Q3 2023 Aurora Mobile Ltd Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile third quarter 2023 earnings Conference call. At this time, all participants are a listen only mode.
We will conduct a question niche session and instructions will be given at that time. Please be advised that today's conference is being recorded I would now like.
Yeah the conflict.
Rene bankruptcy. Thank you. Please go ahead Sir.
Thank you Michelle.
Hello, everyone and thank you for joining us today.
The earnings release was distributed earlier today and is available on the IR website.
Oh Gee why are you not see.
On the call today are Mr. Shan, Nen, Bong, Chief Financial Officer, and Mr. Yao 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'd 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 a mandate 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 factors are included in the company's filings with the U S Securities and Exchange Commission.
The company does not undertake any obligation to update any forward looking statement as a REIT.
The heart of new information.
Future events or otherwise, except as required under applicable law.
With that I'd now like to turn the conference over to Mr. Bob. Please go ahead.
Thanks Renee.
Good morning, and good evening.
Everyone welcome to Aurora, Mobile's, 2023, third quarter's earning release call.
All of the listeners today wanted to let you know that our CEO, Chris is on business trip at different times.
Perhaps he is not available to attend the call today.
And we have Chris.
Chris Evans I should have the privilege to share review all on all the great on the good quarters that we have this quarter.
And before I comment on our Q2 results I would like to remind everyone that the quarterly earnings earnings deck is available on our IR website.
We may refer to the deck as we proceed with the call today.
I referred to this quarter to be a great quarter for a number of reasons.
I would like to.
Category, particularly well through the great things that we have achieved this quarter.
Firstly to all of our business line recorded sequential revenue growth in each of the three quarters or.
2023.
Subscription revenue grew 15% quarter over quarter.
Application revenue grew 6% quarter over quarter, driven by financial risk management revenue, which grew 11% quarter over quarter.
Secondly, gross profit in absolute dollar terms also grew in each of the three quarters in 2023.
Suddenly we achieved yet another lowest opex in history in this quarter.
Last but not least we achieved adjusted EBITDA positive in this quarter.
Therefore, this quarter has been great operationally and financially.
Next I'll spend more time to share review Davis aspect of the business.
For our total group revenue, we achieved positive growth of 1% quarter over quarter.
Now, let me go to a different revenue stream.
Development services revenue decreased 10% year over year, mainly due to the weakness seen in the value added service offset by the 12% growth in subscription service.
Next is a detailed discussion of each business line.
Subscription business.
Revenue was rooming be $46 7 million up 12% year over year, and 15% quarter over quarter.
And this was mainly driven by increase in both Ottawa and customers numbers with you in quarter over quarter.
And we are very pleased with the positive trends of this business, where the revenue grew in every quarter since Q1 of 2023.
And some of the notable new and renew our customers in this quarter include but not limited to Citic Bank.
<unk> Robyn <unk>.
<unk> Toyota.
Gentlemen, just to name a few.
Value added service revenue was RMB, four 9 million decreased by 58% quarter over quarter.
It was due to the annual 618 online shopping festival in Q2, we're advertising increased guest spending.
No such events in Q2.
Net.
Let me give you some updates on our overseas product English left.
We have hit a few key milestone in this quarter that we are very proud off.
Firstly, we now have more than 100 customers sign up to purchase or English learner product.
Secondly, this customer come from 16 different countries in the region, including Hong Kong and Taiwan.
And in this quarter alone.
We added four new countries well.
Levies maintenance available to overseas customers.
Thirdly, our cumulative signed contract value of English left exceeded renminbi 10 million since the launch of this product in Q3 of.
2022.
So all going overseas initiative has clearly been a success.
From all quite a few initiatives for you undertake to further our English expansion.
These include one we are continuing to expand our reach inside each of the 16 countries and region. Yes. We are servicing now we aim to sign up more customers in this country.
Two we will expand to other new countries and region every quarter.
Now, let me recap on the English learner product, we have all English left product allows our customers in different countries and regions are engaged we've got one customer effective cost efficient manner.
Oh, one stop English less customer engagement platform enables.
Our customers to use any of these following messaging channels.
At push sweat push.
Email service <unk> service.
Whatsapp business API.
Since its launch in Q3 of 2022, we are very pleased with our progress to date.
However, the work is not done we have continued to improve our service delivery of English left so whatever you've continued to expand across different continents in the near future.
Next I'll go over the revenue for a particular application.
Wakes me up of financial risk management and market intelligence.
What are you gonna applications had another great quarter sequentially quarterly revenue for what they can application has grown in each of the quarter in 2022.
