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spk05: Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile fourth quarter and fiscal year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, press star 0. please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Rene Vangestein. Thank you. Please go ahead, sir.
spk03: Thank you, Andrew. Hello, everyone, and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at ir.jiguang.cn. On the call today are Mr. Wei-Dong Luo, Chairman and Chief Executive Officer, Mr. Fei Chen, President, and Mr. Shannon Bong, Chief Financial Officer. Following the prepared remarks, all three will be available to answer your questions during the Q&A session that will follow. 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 Security Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions. which are difficult to predict and may cause the company's actual results, performance, or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and or factors are included in the company's filings with the US SEC. The company does not undertake any obligation to update any forward-looking statement as a result of new information future events or otherwise, except as required under applicable law. With that, I'd now like to turn the conference over to Mr. Luo. Please go ahead.
spk02: Thanks, operator. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's fourth quarter and full year 2021 earnings call. Before I comment on our Q4 and FOIA results, I would like to remind everyone that the quarterly earnings debt is available on our website for your reference. You may refer to the debt as we proceed with the call today. Despite a very challenging operating environment in 2021, we have achieved remarkable progress in our business operations and financial performance. The conclusion of the first quarter marked the first full year of our successful transition into our SaaS business model, which includes developer services and vertical applications. I am more than delighted to share with you the achievements we have made with various record-high key business results. For an effort-to-effort comparison, Numbers presents its core contribution from the legacy target marketing business in the pre-year. We entered the fourth quarter with a lot of momentum. Our key business metrics are showing exceptionally great results, which further proves that our strategy's decision to fully transition into the SaaS business is a great victory. Revenue was RMB 101.2 million over 32 years of the year. This marked the highest SaaS revenue record for the company, surpassing RMB 100 million for the first time, a key milestone for us. Gross profit was RMB 72.1 million, the highest gross profit since Q1 of 2020, up by 23% year-over-year. Group gross margin was 71.2%, which is more than 1.2 times compared with 56.7% a year ago. Adjusted EBITDA was RMB 1.84 million, the first-ever adjusted EBITDA profitable profitable quarter since our transition to the pure stock basis since Q1 of 2021, and adjusted EBITDA significantly improved by RMB 19 million year-over-year, from negative RMB 17.1 million in Q4 2020. Net loss was RMB 35.6 million, significantly narrowed down by 60% for a year ago. The number of paying customers increased to 2,768 from 2,367 a year ago, up 17% year-over-year. Total deferred revenue was about $1,100 million for seven consecutive quarters, indicating strength in our SaaS business growth where we collected payments from customers at the inception of each contract period. AR days remained consistent at around 38 days, indicating our disciplined customer credit checks and credit granting policy when pursuing revenue growth. Last but not least, our 2031 three-year revenue was RMB357.3 million, representing a year-over-year of growth of 39%, achieving the top end of revenue guidance range. Turning it into profitability is a strong acknowledgement of our success in growing the top-line revenues, as well as our disciplined approach to driver optional efficiency throughout the year. We are committed to continue to control and optimize operating expenses across all business functions going forward, and we expect to further drive operating efficiency in 2022. We are confident that with all these efforts in place, we are on the right path to achieve free profitability on adjusted EBITDA for 2022. Let me now give you some updates on our product iterations and technology innovations, which we believe are key to driving our long-term competitiveness and meet the ever-evolving needs of our customers. At UMS, we imported two meaningful product features. Our first feature update was focused on encrypting and enhancing the protection of data information. With this new feature, our customers' internal information can be centrally accessed, and at the same time, sensitive data are separated into various project data banks to mitigate risk of information leaks and ensure compliance and information security of users and developers. The second update is where we have