Aurora Mobile Limited (JG) Q2 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile second quarter 2021 earnings conference call. At this time, all participants will are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Mr. Rene Vanguestaine. Thank you. Please go ahead, sir.

Thank you Rory. Hello everyone and thank you for joining us today. Aurora's earnings release was distributed earlier and is available on the IR website at ir.jiguang.cn. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer, Mr. Fei Chen, President and Mr. Shan-Nen Bong, Chief Financial Officer. Following their prepared remarks, all three will be available to answer your questions during the Q&A session that follow. Before we begin, I would 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 U.S. Securities and Exchange Commission. 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. Luo. Please go ahead.

Thanks Rene. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's second quarter 2021 earnings call. This is the second quarter where we have been operating under the pure SAAS business model since the beginning of 2021. We delivered strong results and I am pleased to kick off this call now to share with you our business progress and key business metrics achieved in the second quarter of 2021. Before I comment on our Q2 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website for your reference. You may refer to the deck as we proceed with the call today. Let's begin our review with highlights of our key operating and financial performance for the second quarter of 2021. As a reminder, we completely exited the Targeted Marketing at the end of 2020 and our business is now 100% focused on the SAAS business, which include developer services and vertical applications. For apple-to-apple comparison, numbers presented exclude contribution from the legacy Targeted Marketing in the prior year. In the second quarter, we continued to apply our company-wide focus and concerted effort to grow our SAAS Business and it has paid off. Here is the summary of the strong results for Q2 2021. The number of paying customers increased to 2,634 from 2,281 a year ago, up 15% year-over-year. Revenue were RMB89 million, up 34% year-over-year. Group gross margin was 75.7%, which is more than 1.8 times compared with 41% from a year ago. Gross profit was RMB57.4 million, up 23% year-over-year. And adjusted EBITDA was negative RMB13.3 million, a substantial improvement of 27% from a year ago, demonstrating our strong operating leverage. Revenues from our SaaS business continued their strong growth momentum this quarter, mainly due to the 34% growth in both the developer services and vertical applications. The successful transition into the pure SaaS business model since the beginning of 2021 has helped us to deliver two consecutive quarters with gross margin above 75%, a significant improvement from 41% a year ago. The strong gross profit growth of our SaaS business was mainly driven by revenue growth of 34% year-over-year. Here, I would like to take a moment to give an update on our latest products, JG Unification Messaging System, JG UMS and JG Video-as-a-Service, which is JG VAAS. We continue to see strong market demand for our new product, namely JG UMS and JG VAAS since their respective launch. The total signed contract value for UMS and VAAS has crossed over RMB3 million. The current and potential customers for these products come from a wide and diversified number of industries including finance, medical and healthcare, media, short video content providers, social networks, e-commerce platforms and more. For example, we recently partnered with UU Paotui, an online consumer errands and delivery platform. They start implementing our AI-powered JG UMS to help optimize their smart operations and drive intelligent solutions to expand user reach. Through this partnership, UU Paotui was able to replace manual operations such as sending messages on different platforms throughout different channels with JG UMS integrated messaging platform to reduce costs and increase operational efficiency with flexible routing management. Going forward, we will continue to help our customer jointly build an extensive value chain of their existing services. When we provide better and more customized solutions, we are able to create a deeper and closer connection with our customers. We recently also launched a new public cloud version of UMS, which provides free basic UMS services for mobile developers. Mobile developers can use this free version as a quick asset and meaningful trial of JG UMS integrated, multi-channel messaging services upon registering for an account without additional cost. In turn, this will help us to convert these mobile developers into fee paying VIP customers. For customers with higher requirements for multi-channel push notifications and user management, they can upgrade to the VIP version of JG UMS and enjoy unlimited channel management, higher API call frequency limits and other exclusive VIP services. As we discussed before, we need to continue to push innovation our R&D efforts in order to meet the evolving customer needs and new requirements, which in turn will continue to drive our business growth. Our motto is to continuously promote innovation through our R&D organizations which remains at the top of our priority. I would like to take a few minutes to share with you the progress of some of our product innovations during the quarter as a result of our relentless efforts and focus to stay ahead of the game. Besides continuous iterations developed for UMS and VAAS products, we recently introduced a smart push version for our JPush services, which added a new post push analytical functionality to the integrated platform. App developers are now equipped with multiplatform, multi-channel analysis of the push message cycle. For example, developers are given message delivery data, including total number of message sent, total messages reached to end users and click-through rate with the ability to visualize the data from different levels. These statistics help past developer identify key issues more accurately and efficiently in real time. For push message delivery that fail, developers can also utilize our all the real reasons and analytics functions to detect the data from the full message delivery cycle and from there they can uncover the root cause of any undelivered messages. With the help of these pot push functionalities and the push strategy recommendations, this feature, they have our developers effectively increase the delivery rate and click-through rates of the push message by providing a much more accurate push strategy based on learning from the past results. We believe that this new functionality will help our developers create a more reliable, comprehensive and intelligent toolkit and this toolkit will in turn greatly assist developers in improving delivery rates of notifications and click-through rates of the push message. Now, I will turn the call to Fei, who will discuss the Q2 performance in greater detail.

