Aurora Mobile Limited (JG) Q4 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Aurora Mobile Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Rene Vanguestaine. Thank you. Please go ahead, sir.

Thank you, Amber. Thank you. Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed earlier today 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. Shan-Nen Bong, Chief Financial Officer; and Mr. Guangyan 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 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 other 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'd like to turn the conference over to Mr. Luo. Please go ahead.

Thanks, Rene. Greetings to all. Welcome to Aurora Mobile's 2024 Fourth Quarter Earnings Call. Before I comment on our Q4 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website. You may refer to the deck as we proceed with the call today. As we did in the past, based on the Q4 numbers, the appropriate description I would describe for the fourth quarter result is an incredible Q4 to close out our perfect 2024 for the following reasons. Firstly, we recorded full year adjusted EBITDA positive for 2024 calendar year. This is our very first full year profitability since the inception of Aurora Mobile 14 years ago. In this quarter, we recorded the sixth consecutive quarterly positive adjusted EBITDA. Secondly, the group's revenue this quarter of RMB 93.2 million, achieving a remarkable 20% growth year-over-year, this was attributable to solid growth in all business lines within the group. Thirdly, our overseas business, EngageLab, continued its great growth momentum, recording a whopping 20% revenue growth on a year-over-year basis, and newly signed contract value grew by RMB 10 million in Q4 alone. Fourthly, we recorded net operating cash inflow of RMB 19.5 million, yet another highest quarterly number in the past 17 quarters, bringing the cash balance close to RMB 120 million as of 12/31/2024. Now let's move to the individual business performance. Our total Q4 group revenue has grown 20% year-over-year, driven by the very strong numbers from Developer Services. Within the group revenue, all revenues, mainly developer subscription services, value-added services and financial risk management, all recorded year-over-year and quarter-over-quarter revenue growth. Developer Services revenue, which consists of subscription services and value-added services, increased by a strong 28% year-over-year and 24% quarter-over-quarter. Subscription revenue has been recording great numbers where it increased by 12% year-over-year and 6% quarter-over-quarter. Value-added services revenue grew by 142% year-over-year and 180% quarter-over-quarter. Our core businesses, subscription services revenue of RMB 54.7 million recorded growth of 12% year-over-year and 6% quarter-over-quarter. The year-over-year and quarter-over-quarter revenue growth was mainly driven by increase in both ARPU and customer number. Carrying on the great momentum we had in Q3, our subscription revenue broke the history record again well in this quarter. We have the highest quarterly revenue yet at RMB 54.7 million. For subscription services, we have record year-over-year revenue growth in both the domestic and overseas markets. In particular, our EngageLab revenue grew close to 200% year-over-year. This was driven by the new customer acquisition in the overseas market. Since we venture overseas, we get one services contract from both Chinese companies venturing overseas and overseas companies domestically in their respective countries. With our exemplary suite of products and services, we are gaining more new customers every quarter. However, this is just a tip of iceberg. The total addressable market for overseas is huge. We will direct more resources in terms of human capital and