Aurora Mobile Limited

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile First Quarter 2025 Earnings Conference Call. At this time, all participants are in a 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 1, 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, René Van Gestein. Thank you. Please go ahead, sir.

Thank you, Heidi. 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. Wei-Dong Luo, Chairman and Chief Executive Officer, Mr. Shan-Len Bong, Chief Financial Officer, and Mr. Guan Yan Chen, General Manager. Following the 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 and Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Mitigation 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, René. Greetings to all. Welcome to Arona Mobile's 2025 First Quarter Earnings Call. Before I comment on our Q1 results, I would like to remind everyone that the quarterly earnings debt is available on our IR website. You may refer to the debt as we proceed with the call today. As we did in the past, based on the Q1 numbers, I have a suitable description for the first quarter results, which is a quarter of accessory growth driven by globalization for the following reasons. Firstly, our engagement basis had a master quarter where we closed out more than $63 million worth of contract value in just one quarter. unprecedented in our history. This brings the total cumulative engagement of contract value in excess of revenue 110 million by March 31st, 2035. Secondly, the group's revenue this quarter of revenue 89 million, achieving a remarkable 48% growth year-over-year. This remaining $89 million was the highest Q1 quarterly revenue we had since transition to pure SaaS. Engaged Labs recognized revenue also grew by 127% year-over-year. This Q1 revenue number here is what we have previously guided in Q4 of 2024. Further, our financial risk management business had its best quarter in its history. recording highest quarter revenue of revenue 22.2 million. Revenue grew by 64% year-over-year. Firstly, gross profit grew strongly by 27% year-over-year, while achieving the highest gross profit for the past nine quarters. Gross margin has also improved 530 basis point quarter-of-quarter. First, we record another adjusted EBITDA profit in this quarter. This marks the seventh consecutive quarterly perceived adjusted EBITDA we have had. Overall, it was a great quarter where all the business lines have outperformed the targets we have set for them. This has no doubt set a great momentum for the rest of 2025. The progress in our performance and our solid financial position enable us to invest more resources into the development of our enterprise AI agent platform and its global expansion. Now, let me share more on the individual business performance. Our total Q1 good revenue has grown 38% year-over-year driven by the great numbers from developer services within the group revenue or business segments. Many developer subscription services, value-add services, and financial risk management all outperform and record significant year-over-year revenue growth. Developer services revenues, which consist of subscription services and value-add services, increased by a strong 39% year-over-year and decreased 12% quarter-of-quarter. Subscription revenue has been record in great number where it increased by 26% year-over-year and decreased 2% quarter-of-quarter. Better Agile Services revenue grew by an incredible 269% year-over-year and decreased 46% quarter-of-quarter. Our core business, Subscription Services revenue of revenue be 53.5 million, record growth of 26% year-over-year and decreased 2% quarter-of-quarter. The year-over-year revenue growth was mainly driven by a 22% increase in ARPU, carrying on the great momentum we get in Q4 of 2024. Our subscription revenue record for consecutive quarter of revenue be 15 million plus revenue. For subscription services, we get record year-over-year revenue growth in both the domestic and overseas markets. In particular, our engagement revenue grew by 127% year-over-year. This remarkable number was a result of the hard work by the team to convert many notable wins in the overseas markets. Both the customer numbers and output have solid growth year-over-year. With the great products and services we have, I believe we can scale this business globally to get more customers and new wins in many quarters to come. Next, I shall elaborate more on our engagement business this quarter. This business always gets me very pumped up when sharing with you. Firstly, the total contract value we have signed has broken maybe 110 million milestone in Q1 of 2025. Just to recap, the total contract value was only maybe 10 million at Q3 of 2023, six quarters later. This amount has grown 10 times. This is a remarkable achievement by the team. Secondly, customer acquisition continues to be the driving force of the success of this species. The customer number has increased by 25%, reaching 848. The revenue recognized for the Engagelab again record great growth of 127% year-over-year. Firstly, our Engagelab products and services are now sold to customers in more than 40 different countries and regions globally. I'm truly pleased with the team's execution effort, results, and the momentum of Engagelab. I believe that it's the engine of growth for us in the next 24 months. Within subscription revenue, some of the notable new and renewable customers in this quarter include, but not limited to, DeepSeq, BYD, SF Express, Moonshot AI, and Hangzhou Bank, just to name a few. Value added services revenue will remain 8.9 million, increased by 269% year-over-year, but decreased by The huge revenue year-over-year growth we have seen was mainly due to the recovery of the advertised spending we have seen in Q1. For the same period, the advertised spending has increased more than 200%, which filled the revenue spike year-over-year. The sequential revenue decline was mainly due to the Double 11, a Double 12 online shopping festival in Q4, but was not in Q1. Let me pass the call over to Shannon, who will share more about the vertical application and other aspects of our financial performance of 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 very strong quarter, where revenue increased by 35% year-over-year and 20% quarter-over-quarter. And within vertical application, financial