Thank you Chris. Let me start the discussion of different revenue streams within the SaaS businesses. In the second quarter of 2021, revenues from developer services reached RMB61.2 million, a robust 34% and 17% growth on a year-over-year and a quarter-over-quarter basis respectively. The year-over-year revenue growth was fueled by strong growth of 22% in subscription services and a 57% growth in value-added services. Subscription services revenue were RMB37.5 million, an increase of 22% year-over-year, primarily driven by new customer acquisition. In addition, we continued cross-selling various non-push subscription products such as JVerification, JSMS,, JAnalytics, et cetera to our customers in efforts to increase our subscription uptake via multiple product lines. This effort has delivered solid results as the revenue contribution of non-push notification products increased to 38% from 32% a year ago. And the non-push notification products achieved a higher ARPU of RMB38,100 resulting in the overall ARPU for subscription services increasing by 5% to RMB16,200 compared with RMB15,500 a year ago. New and renewed contracts of notable customers in the quarter include China Everbright Bank, UU Paotui, SuoYang International, Yonghui Superstores and so on. In this quarter, value-added services within developer services, which includes revenues from JG Alliance services and advertisement SaaS, once again delivered a set of impressive results where revenues grew by 57% year-over-year to RMB23.6 million from RMB15.1 million in second quarter 2020 and by 26% quarter-over-quarter from RMB18.8 million in first quarter 2021. We continue to see very strong and solid demand for our JG Alliance products. On the supply side of the JG Alliance, during the quarter, we continued to apply all resources to sign up more mobile apps in order to grow this traffic pool. The total number of apps within our network exceeded 340 apps compared to 280 in the first quarter 2021, representing a 23% growth quarter-over-quarter. As a result of apps growth within this traffic pool, the DAU within our network has increased by 20% to RMB180 million from RMB150 million in first quarter 2021. On the demand side, we continued to see strong demand from many program developers who contributed close to 40% of JG Alliance revenue. To further expand market reach and shorten the go-to-market process, we have used ad agencies to help us cover a broader customer base while our direct sales team focused on serving large KA customers. In second quarter, ad agencies contributed more than 50% of JG Alliance revenue stream while the rest came from direct customers. Major customers of JG Alliance in the quarter consisted of repeat customers and market leaders across many industry verticals. They include, but are not limited to Weibo, [indiscernible], Alipay, Taobao, Du Xiaoman, TravelGo, et cetera. Now let's' move on to the discussion of vertical applications. Vertical applications revenue, which include the financial risk management, market intelligence and iZone, grew by 34% year-over-year as demand continued to recover from the impact of the pandemic, with the majority of the revenue growth coming from the financial risk management business. In the financial risk management segment, revenues increased significantly by 42% year-over-year with the help of the 55% growth in ARPU. This quarter, we recorded the highest quarterly revenues, compared with the results since the beginning of COVID-19 in first quarter of 2020. We continue to see huge demand for this product from KA customers such as banks and licensed financial institution. New and renewed customers include Mashang Consumer Finance, Du Xiaoman Financial and 360 DigiTech. Revenues from our market intelligence product increased by single digit year-over-year. The lack of meaningful growth was due to a few customers delaying customized projects with us due to recent macroenvironment. However, we continued to see strong renewal with many large corporate customers, including TravelGo, Netease Media, ITE and so on. And lastly, while the new product transition is still underway, our iZone business delivered solid result during the quarter with significant double digit revenue growth. This was mainly due to the completion of a few large-scale one-time contracts. With that, I will now pass the call over to Shan-Nen.