infrastructure to capture more overseas market share. Based on the historical track record we have had, I'm convinced our EngageLab business will have a very strong and long streak of growth in the future. Next, I shall elaborate more on our EngageLab business this quarter. Firstly, the growth of EngageLab business has been important and instrumental for us to achieve great quarterly revenue number. Secondly, customer momentum has been impressive from day 1. We converted more overseas customers in this quarter. The contracted customer number has reached 678, representing an impressive 32% sequential growth. Thirdly, the cumulative signed contract value of EngageLab has, in 2 consecutive quarters, grown by close to RMB 10 million quarter-over-quarter. As of December 31, 2024, the total signed contract value was RMB 48 million. Fourthly, we continue to expand our footprint globally. By December 2024, our EngageLab products and services are now sold to customers in more than 37 different countries and regions globally. Within subscription revenue, some of the notable new and renewal customers in this quarter include but not limited to China Telecom, Ping An and China Merchants Securities, just to name a few. Value-added services revenue was RMB 16.3 million, increased by 180% quarter-over-quarter and increased by 142% year-over-year. The sequential revenue spike was mainly due to the Double 11 and Double 12 online shopping festival in Q4, but was non-existent in Q3. This revenue growth trend in Q4 was within our expectations, but the magnitude of our growth was much better than what we had anticipated. A job well executed by our team to secure more ad spending from advertisers in the last Q of 2024. Next, let me share with you on my thoughts on how the recent advancement in AI will shift the landscape. The development of AI technology and overseas expansion has been Aurora Mobile's core strategy over the past 2 years. These strategies have already led to strong revenue growth at EngageLab and even accelerated the overall revenue growth of our entire group. We believe this momentum will continue and set the stage for new growth trajectory. In the past, we can primarily provide updates on our overseas expansion. Now we would like to reiterate our AI strategy to the market. Aurora Mobile remains committed to our AI First strategy and views AI as the most critical business driver for the future. We are now not only deeply integrating AI into the workflows of various departments, but also using it as a KPI in the BSC assessments for both the company and each employee. This ensures that technology implementation is closely aligned with the performance results. Our core products are fully integrated with advanced AI capabilities that enable various applications such as e-mail editing, push notification copywriting and data analytics. This AI-driven enhancement enable our customers to drive business innovations and improve operational efficiency. Over the past 2 years, we have continuously invested in the development of GPTBots.ai, an enterprise-level AI agent platform. By seamlessly embedding native AI agent technology into workflows, we are helping companies accelerating their transformation to an AI First strategy. Over the past few quarters, we have seen rapid growth in subscription revenue for GPTBots.ai. The new era of industry revolution is just beginning. The enterprise application of AI is still in its early stage, and we remain committed to increasing our investment in enterprise AI. We believe that our vast enterprise customer base, diverse business scenarios and rich data resources will be invaluable assets in this AI era. Let me pass the call over to Shan-Nen, who will share more about the vertical application and other aspects of our financial performance for this quarter.

