Aurora Mobile Ltd Q2 FY2025 Earnings Call

Ladies and gentlemen, thank you for being with us, and welcome to Aurora Mobile's Second Quarter 2025 Earnings Conference Call. Please note that today’s conference is being recorded. I will now turn the call over to your host, Christian Arnell. Thank you. Please proceed, 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. 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 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 the 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.

Thank you, Christian. Hello everyone, and welcome to Aurora Mobile's second quarter earnings call for 2025. Before discussing our Q2 results, I want to remind you that the quarterly earnings presentation is available on our Investor Relations website for your reference during the call. I’m excited about this call and sharing our Q2 earnings release with you because this has been our best quarter ever. By the end of this call, I believe you will share my excitement. Let’s dive in. As in previous calls, I have a fitting description for our Q2 results: it marks a new chapter for Aurora Mobile. A significant achievement for us is that we recorded our first-ever quarterly net profit, a GAAP profit, in our history. Alongside this milestone, we have achieved numerous other impressive operating results this quarter, which I will elaborate on later. First, our flagship product, EngageLab, continues to expand globally, showing great year-over-year and quarter-over-quarter growth in customer numbers and contract value. Our group revenue this quarter reached RMB 89.9 million, reflecting remarkable growth compared to the same period last year and sequentially as well. This figure was at the higher end of our guidance. EngageLab's recognized revenue grew significantly by 67% year-over-year and 24% quarter-over-quarter. Additionally, our financial risk management business had another strong quarter, achieving solid revenue growth of 27% year-over-year. Gross profit also increased by 13% year-over-year, reaching the highest level in the past ten quarters, while gross margin improved quarter-over-quarter. In summary, I am genuinely thrilled with our accomplishments this quarter. Achieving a historical GAAP net profit is no small feat. We’ve invested a considerable amount of time and energy over the past few years to create a growth strategy. Reflecting on that time, it has been a challenging yet rewarding journey. During this period, we explored new markets and consolidated our services, leading to the creation of our global flagship product, EngageLab. Our AI agent platform, GPTBots.ai, offers enterprise customers an intuitive solution to harness the power of artificial intelligence. Through these efforts, we've seen significant increases in customer numbers and business volume, putting us on a sustainable growth path. Beyond focusing on top-line growth, we also closely examined our operating expenses and improved our organizational efficiency. We made tough decisions to streamline services and certain departments, discontinuing services with suboptimal gross margins. Our workforce was reduced from over 820 to around 400. Our continual efforts to scale revenue, maintain high gross margins, and adapt a lean cost structure have made achieving quarterly GAAP net profits a matter of timing. With everything aligning perfectly in Q2, we finally achieved our first GAAP net profit. Now, let’s review individual business performance. Our total Q2 revenue grew by 13% year-over-year, driven in part by excellent results from Developer Services. All segments of our group revenue, particularly Developer Subscription Services, value-added services, and Vertical Applications, experienced solid double-digit year-over-year growth. Developer Services revenue, which includes subscription services and value-added services, increased by 14% year-over-year and 3% quarter-over-quarter. Subscription revenue saw a 12% year-over-year increase, with slight quarter-over-quarter growth. Value-added services revenue grew impressively by 30% year-over-year and 21% quarter-over-quarter. Our core developer subscription services revenue reached RMB 53.7 million, representing a 12% year-over-year increase and some quarter-over-quarter growth. This growth was primarily driven by increases in customer numbers and ARPU, firmly establishing this segment, which has shown consistent quarterly revenue of over RMB 40 million. Next, I'll elaborate on our EngageLab business this quarter. EngageLab remains a strong contributor to our revenue growth. We had another impressive quarter, securing total contract value of RMB 11.2 million in Q2. The growth in this business has been significant from the beginning. Customers from various global regions continue to adopt our products and services, resulting in a sequential increase in customer numbers by 25%, totaling 1,058. This growth reflects our ongoing success in our go-to-market strategy. Furthermore, EngageLab revenue also reported robust growth, with a 67% increase year-over-year and a 24% increase quarter-on-quarter. EngageLab products and services are now utilized by customers across over 45 countries and regions, with four new countries signing up in Q2. I firmly believe that EngageLab will be a key growth driver for Aurora Mobile over the next 12 to 24 months, as evidenced by its strong performance over the past eight quarters. Notable wins in subscription revenues this quarter include China Citibank International, among others. Value-added services revenue reached RMB 10.7 million, reflecting a 30% year-over-year and 21% quarter-over-quarter increase. The significant growth was primarily due to increased advertising expenditures allocated to us and new customer acquisitions in Q2, as well as contributions from the traditional online shopping festival in Q2. Now, I will pass the call to Shan-Nen, who will provide further details on Vertical Application and other aspects of our financial performance for this quarter.