Okay. Thanks Fei. I will go through some of the key expenses and balance sheet items. On to the operating expenses. Total operating expenses increased by 7% year-over-year to RMB105.3 million. In particular, R&D expenses increased by 16% to RMB54.3 million, mainly due to the increase in staff costs as we continue to invest in our R&D department, higher bandwidth and cloud expenses to support the SaaS business expansion. Selling and marketing expenses increased by 1% to RMB27 million, mainly due to the increased customer visits and offline marketing promotion activities. G&A expenses decreased by 4% to RMB23.9 million, mainly due to year-over-year reduction of RMB1.2 million in bad debt provision which was the result of our companywide focus on strict financial control measures. Adjusted EBITDA, calculated as EBITDA excluding share-based compensation and change in fair value of foreign currency swap contracts, improved 37% year-over-year to negative RMB13.3 million from negative RMB18.3 million in Q2 2020. And this was the best adjusted EBITDA performance since Q1 of 2020. For the second quarter of 2021, we delivered another set of solid financial results. For a year-over-year comparison, the key highlights for this quarter include our SaaS businesses revenue increased significantly by 34%, group gross margin improved from 41% to 75.7%, a direct result of Q2 2021 gross margin being 100% contributed by high-margin SaaS businesses. OpEx, however, increased by only 7%. As a result, our adjusted Ibiza improved by 27%, which continues to demonstrate the scalability of our business model. And this is the second quarter where we have delivered SaaS business only results and we are very pleased with the results we have achieved and we believe that the growth momentum from Q1 and Q2 2021 will continue to bring more solid results in the coming quarters. On to the balance sheet. I will start with two key very important KPIs that we closely monitor. Firstly, the AR turnover days decreased significantly from 59 days in Q2 2020 to 38 days this quarter. This was similar to the trends in last quarter, due to both the shift away from the legacy targeted marketing to focus on SaaS business. And the companywide focus on improving collection. Secondly, the total deferred revenue balance, which represents cash collected in advance from customer, for a fifth consecutive quarter has exceeded RMB100 million at quarter-end. As of June 30, 2021, the balance was at RMB111.5 million. Next, total assets were at RMB642.7 million as of June 30, 2021. This includes cash and cash equivalent of RMB297.2 million. The reduction in cash balances over the quarters was mainly due to the redemption of the convertible notes of $35 million in April 2021. Accounts receivable of RMB38.1 million, prepayments of RMB8.4 million, fixed assets of RMB75.5 million and long-term investment of RMB168 million. Total current liabilities were at RMB360.5 million as of June 30, 2021 and this includes short term loan of RMB150 million, accounts payable of RMB13.7 million, deferred revenue of RMB106.3 million, accrued liabilities of RMB90.6 million. And on to business outlook. Our new full year 2021 revenue guidance is now in the range of RMB342 million toRMB360 million, representing growth of 33% to 40% year-over-year compared with last year. And guidance for our full year gross margin remains above 70%. The update is primarily due to the revised outlook for our JG Alliance business. The use of third-party agents for our developer service, value-added service business has caused a change in accounting method for our revenue from gross revenue to net revenue, net of any agent rebates under U.S. GAAP. In addition, due to the recent macroenvironment uncertainties, some of our potential JG Alliance partners have temporarily delayed joining and integrating with our traffic supply network. However, the long term outlook for the JG Alliance remains unchanged and we still expect it to be our main growth driver going forward. Please note that, for meaningful comparison purposes, the prior year revenue numbers used to calculate the revenue growth percentage excludes revenue from targeted marketing business. The above outlook is based under current market conditions and reflects the company's current and preliminary estimates of the market and operating conditions and customers' demand, which are all subject to change. And lastly, before I conclude, I will give a quick update on the share repurchase plan. In the quarter ended June 30, 2021, we did not repurchase any shares. As of June 30, 2021, cumulatively, we have repurchased a total of 921,000 ADS since the start of our repurchase program. And this concludes management's prepared remarks. We are happy to take any question now. Operator, please proceed.

