Aurora Mobile Limited

Ladies and gentlemen, thank you for standing by and welcome to Aurora Mobile second quarter 2025 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 one one 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. And I'd like to hand the conference over to your host today, Christian Donnell. Thank you. Please go ahead, sir.

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. Wei-Dong Luo, Chairman and Chief Executive Officer of Mr. Shannon Bong, Chief Financial Officer, and Mr. Guangyan Chen, General Manager. Following their prepared remarks, they will all 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, or factors are included in the company's filings with U.S. 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.

Thanks, Christine. Greetings to all. Welcome to Arora Mobile's 2025 Second Quarter Earnings Call. Before I comment on our Q2 results, I would like to remind everyone that the quarterly earnings step is available on our IR website. You may refer to that as we proceed with the call today. I was so excited about this call today and sharing this Q2 earnings release with you because this was just the best quarter we have ever had. At the end of this call, I believe all of you will be equally excited as I am now. Let's get started. As we did in the past, based on the Q2 numbers, I have a suitable description for the second quarter results, which is a new chapter in our mobile. For one very significant milestone we have achieved. We record the first ever quarterly net profit. This is get profit, by the way, in our history. This great milestone aside, we have record many other great operating resources in this quarter too. Let me elaborate more later in the call. Firstly, our global flagship product, Engagelab, continues to expand and scale globally with great year-over-year and quarter-of-quarter customer number and contract value growth. Secondly, the group's revenue this quarter of revenue be 89.9 million, achieving a remarkable year-over-year and sequential growth. This revenue be 89.9 million was the higher end of the guidance we have provided. Engaging Apps recognized revenue also grew strongly by 67% year-over-year and 24% quarter-of-quarter. Thirdly, our financial risk management basis has another great quarter. recording solid revenue growth of 27% year-over-year. Fourthly, gross profit grew strongly by 13% year-over-year while achieving the highest gross profit for the past 10 quarters. Gross margin has also improved quarter-over-quarter. In summary, I'm truly pleased with the great achievement we have had in this quarter. Achieving historical GetNet profit is not easy. We have spent considerable time, effort, and energy over the past two to three years to strategize the growth path. Looking back, it was a tough but truly enjoyable and fulfilling journey. During that period, we explored new markets, consolidated our services, created our global flagship product, Engagelab, for global market. Our AI agent platform, gptbots.ai, can still work too. providing our enterprise customers an easy-to-use AI agent platform for them to easily embrace the advancement and the great power of artificial intelligence. Over these periods, we saw significant increase in both customer numbers and business volume. This puts the business firmly on solid ground and on sustainable expansion path. Apart from ensuring top-line growth, We also seriously looked at all paths. We challenged and improved the operational efficiency of the entire organization. Hard decisions were made to streamline our services offering and certain departments. Certain services with less than ideal gross margins were abandoned or ditched. The group headcount was also reduced from the higher of more than 820 to around 400 now. As we work hard scaling up revenue, maintaining high gross margins, and with tight and lean cost structure, achieving the quarterly gap net profit is just a matter of when. Since everything fell into the right place in Q2, that's the very first around mobile gap net profit camp in this quarter. Now let me share more on the individual business performance. Our total Q2 good revenue has grown 13% year-over-year driven by the great performance from developer services. Within the good revenue, all business segments, many developer subscription services, value added services, and vertical applications, record solid, acceleration, and double-digit year-over-year revenue growth. Developer services revenue, which consists of subscription services and value added services, increased by a strong 14% growth year-over-year and 3% growth quarter-of-quarter. Subscription revenue can solidly revenue numbers well increased by 12% year-over-year and increased slightly quarter-of-quarter. Value-added services revenue grew by an impressive 30% year-over-year and increased 21% quarter-of-quarter. Our core basis, developer subscription services revenue of revenue be 53.7 million, record growth of 12% year-over-year and increased slightly quarter-of-quarter. The year-for-year revenue growth was mainly driven by increase in both customer number and ARPU. I believe this segment has stood firmly on its solid foundation, where the subscription revenue record falls consecutive quarter of revenue be 40 million plus revenue. For subscription services, we can record year-for-year revenue growth in both the domestic and overseas markets. Next, I shall elaborate more on our EngageLab basis this quarter. Our flagship product, EngageLab, continue to be the star performer for the group as far as revenue growth trajectory goes. Firstly, we had another strong quarter for EngageLab where the total contract value we have signed amount to remain be 11.2 million in Q2. The growth acceleration has been great for this business since day one. Secondly, global customers from all corners of the world continue to purchase our product and services. The customer number has increased by 25% sequentially, reaching to 1,058. This was driven by the continued progress we are making across our go-to-market growth. Further, the revenue recognized for the Engaged Lab, again, record very strong growth of 67% year-over-year and 24% quarter-over-quarter. Firstly, our Engaged Lab products and services are now sold to customers in more than 45 different countries and regions globally. customer from four new countries has been converted and signed up with us in Q2. I have mentioned this before, but I would like to reiterate that I truly believe that EngageNet is the engine of growth for AeroMobile in the next 24 months. The number it has delivered over the past eight quarters is the greatest testament of my belief. Next, within subscription revenue, some of the notable wins this quarter include anonymity to Pufa Credit Card, Tesla China, China City Bank International, just to name a few. Value-added services revenue will remain be 10.7 million, increased by 30% year-over-year and increased by 21% quarter-of-quarter. The significant revenue year-over-year growth we have seen was mainly due to the increased advertiser spending allocation to us and new customers acquired in Q2. In addition, the traditional Q2 online shopping festival also contributed to the revenue growth. Now, let me pass the call to Shannon, 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 has a strong quarter, where revenue increased by 10% year-over-year, but decreased 4% quarter-over-quarter. Within vertical application, financial risk management recorded a 27 growth in revenue year-over-year, but decreased 