Aurora Mobile Ltd (JG) Q1 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile First Quarter 2026 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 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 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, Christian Arno. Please go ahead, sir.

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. Shannon 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 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, and 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. Luol. Please go ahead.

You may refer to the BEC as we proceed with the call to the good year. Within this first quarter of 2026, our achievements are as follows. Firstly, in this quarter, RMB 93.3 million, representing a solid EngageLabs, continues to shine. The EngageLabs, $1 million, representing 172% year-over-year growth, year-over-year. Growth margin improved by between the years. The Q1 that we have delivered was indeed a new 2026 financial year. Q1 of each year is always the top quarter for majority, if not all, of businesses. Just to share, within the first quarter of the year, we have the shorter month of February, coupled with the long Chinese New Year holidays. Business activities tend to be slower at this time of the year. Despite the slower quarter of the year, we worked harder and smarter and managed to pull through with relative excellence, R&B 93.3 million, representing a solid 5% year-over-year growth. In this quarter, growth year-over-year. but vertical applications revenue dipped 19% year-over-year. Developer services revenues, which consist of subscription service and value-added services, growth year-over-year over a quarter. I will call business 4.9 million, representing growth of 21% year-over-year and 5% quarter-over-quarter. The year-over-year revenue growth was mainly driven by increases in both customer number and ARPU. In this quarter, we have no history yet at RMB $64.9 million, surpassing the RMB $61.9 million high level in Q4 of 2025. Now, let's move on to the updates on our global flagship product, Engage Lab. As we have seen in the past 12 to 18 months, Engage Lab is now the indisputable primary driver of revenue growth for Aurora Mobile, and it is on a great acceleration path. First, EngageLab achieved a new milestone of $11.7 million as of March 2000 year-over-year ARR growth. In this quarter, the growth was $106 million. EngageLab $185 million by the end of Q1 of 2026. In Q1 alone, $28 million worth of new contracts. Customers signing off to purchase EngageLab. In this quarter, only three new customers year-over-year, $24 million. representing an outstanding year-over-year. We continue to see great strengths in EngageLab business expansion. New wins and by the team to meet and exceed overseas customers' needs and expectations. We have converted to using EngageLab to address their needs and resolve customers' issues on a timely basis into 24 months and why we can grow the EngageLab revenue with strength.