increased the amplitude of one of the UMS channels, the SMS channel, with the ability to manage both upstream and downstream SMS messages. With these new functionalities, customers can manage not only the messages they send to the end user, but they also can receive, save, and manage the messages that are sent back from end users. We are continuing to see customer reception steadily increasing for our UMS product. Well-known customers who have signed up during the quarter include but are not limited to China International Capital Corporation, China Merchants Fund, and Wudu Security. We also want to share with you the latest development regarding our partnership with Huawei Cloud since November 2021. When we officially launched our Java verification and other customized surveys on Huawei Cloud recently, we have also launched our iApp product and will soon add the J-Push Private Cloud to the list. By the end of 2022, we aim to complete the integration of our full product lineup to Huawei Cloud, including BaaS, UMS, M-Link and so on. Our cooperation with Huawei Cloud demonstrates the industry-wide account and trust we command for our comprehensive and competitive product portfolio and services. Similarly to the partnership with Huawei, we have entered into a partnership agreement with TeamCloud Technology Corp to launch our verification service, J-Verification, on the TeamCloud marketplace. a one-stop trading platform that provides cloud-based apps and other service offerings. Securely integrated into the Cloud hybrid ecosystem, JV will provide a quick user registration and logging, two-step security verification, and other multi-factor authentication. G1 will continue to promote in-depth cooperation with the Cloud. and leverage our technology advantage to expand our product offering to empower developers and enterprises to conduct high-quality operations. Sustainable development and effective monetization on the SYNCLOUD platform. Earlier this week, we entered into a definitive agreement to acquire a majority equity interest in SYNCLOUD. China's leading email API platform for consumer marketing and user-centric transactional email services. We are a pioneer in the field of customer engagement, and SendCloud has a leading position in email sending services. Customers today are more and more dependent on flexible omni-channel strategies as the need for user engagement intensifies. With the addition of SendCloud's email sending services, we will be able to quickly enrich our omni-channel customer engagement product offering, which currently includes mobile app push notifications, SMS, WeChat official accounts, WeChat mini programs, Alipay mini programs, ThinkTalk, and enterprise WeChat. With DAO4 can provide customers with industry-leading technology to simplify their omni-channel communications without having to manage different vendors for each channel. Together, we will have the joint advantage to provide a reliable and effective customer engagement platform for different industrial verticals. Our paying customer base is also expected to almost double upon completion of this transaction, as ZenCloud has more than 2,000 paying customers during the fourth quarter of 2021. Both parties can benefit from this acquisition through more close selling opportunities to the combined customer base and help fill our future revenue growth. I'm truly looking forward to the one plus one greater than two synergy between the two companies and believe we can achieve more together. Now I will turn the call over to Fei who will discuss the Q4 performance in greater details.
spk01: Thanks, Chris. Let me start the discussion by elaborating on the different revenue streams within the SaaS businesses. In fourth quarter of 2021, our developer services continue to deliver solid results with a 42% year-over-year growth, which was mainly fueled by a substantial 73% year-over-year growth in value-added services and a 27% strong growth in our subscription services. Subscription services revenues will remain be 44.4 million an increase of 27% year-over-year, primarily driven by new customer acquisition and a strong growth in the private cloud services. Our strategy of cross-selling various non-push subscription products has also been contributing to this significant growth. As a result, our revenue contribution of non-push notification products increased to 49% from 38% a year ago. Non-Push Notification products, which include Private Cloud, SMS, and J-Verification, also achieved a higher R pool of RMB 43,000, resulting in the overall R pool for subscription services increasing by 8% to RMB 18.2 thousand, compared with RMB 16.8 thousand a year ago. New and renewed contracts of notable customers in the quarter include China Telecom, Tesla, China Eastern Airlines, and so on. Value-added services within developer services, which include revenues from JG Alliance services and advertisement SaaS, continue to deliver impressive results by achieving a 73% year-over-year growth to RMB from RMB 17.4 