Aurora Mobile Limited

Standing by and welcome to Aurora Mobile fourth quarter and fiscal year 2024 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, René Wegenstein. 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.cm. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer, Mr. Shanlen Bong, Chief Financial Officer, and Mr. Guan Yang 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, is amended and is defined in the US Private Securities Litigation Reform Act of 1995. The 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, Renee. Greetings to all. Welcome to AromaBoards' 2024 Fourth Quarter Earnings Call. Before I comment on our Q4 results, I would like to remind everyone that the quarterly earnings set is available on our IR website. You may refer to that 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 cure for to close out a perfect 2024 for the following reasons. Firstly, we record a full year adjusted EBITDA perspective for 2024 calendar year. This is our very first full year profitability since the inception of our mobile 14 years ago. In this quarter, We recorded the sixth consecutive quarterly positive adjust EBITDA. Secondly, the group's revenue this quarter of remaining $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 engaged lab continued its great growth momentum, recorded a whopping 20% revenue growth on 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 good revenue has grown 20% year-over-year, fueled by the very strong numbers from developer services. Within the good revenue, all revenues, namely developer subscription services, value-added services, and financial risk management, all record their 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-of-quarter. Subscription revenue has been recorded in great numbers where it increased by 12% year-over-year and 6% quarter-of-quarter. Value-added services revenue grew by 142% year-over-year and 180% quarter-of-quarter. Our core businesses, subscription services revenue of revenue be 54.7 million, recorded growth of 12% year-over-year and 6% quarter-of-quarter. The year-over-year and quarter-for-quarter revenue growth was mainly driven by increase in both output 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 maybe 54.7 million. For subscription services, we have record yield 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. Exemplary three of product and services, we are getting 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 am convinced our engagement 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 numbers. Secondly, customer momentum has been impressive from day one. We converted more overseas customers in this quarter. The contracted customer number has reached 678 representing an impressive 32% secretion growth. Further, the cumulative Sun contract value of EngageLab has, in two consecutive quarters, grown by close to remaining 10 million quarter of quarter. As of December 31, 2024, the total Sun contract value was remaining 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 renewable customers in this quarter include, but not limited to, China Telecom, Ping An, and China Merchant Security, just to name a few. Value-added services revenue will remain be 16.3 million, increased by 180% or quarter-of-quarter and increased by 142% year-over-year. The sequential revenue spike was mainly due to the double 11 and double 12 online shopping fixed over 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 year of 2024. Next, let me share with you my thoughts on how the recent advancement in AI will shape the landscape. The development of AI technology and overseas expansion has been AeroMobile's core strategy over the past two years. 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 the 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 email editing, push notification copywriting, and data analytics. This AI-driven enhancement enables our customers to drive business innovations and improve operational efficiency. Over the past two years, we have continuously invested in the development of GPT-PoS.AI, an enterprise-level AI agent platform. By seamless 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 GPT-PoS.AI. The new era of industry revolution is just beginning. The enterprise application of AI is still in its earliest stage. and we remain committed to increasing our investment in enterprise AI. We believe that our master 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 Shannon, who will share more about the virtual 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, Weizhong Bank, Fenqi Le, 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. Onto operating expenses. The Q4 OPEX was at 16.3 million RMB, 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 that 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 travelling expenses, in line with 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 three very important KPIs that we closely monitor. For net dollar retention rate, the commonly used KPI for SaaS company is stood at 95% for core developer subscription business for the trailing 12 months period ended December 31st, 2024. And it was a good growth compared to 92% for the period ended September 30th, 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 RM147.1 million. And this is the 12th consecutive quarter where our deferred revenue balance has exceeded RM130 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 RMB19.5 million, which was the highest level in the past 17 quarters. On to the balance sheet. Total assets were at RMB378 million as of December 31, 2024, and this includes cash and cash equivalent of RMB119.5 million, accounts receivable of RMB50.8 million. prepayments and other current assets of $14.3 million, operating list right of use assets of $17.1 million, fixed assets of $4.6 million, long-term assets of $113.5 million, goodwill of $37.8 million, intangible assets of $13.8 million resulting from the SEND Cloud acquisition in March 2022. The total current liabilities were at $261.6 million, This includes short-term loan of $3 million, accounts receivable of $32.7 million, current operating liabilities of $4.5 million, deferred revenue of $147.1 million, accrued liabilities of $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 companies in the SaaS space. Our core developer subscription services had a 54.7 million revenue, another first in history. Second, our Engage Lab product continued its great momentum. Revenue grew by close to 200% on a year-over-year basis, And cumulative contract value increased by more than $10 million in Q4 alone. And third, we have a six 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 $19.5 million 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 74,000, million to 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.

Thank you. We will now begin the question and answer session. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. We will now take our first question from the line of William Chen from Speaker Capital. Please ask your question, William.

Hello. Hello, management. Thank you for taking my question. First, I want to congratulate to the management to deliver such a strong quarterly results. I think an incredible Q4 to close out perfect 2024 is a perfect description for this quarter and for 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? Thank you.

Thanks, William. Let me take the call. Yes, you are right to point out that Chris has We reiterate 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 $50 million mark revenue in two consecutive quarters. And, of course, our overseas business continue is great momentum, and revenue increased by close to 200% year over year, and we signed more than 10 million or close to 10 million new contract value in a single quarter. And of course, we have been very diligent in spending our money, so that's why the optimal level of OPEX. And lastly, we have six 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 would 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 six consecutive quarters of positive adjusted EBITDA. Therefore, I would say this is not a one-off event or fluke or by any luck. And it 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 two years ago. And during the time, I think we have beat the bullet by doing a few things. One is we streamline the product and services that we offer in the market. We make tough decision to cut the low margin business and cut the department and the headcount. And we redirect our resources and effort to serving global customers in a 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 measure 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 growth in our business. And all the market signal we have received are also very promising in terms of future growth. I hope this answers your question, William.

Thank you. Thank you for your answer.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. We will now take our next question from the line of Jack Sun from Galonghui Research. Please ask your question, Jack.

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

Hi Jack, thanks for the question. You're right. Subscription business has been the star of the business unit where it crosses 50 million mark in two consecutive quarters. Let me share with you why that's so. 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. This demand has not changed. And the next is we have a suite of products that cater to their needs. And besides the traditional app push, we now offer web push, we offer email, WhatsApp, OTP, and other communication channels. 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 our pool. And this is very important, and this is exactly what we are looking for. Because we want to grow the customer's number while also growing the R pool. 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 talk about and a huge addressable market, we are very hopeful of the good results in the future. I hope this answers your question, Jack.

Yeah, that's very great. Thanks a lot.

Thank you. Once again, to ask a question, please press star 11 on your telephone keypad.

Once again, it's star 11 for questions.

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.