Q4 2023 Aurora Mobile Ltd Earnings Call

March 12, 2024

And investment funds.

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

Onto operating expenses.

Q4 operating expenses once that bromine P $61 2 million, representing 36% decrease you would you about slightly increased 2% quarter over quarter.

Overall, we are very pleased with our expense control and monitoring effort between the years.

In summary, our Q4 Opex is decrease year over year by $34 2 million. This is a testament of our commitment to wisely spent every single penny.

And if you look at the Opex on an annual basis. It has decreased by renminbi, hundreds and 8 million between the us representing a 30% decrease year over year.

This again showed a management determination to effectively execute its cost saving plans as previously previously announced.

I think at this stage the company is well managed and ready to radio.

Really for the next growth phase cycle.

This relatively low opex to run the business, so long as we execute topline growth 10, well.

I believe the good result will come sooner rather than later.

Next I'll go to the individual opex categories in particular.

R&D expenses decreased by 23% year over year to robbing Peter to $27 1 million, mainly due to lower head count that reduced salary costs and associate the share based compensation and a decrease in depreciation expenses due to the green coffee initiative.

Selling and marketing expenses decreased by 10% year over year to be $32 1 million, mainly due to a decrease in salary costs resulted from headcount reduction as we further make.

Just want to operate at an optimal level.

G&A expense decreased by 66% year over year to really be $12 1 million, mainly due to one time noncash impairment loss of 22 million recognized in last year's Q4 of 2022.

Further streamline the head count also contributed to a decrease in salary costs between the use.

And for the quarter ended 12, 31 23, the adjusted EBIDTA.

We just calculated as EBITDA, excluding share based compensation reduction enforced charges impairment of long term investment.

And change in fair value of foreign currency swap contracts, we recorded another positive adjusted EBIDTA in this quarter and this is a historical event, where we have consecutive quarters of positive adjusted EBITA.

Onto the balance sheet.

Oh sure.

Two very important keep your eye that we closely monitor.

We continue to maintain a healthy you ought to know whether it's at 38.

Days, which is two days improvement quarter over quarter.

These two shopping this is very important.

Let us collect cash from customers, even shorter period of time.

Believe these 38 days turnover is.

Bleeding.

Just reading it is leading them.

Industry in terms of collection days.

Secondly, one of the key financial Kpis that we track for performance of sorts company is the total revenue which represents.

Cash collected in a bunch of customer for future contract performance continued to be the high level high balance of GBP 141, 5 million. This is the eighth consecutive quarter.

Our deferred revenue balance has exceeded 130 million. This is very important as we are collecting more cash in a bunch of customer and is greatly improve our cash flow at the same time mitigate risk of bad debt.

On the cash flow, we have another great quarter in Q4 of 2023, where we recorded net operating cash inflow of 11 million wouldn't be and total cash inflow of $16 6 million.

And this was a combination of our sales team clock actively collecting cash from customers and we tightly control our spending.

Next well, that's that's where at renminbi tree for $9 1 million as of today.

As of December 31st this includes cash and cash equivalents.

115 million accounts receivable of $34 3 million prepayments and other current assets of $20 2 million fixed assets of $1 4 million long term investment of $112 9 million.

There are $37 8 million of intangible assets of $17 9 million resulted from the central acquisition and much anything too.

Total current liabilities.

We're at two for $1 3 million as of December 31st in history. This included.

Accounts payable of $51 1 million.

Current operating lease liability of 4 million deferred revenue of 141 5 million.

Accrued liabilities of $74 7 million.

At this juncture, let me take a few minutes.

To summarize our growth quarter that Chris has mentioned earlier in.

In Q4, and you can treat our total revenue and developers subscription revenue grew in every single quarter of so many countries.

Gross profit has also recorded sequential growth in all quarters after a new entry.

First time in the history, we have considered.

Consecutive quarters of positive adjusted EBIDTA.

Total annual operating expenses decreased by 108 million between the years.

And our English with anguish lab product operation globally, signing up more and more customers and contract every quarter.

We have done many things right in this quarter and the result has shown as such.

We are very pleased with the Q4 execution effort in numbers. Nevertheless, we will not sit on our laurels, we will continue to execute our plan and deliver the goods.

Lastly, before I conclude I'll give a update on the share repurchase plan.

In a quarter ended December 31st 20 countries, we have repurchased 53000, a D. S. Cumulatively, we have repurchased a total of 188000 since the start of our repurchase program.

And this concludes management prepared remarks, we're happy to take your question now Christian.

If you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced until we draw. Your question you can press star one again.

Thanks, you mean Cleveland.

We will now take our first question.

First question is from the line of Calvin Wong from Speaker capital. Please go ahead.

Good evening.

Thank you for taking my questions.