million in fourth quarter 2020. Since we first started our value-added services in fourth quarter 2019, the revenue has exponentially grown by 8.2 times and reached a new historical high this quarter. On the supply side of the JG Alliance, During the quarter, we continue to grow the traffic pool as it is a vital part of our strategy to increase opportunities for monetization channels. The total number of apps within our network exceeded 470 apps compared to 394 in third quarter 2021, representing a 21% growth quarter over quarter. And the total number of DAU within the network has also steadily increased to around 190 million for this quarter. On the demand side, many program developers and the retargeting related demand continue to dominate by contributing over 80% of our JG Alliance revenues in fourth quarter 2021. In terms of industrial verticals, we have had an increasingly strong demand from finance, e-commerce, and internet services. During the quarter, ad agencies contributed more than 40% of JG Alliance revenue stream. while the rest came from direct customers. Major customers of JG Alliance consisted of repeat customers and the market leaders across many industry verticals. They include but not limited to Taobao, Jindong, Tencent Music, Alipay, UC Browser. Now let's move on to vertical applications that mainly cover financial risk management and market intelligence. These revenues grew steadily by 11% year-over-year with the highest growth contribution coming from the financial risk management business again. In the financial risk management segment, revenues increased by 18% year-over-year with a solid 43% growth in ARPU. The second, the record high quarterly revenue has been the most meaningful achievement since first quarter 2020. showing that the adverse impact of the pandemic on the financial risk management business segment is substantially behind us. We anticipate a favorable macro environment to support the business and will continue to grow in 2022. During the quarter, we acquired new key account customers and continue to retain many existing customers. Some of our new and renewed customers include MaShang Consumer Finance, China Telecom Best Buy, Best Pay Company Limited, and WeBank. Our marketing intelligence product line has made big progress by signing a number of new and well-known key accounts or K-corporate customers during fourth quarter 2021, including Baidu, Amazon, Zhihu, etc. Our new product, iBrand, launched a couple of quarters ago, has been extensively used by investors and brands, to traffic index for offline retail shops, and has gained traction during the quarter by signing a number of notable investment customers. We expected this product to be our new growth driver from the product perspective. Going forward, we will continue to grow the IF business by having a wider coverage of KA corporate customers, as well as cross-selling iBrand products. With that, I will now pass the call over to Shannon.
spk00: Thanks, Fei. I'll go over some of the key expenses and balance sheet items. Let's talk about operating expenses. As a result of our continuous effort to efficiently manage operating expenses, in Q4 2021, our OPEX decreased by 13% year-over-year to RM92.5 million. In particular, R&D expenses increased by RM11 million to RM45 million, mainly due to a 4.5 million increase in cloud cost to support the expansion of the SaaS businesses. Selling and marketing expenses increased by 48% to RMB 33.2 million, mainly due to the increase in sales commission and the expansion of our sales organization. R&D G&A expenses decreased by 67% to RMB 14.4 million, mainly due to a year-over-year reduction of $11 million in bad debt provision due to our proactive and strict financial control measures, reduction of $11 million in long-lived assets impairment due to one-time cost for growing cloud project in the same quarter last year, and a $5.9 million decrease in staff-related compensation. Also during the quarter, we streamlined our workforce in an effort to further improve our overall operating efficiency, and to ensure OPEX maintained at a healthy level. We will continue to optimize our organizational structure and fine-tune our OPEX level while sustainably grow our revenue. Adjusted EBITDA, calculated as EBITDA excluding share-based compensation, reduction in forced charges, impairment of long-lived assets, impairment of long-term investment, and change in fair value of foreign currency swap contracts. has had a significant breakthrough and delivered the first positive quarter since 2020. At RMB 1.8 million, we significantly improved by 19 million year-over-year from negative 17.1 million in Q4 2020. For the fourth quarter of 2021, we have delivered a set of excellent financial results, which includes the following highlights. First, revenue of our SaaS business increased significantly by 32%. Our gross margin improved from 56.7% to 71.2%, a direct result of our Q4 2021 gross margin being 100% contributed by high-margin SaaS business. OPEX