[Operator Instructions]. We have the first question. This is coming from the line of Jacob Silverman from Alliance Global. Please go ahead.

Hi everyone. Thanks for taking my questions. Are there any additional details you can give us on why partners are delaying joining? And maybe when can we expect customers to start doing due diligence? Also, around the accounting methodology, for reported gross margin, will that have an impact on a reported gross margin for JG Alliance?

Hi Jacob. This is Fei. I will answer the first question and Shan-Nen will answer your second question. So as you know, recent the macro regulatory environment has changed, right. And because of this, it has resulted a temporarily delay in integration for some of our potential JG Alliance partners to join our traffic supply pool. Because many of the app developers in the pipeline are now focusing on getting compliance for their own mobile apps in terms of the privacy issue, the data collection issue which is required by the government to rectify these issues, right. So they will slow down the cooperation with the third-party partners, including us. However, once their compliance work is finished, they will renew the collaboration process. So that's why we say the longer term the outlook for this business will remain unchanged and we still expect the JG Alliance to be the growth driver for our business going forward, right. Despite the revision, actually for this business, JG Alliance, we still expect this year to have a growth close to 100%, which is already very high, which is a great achievement we are going to have. And Shan-Nen will answer the second question.

Jacob, on the gross versus net accounting and the impact on the gross margin, yes, it will impact some of the margin downward adjustment. But we are not expecting to be major because if I look at the example that we used before, $100 versus $106 gross revenue, the impact is only 2%. So answer to your question is, yes, there will be some deterioration in gross margin, but we do not expect it be material.

Okay. And then the delays there are mostly on customers' end? Are there any delays on your end for getting customers on JG Alliance?

No. There's no delay from our side. This is all from their side, from the customer side, yes.

Okay. So it sounds like also -- you go ahead.

No. I am done.

Okay. So it sounds like your relationships with publishers are improving. After 618, should we expect that success to continue for maybe Singles Day? Or given the recent regulatory environment, maybe you are now sure what publishers will improve maybe more in the in the next year in 2022?

I think we will start to see the improvements starting from the fourth quarter, right. Because the regulatory, the rectification for these apps is ongoing process. So some of the partners, they are through the end of doing the -- [AUDIO GAP] With the revised the guidance, right. So actually, we are going to expect a flattish quarter-over-quarter growth for the third quarter. So actually, this is normal. In a normal situation, if you look at our past year, right, in 2020, actually we are seeing flattish seasonality from the third quarter to second quarter, right. So because of the slowdown, we are seeing the similar flattish trend, But if there's no slowdown, actually we were expecting a higher quarter-over-quarter growth, right. But that said, since some of some of the supplier in the pipeline, they finished their work, their regulatory work and they will start collaboration with us. So we do expect the traffic to continue to grow in the fourth quarter. And also we do expect the Singles Day, Double 11, will have a positive impact to this JG Alliance business from the demand side. So that's why our full year guidance actually already reflected the quarter-over-quarter growth from the fourth quarter to third quarter.

Okay. And then switching gears. How has Video-as-a-Service has been progressing in recent months such as the pace of new signups?

Yes. So actually for the VAAS and UMS, right, basically these two products, when I look at the number, the contract signing progress, actually the recent data that shows it's close to RMB4 million contract value has already been signed up, right, which is actually last quarter when we were having the call, it was like RMB million. So actually already doubled. So we are continuing to make major progress in these two products. And actually for the contracts, we just signed up actually with very famous, actually meaningful big customers such as China Merchants Securities, right. So with these household names as our new customer, we can use this as a case study to continue to push through the similar customers in the same industry, right. So we do expect these two businesses to continue to gain momentum in the following quarter before the year-end.