In Q3 alone it grew another 6% quarter over quarter fueled by the strong revenue growth from financial risk management.
For financial risk management revenue grew both year over year and quarter over quarter.
In addition, the revenue recorded sequential growth in each of the two quarters in <unk>.
It was positively impacted by customer number growth.
18% and 27% quarter over quarter.
The addition of <unk>.
New customers number of signify that we are getting more.
Customers and as the things customers are renewing their services with us.
This is important as well.
For us to achieve revenue growth in the near future.
These Q3 customers, including but not limited to when Sheila.
There was always some.
<unk> faced income and.
And other more licensed financial institution throughout China.
And so our market intelligence, the revenue decreased 4% quarter over quarter due to the relatively quiet investment sentiment towards Chinese ADR.
First the demand for our China based <unk> data is supposed to decrease accordingly.
Nevertheless, we still managed to sign up.
Well known large customers such as Mercedes.
Matewan quite so.
Outsourcing and other global hedge fund and overseas investment funds.
I'll now go through some of the key expenses and balance sheet items.
Onto operating expenses.
And again, we're pleased to share with you that in Q3 2023, we have.
Yet another record low quarterly opex at $60 million <unk>.
Q3, Opex was down 35% year over year, and 6% quarter over quarter.
As I mentioned in the previous quarter, maintaining low level of Opex is of critical importance to us.
This was the main reason why we are able to record the lowest quarterly net loss since IPO and return adjusted EBITDA positive in this quarter.
Next I'll go through the individual opex.
Category.
Particular, R&D expenses decreased 14% year over year to be $32 8 million.
Mainly due to the lower head count that reduce salary cost and associated compensation.
The decrease in server depreciation expenses due to our own Green initiative.
Selling and marketing expenses decreased by 10% year over year to be $21 8 million.
Mainly due to the decrease in salary costs, resulting from headcount reduction.
Make adjustment to operate at the optimal level.
G&A expenses decreased by six 9% year over year to be $5 4 million.
This was mainly due to the one time gain on disposal of fixed assets recognized in this quarter.
Even if this one off item is excluded the G&A expenses still decreased by 37% mainly due to the overall continuous effort to streamline expenses across the board.
As I mentioned earlier as a result of our focus will drive opex pad optimal level.
Adjusted EBIDTA, that's recorded a positive rubbing be $4 5 million in this quarter.
In plain English is simply means that the group is making more than it is spending we've said keeping.
Keeping this quarter.
And this is a great result for which I'm very proud of.
That's what the team has done throughout the organization from our frontline sales team quite a bit.
Going all out to acquire new customer sign up new contracts to the support team and the back office through diligently control our expenses.
Next onto the balance sheet.
I'll share two very important kpis that we closely monitor.
We continue to maintain a healthy turnover at 40 days and this is relatively consistent.
And quarter over quarter.
We pride ourself in achieving such a law.
Yeah, I'll turn over these comparing to the peers in the same industry.
Secondly, one of the key.
Financial keep your eyes for tracking the performance of Cross company, you said total deferred revenue, which represents cash collected in advance from customer for future contract performance.
This continues to be at high balance of $130 6 million.
And this is the seventh consecutive quarter, where our deferred revenue balance has exceeded $130 million.
And both our onshore and overseas customers are continuing to purchase and renew our services more importantly, we are collecting cash bonds from customers.
Next.
So with that asset.
$359 5 million.
September 30th 22.
This includes cash and cash equivalents of $98 four.
4 million accounts receivable of $31 3 million prepayments and other current assets at $23 7 million fixed assets of $1 9 million long term investment in <unk>, $4 9 million, which grew at $37 8 million in intangible assets.
$19 5 million.
Total current liabilities.
$233 2 million.
Coming back to <unk>, and you're going to treat this.
These include short term loan of 5 million accounts.
Accounts receivable of $20 2 million current operating lease liability of $6 4 million deferred revenue of 136 million.
Accrued liabilities of 71 million.
Next allow me to take one minute to recap four key achievement that we have had in this quarter that I would like that all of you to take away from this earnings call today.
It is quarter, one our developer services subscription and financial risk management businesses recorded Chico's.
Three consecutive revenue growth.
We have more than 100, English less paying customer from 16 countries and regions around the globe with cumulative signed contract value exceeded 10 million renminbi.
Three we have the highest quarterly gross profit and lowest quarterly opex in <unk>.
For rehab.
We have put in.
The EBITDA positive.
Lastly, before I conclude I'll give a quick update on our share repurchase plan.