decreased by 13% due to effective and stringent cost control measures. As a result, our adjusted EBITDA turned around and reached positive RM1.84 million, which marks the first adjusted EBITDA profitable quarter since the beginning of 2020 when we commenced the transition into the SaaS business model. This demonstrates that with the right cost structure, profitability is highly achievable as we move and continue to scale our SaaS businesses. Onto the balance sheet. I'll start with two very key KPIs that we closely monitor. Firstly, the AR turnover days remain stable at 38 days this quarter compared to 37 days a year ago. Our disciplined accounting policy and cost and cash collecting efforts ensure a timely collection of our accounts receivable. We are very pleased with the AR turnover days remain fairly consistent quarter over quarter. Secondly, the total deferred revenue balance, which represents cash collected in advance from customers, has exceeded $100 million at quarter end for the seven consecutive quarters. As of December 31, 2021, the balance was at $124 million, up from $119 million in Q3 2021. Next, total assets were at $595 million as of December 31, 2021. This includes cash and cash equivalent of $284 million, accounts receivable of $43 million, prepayments of $12 million, fixed assets of $62 million, long-term investment of $142 million. Total current liabilities were at $373 million as of December 31, 2021. This includes short-term loan of $150 million, accounts payable of $18 million, deferred revenue of $120 million, accrued liabilities of $85 million. Business outlook. Based on the current available information, the company sees the full-year 2022 revenue guidance to be in the range of RMB $435 million to RMB $455 million, representing a growth of 22% to 27% year-over-year compared to The above outlook is based on the current market conditions and reflects the company's current and preliminary estimates 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, 2021, we did not repurchase any shares. As of December 31st, 2021, cumulatively, we have repurchased a total of 921,000 ADS since the start of our program. And this concludes management prepared remarks. We are happy to take your question now. Operator, please proceed.
spk05: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. If your question has been answered or you wish to remove yourself from the queue, you may press the pound key. Once again, to ask a question, please press star one. And I'm sure we have a question from the line of Brian Kisslinger with Alliance Global.
spk07: Hi, guys. Good morning or good evening, sorry. Nice results. Can you talk about the announcement for verification services with Huawei Cloud. What are the dynamics to generate revenue from this, and can you help us understand when it will begin generating revenue and maybe some targets for this business that we should evaluate?
spk01: Hey, Brian. Hi, this is Fei. So actually, this collaboration with Huawei with Huawei started actually last quarter, right? So actually in last quarter, in the call, we've already mentioned that actually it already started to generate revenues. Although the revenue is not big, okay? It's in the tens of thousands, right? But it does have a contribution to our developer service revenue. And going forward, not only this J-Verification product, this is just the first product. We are actually in the process of adding the whole suite of our product portfolios into Huawei Cloud, like UMS, IF, you name it. So hopefully by the end of this year, we will be able to upload and get certified by Huawei for all of our product offerings. And this year, we think our goal is not to have an ambitious goal, but to have the relationship started and generate a certain amount of revenue. It's not going to be big. It should be a few million RMB.
spk07: Great. Okay. In the last quarter, you spoke about JG Alliance installations starting to improve, but they were dealing with the personal information protection laws. Can you update? Is this no longer a challenge? Is it still a challenge to talk about how the rate of installations you're seeing versus a quarter ago?
spk01: Actually, the regulation hurdle is largely behind us in the fourth quarter. Everything comes back to normal. And as we talk about disclosing in the prepared remarks, we have over 20% of growth in number of apps joining this app pool. So we do see things come back to normal. And we do expect the trend to continue in the following quarter. And as you can see, actually, the revenue also also exhibits this trend, right? The revenue had a big sequential double-digit growth, which, you know, totally is a reflection of, you know, more apps coming to join our JJ Alliance network, as well as, you know, in last quarter, we also mentioned, actually, the ad load is also another factor, right? So in the quarter, we also increased the ad load So both effects actually contributed to the growth, the sequential growth of the revenue for JG Alliance.
