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 a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Rene Vanguestaine. 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. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer; Mr. Shan-Nen Bong, Chief Financial Officer; and Mr. Guangyan 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 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 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 statements as a result of new information or otherwise, except as required under applicable law. With that, I will now turn the conference over to Mr. Luo. Please go ahead.

Thanks, Rene. Good morning, and good evening, everyone. Welcome to Aurora Mobile's 2022 third quarter earnings call. Before I comment on our Q3 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website; you may refer to the deck as we proceed with the call today. While we continued to navigate through macro-economic uncertainties, 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 on more details in the later section of my remarks. We continued our cost control initiatives in the third quarter and are very pleased with our progress. Here is a snapshot of some of the key results that we want to share with you. Lowest operating expenses for the past 16 quarters since Q4 of 2018, at RMB80 million, down 23% year-over-year. Lowest net loss since Q3 of 2019, at RMB20.7 million, narrowed down by 42% year-over-year. Adjusted EBITDA at negative RMB6.7 million, significantly improved by 58% year-over-year. Deferred revenue balance is the highest in the history of the Company, at RMB139.1 million. Total customer number up 71% year-over-year to 4,665. AR turnover days significantly improved by 8 days from 46 days in Q2 2022 to 38 days despite the tough business environment. And I'm sure everyone on the call is aware of the massive layoff 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. Had we been slow to make such a decision, we would be in a much worse financial situation now. Back to these key financial highlights in this and past few quarters. I'm 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 stronger. This quarter, we recorded another quarter with historically low operating expenses level of RMB80 million, down 23% year-over-year. Our net loss is also the lowest since Q3 of 2019 at RMB20.7 million, narrowed down by 42% year-over-year. One of our main goals going into Q4 and the 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. While we are anticipating more recovery in growth, it’s 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, we look at sequential revenue growth as more indicative of the health of our business and expect that this will change. 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 revenues increased by 3% quarter-over-quarter to RMB57 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 RMB41.7 million, up 9% quarter-over-quarter and up 5% year-over-year. Subscription Services, our core business line, including JPUSH, 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 revenues, and we managed to grow our customer base, signing up several well-known and sizable customers. Value-added Services revenue decreased quarter-over-quarter by 9% and year-over-year by 39% to RMB15.3 million. As we saw market demand further pressured and advertisers continuing to cut back budgets, this trend is quite visible and is similar to those reported by larger advertisement pipelines. Direct customers contributed more than 75% of JG Alliance revenue stream, while the rest came from third-party AHS. Major customers of JG Alliance consist of reputed customers and market leaders across many industry verticals, key customers include Baidu, Alibaba, Tencent. Although we believe that these factors 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 our platform, and we are anticipating more DAUs to join our platform in Q4. Services enabling traffic monetization for ads have become an important driver during the development of the mobile internet ecosystem. As the major mobile ad mediation platform has spread overseas in established markets, such as Europe and North America, we are also striving to help developers 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 refined and accurate user reach and engagement at low cost with high message delivery rates and conversion rates. I invite you to visit our website to see for yourselves. At present, EngageLab provides five major services including: AppPush, WebPush, Email Service, SMS Service, and WhatsApp Business API and is exploring additional messaging channels in overseas markets. Based on the current inquiries 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 business in future quarters when the numbers are material. With that, I will now pass the call over to Shan-Nen, who will share more information about our Vertical Applications and other aspects of our performance.