Thank you, Chris. Next, I'll discuss the revenue for Vertical Applications, which includes financial risk management and market intelligence. Overall, Vertical Applications performed well this quarter, achieving a 10% increase in revenue year-over-year, though there was a 4% decrease quarter-over-quarter. Within Vertical Applications, financial risk management saw a significant 27% growth in revenue year-over-year, while it decreased by 1% quarter-over-quarter. Financial risk management had another strong quarter, achieving over RMB 21 million in revenue for the second consecutive quarter. The 27% growth year-over-year was primarily driven by a substantial 48% increase in customer numbers. As I mentioned last quarter, our upgraded products and services have been well-received in the financial industry. We're observing deeper collaboration and increased use of our financial risk management product among leading platforms in China, which will support ongoing demand for this service in the upcoming quarters. New and existing licensed financial institutions are actively purchasing and utilizing our products and services in their risk management models, with customers acquired in Q2 including many licensed credit and financial institutions across China. Conversely, revenue from Market Intelligence decreased by 38% year-over-year and 23% quarter-over-quarter due to persistently weak demand for Chinese APP data, which aligns with our expectations. We are implementing significant upgrades to the market intelligence product to better address the changing needs of the market, and we believe that once completed, we will attract more usage and customers. The initial feedback has been very promising, and I will provide a more timely update on this upgraded product in our future earnings calls. Now, I'll move on to discussing some profit and loss items as well as the balance sheet. Our gross profit has reached new heights, growing both year-over-year and quarter-over-quarter to RMB 59.6 million, marking the highest level we've achieved in the last 10 quarters. This demonstrates that at Aurora Mobile, we can achieve both revenue growth and gross profit acceleration simultaneously, which is a challenging balance but reflects the high-quality revenue we generate. We do not pursue revenue growth at the expense of our margins, which is fundamental to our overall business management. Regarding operating expenses, Q2 operating expenses were RMB 60.8 million, reflecting an 11% year-over-year increase and a slight quarter-over-quarter rise. Operationally, in Q2, we saw revenue grow by 13% year-over-year while operating expenses rose by only 11%. We are pleased with how we’ve controlled operating expenses to support robust revenue growth across all business lines. Now, let’s discuss the individual operating expense categories in more detail. R&D expenses increased by 10% year-over-year to RMB 26 million, primarily due to rising staff costs and associated expenses. Technical service fees and cloud costs also contributed to this increase. Selling and marketing expenses rose by 11% year-over-year to RMB 22.7 million, mainly driven by increased sales commissions and travel expenses in line with our revenue growth and cash collection this quarter. Marketing expenses for our global business expansion also contributed to the year-over-year rise in selling and marketing expenses. G&A expenses increased by 14% year-over-year to RMB 12.2 million due to higher staff costs and losses from the disposal of property and equipment. Next, I want to highlight three important KPIs we closely monitor. First, our net dollar retention, a key KPI for SaaS companies, stood at 99% for our core developer service business for the trailing 12-month period ending June 30, 2025. This high retention rate indicates strong customer loyalty while enabling revenue growth through upselling, upgrades, and expansions. We are pleased to maintain impressive NDR numbers for another quarter. The second KPI, total deferred revenue—which represents cash collected in advance from customers for future contract performance—was at a healthy RMB 156.1 million. This is the second consecutive quarter with deferred revenue exceeding RMB 150 million. Lastly, we maintained a healthy accounts receivable turnover of 54 days, which is an industry-leading low. We're actively and promptly collecting cash from customers while managing the risk of bad debts. Regarding cash flow, we are pleased with our overall cash collection and operational activities this quarter, achieving a net operating cash inflow of RMB 7.9 million. Now, concerning the balance sheet, total assets amounted to RMB 381 million as of June 30, including cash and cash equivalents of RMB 119.8 million, accounts receivable of RMB 54.1 million, prepayments and other current assets of RMB 16.5 million, operating lease right-of-use assets of RMB 17.4 million, fixed assets totaling RMB 3.2 million, long-term investments of RMB 113.3 million, goodwill of RMB 37.8 million, and intangible assets of RMB 12.1 million resulting from the SendCloud acquisition in March 2022. Total current liabilities stood at RMB 267.7 million, which includes accounts payable of RMB 38.4 million, current operating lease liabilities of RMB 84.8 million, deferred revenue of RMB 156.1 million, and accrued liabilities of RMB 68.4 million. Now, let's take a moment to recap the new chapter in Aurora Mobile that Chris mentioned earlier. This quarter, we achieved our very first quarterly GAAP profit in our history. Additionally, all business lines demonstrated double-digit year-over-year revenue growth; our core developer subscription business recorded its fourth consecutive quarter with revenue over RMB 50 million. Our flagship product, EngageLab, continues to grow significantly, winning new contracts worth over RMB 11 million in Q2, fueled by new global customer acquisition. Our gross profit increased by 13% year-over-year, reaching the highest level in the past 10 quarters. Operating activities generated a net cash inflow of RMB 7.9 million, and our net dollar retention for our core Developer Service stood firm at 99%. This has been an exceptional quarter with strong performances across all our business lines and related KPIs. We are encouraged by the stellar Q2 results. Looking ahead to the rest of 2025, we are optimistic about our ability to execute on the factors within our control. Chris and I appreciate the dedication and commitment of our teams. This quarter's outstanding performance is a true reflection of their hard work. We are privileged to work alongside such an extraordinary group each day. Now, let’s turn to our business outlook. Based on the current information available, we project Q3 revenue to be in the range of RMB 88 million to RMB 91 million, representing solid growth of 11% to 15% year-over-year compared to the same quarter in 2024. This forecast is based on current market conditions and reflects our preliminary estimates regarding market and operating conditions, which may evolve. Lastly, before I conclude, I’ll quickly update on our share repurchase program. In Q2, we repurchased 27,000 ADS, bringing our total repurchases to 323,000 ADS since initiating the program. This concludes our prepared remarks, and we look forward to taking your questions now.