In the quarter ended September 30 of 2023, we have repurchased 854000 eds cumulatively, we have repurchased a total of $2 six 9 million.
Since the start of program.
And this concludes management's prepared remarks, we'll be happy to take questions. Operator. Please proceed.
[noise], ladies and gentlemen.
Ladies and gentlemen, if you'd like to ask a question. Please press star one one if.
If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Our first question comes from Calvin Wong with Speaker capital. Your line is open.
Okay.
Good evening. Thank you for taking my questions I would like to appeal to you if I may.
First of all congrats on a great Q3 results. It seems that the positive about just that you'd be done has come earlier than we have discussed last quarter. So appreciate you have to manage money 10, Sam Moore, how this is a team.
And whether we will continue to see positive adjusted EBITDA going forward.
Second question is about <unk>.
So that business is.
It is great to see that you have signed up more than 100 and overseas customers.
More than 10 million now M b contract that it would be in the year. So with this I would like to hear from the management and how do you go about expanding this and gates that that's just outside of China and.
And how would you manage to make such enroll in overseas markets. So two questions. One on the just high EBITDA and two on the engage that process. Thank you.
Sure. Thanks, Laura question Okay.
Okay.
Yes, Youre right. We are really pleased to turn adjusted EBITDA positive in this quarter earlier than we have expected.
In.
Summary, lever is combination of where we drive the high margin revenue.
We grew the gross profit and we tightly control opex.
I can elaborate more so on the revenue front as I touched on earlier in the alcohol Wolff, our developer subscription business and what the application business record of consecutive revenue growth.
Each quarter of 2023.
And these are the high margin business with gross margin in the range of 75% to 80%.
And then develop a service subscription business are doing well, where we recorded both <unk> and customers growth quarter over quarter.
And in particular in this quarter, we completed a number of projects we have on the revenue growth.
Similarly for financial risk management, we also had.
<unk> and revenue growth sequentially.
And with the global this high margin business.
As a result gross profit grew at.
As a result, so that's what our Opex, we have another historical low opex at $60 million in Q3, So we have to grow up in revenue and we managed to reduce opex.
And eventually the numbers just turned out to be a positive adjusted EBIDTA.
And on the question.
For Q4 and beyond.
Yes, typically we don't give any guidance on adjusted EBITA.
At this stage all I can say is we are working hard on.
Growing our high margin revenue and continue to.
Control of Opex.
So these are.
Answer to the first question.
And second question is English.
It seems like that has attracted our attention if I remember correctly you asked this question last quarter as well.
Again, we're very pleased on the progress to date I guess looking back the most important decision that we have made is more than a year ago, we decided to eventual overseas.
And of course the.
It was not smooth sailing in day, one and.
And everyone has been rough but has been rewarding.
If you remember we started the business in Q3 of 2022.
Zero customers and zero contract value and we have done pretty well since then.
And as to how we.
Do their business overseas I can shed a little.
Firstly, we invested in overseas infrastructure, so that customers.
These have the peace of mind on that data storage in the countries of their choosing.
Which means that whether you are in southeast Asia.
In Europe, or Australia, we have the right set of combination of infrastructure for you or for our customers.
And secondly, we worked closely with the Chinese companies venturing and expanding overseas.
And this group of customers are important.
Because the other one that we are providing services onshore. So they will always selected us as their vendor of choice Wendy.
Because they know who we are.
What we've done before and we are confident with our service delivery.
And thirdly.
We also engaged quality SP, which is the independent software vendors in overseas market too.
And if I had to be arrangement works perfectly for us for a couple of reasons. One is as we are well.
Well connected in their respective domestic market with many existing customers that they can help to sell our product.
And two.
<unk> presence is different overseas market reduce our need to invest to set up offices higher local sales team.
In the respective countries.
And thirdly to these items be it also help us safer to deal with individual customers contracting negotiation on pricing on cash collection, which tapers on administrative burden.
I guess in short English.
Overseas services.
It's important for us and it.
It represents a new growth engine for us which is less reliant.
On the Chinese economic environment to a large degree. So you can access a good buffer for us to continue on the revenue growth plan, regardless of the situation on shelf.
So Kevin I Hope this concludes our question.
Okay very clear thanks.
Thank you.
Thank you as a reminder, if you'd like to ask a question. Please press star one.
Again, that's star one wanted to ask a question.
Okay.
There are no further questions at this time I'd like to turn the call back over to Rene <unk> for any closing remarks.
Yeah.
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 our call have a good night. Thank you.
Thank you for participating this does conclude the program and you may now disconnect everyone have a great day.
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