dubai, Brazil, Sao Paulo and Australia, Sydney. Customers can select one appropriate data center to store data for an application based on comprehensive considerations such as the location of their end-user and regulations.

Speaker 4: We will continue to invest in technology innovation and global infrastructure building, and are committed to providing our customers with the highest level of data security and compliance as show is.

Speaker 4: We are free to report that EngageLab has attracted numerous variable-oversee customers and generated a significant revenue and output in just a few months.

Speaker 4: Encouraging new contribution from ROC customers continue to...

Speaker 4: outpace those from domestic customers and we anticipate that our RBC business will be one of our biggest growth drivers going forward.

Speaker 4: Our products have been well received by customers in multiple countries and regions, including the US, Malaysia, Thailand and Singapore.

Speaker 4: Notably, well-known companies such as BYD, Daxun Band and Media have become our loyal customers.

Speaker 4: With this recognition from our customers, we remain committed to enhancing our products and services to enable global developers to achieve high efficiency and cost-effective user eagle Ni seeing alone SF West Somewhere in the US use a rich. Hello. Bi headquarters in their

Speaker 4: In addition to other achievement discourses, we can launch our latest enhancement to JPush, the in-app messaging function.

Speaker 4: Unlike notifications sent through external channels, G1 in-app messages appear within the apps, using pop-up windows and floating boards to capture users' attention. This feature places emphasis on user interaction and engagement, ensuring developers can curative and retain their most available users. While push notifications bring users back to the app, in-app messages appear within the apps.

Speaker 4: and growth amounts and provide better user experience. With that, I will now pass the call to Chian-Ling, who will share more information about vertical applications and other aspects of our performance. Thanks, Chris. As Chris has mentioned before, we are facing external uncertainties during Q1, and our vertical application business was also challenged this quarter.

Speaker 5: Vertical application mainly consists of financial risk management and market intelligence.

Speaker 5: Vertical application revenues decreased by 22% year over year. For both financial risk management and market intelligence segment revenues were negatively impacted and decreased by 20% and 5% respectively year over year to RMP 11.8 million and RMP 7.2 million.

Speaker 5: Our Q1 revenue was impacted since many of our customers were not able to close contracts on a timely basis due to the COVID outbreaks.

Speaker 5: Going into Q2, we have seen recovery in the revenue from both sectors already.

Speaker 5: Under the challenging environment in Q1 of 2023, we were still able to set up various KA customers such as…

Speaker 5: Guizhou Yinhan, Huaxia Yinhan and VIP Shop just to name a few.

Speaker 5: I will now go through some of our key expenses and balance sheet items.

Speaker 5: On to operating expenses. We are on track in our operational goal to becoming more efficient company by centralising our resources to focus on fewer but more important tasks.

Speaker 5: During Q1, adjusted operating expenses marked another all-time low since IPO at 57.4 million.

Speaker 5: Our net loss has also narrowed down to 15.2 million, the lowest since...

Speaker 5: Q3 of 2019. All three components within OPEX category recorded year over year and quarter over quarter reduction. In particular,

Speaker 5: R&D expenses decreased by 21% year over year to $31.7 million.

Speaker 5: Many due to lower headcount that reduced salary cost and associated share-based compensation, and a decrease in cloud costs and depreciation expenses as a result of improvement and optimisation of our cloud platform.

Speaker 5: Selling and marketing expenses decreased by 28% year over year to 18.9 million, mainly due to the decrease in head cow by 31.

Speaker 5: GNA offences decreased by 49% year over year to 14.3 million, mainly due to a 8.4 million decrease in personnel costs, a 2.9 million decrease in professional fee as a result of strict cost management control.

Speaker 5: and a 1.8 million decrease in bad debt provision as a result of our company-wide consistent effort on strict financial control measures.

Speaker 5: An adjusted EBITDA calculated as EBITDA excluding share based compensation

Speaker 5: reduction in force charges impairment, improved by 9% year-over-year to negative 7.5 million. On to the balance sheet.