risk management recorded a 64% growth in revenue year-over-year and 36% growth quarter-over-quarter. Financial risk management has its best and biggest quarter ever, recorded Q1 revenue in excess of RM22 million. This 64% year-over-year revenue growth was mainly due to the strong 19% customer number growth and 38% ARPU growth. As I mentioned in the prior quarter that our team has fine-tuned and upgraded the service and products. The result is simply stunning to say the least. The upgraded product and services were in high demand amongst the financial industry vertical. The new and existing licensed financial institution were buying and consuming our product and services. Apart from developer subscription revenue that Chris mentioned earlier, Financial risk management presented itself as the next growth engine in early 2025. We are certainly very pleased to see the resurgence of this business in this quarter and beyond. The customers that we have signed up or renewed in Q1 include but not limited to Fenqi Le, Yingbo Bank, Xiaoyun Hui and many more licensed credit and financial institutions throughout China. Market intelligence revenue, on the other hand, decreased by 26% year over year and managed to record a modest 4% growth quarter over quarter due to the continued weakness in the market demand for China's APP data. And this result is in line with our expectation. Next, I'll go through some of the key expenses and balance sheet items. Onto operating expenses. The Q1 operating expenses was at RMB 60.6 million. representing a 14% increase year-over-year and remained flat quarter-over-quarter. The majority of the increase was attributable to our sales and marketing department. In a snapshot, our Q1 revenue grew by 38% year-over-year, gross profit grew by 27%, while OPEX only grew by 14%. Overall, we are very pleased to see how OPEX has been trending in view of the revenue and gross profit growth we have achieved. And this is a sustainable growth model for long-term basis. I'll now go over the individual OPEX category. For R&D expenses, increased 8% year-over-year to RMB 24.6 million, mainly due to the increase in staff costs and associated expenses. Cloud costs has also contributed to the year-over-year increase in R&D expenses. Selling and marketing expenses increased by 34% year-over-year to RMB 23.3 million, mainly due to the increase in sales commission and traveling expenses in line with our revenue growth and cash collection recorded in this quarter. G&A expenses decreased by 2% year-over-year to RMB 12.7 million, mainly due to the reduction in professional fees as a result of our continuous discipline management of expenses. Next, I'll share three very important KPIs that we closely monitor. For net dollar retention rate, a commonly used KPI for a SaaS company is stood at 96% for our core developer subscription business for the trailing 12 months ended March 31, 2025. And this high NDR percentage, reflecting that we have high customer retention rate, coupled with the ability to increase revenue to upsells through upgrades and expansion. And this is another great quarter with such an impressive number. Secondly, another financial KPI for tracking the performance of SaaS company is the total deferred revenue, which represents cash collected in advance from customers for future contract performance, which at a record high of RMB 1,500. and this is the historical record where our deferred revenue balance has exceeded RM150 million. Thirdly, we continue to maintain healthy 8-hour turnover level at 53 days, and this was slightly higher than what we had in Q4, simply due to the extended holiday during the Chinese New Year period where collection is typically slower than other quarters. We will continue to work hard to ensure we collect cash from customer active fee and at the same time mitigating the risk of bad and doubtful debts. On to balance sheet. Next, total assets were RMB 376 million as of March 31, 2025. This includes cash and cash equivalent of RMB 113.6 million, accounts receivable of RMB 54.1 million, prepayments and other assets of RMB 17.4 million, operating expenses operating lease right of use assets of $15.9 million, fixed assets of $4.3 million, long-term assets of $113.5 million, goodwill of $37.8 million, and intangible assets of $12.8 million resulting from the SendCloud acquisition in March 2022. And total liabilities were at $261.6 million as of March 31st. This includes accounts payable of $34.1 million, Current operating lease liability of $4.2 million. Deferred revenue of $156.9 million. And accrued liabilities of $66.4 million. And now let me take a few minutes here to recap the description. A quarter of accelerated growth driven by globalization that Chris used at the beginning of this call. In this quarter, our revenue year over year grew strongly by 38%, reaching maybe $89 million. This was the highest Q1 revenue since we transitioned into pure SaaS model. Our developer subscription service had another $50 million revenue quarter, with remit fee $53.5 million. Secondly, our engaged lab had a very strong quarter. Revenue grew by close to $127 million on year-over-year basis, and cumulative contract value increased by more than $63 million in Q1 alone, bringing the total signed contract value to exceed RM110 million. Both the gross profit and gross margin has improved along with our global expansion effort. We have a 7th consecutive quarter of positive adjusted EBITDA. This is no doubt a very strong growth quarter for Aura Mobile. We started the year with a great Q1 and we believe the momentum will carry on to the other quarters of 2025. Now let's turn to the business outlook. Based on the current available information, the company sees the Q2 2025 revenue guidance to be in the range of RMB $87.5 million to RMB $90.5 million, representing a solid 10% to 14% year-over-year compared to the same quarter of 2004. The growth outlook is based on the current market conditions and reflects the company's current and preliminary estimate of the market and operating conditions and customer demands, which are all subject to change. Lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended March 31, 2025, we repurchased 16,000 ADS. Cumulatively, we have repurchased a total of 295,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. We're happy to take

