Aurora Mobile Limited

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile Third Quarter 2022 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Rene Brangustan. Thank you. Please go ahead.

Thank you, Desmond. 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 irgguang.cn. On the call today are Mr. Wei-Dong Luo, Chairman and Chief Executive Officer, Mr. Shan-Len Bong, Chief Financial Officer, and Mr. Guan Yan Chen, General Manager. Following their prepared remarks, they 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 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 findings 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, except as required under applicable law. With that, I will now turn the conference over to Mr. Luo. Please go ahead.

Hi, Rene. Good morning and good evening, everyone. Welcome to Aurora Mobile's 2022 First Quarter Earnings Call. Because I comment on our Q3 results, I would like to remind everyone that quarterly earnings debt is available on our IR website. You may refer to the debt as we proceed with the call today. While we continue to navigate through macroeconomic opportunities, Q3 was a solid quarter for performance and financial measurements in most of our business lines. We are also actively expanding our footprint into overseas markets and prioritizing opportunities for future growth. I will expand into more details in the later section of my remarks. We continue our cost control initiatives in the third quarter and are very pleased with our progress. Here is a snapshot of some of the great key results that we want to share with you. Lowest operating expenses for the past 16 quarters since Q4 of 2018 at RMB 80 million, down 23% year-over-year. Lowest net loss since Q3 of 2019 at RMB 20.7 million, narrowed down by 43% year-over-year. Adjusted EBITDA at negative RMB 6.7 million, significantly improved by 58% year-over-year. Deferred revenue balance is the highest in the history of the company at RMB 139.1 million. Total customer numbers up 71% year-over-year to 4,665. AR turnover days significantly improved by 8 days from 46 days in Q2 2022 to 48 days despite the tough business environment. I'm sure everyone on the call has heard and read about the massive layoffs announced by one of the world's largest social media tech companies recently. Looking back, our decision to start restructuring and cost-cutting in the second half of 2021 could not have been wiser. Yet we've been slow and only make such a decision now, we would be in a much worse financial situation. Back to these key financial highlights in these and past few quarters, I am very proud that our team has stayed together and executed brilliantly to help the company become leaner and more efficient. I am confident that we will come out of these difficult times earning stronger. This quarter We record another quarter with a historically low operating expenses level of RMB 80 million, down 23% year-over-year. Our net loss is also the lowest since Q3 of 2019 at RMB 20.7 million, narrowed down by 42% year-over-year. One of our main goals going into Q4 and financial year 2023 is to ensure we continue to operate efficiently where we organically grow our revenue faster than expenses. Another encouraging sign is from the revenue perspective. As we saw sequential revenue growth in most of our business lines this quarter, well, we are anticipating more recovery in growth. It is still too early to call this a definite trend. However, the sequential growth in our business lines is a major positive sign for us. As the global and domestic economies are currently going through some major transitions and downtrends, we look at sequential revenue growth as more indicative of the health of our business and possible directional changes. With that said, we want to see the sequential trends continue for several more quarters before we are comfortable saying the business is back to normal. Now, let me go through the different revenue streams within the group. Developer services revenue increased by 3% quarter-of-quarter to $57 million, which was mainly due to the increase in subscription services. Year-over-year developer services decreased by 12%, mainly due to the weakness in value-added services, offset by the growth in subscription services. Subscription services revenues were only $41.7 million, up 9% quarter-over-quarter and up 5% year-over-year. Subscription services are core business line, include J-PUSH, Analytics, UMS, and others, are products and services that help app developers and enterprises to improve their operational efficiency. The increase in ARPU contributed to the growth in revenue, and we managed to grow our customer base, signing up several well-known and sizable customers, including Lili's Games, Starbucks, Mihoyo, and Kenyi Games, just to name a few. Value-added services revenue decreased quarter-over-quarter by 9% and year-over-year by 39%, to remain be 15.3 million. As we saw market demand further pressures and advertisers continuing to cut back budgets, this trend is quite visible and similar to those reported by larger advertisement platforms. Direct customers contributed more than 75% of J.J. Alliance revenue stream while the rest came from third-party agents. Major customers of JG Alliance consisted of repeated customers and market leaders across many industry verticals. Key customers include Baidu, Alibaba, Tencent, Tencent Chart, and Sohu. Although we believe that these fractures are temporary and the advertising market is expected to bounce back, we are taking actions and continue to prioritize our resources on projects that will drive the most growth. With the launch of our AD mediation platform in Q2, over 3 million DAUs and over 40 apps have joined the platform, and we are anticipating more DAUs to join our platform in Q4. Services enabling traffic monetization through our ADs have become an important driver during the development of the mobile internet ecosystem. As the major mobile app mediation platforms have spread overseas in established markets such as AppLavi, IronSource, and MoPAP, we are also striving to help the developers to rapidly grow and improve monetization efficiency. While we put some emphasis on coping with the near-term uncertainties, we consistently stay focused on our long-term strategy of expanding our business overseas since we believe that going overseas is becoming a substantial growth strategy for Chinese companies. After several months of our team's effort, in mid-October, we launched our overseas messaging service platform, Engagelab, allowing developers to reach global users efficiently and effectively. This is a major milestone for us, since we can now help both the Chinese companies and overseas-based companies to carry out refine and accurate user reach and engagement at low cost with higher message delivery rates and conversion rates. I invite you to visit our website at www.engagelab.com to see for yourselves. At present, EngageLab provides five major services, including app push, web push, email services, SMS service, and WhatsApp Business API. and is exploring additional messaging channels in overseas markets. Based on the current volume and nature of inquiry from both Chinese companies going overseas and overseas-based companies, we are very pleased with our progress. We believe we have a set of tools and services that meet the market demand, and we are in the best possible position to tap into the growth in this segment of the market going forward. We will provide regular updates on this basis in the future quarters when the numbers are material. With that, I will now pass the call to Changlin, who will share more information about the vertical applications and other aspects of our performance.