Qualitary updates within the financial industry have resulted more hit wins for soil adjustment in terms of products and fast operating environment, we still manage to win new contracts as the demand for our products and services is still there. The customers that sign up or renew in Q1 include, but not limited to Feng Shilu, and many more licensed credit or financial institutions throughout China. Market intelligence revenue increased by 3% quarter over quarter, but decreased by 25% year-over-year condition and demand for Chinese. Coming to the other, profit, 13% year-over-year growth. There will be 66.3% foundation for the rest of the year in 2026. Our gross margin also recorded significant improvement by 490 basis points year-over-year. This again signifies the healthy business model that we are operating in. With this healthy level of margin, we are poised to record good bottom line numbers going forward. On net profit, following the great momentum that we have in 2025, we started the year 2026 with another gap net profit quarter. This is a great achievement as Q1 is a cynically slow quarter for each year. On to operating expenses. Q1 OPEX was at R&P $66.1 million, down 3% quarter-over-quarter, but up 9% year-over-year. The OPEX is within our forecast, and we're happy with the level where they are. I will now dive deeper into the individual OPEX category. For R&D expenses, it increased by 17% year-over-year to R&D $28.7 million, mainly due to the higher staff cost and associated expenses. Technical service fee also contributed to the year-over-year increase. Selling and marketing expenses increased by 11% year-over-year to R&D $25.9 million, mainly due to the higher staff cost driven by overseas business expenses. G&A expenses decreased by 9% year-over-year to $11.5 million, mainly due to the decrease in bad debt provision resulting from improved collection efficiency. And next, I'll share three very important KPIs that we closely monitor. Our net dollar retention rate, a commonly used KPI for SaaS companies, stood at 103% for our core developer subscription business for the trailing 12-month period ended March 21, 2006. And this is the third consecutive quarter where the NDR number has exceeded the 100% threshold. And this is the best testimony on the great products and services we are selling. In summary, customers continue to increase their spending with us over time. Secondly, another financial KPI for tracking the performance of SaaS company is the total deferred revenue. This represents cash collected in advance from customers for future contract performance, and it stood at R&B 173.9 million as of March 31, 2026. And this highest deferred revenue balance is the best proof that SaaS business model that we are in is working well. In short, we have secured R&B 126. Thirdly, we continue to maintain a healthy level of AR turnover days at 42 days. And these low turnover days ensure we have great cash liquidity while mitigating the risk of bets and tofu debts. Cash collection is one of the key KPIs that we have for our sales team. Let us now recap on Chris's comment on a good spring brings a good year at the beginning of this call. In view of the slower quarter in Q1 of each year, we have achieved and delivered a terrific set of Q1 numbers. Firstly, we achieved net profit in the very first quarter of 2026, and this marks our fourth consecutive quarter of net profit. Secondly, our core developer subscription business achieved a historical record high of $64.9 million revenue this quarter. Third, our flagship product, EngageLab, continues to scale rapidly across the globe. Our EngageLab business exceeded its own past record in this quarter. The ARR in March reached US$11.7 million. This represents a stunning 172% year-over-year growth. Fourth, gross margin grew by 490 basis points year-over-year, the highest it has been for the past eight quarters, and the gross profit grew by 13% year-over-year. Last but not least, our net dollar retention for core developer service stood strongly at 103%. Although Q1 has been a tough quarter, but we have been resilient and managed to navigate through these rough waters. In Q1 26, results that we have presented today's week volume, we deliver revenue growth and our engaged-led business continue to scale new highs. and this lays solid foundation for the rest of 2026 and we are very we are very committed to expanding the business on a global level and continue to be highly disciplined in our spending we believe this combination is the appropriate strategy to bring us to bring the business forward lastly before i conclude i'll give a quick update on the share repurchase plan In this quarter, ended March 31, 2006, we repurchased 42,000 ADS. Cumulatively, we have repurchased a total of 441,000 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. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. One moment for our first question. And the first question comes from the line of William Chun from Speaker Capital. Please go ahead.

Good evening, Edmund. Thank you for taking my question. Based on the Q1 numbers you have released earlier today, it is a really good set of financial statements. We have revisited and reanalyzed the company ER for the past five quarters, and it appears that things are moving to the right direction operationally and financially. The revenue, I mean, especially the EngageLab, has been showing great growth momentum, growth profits and the margins are pretty solid most importantly the company has turned a full year profit in 2025 and again in this quarter so my question for the management is how we should look at the aurora mobile for the financial year 2076 thank you hi william let me take this call this question. Yes, you are right. We are well pleased with the Q1 results for the beginning of 2026. And you are right to point out too, for the entire financial year of 2025 and Q1 of 2026, we have been consistently delivering solid financial numbers quarter over quarter without fail. And this has proven that the business model and the execution capability of the management are standing up to the test quarter over quarter and year over year. and in a call earlier you have heard Chris share on Aurora Mobile's competitive advantages in the market that propel the growth that we have seen today and these competitive advantages are real and continue to feel our growth acceleration in the future and customers are switching to us and buy our services because of these advantages that we have in the marketplace. At this point I would like to add that maybe it is time now to re-look at our robot bow and why it is time to invest right now. And there's no doubt that the current valuation is at the low side. But let me share with you on our long-term valuation logic. I believe our valuation logic includes the following aspect. One, our solid and foundational domestic core business delivers stable cash flow and strong silica resilience. Secondly, to our global flagship product, English Lab, our scalable global SaaS expansion brings clear, predictable long-term growth curves. And through GPT bots, the in-depth native AI integration empower us and our business to gain tech premium and re-valuation re-rating upside. Our exclusive full scenario contextual platform builds irreplaceable competitive modes and operational defensibility. And equally important is the alignment of outcome-based enterprise software trends. And this significantly enhances our long-term monetization capability and profit elasticity. And what all this means is I think ArobaBall should not be valued purely as a traditional infrastructure company, nor as a purely as a single-point AI tool. Our corporate framework should reflect platform synergy, global SaaS growth, and AI upside altogether. I believe the above is a better way to view and value Aromobile as a whole from now. And I hope this answers your question, William.

Thank you.

Thank you. Our next question comes from the line of Jackson from Gelongwe Research. Please go ahead.