Speaker 5: I will again share two very important KPI that we closely monitor.

Speaker 5: We continue to maintain a healthy AR turnover level at 39 days.

Speaker 5: Usually Q1 is a slower quarter due because of the Chinese New Year holidays, but I'm glad to see that our persistent payment collection policy works effectively during the period.

Speaker 5: Secondly, one of the key financial KPI for tracking the performance of SaaS company is the total deferred revenue, which represents cash collected in advance from customers for future contract performance.

Speaker 5: Again, ended quarter.

Speaker 5: on a high note at RMB 133.8 million. And this is the 12th quarter of different revenue balance has exceeded 100 million RMB. Healthy cash flow aside, the level of different revenue also signifies that our business is in great shape. Our customer has continued to buy our product and services for the year after year.

Speaker 5: And we are very pleased with the trending of this different revenue balance.

Speaker 5: Next, total assets were RMB 3.96.4 million as of 31 March 2023.

Speaker 5: Cash and cash equivalent of $88.4 million.

Speaker 5: accounts receivable of 26.4 million, prepayments and other assets of 33.7 million, fixed assets of 11.9 million, long-term investment of 141 million, group view of 37.8 million and intangible assets of 22.3 million resulted from a share of $2.5 million.

Speaker 5: same cloud acquisition in March 2022. Total current liabilities were at 238 million as of March 31, 2023. This includes a short-term loan of 5 million.

Speaker 5: acquisition in March 2022. Total current liabilities were at 238 million as of March 31st, 2023. This includes short term loan of 5 million, accounts payable of 18.4 million.

Speaker 5: Current operating list, liability of 18.2 million. Deferred revenue of 131 million. Recruit liability of 65.2 million.

Speaker 5: Lastly, before I conclude, I'll give an update on the shared repurchase plan. In a quarter ended March 31, 2023, we repurchased 194,000 ADS.

Speaker 5: Cumulatively we have repurchased a total of 1.39 million ADS since the start of our repurchase programme. And this concludes management prepared remarks. We are happy to take your calls now. Thank you. Thank you.

Speaker 2: As a reminder to ask a question you need to press star 1 1 on your telephone. If you'd like to cancel requests please press the hat star 1 1 again.

Speaker 2: One moment for the first question.

Speaker 2: First question comes from the line of Calvin Wong from Spiker Capital. Please go ahead.

Speaker 6: Good evening, management. Thank you for taking my questions. I would like to have two questions, if I may. Two questions related to financials. First of all, about our op-eds.

Speaker 6: We note that the company continues to record historical low on your both GAAP and adjusted op-eds. Just wonder how did you do that? Did you make further headcount reduction? So how will the reduced workforce impact on your business opportunities?

Speaker 6: We saw a dip in revenue year on year and quarter on quarter. Of course, management has already made a very good explanation on the reasons behind. So what we would like to know is going forward, what will be the revenue growth drivers? So two questions, one on OPEX, the other on revenue.

Speaker 5: Okay, thanks for your call. This is Shannon. Let me try to answer your question. I guess from financial perspective, we are very pleased to report that we did achieve the so-called gap and non-gap adjusted OPACs on a low basis this quarter again. And as to how we do it, there are a couple of things that we have been doing well.

Speaker 5: First, our growing cloud project was executed successfully, which means that we are able to reduce significant amount of depreciation from the server expenses.

Speaker 5: This is very important. Besides the expenses aside, as you know, over the past few years we have been spending like 10 million a year on servers and with the going cloud project we have done over the past.

we are no longer needing to spend such money. So for the servers that we are using right now, the cloud servers, and we are only pay as we go, which means that we only have to input expenses based on what we have consumed. And this also really improve our cash flow. And this is the first thing that we did. Second, the thing that we have done on the...

reducing the OPEX is that we have implemented this strict cost control based management strategy over the past years. And probably you can see over the years we have reduced the headcount. We have also looked at everything that we have.