Thanks, Chris. Next, I'll go over the revenue for Vertical Application that includes financial risk management and market intelligence. Overall, Vertical Application had a good quarter where revenue increased by 3% quarter-over-quarter and 1% year-over-year. And within Vertical Application, financial risk management recorded a 34% growth in revenue year-over-year and 4% growth quarter-over-quarter. The 34% year-over-year revenue growth was mainly due to a strong 24% growth in customers number and 8% ARPU growth. We are very pleased with the progress made by this business. Over the past few quarters, the team has fine-tuned and upgraded the service and products. They are very well received by the market plus the revenue growth we have seen. The customers that we have signed up or renewed in Q4 include, but not limited to, [Weitonginhan], [Sunchila], [Chonbangnihan] and many other licensed credit and financial institutions throughout China. And market intelligence revenue, on the other hand, decreased by 36% year-over-year and stayed flat quarter-over-quarter due to the continued weak market demand for Chinese APP data, and this result is within our expectation. Now let me go through some of the key expenses and balance sheet items. On to operating expenses. The Q4 OpEx was at RMB 16.3 million, representing a slight 1% decrease year-over-year and a 6% increase quarter-over-quarter. The majority of the increase was attributable to our sales and marketing department. The continued increases in revenue and cash collection in this quarter resulted in additional commission and expenses. These are all within our expectation. Overall, we are very pleased to see how OpEx has been trending in view of the revenue growth we have achieved. I will now go through the individual OpEx category. For R&D expenses, it decreased 10% year-over-year to RMB 24.3 million, mainly due to reduction in personnel costs, both the salary and share-based compensation as we continue to optimize expenses and improve operational efficiency. Selling and marketing expenses increased by 11% year-over-year to RMB 24.6 million, mainly due to the increase in sales commission and traveling expenses, in line with the revenue growth and cash collection recorded in this quarter. G&A expenses decreased by 6% year-over-year to RMB 11.4 million, mainly due to reduction in personnel costs, both the salary and share-based compensation as a result of continued effort to manage costs. Next, I'll share 3 very important KPIs that we closely monitor. For net dollar retention rate, a commonly used KPI for SaaS companies, it stood at 95% for our core developer subscription business for the trailing 12-months period ended December 31, 2024, and it was a good growth compared to 92% for the period ended September 30, 2024. Secondly, another financial KPI for tracking the performance of SaaS companies is the total deferred revenue, which represents cash collected in advance from customers for future contract performance, which was at record high of RMB 147.1 million. And this is the 12th consecutive quarter where our deferred revenue balance has exceeded RMB 130 million. Thirdly, we continue to maintain a healthy AR turnover days at 44 days. We continue to work hard to secure more cash from our customers and, at the same time, mitigating the risk of bad and doubtful debts. And carrying on the great momentum we have from Q3, we achieved great results on the cash flow in this quarter. Our team has done a great job in cash management in operating activities this quarter. For the quarter ended December 31, 2024, we recorded net operating activities cash inflow of RMB 19.5 million, which was the highest level in the past 17 quarters. On to the balance sheet. Total assets were at RMB 378 million as of December 31, 2024, and this includes cash and cash equivalent of RMB 119.5 million, accounts receivable of RMB 50.8 million, prepayments and other current assets of RMB 14.3 million, operating lease right-of-use assets of RMB 17.1 million, fixed assets of RMB 4.6 million, long-term assets of RMB 113.5 million, goodwill of RMB 37.8 million, intangible assets of RMB 13.8 million, resulting from the SendCloud acquisition in March 2022. The total current liabilities were at RMB 261.6 million. This includes short-term loan of RMB 3 million, accounts receivable of RMB 32.7 million, current operating liabilities of RMB 4.5 million, deferred revenue of RMB 147.1 million, accrued liabilities of RMB 74.4 million. And here, I would like to echo what Chris has said at the beginning of this call. Let me recap the description that he made: an incredible Q4 quarter to close out a perfect 2024. In this quarter, the total revenue grew strongly by 20%, reaching RMB 93.2 million. This is a set of remarkable results when we compare to our peers and other listed company in the SaaS space. Our core developer subscription services had a RMB 54.7 million revenue, another first in history. Second, our EngageLab product continued its great momentum. Revenue grew by close to 20 -- 200% on a year-over-year basis and cumulative contract value increased by more than RMB 10 million in Q4 alone. And third, we have the sixth consecutive quarter of positive adjusted EBITDA. And more importantly, we achieved, for the first time in history, full year adjusted EBITDA profitable year. And fourth, we have a net operating cash inflow of RMB 19.5 million in quarter. And with these impressive numbers that we have delivered across all financial metrics, it was a great quarter that we had, and it has been a great year of growth in our core business. I believe we have delivered a set of financials that current shareholders and investors will be pleased. Now let's turn to the business outlook. Starting from this quarter, we will start to provide revenue guidance on a quarterly basis. Based on the current available information, the company sees the Q1 2025 revenue guidance to be in the range of RMB 74 million to RMB 77.5 million, representing a strong 15% to 20% year-over-year growth compared to the same quarter in 2024. The growth outlook is based on the current market condition and reflects the company's current and preliminary estimate of the market and operating conditions and customer demands, which are all subject to change. And lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended December 31, 2024, we repurchased 33,000 ADS. Cumulatively, we have repurchased a total of 279,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. We are happy to take the question now. Operator, please proceed.