Hi, management. I'm Jack from Go on for Research. I look at the Q1 earnings with one particular focus on EngageLab. We have been seeing EngageLab growing every quarter with good numbers from customer numbers. A contract value is fine to impress ARR growth. My question for the management is, how much fuel is left in the tank for EngageLab? In other words, how long can this EngageLab growth can be sustained since?

Let me take this question too. This is a good question, but it's a bad tough one that you have for us today. And my short answer to your question is, we still have a long way to go in terms of the growth of EngageLab. You're right, and a lot of people have been saying our EngageLab business has been growing from day one of its launch about three years ago. and as of now, after three years, we are still growing, but we are only gaining a fraction of the market globally. Let me share a view on your question. Let me answer your question in two aspects. Firstly, let's look at the geography. If we zoom further into Southeast Asia market, where we generate about 40% of English-led business, we are nowhere near market-dominant position. What that means is the room for growth, even in just Southeast Asia itself, is huge. Overall, the global user engagement market is vast. Besides Southeast Asia, the other markets are sizable too. For example, Asia Pacific includes Australia and New Zealand, Middle East and European markets. Right now, we are just at the tip of the iceberg. The market is so huge that we believe it can provide many years of growth to come. The second aspect is the industry that we are falling into. Again, as of now, we have not dominated any particular industry vertical at all. As a matter of fact, majority, if not all businesses in all industry vertical have needs to engage with their users. Let me share a view on the actual examples. One, all APPs will need to send notification to its user, be it promotional or simply inform its user to update the latest version of APP. A second example is online merchant would like to send notification to its user on the timing of the merchant delivery. And coffee apps such as Starbucks and Kuti Coffee, both are our clients, informing customers that their lattes or Americanos are ready to pick up. and fourthly, airline companies needing to inform their passenger on upcoming flight, the check-in gate or the boarding gate. So these are just some of the real-life examples that notifications are being deployed in a daily life and I'm sure you can appreciate this application. The notification or user engagement are simply omnipresent for most, if not all, enterprise in all industry. Therefore, the market is there for us to capture with both hands. So back to your question, there's still a lot of fuel left in the tank for our English Lab business. The English Lab market landscape remains vast, which equipments with a substantial multi-year growth headroom for further penetrate for more markets and drive steady revenue growth. And hope this answers your question.

Yeah, yeah, that's very clear. Thanks a lot.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone. That is star 1 and 1 to ask a question. We are now going to take our next question. And this question comes from the line of Mike Ting from Bardic Research. Please go ahead.

Good evening. Thanks for taking my question. And congratulations on a great quarter. Just a quick question for me. I've noticed that from a year-over-year perspective, both revenue and gross profit seems to have, in terms of the growth rate, seems to have fallen a bit compared to fourth quarter. Can you just maybe talk about some of the reasons behind that? Thank you.

Michael, thanks for your interest on our mobile and your question. Let me take this call. And probably you appreciate Q1 is a traditionally slow quarter amongst the four quarters within a year. But we still managed to see good results from our core developer subscription business, where year-over-year revenue achieved a solid 21% growth that I talked about, Chris talked about too, and reaching an all-time high of $64.9 million. And also in this quarter, gross profit rose by 13% year-over-year. The overall slow growth that you mentioned was mainly attributable to the revenue from other sector, which is the value-added service and vertical application. And let me share with you the reason. And one is the fact that advertising business was pressured by the seasonality. And Q1 is traditionally a slow season for the industry. And without the traffic capitalists such as e-commerce shopping festival and coupled with the long Chinese New Year holidays, marketing spending by brand clients remains slow and leading to the current market condition that you have seen in Q1. And secondly, the slower demand for vertical application. The macroeconomic headwinds have softened our overall client demand. In particular, the financial risk management business was also impacted by the recent regulatory adjustment that I shared earlier on. But for the remaining three quarters of 2026, our core developer subscription business is poised for substantial growth meaningful revenue expansion. And meanwhile, our overseas business, Engish Lab, is expected to accelerate and benefit from our global footprint will further be unlocked and realized. I hope you answer your question.

Thank you.

Thank you. There are no further questions for today. I will now hand the call back to Christian Arnaval, closing remarks.

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 and thank you.

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