First of all congrats to manage one four consecutive quarters of positive adjusted EBITDA. This is a great result was well done I would like to have two questions. If I may the first one a follow up on this like just the EBITDA just want to hear from management and how you see these adjusted EBITDA will.

Trend going forward in 'twenty 'twenty pool right. That's the first question and second question again on the on the engage now but you know we've been tracking you engage that bar business every quarter. So it seems like it has been doing great with our better than our expectation result was in terms of customer.

Number and contract value every quarter.

So we would like to low two things H E R.

Are you expecting such explosive growth every quarter going forward and B what is the revenue contribution by engaged snap in this quarter.

Okay.

Okay, Kevin let me.

Take a minute to recap your question. So I have two question one is on the positive adjusted EBIDTA in the other one is on angry Schlep Yeah, Linda Let me take this question.

Yeah, I guess, yes, we are very pleased with the fact that we delivered another quarter of positive adjusted EBITDA in Q4 to lead any tree and as I say this is a historical event for us since IPO to happy to.

Quarters of positive adjusted EBIDTA.

This is a positive possible through the hard work they have put in every day day in day al and I believe besides the fact that you all shareholders and investors are really true to see this positive adjusted EBITDA that we have recorded.

And if a few true the most important thing that I think we'd like to deliver the message is.

The opex numbers over the phone calls over the four quarters, you will see one good trend I mentioned between the years the annual Opex of between 23 and 20 day two that's actually decreased by 108 million. So in summary, we are safe or trim or more than 100 million expenses intelligently tree.

This cost cutting cost cutting initiatives, we have undertaken from head count reduction and then we will review all the expenses, we have been reduced our office rental space. So we have been working hard over the past year to seriously reduce our opex in the in the past 12 months. So what this means is really really.

Portland Weird.

This much lower opex were in a good position for 2024.

As I say, so long as we continue to grow our topline domestically or true English lab globally.

I believe sooner or later the positive adjusted EBIDTA will come S. In natural course of events. So this is the answer to your first question. The second question is on English that yes, I think we are very true and that's mentioned by Chris is really happy to see the things that has been trending well.

I guess the fact that this is no. So there's a resolve again our commitment and our investment by the company and the dedication by the team to expand overseas and let me recap that a great achievement.

Q4, English lab that Chris has mentioned firstly the contract value has grown 50% between the quarters, achieving cumulative up to renminbi 15 million by Q4.

And secondly, the customer's number has grown 70% 270 between the quarters and is 70% revenue customer number growth is simply an impressive and thirdly, our customer has come from 17 different countries around the world.

So can you.

In summary, we do have high hopes for this business to grow every single quarter.

As I mentioned in the previous quarter editions were using I S. B independent software vendor arrangement that I talked about last quarter. We have started sending teams to overseas market to further solidify our position there.

And just last week. We also started a team a small team in Singapore to kick off our expansion plan and we believe the overseas market, especially in southeast Asia.

It's where we can grab more market share due to the proximity the cultural familiarity and the high penetration of Chinese cell phone data.

So this is the English that and for the revenue contribution that you talked you asked it is still not material I'm just simply the fact that as you're aware, we recognize revenue based on amortization depend.

Depending on the length of the contract be one year or two years.

So.

The 15 million contract that I mentioned earlier will make its way to the books over the over the years.

However, one number that I can share with you is that the recognized English lab revenue, which is the overseas revenue has grown eight times from Q1 of <unk> 23 to Q4, we should be set.

Revenue recognized is just.

On the exclusive growth.

If I may summarize.

I would like to leave this message with you and all the callers and today's call is the fact that our English lab business is doing great. We are continuing to invest in the necessary infrastructure to Inc.

Sure Rich service delivery and quality service and we've continued to export every single market is always the issue of every quarter.

Kevin I hope this answer.

So to your question.

Okay very clear thank you.

Thank you.

We'll now take our next question.

This is from the line of Brian can swing gas from Allianz Global partners. Please go ahead.

Thanks, So much good evening to you guys and thanks for taking my questions I have a whole bunch and subscriptions are growing nicely you mentioned Judy.

Due to the higher our crew.

Talk about the new customer accounts, and I think I heard 26 in the quarter.

But generally what are new business trends like what industries are driving this recovery and maybe discuss your ability to continue to grow subscriptions.

And the impact of the Chinese economy might have on the service offering or is having.

Okay, Yeah, Thanks, Brian just Shannon.

I guess what industry for subscription we don't see any particular concentration I think it is across the board as we mentioned a couple of quarters are cool for the past few years, we have seen a change in terms of how people look at push notification investment rather than investing in your own.

Infrastructure employee employees engineers to do this work they now are more than willing to outsource to a company like us. So we see this change of in terms of mentality by companies, that's where we pick up all the new customers be it private cloud or public.