the question now operator please proceed thank you as a reminder if you wish to ask a question please press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 1 again we will take our first question and the first question comes from the line of Calvin Wong from Spicer Capital. Please go ahead. Your line is open.

Good evening, management. Thank you for taking my question. I have one question related to the Engage Lab. First of all, congrats on the Engage Lab business. It has achieved breakthrough contract value of 110 RMB, 110 million RMB in Q1. So if I work back the calculation correctly, so that's the total newly signed contract value was more than 60 million RMB in Q1. So I would appreciate if management could provide some guidance outlook of the Engaged Lab business going forward. Thanks.

Okay, thanks Gavin. Let me take this call, this question. I guess your calculation is spot on. So at the back of achieving this 60 million contract in a single quarter, there are a few matters that I would like to share with you and everyone on the call. One is the fact that we have proven to have the ability to win big contracts in global stage. Just to clarify, this newly signed 60 million contract in Q1 2025 were from different customers outside of China. And second, our products and services are indeed meeting the needs of global customers. customers are willing to sign multi-year contracts with us is another testament of the superior quality of our service and product. And these customers have shown great long-term commitment towards our products and services. And if you ask me whether we'll get another $60 million new signed contract in Q2, I guess my frank and honest question is unlikely at this stage, which is a realistic expectation. But this 60 million RMB a quarter taught us a few very useful lessons to make significant wins going forward. It shows that we have the technical capability and the know-how to win big contracts. Our products are superior to competitors in the market. So with our growing presence in the global stage, other overseas customers will start to look at Engagelab differently. And maybe this 60 million new contracts a quarter is not too far away after all. I hope this answers your question, Gavin.

Very clear.

Thanks.

Thank you. Once again, if you wish to ask a question, please press star 1, 1 on your telephone. We will take our next question. Your next question comes from the line of Marco Zhang from Gao Gongli.

research please go ahead your line is open hi uh this is marco from uh colonial research then grad to the company on other strong quarters. I have one question for the management. So this quarter, your revenue grew 38% year over year, gross profit grew 27 year over year, and your adjusted EBITDA is on the seventh consecutive quarter of positive number. However, the company is still recording that loss. So my question is that when do you think we can expect your quarterly net profit? Thanks.

Hi, Marco. Let me take your question. I think you are right to point out a few key numbers. Let me recap. In this quarter, what we have is revenue grew by 38%, gross profit grew by 27%, and our OPEX is only grew by 14%. And this business model has a perfect relationship to generate profitability. In short, you may conclude that we earn more than what we spend. But if I peel further deeper beyond the surface, one very important finding that I want to share with you and the others on the call is that there are certain expenses that we need to spend now in order to feel the continuous growth trajectory. Let me explain more. For example, R&D. And it is vitally important that we continue to research and develop and continue to fine-tune our product. And one great example is the financial risk management where the business grew by 64% year-over-year. And this is mainly due to product upgrades that we have made. And this upgrade resulted in more customers using and consuming our products. Therefore, we have the 65% revenue growth. On the flip side, if we stand still and with no intention to increase our R&D activities, our product will not have evolved and we will not get a 65% revenue growth. And secondly, marketing expenses is another crucial expense for any company needing to spend in order to broaden global reach and expansion. We need to have Engagelab brand name known globally. It was because the marketing campaign that we had, we were able to grow the business without borders into 40 countries and regions by March 31st, 2025. As a matter of fact, if we want net profit next quarter, I think we can do that. All we need to do is just to freeze our R&D and marketing expenses. However, this will come at the expense of product development and continuous market spend. And this will certainly hurt our ability to grow our revenue in the near future. Therefore, we need to strike a balance between spending diligently enough so that we can have the firepower to fuel our continuous revenue growth in the next 12 or 24 months. And so long as we continue to scale our business, the results will come sooner or later. And hope this answers your question, Marco.

Okay, yeah, thanks. Congrats again, and we look forward to see another strong quarter. Thanks. I have no more questions.

Thank you. Thank you. There are no further questions. I would like to hand back to Rene Van Gasteen for closing remarks. There are no further questions. I'll hand back to René Van Gasteen for closing remarks.

Thank you, Heidi.

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.

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