Thank you. We will now begin the question-and-answer session. We will take our first question from Kelvin Wong from Speaker Capital.

First of all, congrats on the great first GAAP net profit in history. I would like to have 2 questions, if I may. The first question, I would appreciate it if you could share with us what were the factors behind the great results in Q2. And secondly, more on outlook, are you expecting quarterly GAAP net profit to be ongoing going forward?

Kelvin, it’s great to hear from you again. I’ll address your question. This quarter's impressive performance is the result of a collaborative effort involving multiple factors. It is largely driven by the hard work of our employees at Aurora Mobile, whose commitment to overcoming challenges in technology, development, customer service, and operations has significantly bolstered our performance growth. Furthermore, our forward-looking strategy has provided a clear direction for business development with effective execution. From a business standpoint, the growth momentum is fueled by strong internal and external forces. Our overseas flagship product, EngageLab, is continuing to expand rapidly, breaking new ground in global reach and localized service capabilities. Additionally, our AI agent platform, GPTBot.ai, is harnessing AI-driven technology to foster innovation across various business scenarios, positioning itself as the next growth engine. It’s important to note that the domestic market also performed well this quarter, showing solid year-over-year growth and creating a synergistic link between internal growth and overseas markets, collectively contributing to this quarter's exceptional results. Looking at the underlying business drivers and financial support, these factors are not merely short-term but are rooted in long-term capability building, strategic implementation, and market trends. With the ongoing realization of synergies between our internal and external businesses, continuous enhancement of technological empowerment, and steady progress in strategic execution, we aim to achieve our goals. I hope this clarifies your question, Kelvin.

We will now take our next question from Marco Zhang from Gelonghui Research.

This is Marco from Gelonghui Research. Congrats to the management for delivering a set of outstanding results 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 EngageLab has been delivering strong numbers and is driving the growth for the group. So, I appreciate management sharing more on this business, including the current and future states.

Marco, thanks for your question. Let me take this question too. As you rightly pointed out, our EngageLab product, our flagship product is a highly promising business segment of the group. It has already demonstrated strong business viability and is becoming the group's next growth engine. Currently, EngageLab is serving customers in more than 45 countries and regions worldwide with a total signed contract amount reaching RMB 113 million and a year-on-year revenue growth of 67%. Looking ahead to the upcoming quarters, we are confident and have high hopes for EngageLab's growth momentum. 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 are solidifying the service foundation by forming local teams in Thailand and Japan. By leveraging this regional depth and localized service capability, combined with existing technological advantages and service experience, EngageLab will continue to penetrate market demand across different industries and regions, attracting more customers to collaborate. Both Chris and I are very confident in the continuous growth trajectory of this business. I hope this answers your question, Marco.

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.