And one last one for me. Maybe to further monetize Videos-as-a-Service, are you considering offering maybe any ad placements, ad sharing capabilities in combination with the subscription that you are already offering?

Yes. Actually, we thought about this, right. I think that's like two very different business model. One, currently what we are offering is the true SaaS model, right. Actually, it's a subscription fee, which is pretty much a true margin, right. It's a software type of margin. But once we offer like as a kind of like similar to JG Alliance business model, which will certainly we will need to pay the media fee and also as well actually we need to pay the bandwidth cost, right. So the margin will be dramatically lower than current JG Alliance business model. So for the time being, we actually opt not to choose this way of monetizing. And we want to continue to focus on the subscription based model first before once we have gained a massive, a good size of this subscription model, then we can think about it later on. Chris, do have anything to add?

Yes. Also, this is actually two different directions. So first of all, we want to focusing on some vertical industry, for example, financial industries, the banks. And those apps, they have huge budget to invest in these VAAS content. But they are not willing to have any advertisement within their apps. So in this case, they are willing to pay in a SaaS business model. But for some like internet companies, those companies, they monetize by the advertisement. So in that case, they will probably like revenue through the traffic revenue share model. But in the first case, in our stage, we want to focus on the SaaS business model and because the banks and financial industry, they have huge budgets and we are very similar to what we spend in pot push services.

All alright. Thanks so much everyone.

Thank you. You have the next question, which is coming from Ryan Roberts from Navis Capital. Please go ahead.

Hi. Good evening management. Thanks for most of the update. A couple of questions coming from my side. Kind of I guess the first one is really, you talked a bit about the supply side from JG Alliance. So I guess some of the apps are undergoing rectification and so forth and are kind of slowing down their integration with you guys. What about demand? What are you seeing there? It sounds like your current DAUs are about 180, which is a nice step up from last quarter or from Q1 rather and you target the year-end, I thought, was around 160. So it seems like you guys are doing well on DAUs, which would make me think that you have some pretty solid revenue generation capability. I just want to hear what's happening on the demand side of that first.

Hi Ryan. This is Fei. So actually from the demand side, it's never an issue, right, because as always customers who want to acquire new users, more new users and also in large internet companies, they want to wake up their dormant existing older users, right. So our size of this business for the time being even with the expectation of the third quarter, fourth quarter revenue, it's going to be close to RMB100 million revenue. So this is still relatively small versus compared to the huge market size for the advertising industry, right. So that's why and also for our JG Alliance service, actually this is completely new media format, which doesn't really compete directly with the existing service providers, right, which serves to our advantage. So we see all these pent up demand and the bottlenecks has always been and will be the supply side, right. So that's why we need to wait a little bit until the macro regulatory process has settled, then we can renew the growth.

Right. And then just talk to me a little bit about the ad loads. I think that was one of the things, one of the little value could turn for monetization. What's the current ad load looking like for JG Alliance?

Yes. So ad load is still about 50%, right. Exposure divided by the denominator is basically the DAU, right. So ad load hasn't really been our focus yet. It hasn't been our focus yet. We want to continue to acquire as much traffic, as much DAU as possible before we do the fine tuning of the ad load. And certainly, we are working on it, okay, from the product perspective. We actually launched the SSP 2.0, which will offer the functionality that for per DAU, we will be able to offer multiple exposures, right. And the product got launched in July and actually has been in trial process with a few apps and the result actually is pretty encouraging. For the same DAU, we are able to increase the ad load basically by 25% right. So we also have already established a migration plan to migrate our existing apps in our network into this SSP 2.0. So we will start with the smaller DAUs first and when they becomes stable and achieve the results that we wanted, then we will move on to those apps with greater DAUs. So we expect such migration process to be ongoing and a continuous effort and we hope to be able to finish majority of the migration before the end of fourth quarter. So this, in addition to the organic traffic acquisition, DAU acquisition, this will help the total exposure that we can leverage in the coming quarter. That's why we already built in the assumption for our traffic to continue to grow in the fourth quarter because fourth quarter, we will expect seasonal quarter-over-quarter growth of JG Alliance.