1% quarter-over-quarter. Financial risk management has another excellent quarter, recorded two consecutive quarters of revenue in excess of maybe $21 million. The 27% year-over-year revenue growth was mainly due to a strong 48% in customer number growth. As I have shared in the previous quarter, the upgraded product and services found their place in the financial industry vertical. We continue to see deeper cooperation and usage of our financial risk management product by many leading platforms in China. This will no doubt further solidify the continued demand for this service in the many quarters to come. We see new and existing licensed financial institutions continue to buy and use our products and services in their risk model. The customers that we sign up or renew in Q2 include, but not limited to, Fen Qi Le, Zhong Yuan Xiao Jing, Ping An Pu Hui, and many more licensed credit and financial institutions throughout China. Market intelligence revenue on the other hand decreased by 38% year-over-year and 23% quarter-over-quarter due to the continued weak demand for Chinese APP data. This result is within our expectation. For market intelligence, we started making major and meaningful upgrades for the product to better meet the dynamic market needs. We believe upon completion, it will attract more usage and customers. Based on the current feedbacks we have received, It has been very encouraging. I shall provide more timely updates on this upgraded market intelligence product in the future earnings call. Next, I'll go over some of the profit and loss and balance sheet items. Our gross profit, it continued to scale new heights. It grew both year over year and quarter over quarter to remain be 59.6 million. This was the record high level that we have achieved for the immediate past 10 quarters. This shows that at Aeromobile, we can have revenue growth and gross profit acceleration at the same time. This is a very hard act to juggle, but we did it. It demonstrated the high quality revenue that we have been able to generate. And we do not blindly go after revenue growth at the expense of margin. And this is a fundamental of how we go about managing a business as a whole. Onto operating expenses. The Q2 operating expenses was at RMB 60.8 million, representing an 11% increase year-over-year and slightly increased quarter-over-quarter. Operationally, our Q2 revenue grew by 13% year-over-year, while OPEX only grew by 11%. And we are pleased to see how we have been controlling OPEX to support the double-digit revenue growth across all business lines. I'll now dive deeper into the individual OPEX categories. For R&D expenses, it increased 10% year-over-year to RMB 26 million, mainly due to the increase in staff costs and associated expenses. Technical service fee and cost also contributed to the year-over-year increase. Selling and marketing expenses increased by 11% year-over-year to RMB 22.7 million. mainly due to the increase in sales commission and traveling expenses in line with revenue growth and cash collection recorded in this quarter. And marketing expenses for investment in global business expansion also contributed to the year-over-year increase in selling and marketing expenses. G&A expenses increased by 14% year-over-year to $12.2 million, mainly due to the increase in staff costs and the loss on disposal of property and equipment. And next, I shall share three very important KPIs that we closely monitor. For net dollar retention, a commonly used KPI for SaaS company is stood at 99% for our core developer service business for the trailing 12-month period ended June 30, 2025. This high NDR number reflecting that we have high customer retention rate coupled with the ability to increase revenue through upsell upgrades and expansion. And this is another quarter with impressive NDR number. 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 a high of $156.1 million. This is the second consecutive quarter where we have deferred revenue balance in excess of Thirdly, we continue to maintain a healthy AR turnover at 54 days. This remains an industry-leading low level. We continue to work hard to ensure we are actively and timely collecting cash from customers and at the same time mitigating the risk of bad and doubtful deaths. On the cash flow, we are also very pleased with the overall cash collection and usage in operating activities this quarter. For the quarter ended June 30th, we recorded net operating cash inflow of RMB7.9 million. On to balance sheet. Total assets were RMB381 million as of June 30th. This includes cash and cash equivalent of RMB119.8 million, accounts receivable of RMB54.1 million, prepayments and other current assets of RMB16.5 million, operating list right of use asset of $17.4 million, fixed assets of $3.2 million, long-term investment of $113.3 million, goodwill of $37.8 million, and intangible assets of $12.1 million resulting from the ScentCloud acquisition in March 2022. The total current liabilities were $267.7 million. This includes accounts payable of $38.4 million, current operating list liability of 4.8 million, deferred revenue of 156.1 million, accrued liabilities of 68.4 million. Let me now take a few minutes here to recap the description, a new chapter in ARO Mobile that Chris mentioned in the beginning of this call. In this quarter, we achieved our very first quarterly gap profit in the history. Equally important, all business line achieved double-digit year-over-year revenue growth. Our core developer subscription business had a fourth consecutive quarter of $50 million plus-plus revenue quarter. Our flagship product, Engagelab, continues its great growth trajectory. We won and signed more than $11 million worth of new contracts in Q2 alone, fueled by the new global customer acquisition. Gross profit grew 13% year over year, achieving the highest level for the past 10 quarters. Operating activities brought in net cash inflow of 7.9 million. And our net dollar retention for core developer service stood strongly at 99%. And this was indeed a spectacular quarter where all our business line and related KPIs have done very well. And we are encouraged by the excellent Q2 numbers we have delivered. As we look ahead for the rest of 2025, we are very optimistic and confident about our ability to execute against the things that we can control. And Chris and I are very thankful for the dedication and commitment by the teams. And this quarter's stellar performance is a true testament to the effort that they put in day in and day out. And we are truly honored to come to work side by side with such an exceptional group every day. And now, let's turn to business outlook. And based on the current available information, the company sees the Q3 revenue guidance to be in the range of RMB $88 million to RMB $91 million, representing a solid growth of 11% to 15% year-over-year compared to the same quarter in 2004. And the above outlook is based on the current market condition and reflects the company's current and preliminary estimates of the market at operating conditions and customer demands, which are all subject to change. Lastly, before I conclude, I shall give a quick update on the share repurchase plan. For the quarter ended June 30, 2025, we repurchased 27,000 ADS. Cumulatively, we have repurchased a total of 323,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. And we are happy to take your 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 Kelvin Wong from Speaker Capital. Please ask your question, Kelvin.