Public call. So these we do not see any concentration in terms of where the new customers not for them.

And then can you just speak to the Chinese economy.

Is it neutral right now to the impact on your revenue offsetting the strength in demand and you could do much better on the recovery just kind of take us through the impact of the economy is having on your subscriptions in in China.

Sure.

Compared to domestic and overseas.

Sure you can sense that overseas market is where the growth is there.

From yes domestically, we do not see such extra safe growth, but we do we think that it was good to a stable, but relatively low growth.

Domestically.

But engage why is it not having a big impact on your revenue should I assume still the growth in recovery is coming a journey.

Yes, yes.

Roof is much slower compared to English.

And then.

Can you quantify the change in our pool pursue subscription that's driving this and is there still opportunity to grow our people even more and if so what gives you that confidence.

Sure.

The if you look at our our pool from Q1, often literally tree easily.

8000, Renminbi and come Q4 is 11000.

Okay. So this is we have seen a plus 17.

17% growth.

Over to you.

And we do see this to continue to grow but at a much slower pace probably about.

Single digit 5% growth and partly of this is the fact that we are eager to complete some of the private cloud project as well, which is a much bigger contract value.

So yeah. So this is what is driving the upper graph on an annual basis the same customers.

We are not able to increase the price too much.

Got it. Thank you that's helpful. And then in terms of non subscription revenue such as vertical applications. They know this includes marketing coverage into other services. It seems like that revenue base is stabilized.

What has to happen in terms of market conditions.

To begin to get confident that.

Revenue line will begin to recover and grow even more.

[noise] Yeah, if you look at the advertising business in a way, we do not invest as much in it.

So we let it run its natural course, so it is very much fluctuate depends on the overall sentiment right. If you look at how the fourth quarter panel every single year.

The advertising market will peak in Q2, and Q4 Q2 being the 618 online.

And then the Q4, it's just what.

As mentioned, we got double 11 double 12. So these are the two peaks. So that is for value added service and for a particular application I think in overall.

Market intelligence is still a bit slow in terms of the demand for Chinese ADR a P. P numbers, but what have you seen this D.

Financial risk management is doing well is doing well, it's it's increasing 17% year over year. So this is where we earn money to the.

Credit companies or the banks, who trying to.

Get the credit worthiness of individual lenders or the borrowers under the borrower's credit cuts. So we see this trending up in terms of the inquiries. Each bank is buying all services. So if you look at the tree non subscription business.

Financial risk management is something that we have higher hopes in terms of continued growth.

Yeah.

Hi.

And then just to the balance sheet.

It looks like quarter to quarter, you increased cash by 4 million I think I heard cash flow if I did a quick.

Calculation.

Operations was up more than a million and change. So what were the other sources of cash that you know increased 4 million compared to the cash flow of $1 3 million sequentially sure sure we'd be in Q4, we divested one of the investment that we have made so.

So we make some we receive some addition of cash based on that.

So those are dividend under investment investing activities.

But that that divestiture doesn't have any impact on revenue.

No no not at all just pure divesture of investment.

And then lastly on seasonality I assume that first quarter is your weakest quarter given holidays.

Correct me if I'm wrong.

Hum.

Help us with any other seasonality I think you said are the second and the fourth quarter. Your strongest for there I just wanted to make sure that I understand completely the seasonality.

Sure. If you look at it overall in terms of business given the entire China. If I may the Q1 will be slow simply by the fact that he was Chinese new year February seven months or everybody's aren't away. So the last thing. They want is to try and do everything else. So Q1 will definitely be a slow season.

Before long.

Non <unk> subscription business.

Only the value added service, which is the absolute appears to have peaked in Q4 and Q2 the others.

Assuming the economy is doing.

You should be we should see an uptrend every single quarter from Q1.

And in the previous caller's question.

Given the seasonal weakness in the first quarter I assume you won't be EBITDAR cognitive but in.

Orders following that you will be is that is that how I got how am I reading that right or am I not reading that right.

Yeah, I think it'll be pretty much what you say Q1, we really do it.

It would be difficult to get positive EBIDTA.

Right.

Do you think there'll be around breakeven after.

Yes that does to go difficult yes.

Okay. Thank you so much and nice work on the recovery over the year.

Thank you Sir.

Thank you as a reminder, if I have any further questions you can press star one and one on your key pads until my Chili Youre question is compressed on one on one again.

They standby, while we check for any further questions.

[noise] and with no further questions at this time.

I will now hand, the conference back to Christian Arnell for closing remarks. Thank you.

Thank you everyone for joining the call Tonight. If you have any further questions or comments. Please don't hesitate to reach out to the IR team that concludes the call. Thank you and have a good evening.

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

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Q4 2023 Aurora Mobile Ltd Earnings Call

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