In kind of a blue sky scenario, what's your ad load target in Q4?

I think it maybe increased by 10%.

So you are going to increase from 50% to 55%.

Yes. 55% to 60%, yes. We are thinking somewhere in that range.

Okay. Understood. Okay, it's helpful. Thanks. And then maybe another question is, I think you were talking a bit about kind of cross selling and progress there. I wonder if you guys have had any analysis kind of on a customer cohort kind of basis for kind of your VAAS business, because that's what we kind of expect to see deliver some explosive growth as we talked about in the past a lot. Subscription growth is nice, but VAAS is really kind of where you think there's a lot more potential there. Do you have any data you can share yet in terms of how many, average revenue, kind of recurring revenue rate might be or kind of the some of those typical SaaS metrics, I think that maybe some other companies that are wherever are following? Can you share some of those updates or some of those data points, if you have them?

Yes. We do. Actually, we do have those metrics, right, that's SaaS kind of like metrics. So we actually segment our subscription business, subscription-based customers into two buckets, right. One is the KA customers, which is the top 1,500 internet companies based on the DAU, right. So for these customers, actually when we look at the customer retention dollar based, actually NDR, net dollar retention, okay. And over the past several years, it's been in the range of 100% to 120%, which is a very sticky, okay. And then for the second bucket basically are those customers who are more like SMB, smaller type of customer. For these types of customers, as you know, in China every year, actually every day the apps come and ago, right for the smaller ones. They tend to, by nature they cannot survive after a certain period of, a certain time of operation. So these segment customers, when we look at the NDR, actually they are in the range of around 70%. So this is natural. It's very difficult to kind of like increase the NDR for these type of customers unless we do want to deal with these customers, right. So that's sort of the current situation, okay.

Understood. That's helpful to hear that the KAs are kind of 100%, 120% and sticky. That's good. And then maybe kind of adjacent to that, you mentioned kind of a realignment of the sales process a little bit having internal SaaS focus on KAs and having agents do everyone else. Where you kind of kind of draw that lime with respect to the WeChat mini-programs? Is that going be agents handling that business for you? Or alternatively, you are going to continue that in-house? And is there a potential at some point where, at these least the advertising side of this, could kind of sell itself? I realize you are signing JG Alliance customers for supply is maybe a very labor intensive thing, but eventually, ultimately, there must be kind of a target in sight where an advertising client can kind of purchase inventory or start exposure themselves, right, which would make a lot of this much more stable?

Yes. So actually, currently, from the revenue perspective, right, revenue split, already over 50% of our JG Alliance revenue actually are coming from the ad agencies. So most of these ad agencies, they will do the customer acquisition, basically add a customer acquisition themselves. And then they will even, a lot of them, they will do the ad placement actually operation themselves as well. So actually, we only offer the platform for them to work on, right. So for this set of agencies actually, already it's very kind of like automatic and it doesn't really require our internal labor or whatever resource, right. So going forward, we expect that these ad agency kind of like the revenue pile will continue to grow because we are direct sales force, their main mission is to serve a few very large customers such as Weibo, right, such as WeSee. These are very large customers, right. And these customers, we need to deal with them directly because they have actually maybe a more complicated request or demand on each, right. So for majority of the customers, we will let the agents to do it. So the scalability is not an issue in our opinion. We never budget we will build a very massive ad operation team and add sales force, okay. We don't need to do that. It's not in our strategy.

So could we potentially see some of the sales and marketing spend kind of come down a bit? Or was that likely not in the cards?