Thanks, Chris. And now let me provide some context on the Vertical Application business. In this quarter, we have seen sequential growth in Vertical Application revenue, which is very encouraging. Vertical Applications mainly consist of financial risk management and market intelligence. Vertical Applications revenues increased by 12% quarter-over-quarter and decreased by 9% year-over-year. In the Financial Risk Management segment, revenue increased by 20% quarter-over-quarter to RMB14.4 million and decreased by 7% year-over-year. The Financial Risk Management quarter-over-quarter revenue growth was mainly due to the increase in customer numbers as demand has shown good growth over the quarters. While our Financial Risk Management team has pushed continuously to establish deeper connections with our key customers, it has also discovered more opportunities with our existing client base. Our ongoing improvement and additions to the product mix have helped with signing up many more new clients and renewing customers. Our Market Intelligence Services delivered strong revenue growth, up 23% quarter-over-quarter and up 24% year-over-year to RMB8.9 million. During this quarter, we have further cemented our strategy to retain key customers from both PRC and overseas markets, and we signed up numerous well-known customers including, but not limited to, Morningstar and Tsinghua University. I will now go through some of our key expenses and balance sheet items. Regarding operating expenses, tightening expense control has been the theme over the past few quarters. And by doing so, we have achieved solid results to tide us through these tough times. We have had another record low quarter for operating expenses at RMB80 million, down 23% year-over-year. All three components within the operating expense category have recorded year-over-year reductions; in particular, R&D expenses decreased by 31% to RMB38.3 million, mainly due to lower headcount, reduced salary costs, and a decrease in cloud costs as a result of improvement and optimization of our cloud platform. Selling and marketing expenses decreased by 18% to RMB24.2 million, mainly due to the decrease in our headcount and corresponding reductions in marketing expenses and salary costs this quarter. G&A expenses decreased by 7% to RMB17.6 million, mainly due to salary costs, resulting from a reduction in headcount. Adjusted EBITDA improved by 58% year-over-year and by 16% quarter-over-quarter to negative RMB6.7 million. Our company-wide effort to optimize headcount and operating expenses has continued to pay off and yielded good results for us. Below are the highlights I want to recap. In this quarter, we have had the lowest operating expenses for the past 16 quarters since Q4 of 2018 at RMB80 million, decreased 23% year-over-year. We had the lowest net loss since Q3 of 2019 at negative RMB20.4 million, narrowed down by 43% year-over-year. Adjusted EBITDA at negative RMB6.7 million improved by 58% year-over-year. We had the lowest adjusted operating expenses, which represent the cash component of OpEx since Q1 of 2019 at RMB66.9 million, decreased by 24% year-over-year. As for the balance sheet, I will share two very key KPIs that we closely monitor. Firstly, the AR turnover days decreased from 46 days in Q2 2022 to 38 days in this quarter. Our disciplined accounting policy and cash collection efforts ensure a timely collection of our accounts receivables. This is important to mitigate the exposure to bad and doubtful debts during these challenging times. Secondly, one of the key financial KPIs for tracking the performance of SaaS companies is the total deferred revenue, which represents cash collected in advance from customers for future contract performance. We recorded the highest balance in the history of the company at RMB139.1 million. Our deferred revenue balance has continually grown and exceeded RMB100 million at quarter end for the 10th consecutive quarter, demonstrating excellent health conditions for our financial KPI under the SaaS business. Total assets were RMB445 million as of September 30, 2022, including cash and cash equivalents of RMB108 million, accounts receivable of RMB32 million, prepayments and other current assets of RMB32 million; fixed assets of RMB42.9 million, long-term investments of RMB142.9 million; goodwill of RMB37.8 million and intangible assets of RMB25.2 million resulting from the SendCloud acquisition in March 2022. Total current liabilities were at RMB238.4 million as of September 30, 2022, including accounts payable of RMB17.5 million, deferred revenue of RMB132.7 million, and accrued liabilities of RMB88.2 million. Lastly, before I conclude, I will give a quick update on the share repurchase plan. In the quarter ended September 30, 2022, we repurchased 27,000 ADS, and cumulatively we have repurchased a total of 948,000 ADS since the start of our repurchase program. This concludes the management prepared remarks. We're happy to take questions now. Operator, you may proceed.

Thank you for the questions. The first question is from Brian Kinstlinger from Alliance Global. Please proceed.

Hi, this is Brian. Thanks for taking my questions. Now that we're halfway through the fourth quarter, how is it looking compared to the third quarter? Should we expect similar results, or are there any new trends you can mention?

Hi. This is Shan-Nen. Thanks for the question. Yes, based on the trajectory that we have seen to date, Q4 should be able to achieve sequential growth again in this quarter. So things are starting to pick up and we do see signs of recovery for most, if not all, of our businesses.

Thank you. Another question, you guys mentioned the abundance in deferred revenue. Which segments, if any, do you see unusual strength and which do you see unusual weakness, if any? And why do you think that is? Do you think this is affecting your growth in any way?