spk07: And I'm sure I'm wrong, but SendCloud sounds like a targeted marketing platform, but a lot more. So talk about how SendCloud is different than your targeted marketing business that you exited and the strategic fit for your company, how it's different.
spk02: Senkou is not a target marketing company. Senkou is an email API platform, which is very similar to SendGrid, which was acquired by Twilio three years ago. So his company mostly, his customers mostly like a bank or hotel or even the 2B company like G1 is also their customers. Basically, we are using their API to send email notifications to our customers, like developers. And the bank uses their API to send email notifications to their credit card customers. So it's not a market marketing company. It's a SaaS company, actually.
spk07: Can you give us? A little bit about the financial profile of the company, maybe what are trailing 12-month revenues, what's the growth rate and margin profile?
spk02: The margin profile is very similar to our margins. It's over, I think it was over 70%.
spk01: Yeah, it's over 70%. And also, it's a profitable company, so actually, which is a good thing, right? You know, they already generate profit, and the annual revenue for that company is around We expect in 2022, because the deal is going to be closed before the end of March, we will add three-quarters of the revenue to our financials. We expect to generate around $20 million revenue from this company after the acquisition.
spk07: And what about the purchase price? Is it cash? Is it stock? You know, how did you value this company?
spk00: Yeah, Brian, at this stage, we are not... I have the liberty to disclose more. I think when the document is done and dotted and signed, so we'll make some press release on that regard.
spk07: Okay. A couple of numbers questions. Yeah, if I look at the gross margin... while it's above your guidance, it's a bit below each of the last three quarters. So talk about, is it a mix? Is it some other trend in pricing? Just talk about, you know, how fourth quarter compared to the last, you know, the first nine months of 2021 and what were the factors?
spk01: Hey, Brian, I think it's both. You know, I think that the mix probably play a bigger role. As you know, the, you know, the JJ Alliance actually, carries a smaller, lower margin than the rest of the developer subscription business, right? So developer subscription business, the gross margin is like, you know, over 75%. But this JG Alliance, you know, usually it's like around 60%, you know, percent. So as we continue to grow, the JG Alliance business line. When JG Alliance contributes a bigger portion of the total revenue, you should expect to see the overall growth margin to dip a little bit. I think over 70% total growth margin going forward is not realistic due to the reasons I just mentioned. So for this year, I'm sure you want to know what the growth margin target should be. I think anywhere between 65 to 70 is the growth margin we are trying to maintain. And another reason is because when we get more traffic into our network, So the deals are conducted case by case basis, right? So for some app developers, they might command a higher revenue share. So in that instance, we will have a lower gross margin compared to other traffic contributors, right? So again, JG Alliance, the gross margin, it's not static. It's very dynamic. But overall, I think from what we are seeing, I think 60% is a reasonable number.
spk07: Great. Last question, just a housekeeping item. Just to understand your EBITDA, where do I find on the income statement severance charges and the impairment of long-lived assets? What line items are those under? Included.
spk00: Brian, the severance will be under OPEX operating expenses and depends on the associated employees, whether it be R&D, sales and marketing, or G&A. So that's a severance. And in terms of impairment, it will be under other losses after loss from operation.
spk07: Yeah, that's what I thought. Okay. Just wanted to be clear. Thank you so much.
spk00: Thank you.
spk05: Thank you. And as a reminder, if you have a question, please press star one on your telephone. Our next question comes from the line of Ryan Roberts with Navis Capital.
spk06: Good evening, management. Thanks for taking the question. Mine is pretty simple. So looking at the results, I think maybe better than the market expected, and that's fantastic. I want to ask about kind of the current run rate because, you know, with the RAF and kind of the other kind of cost cutting that happened during Q4, I want to ask about what's the kind of current quarterly run rate, kind of a VOPX, because it seems like there's been some cost cutting, and I don't know if that was in the early part of the quarter or last part of the quarter, but, Looking forward, it seems like there's kind of some less cost in the stack here. I want to get a sense of what that is.