[Operator Instructions] We will now take our first question from the line of [William Chen] from Spica Capital.

First, I want to congratulate to the management to deliver such a strong quarterly results. I think an incredible Q4 to close out a perfect 2024 is a perfect description for this quarter and the full year 2024 as a whole. So my question for the management is to achieve such a good result, what measures or actions were taken by the management?

Thanks, William. Let me take the call. Yes, you are right to point out that Chris has reiterated that in Q4, it was an incredible year -- incredible quarter for us that closed out the 2024 for a couple of reasons. Let me just recap. First, our revenue has grown strongly 20% year-over-year, and our core developer service has broke through the RMB 50 million mark revenue in 2 consecutive quarters. And of course, our overseas business continued its great momentum, and revenue increased by close to 200% year-over-year, and we signed more than RMB 10 million or close to RMB 10 million new contract value in a single quarter. And of course, we have been very diligent in our spending our money, so that's why the optimal level of OpEx. And lastly, we have 6 consecutive quarters of adjusted EBITDA, bringing the full year positive adjusted EBITDA for 2024. And probably you appreciate there are many pieces to the puzzle in order for us to have the great numbers. And one important thing that I'd like to bring out is the fact that this good result has been in the making. And we have been consistently delivering good results since Q3 of 2023 when we had our first of the 6 consecutive quarters of positive adjusted EBITDA. Therefore, I would say this is not a one-off event or by any luck. And this was purely due to hard work, dedication and commitment from our team. And also, we have also restructured the group in terms of our strategy and our execution plan by more than 2 years ago. And during the time, I think we have bit the bullet by doing a few things. One is we streamlined the product and services that we offer in the market. We made tough decisions to cut the low-margin business and cut the department and headcount, and we redirect our resources and effort to serving global customers in the global market and also make some resources allocation to our overseas expansion plan. So looking back, under Chris' leadership and the management made the right decision. With a more focused service offering and serving global customers, we found the next growth driver in the business. And not only the global customers are bringing more revenue, their contracts are providing a healthy cash flow into the group. And as we are still at the very beginning stage of overseas expansion, we truly believe the market is huge, and we are able to continue the growth trajectory in the many years to come. And back to the question you have, I guess the short answer is we have taken many steps and measures over the past 12 to 18 months in order to achieve these great results. Any single one of them will not have the same impact. So it was a collective effort as a whole. And we believe we are ready for the next phase of growth in the business. And all the market signals we have received are also very promising in terms of future growth. I hope this answers your question, William.

[Operator Instructions] We will now take our next question from the line of Jack Sun from Gelonghui Research.

I got a question for management. Congratulations to management on achieving another very good quarter. One particular trend that I would like to zoom in the future is the growth of developer subscription revenue. It has surpassed RMB 50 million revenue mark in 2 consecutive quarters. I'd like to hear the management's point of view on how we should look at the trend going forward.

Jack, thanks for the question. You're right, subscription business has been the star of the business unit where it crosses RMB 50 million mark in 2 consecutive quarters. And let me share with you why is that so, and there are a couple of reasons. One, our customers -- the developer service or the developer or the enterprise are in need of this service to help them to engage their users in an effective and cost-efficient manner. So this demand has not changed. And the next is we have a suite of products that cater to their needs. And besides the traditional AppPush we offer, we now offer WebPush, we offer e-mail, WhatsApp, OTP and other communication channel. And we are seeing more and more customers are switching from their incumbent service provider to us. So if you look deeper and the growth of this business came from both the growth in the customers numbers and ARPU. And this is very important, and this is exactly what we are looking for because we want to grow the customers number while also growing the ARPU. And this is a very healthy trend to sustain the long streak of growth in the future. So in a nutshell, we see the developer service revenue, no doubt, will be very important to us and the growth trajectory will help to drive the overall group business. And with a strong demand that I talked about and a huge addressable market, we are very hopeful of the good results in the future. I hope this answers your question, Jack.

[Operator Instructions] I'm showing no further questions. I'll now turn the conference back to Rene for closing comments.

Thank you, everyone, for joining our call tonight. If you have any further questions or comments, please don't hesitate to reach out to the IR team. This concludes the call. Have a good night. Thank you.

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