Good evening, management. Thank you for taking my questions. And first of all, congrats on the great first net profit in the history. I would like to ask two questions, if I may. The first question is, I will be appreciative if you could share with us what are some factors behind the great results in Q2. And secondly, more on our look, are you expecting quarterly gap net profits to be a long going forward?

Hi, Kevin. Good to hear from you again. Let me take this question. This quarter's breakthrough performance reflects a collaborative effort of multiple It is primarily driven by the diligent contribution of our employees in Aura Mobile, whose ongoing commitment to overcoming challenges across technology development, customer service, and operational execution has collectively strengthened the foundation for the performance growth. And more importantly, our forward-looking strategy has anchored a clear direction for the business development with the precise execution From a business perspective, the growth momentum stems from the strong push of internal and external dual engine. On one hand, our overseas flagship product, EngageLab, continues to accelerate its expansion, constantly breaking boundaries to globalize reach and localize service capability. On the other hand, our AI agent platform, GPT Bot AI, leveraging AI-driven technological empowerment to drive innovative across business scenario, becoming the next growth engine. It is worth advertising that domestic market also performing well in this quarter, achieving solid year-over-year growth and creating synergetic pattern of internal and external linkage of growth alongside with overseas market, together contributing to this quarter's outstanding overall performance. And also from a deeper perspective on business drivers and financial support, these driving forces are not short-term variables but rooted in the long-term accumulation of capability building, strategic implementation and market trends. And with the ongoing release of synergies between internal and external businesses, the continuous deepening of technological empowerment and the steady advancement of strategic execution will bring us across the line. And Gavin, hope this answers your question.

Great. It's very clear. Thank you.

Thank you. We will now take our next question from Marco Zhang from Ge Long Kui Research. Please go ahead, Marco.

Hi, this is Marco from Golden Hill Research. Congrats to the management for delivering a set of stunning results in this quarter. It has been proven that the business model does work and it works well to deliver net profit. In particular, we know that your Engage Lab has been delivering strong numbers and is driving the growth for the group. So appreciate management to share more on this business, including the current and future states.

Thanks. All right, Marco, thanks for the question. Also, let me take this question too. As you've already pointed out, our EngageLab product, our flagship product, is highly promising business segment of the group. And it has already demonstrated strong business viability and becoming the group's next engine growth. Currently, EngageLab is serving customers in more than 45 countries and regions worldwide. With a total signed contract amount existing $113 million and a year-on-year revenue growth of 67%. And looking ahead to the upcoming quarters, we are confident and have high hopes of EngageLab growth momentum. And from the perspective of market expansion, its global market footprint has clearly outlined its path. We have established localized presence in Hong Kong, Singapore, and Malaysia, and its solidifying services foundation by forming local teams in Thailand and Japan. And leveraging this regional depth and localized service capability, combined with the existing technological advantage and service experience, EngageLab will continue to penetrate market demands across different industry and regions, attracting more customers to collaborate. And both Chris and myself are very confident on the continuous growth trajectory of this business. And hope this answers your question, Marco.

Great, thanks.

Thank you. I am showing no further questions. I'd now like to turn the conference back to Christian for closing comments.

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 evening or morning. Thank you.

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