spk01: Hey, Ryan. So this is Fei. So you want to know what the cost structure looks like going forward, right?
spk06: That's correct. I reckon in December, it maybe looks very different than October.
spk01: Yeah, so... Actually, if you recall, in last call, I specifically mentioned that the company was conducting a number of cost-cutting initiatives, trying to optimize our business operation, not only from the labor perspective, but also from the IT resource perspective. As you can see, actually, in the quarter, we have made very meaningful progress. And we also finished the budgeting process for the coming year, and we identified the areas which we can eliminate the redundancies and the inefficiencies. So, net-net, after all these assessments, we believe for the OPEX for 2022, you will not see any growth. Instead, you should see some declines compared to last year. So currently, we are estimating anywhere between 10% to 15% reduction of OPEX for 2022. So the goal actually for 2022 is with the current revenue guidance, we also with this cost structure maintain disciplined approach to achieve this cost structure. And we are very confident that we will be able to achieve the full year adjusted EBITDA profitable for the whole year. And so we've done sensitivity analysis and even considered some, you know, very, you know, worst case scenario. I think we are able to achieve that.
spk06: Faye, thanks for that kind of, I appreciate that clarity. I'm curious, like, again, just given the history and kind of the cash burns, Can you give us a sense of what some of those assumptions are behind that claim of getting to non-GAAP EBITDA profitability? What are some of your major assumptions there?
spk01: What are some major assumptions to get to EBITDA profitability? Yeah, so basically to get to EBITDA positive, right, Basically, like I said, the cost control, cost measure, we've done thorough analysis on the cost control, cost measure. The biggest cost element actually are two parts. One is labor, and the second is IT resource. IT resource, we already identified a number of areas that we can continue to eliminate the unnecessary IT spending. This work has been done, has been committed. by the head of IT department, okay? So we should be able to, you know, for the IT spending, we should be able to save anywhere between 10 to 15 percent compared to last year. And also in terms of, you know, the labor cost, right? So throughout the fourth quarter, Last year, we already have done the organizational restructuring, and we eliminated the low performance employees, which made our total number of employees, it's around a 15% reduction. which will set a new base for the labor cost. And also, in terms of the variable cost, so this is a fixed cost for the labor, and also there's a variable cost. Variable cost of the labor part, that's purely decided, basically determined by the performance. So basically, if we can achieve or internally set financial targets, they will get, for example, two months of salary as a bonus at the year end. But if they cannot, if we are not able to deliver, satisfy, meet our financial targets 100%, then that's kind of like a tiered structure to significantly reduce the bonus part of the variable cost. So by designing this structure, you know, we are trying to incentivize everybody is, you know, aligned with the company's goal to, you know, to achieve 100% of our financial targets.
spk06: Got it. Thanks. Maybe just kind of drilling down a bit. In that analysis, just kind of a scenario, kind of computation that you do, What are you expecting revenue-wise in terms of an overall envelope of high and low? What do you guys expect?
spk01: The revenue?
spk06: Yeah, because clearly to reach EBITDA positive, you've got to have some assumptions about your revenue high, revenue low, what you can do. I'm just curious.
spk01: Yeah, yeah, yeah. Okay, okay. So assuming very little revenue growth, okay, you could assume less than 10% of revenue growth under the current cost structure, and we will be able to achieve just a bit of positive.
spk06: Thank you very much.
spk05: Thank you. And once again, if you have a question, please press star 1. And I'm showing no further questions. So with that, I'll hand the call back over to Rene for any closing remarks.
spk03: Thank you, Andrew. Thank you, everyone, for joining our call tonight. If you have any further questions and comments, please don't hesitate to reach out to the IR team. This concludes the call. Have a good night. Thank you very much.
spk05: Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.
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