By moving forward, we do not anticipate any further reduction or big reduction in our headcount. And we are pretty comfortable in terms of where we are in terms of headcount to continue our operation. And so this is the first question. I think you asked about how low can the OPACs go going forward. I think the short answer is,

As I said, all our sensors are at a pretty optimum level right now, and we do not expect to have significant decrease in OPEX every quarter going forward. So this is a pretty optimal level that we think we can operate within the framework right now.

And I think the second big question you asked is the dip in revenue and what are our

And I think the second big question you asked is the dip in revenue and what are our revenue growth driver going forward?

I think if you recap what Chris has said during the call earlier, we have seen a huge opportunity from overseas business, which is the English lab products. There are a couple of things that we have, I would like to share with you. Based on the overall contract pipeline that we have.

internal research, about 15 to 20% of our total sales leads are now coming from overseas, which means that this coming back will be a big chunk of our revenue contribution, because 15 to 20% of our sales leads are coming from overseas.

And this is one of the matrix I'll share with you. The second is for the new contract that we have signed by value, the percentage contributed by Ubersuggest customer has grown three times from 3% to 10% of the total contract value in Q1.

2023, which means that the contract value has grown three times over the past quarter. And this percentage we have seen in the Q2 of this year, which means the month of April and May, the contribution percentage is continuing to improve.

I guess with this trend, we believe that our overseas revenue will be the primary growth driver going forward.

Having said that, we have not taken our eyes off our bread and butter, which is the developer service. They are and will continue to be our major contributor for our stable cash flow and revenue in the future.

I hope this answers your question. Yes, very clear. Thank you.

As a reminder, to ask questions, please dial star 11.

Our next question comes from the line of Brian Kinslinger from AGP. Please go ahead.

Great, thanks so much. Just doing a follow up to the answer you just gave on the revenue drivers. You said overseas has gone from 3% of bookings to 10%.

What products that you sell or services are most being bought by these overseas customers? Is it in Cajelab?

that you sell or services are most being bought by these overseas customers? Is it in Kay's lab or is it some of your other services?

Hi Brian , this is Shannon. Those are 100% from Angish Lab.

Great. So I guess if I understand correctly, EngageLab is a product that's helping customers choose data storage locations.

Do you own the networks or are these partners of yours? And then how are you acquiring customers for this product?

own the networks or are these partners of yours and then how are you acquiring customers for this product? That would be helpful, thanks.

No, Brian , the English Lab is the push notification that we help the customers outside of China to do the notification, the messaging. So it's nothing to do with the storage, which means that a customer in, say like Singapore, they have an app, APP, they would like to reach out to their customers or users.

in Southeast Asia, we help them to do the push notification in Singapore. This is exactly what we are doing since 2021 in China, just that we replicate the product overseas.

them to do the push notification in Singapore. This is exactly what we are doing since 2021 in China, just that we replicate the product overseas.

And then you said you expected a recovery in subscription services. What's driving this recovery in your view? I suspect the environment remains challenging.

Yeah, I think there's a couple of things. One is simply because the Q1 was low season. That's a given. And right now, what we're seeing is customers are, again, people are trying to be more cost efficient. They try to get the best view of their services. So that's why we're seeing a lot of customers are trying to get the best view of their services. So that's why we're seeing a lot of customers are trying to get the best view of their services.

more likely to outsource to us, which is one of their best partner in terms of doing the push notification. So this is a kind of like a change in the mindset of rather for them to invest a lot of money, people, engineers to do in-house, they are going out.

to third party like us. I guess good numbers that I can share with you, based on what we are seeing right now in Q2, we have the April and May numbers in already. And based on this, the project, the trajectory they were looking at is...

the developer service subscription business, we expect to have a double digit growth in Q2, you are a quantum reporter. So you can see the numbers are looking good and people are buying our services.