Yes. It's our goal actually to continue to generate leverage in the expense line items, right. So certainly, first marketing needs to go down as a percentage of total revenue. I think for this JG Alliance business, we think the leverage is pretty high. We will continue to go up, okay. And what we need to do is actually work on is actually to get the leverage for the subscription business. Subscription business, actually per head revenue, is still not in the ideal range yet, okay. So that's why going forward, we are actually going to have actually already building sort of the KA customer and like a sales team, which does not exist before. And this KA customer, they will serve the industry basically verticals, vertical by vertical and serve companies like China Merchants Securities, right. Such kind of a customer. They can generates RMB4 million revenue also, right. So this is where the sales efficiency will come from, right, by serving the large customers, right. And so this is ongoing process. And not only on the sales and marketing, also our R&D, we will continue to drive the efficiency, okay. We will continue to optimize our resource utilization rate. We will continue to allocate the human resource into new product innovation, okay. And also, we will cut back the resource originally devoted into the older products, right, legacy product, push products, right. So that's sort of ongoing process we are currently implementing. So I think that going forward, yes, we should continue to see our operating leverage.

Okay. And a couple two last quick ones, very quick from me on kind of the number side of things. Just kind of curious, I was curios, could you remind us what that other income line is on the P&L? And also for the prior share buybacks, what was the average buyback price? And then I am done.

Okay. Let me take a look. So the other income is mainly on the government grants that we get the subsidies, we get from the Shenzhen government.

Got it. Okay. Right. And roughly speaking, what was the prior buybacks? What were those prices earlier?

I need to back to you because we have now been repurchasing that for at least four quarters. So I don't have the numbers readily available.

Yes. Okay. If you could follow-up on that, that would be great. Okay. Thanks very much, guys. I appreciate it.

Thank you.

Thank you.

[Operator Instructions]. We have the next question from [indiscernible], personal investment Please go ahead.

[FOREIGN LANGUAGE]

[FOREIGN LANGUAGE]

[Operator Instructions]. We have the next question. This is coming from the line of Ryan Roberts from Navis. Please go ahead.

Hi. I actually had a follow-up from the previous caller. So he had an interesting point about kind of maybe user experience and potential ad overload as you cooperate with a couple of different platforms. So if an app developer cooperates with multiple platforms, that could leave you with kind of a deterioration of experience if you are showing an ad and then they show an ad and so on and so on, Is there any, looking at kind of the ad load and kind of the overall performance, I am just curious, is there any kind of way you can monitor that from kind of a user experience perspective kind of the ad developer probably, that's probably more of a concern for them, but then again, if you are providing some of the advertising service for them, I would wonder if you have maybe an element of concern there because that could impact ROI, I would think from your advertising clients, if the inventory maybe saturated. I am just kind of curious how you guys approach that problem.

Yes. So actually the beauty of this product is the user experience is actually, it's never an issue for the time being, right. Because first of all, for the ad load, currently it is very low. It's actually per DAU a day only generates, we only show 0.5 ads, right. So versus the typical funding through or any media fees advertisement they going to show like 10 to 20, right. So this is immaterial compared to the traditional way of showing ads. And even though we increased the ad load by 100%, which is one exposure per DAU, which is still very limited. And second of all, we actually have done few analysis with the developer to analyze whether our this new format has any impact to user behavior such as whether we are caused increased number of users to delete the app, right. So we have done all these sort of analysis. Actually, we were never able to find any evidence that links to users with the deletion of the app because of the app developer used our JG Alliance in the product. And in some cases, actually it also improved actually the user retention, which is very, very surprising to us as well. So net net, basically there's no negative user experience and we never received any user complaints as well since we launched this product.

Actually product wise, basically we look for maybe A/B path to choose for the app developers. So basically, we can do our A/B test for some group of users that will show our advertisement and another group they don't shows any advertisement. So basically from the data and the result, those two, they have no difference of these two groups of users.

Yes. No statistical difference. Got it. Okay. All right. I am good. Thank you.

[Operator Instructions]. We have no further questions at this moment. I would like to hand the conference back to our host, Mr. Vanguestaine. Please take over, sir.

Thank you Rory. Thank you everyone for joining our call tonight. If you had any further question and comments, please don't hesitate to reach out to the IR team. This concludes the call. Goodbye.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect now.