A few of the layers in terms of the makeup of deferred revenue, they are mainly coming from the Subscription Business and Vertical Application, because the value-added services are mainly advertisement-based, so those customers are unlikely to prepay. The main component of deferred revenues are coming from Subscription Services and Vertical Applications. We do not see any weakness in terms of where it's coming from. Based on the balances that have been growing, we have no concern, and we see continued growth this quarter-over-quarter.

Great. Thank you so much. That’s all I had.

Thank you for the questions. We have a question from the line of Kevin Wong from Capital. Please proceed.

Hi, management. Many thanks for taking my question. I would like to have three questions, if I may. The first one is related to the launch of EngageLab for overseas customers. Could you provide more insights on the EngageLab platform for us? That's the first question. The second question is related to your cooperation with BYD for expenses in Europe. So we'd love to hear more about the details on that. Lastly, more finance-related, we noticed that you have done a good job in managing the operational expenses, so could you share with us how this operating expense is trending in the next few quarters? Also, if you can, when are we expecting the company to turn positive adjusted EBITDA? Thanks.

Sure, Kevin. Let me recap your question. For the first one, you're asking about the EngageLab for our overseas customers, right?

Yes.

Okay. So actually, this is part of our plan to facilitate Chinese companies going overseas. We have launched EngageLab to ensure that these Chinese companies can carry out refined and accurate user reach overseas with our low cost and high efficiency rate. If you look at our EngageLab, we are committed to offering omni-channel messaging solutions to global enterprises and developers. As we have mentioned in our press release, EngageLab currently provides five major services, including AppPush, WebPush, Email Service, SMS Services, and WhatsApp. We are also exploring additional messaging channels in overseas markets. Besides assisting Chinese companies venturing overseas, we believe EngageLab is well-suited to overseas-based developers who want to reach their customers more efficiently. Recently, we've signed up more than 15 overseas-based customers with many more in the pipeline. We believe this strategy to allocate resources in EngageLab for overseas customers is the right one and will certainly deliver positive results in the near future. I hope this answers your question.

Thank you. That was quite informative.

As for your second question about BYD in Europe, that’s one of the press releases that we made recently. I can give you some background on the cooperation. In late September, we entered into this agreement with BYD for them to launch their services in Northern Europe, particularly in Norway, where they have delivered more than 1,000 pure electric SUVs. Leveraging our messaging cloud solution, we are helping BYD effectively carry out user reach in that particular market and improve their messaging experience. Apart from the messaging delivery system, we believe that Chinese companies face various security compliance requirements, especially in Europe, where GDPR is very stringent. Our solution is well catered for Chinese companies going overseas. We believe we are the service provider of choice without any doubts. We think that this project with BYD will open more doors for us in securing similar contracts overseas. Please look out for our future press releases in this matter.

And about the trend or the coming trend of your OpEx? You've done a remarkable job in managing OpEx over the past few quarters. We would like to hear your thoughts on the trend of OpEx in the coming quarters. Also, when can we expect the company to turn positive adjusted EBITDA?

Sure. That's a tough question. Based on the financials we've released for the past few quarters, you have seen we have proactively controlled our operating expenses. We made good progress, and for Q3, we have the lowest operating expenses for the past 16 quarters. Our net loss is the lowest since Q3 of 2019. Adjusted EBITDA continues to improve by 58% year-over-year. All these achievements were, by no means, easy or straightforward and were due to our team's effort to execute this cost reduction plan continuously quarter-over-quarter. As you are aware, our cost control initiative is an ongoing process. We believe we are at an optimized level now, but we are challenging all departmental heads to keep the company's expenses lean and more effective. However, there could be unforeseen events that might impact us given the overall global macroeconomic uncertainty. We do not provide any specific timing for when we will turn positive for adjusted EBITDA. So long as we keep our operating expenses at an optimal level, we believe that as the economy recovers and our revenue continues to grow, turning adjusted EBITDA positive is the only natural course of action.

Okay. Very clear. Thanks.

Thank you for the questions. At this time, there are no further questions from the line. I would like to hand the call back to Rene for closing remarks.

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.

Ladies and gentlemen, you may now disconnect your lines.