Yeah, and then value added services really bottomed out. You mentioned and obviously the advertising market is quite challenging. I don't think that's changing right now. So what's the outlook for that business? Can it decline further if the market remains weak or how do you manage that business right now?

Yeah, based on what we are seeing, no, the value added service remains to be fairly flat. We do not expect it to have a good numbers going forward. At best, it will try to be flat in the next quarter or so. Because if you look at what we have is we have researched some of the bigger...

ad players in China such as those like the likes of Tencent, Baidu and Weibo, all of them are recording quarter over quarter reduction in revenue for ad spending so we are not any better so I think the overall environment or overall ad market in China is remaining weak.

or has not recovered to previous good times. Okay, my last question is really a high level question. You said customers have been challenged to close deals still given COVID. Help paint a picture of what the market is today. I mean, that was the first quarter obviously. Here we are two thirds into the second quarter.

Is COVID still a major challenge for you and what are the main obstacles in China enterprises are facing today?

As far as COVID is concerned, lack of a better word, I think it's almost all over.

People are not shutting down or work from home because of COVID anymore. And there's no regulation or policy that workers must work from home or cannot come to work. So COVID per se is over. So what we are looking at right now is probably the recovery from the overhang of the COVID.

Yeah, COVID is over, that doesn't mean that the business operation is under, business activity is 100% back to where it was. But we do see recovery as I said, the developer service subscription business we have seen...

more double digit growth quarter over quarter. So this is a very encouraging sign. Okay, thanks so much. Thank you. Thank you for the questions. As a reminder to ask question, please press star 1 1.

At this time, now, no further questions on the line. I'd like to hand the call back to Christian for closing remarks.

Thank you everyone for joining the call tonight. If you have any further questions or comments, please don't hesitate to reach out to myself or anyone on the Aurora mobile IR team. This concludes the call. Thank you and have a good evening.

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Ladies and gentlemen, thank you for standing by. Welcome to Aurora Mobile first quarter 2023 earnings conference call. At this time, all participants are in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone.

Please be advised that today's conference is being recorded. I would now like to hand over to your host today, Christian Anil. Thank you. Please go ahead, sir. Thank you, operator. Hello, everyone, and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at ir.gguang.cn or www.ir.gguang.cn.com

your questions during the Q&A session that follows.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E 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 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 or factors are included in the company's filings with the US 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, I would now like to turn the conference over to Mr. Rolle. Please go ahead.

I would now like to turn the conference over to Mr. Lowell. Please go ahead. Thanks, Christian.

Good morning and good evening everyone. Welcome to Aurora Mobile's 2023 First-Coder Earning School. Before I comment on our Q1 results, I would like to remind everyone that the quarterly earnings deck is available on our website.

You may refer to the deck as we proceed with the call today.

Despite a challenging macro environment, we successfully concluded the first quarter of 2023, with business and social activities slowly recovering during two pre-following or shift in COVID policy towards the end of 2032.

Some of our businesses will impact to varied degrees. However, we are pleased to report that so far in Q2, we have witnessed good momentum in revenue growth, especially from the beneficial facilities.

Although the external macro environment was rocky during the first quarter, we have not stopped making our organization more efficient.

We carry on with our strict cost management strategy and cultural tyrants threaten our management structure and as a result, our overall expenses have continued to drop year over year and quarter over quarter.

We believe these efforts will help us improve our financial performance in the long run, which will also give us the space in a difficult environment to execute on our ambition. Here are some key financial results that I am proud to share. lowest net loss since 2019 Q3 at a maybe 1.2 million.

Royce adjust operating expenses since IPO at RMB 57.4 million. Royce operating expenses since IPO at RMB 64.8 million. Gross margin bet to 70%.

AR-2 number days at 39th days. The full revenue balance has been higher than maybe 100m for our Rob Christina.

Before revenue balance has been higher than maybe 100m for over 12 consecutive quarters.

Total customer number remains stable and 4527 up 1% year over year.

Our effective cost optimization continues to yield noticeable financial results, with the lowest net loss since 2019 Q3 at RMB 15.2 million and adjust operating expenses at a historically low since IPO of RMB 57.4 million.

We also maintain a very healthy growth margin of 70%. Now let me go through our different revenue streams. Developer services revenue decreased 24% year-over-year, mainly due to the weakness in value-added services offset by the growth in subscription services.

Subsequent services revenue will remain be 37.5 million, up 9% year-over-year, mainly viewed by increasing output. Subsequent services as our core business include J-Push, Amelitic, UMS and other products and despite the external and 13 micro environment we saw not many well-known clients.

including binomial not limited to Gwanda bank, Shrinkfone, Zappa and BYD. Going into Q2, we expect some major recovery in subscription services and we hope we will see double digital growth on Q of Q basis.

Value at the surface revenue will remain be 8.0 million, decreased by 69% year over year, which was a result of weak advertising demand. We believe advertising-related revenue will continue to be impacted by the unfettered and volatile economic environment. Moving on to our products and services.

We have seen strong growth potential and interest in the EngageLab platform that we launched during Q4 last year. We have implemented various improvements to older products under EngageLab. Recently, EngageLab has established a reliable network of data centers in multiple regions around the world to ensure that customers can choose the storage location.

that best suits their business needs. These data centers meet the highest security standards and have part of the rigorous certification and audit process.

With the rapid growth in global data exchange, RCE customers have increasing data security and compliance requirements.

in our patient hosting double

EngageLab has now added a more data center option for overseas customers to deploy the push notification product, everything push and web push.

This includes China, Hong Kong, Germany, Frankfurt, US, California, Japan, Tokyo.

and South Korea through UAE Dubai, Brazil, Sao Paulo and Australia Sydney. Customers can select one appropriate data center to store data for an application based on compliance, consideration, such as the location of their end-user and regulations. We will continue to invest in technology innovation and global infrastructure.

Currently, new contributions from ROC customers continue to

our base knows from domestic customers and we entered and participate that our RBC business will be one of our biggest growth drivers going forward

Our products have been well received by customers in multiple countries and regions, including the US, Malaysia, Thailand, and Singapore. Notably well-known companies such as BYD, Darshan Band, and Media have become our value for real customers.

With this recognition from our customers, we remain committed to enhancing our products and services to enable global developers to achieve high efficiency and cost-effective user reach.

In addition to other achievement discourses, we can launch our latest enhancement to JPush, the In-App Message function. Unlike notifications sent through external channel, J

This feature plays emphasis on user interaction and engagement, ensuring developers can curative and retain their most available users. While push notifications bring users back to the app, in-app message guides users to interact with the app in a way that meets their expectation.

With our app developers' same-trace strategy and for our ongoing improvements and iterations of products and technologies, we will continue to improve the app and help mobile app developers answer their optional and Previous Greg

growth demands and provide better user experience. With that, I will now pass the call to Chian-Ling, who will share more information about vertical applications and other aspects of our performance. Thanks, Chris. As Chris has mentioned before, we are facing external uncertainties during Q1.

and our vertical application business was also challenged this quarter. Vertical application mainly consists of Financial Risk Management and Market Intelligence.

Vertical application revenues decreased by 22% year over year. For both financial risk management and market intelligence segment revenues were negatively impacted and decreased by 20% and 5% respectively year over year to RMP 11.8 million and RMP 7.2 million.

Our Q1 revenue was impacted since many of our customers were not able to close contract on a timely basis due to the COVID outbreaks.

Going into Q2, we have seen recovery in the revenue from both sectors already.

Under the challenging environment in Q1 of 2023, we were still able to sign up various KA customers such as Huizhou Inhan, Huaxia Inhan and VIP Shop just to name a few. I will now go through some of our key expenses and balance sheet items.