Aurora Mobile Ltd (JG) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Aurora Mobile second quarter 2026 earnings 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 would need to press star 11 on your telephone. You will then hear an automated message advised and your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to hand the conference over to your host today, Christian Arnell. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us today. Aurora Mobile's earnings release was distributed early today and is available on its IR website at ir.aurora-mobile.com. On the call today are Mr. Wei Dong 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 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 call over to Mr. Luo.

Please go ahead. ...for this narrative is obvious. In the second quarter, the EngageLabs are taking our eyes off...

...financial risk management and market... ...vertical application revenue decreased year-over-year and quarter-over-quarter. Within vertical application, financial risk management revenue decreased 17% year-over-year and pretty much... ...operating in a tough business environment, and we are making the necessary adjustment on go-to-market and various strategies. The customers that we sign up or renew in Q2 include, but not limited to, Pufa Inhang, Ping An Xiao Jing, Weizhong Inhang, and many more licensed credit or financial institutions throughout China. Market intelligence revenue decreased 11% quarter over quarter and 12% year over year due to the continued weak market demand for Chinese APP data. And this result is in line with our expectation. Coming to the other P&L items, our gross profit recorded another strong Q2 quarter with 16% year-over-year growth to RMB, $69.2 million. Our gross margin has also recorded significant improvement by 197 basis points year-over-year. This improvement reflects better product mix and tighter operating control discipline. Higher gross profit gives us greater flexibility to invest in growth while absorbing external cost pressure. Most importantly, it proves that we can convert business skill into sustainable profit generation, which is critical to driving shareholders' return over time. On net profit, following the great momentum we had in Q1 of 2026, we recorded yet another gap net profit quarter, making it fifth consecutive quarter of gap net profit. We are very pleased with how this quarter has played out financially from top-line growth to bottom-line profitability. On to operating expenses. Q2 OPEX was at Ruin P 67.6 million, up 2% quarter-over-quarter and up 11% year-over-year. The OPEX is within our forecast and we're happy at the level where they are. I'll now dive deeper into the individual OPEX category. R&D expenses increased by 13% year-over-year to maybe $29.3 million, mainly due to the higher staff costs and associated expenses. Technical service fees also contributed to the year-over-year increase. Selling and marketing expenses increased by 25% year-over-year to RMB $28.3 million, mainly due to the higher staff costs driven by overseas business expansion. G&A expenses decreased by 18% year-over-year to RMB $10 million, mainly due to the decrease in bed debt provision, resulting from improved collection efficiency. Besides, there was no loss on disposal on property and equipment in Q2 of 2006. while such loss was incurred in the same quarter last year. Next, I'll share four other very important KPI that we closely monitor. Our net dollar retention rate, the commonly used KPI for SaaS company, stood at 106% for our core developer substitution business for the trailing 12-month period ended June 2026. This is the highest NDR number that we have recorded today. This is an important signal of existing customer health. This record NDR speaks to strong product stickiness, expanded usage from our in-store base, and the success upsell and cross-selling activity within our current client. While NDR can fluctuate quarter over quarter, given customer-specific renewal dynamics, But we are very encouraged by this peak result, and we are focused on sustaining healthy retention trends ahead. Secondly, another financial KPI for tracking the performance of SaaS company is total deferred revenue. This represents cash collected in advance from customers for future contract performance, and it stood at maybe $181.9 million as of June 30, 2026. This is also a historic high balance. This balance acts as a high-quality leading indicator. It gives us good visibility into the near-term revenue stream and strengthens our operating cash flow profile by bringing cash collection forward relative to the income statement recognition. Thirdly, we continue to maintain a healthy level of AR turnover days of 37. This low AR turnover days ensures we have great cash liquidity while mitigating the risk of bad and doubtful debts. And on to cash flow, another important financial KPI for us to manage a business. For the quarter ended June 30th, 2026, we recorded net operating cash inflow of 23.3 Having operating net cash inflow is very important as it validates our earning quality and gives investors and shareholders greater confidence in the sustainability of the reported profit. And let's now recap on Chris' comment on our Roaming P 100 million revenue quarter. In the second quarter of 2016, we achieved another quarter of gap net profit in 2016. This marks our fifth consecutive quarters of net profit, a great trend for healthy, profitable, and sustainable business. Two, our core developer subscription business has outdone itself again by recording another historical high of R&B's 70.7 million revenue in this quarter. The jewel of Aromobile, EngageLab, continues to scale rapidly across the globe. Our English-led business exceeded its past record in this quarter. The ARR in June 2006 reached U.S. dollars $14.6 million. This represents a stunning 170% year-over-year growth. Fourth, our gross margin grew by 197 basis points year-over-year, and gross profit grew by 16% year-over-year. Number five, our net dollar retention for core developer service stood strongly at 106%, another historic high. Number six, equally important was the net cash inflow that I mentioned of renminbi $23.3 million we brought in from operating activities. As I have alluded in the last quarter's earnings call, Q1 numbers we have recorded paved the way for great financial year of 2026. and this momentum we built in Q2 of 2026 was truly phenomenal. The quarterly operating and financial results that Chris and I shared during the call today reflect a considerable strength across our business. We will continue to execute things against our established strategic priorities. As we deliver on our execution roadmap, we are confident this operational wins will translate into sustained improvement in our financial statement. Lastly, before I conclude, I'll give a quick update on a shared repurchase plan. In the quarter ended June 30th, 2026, we repurchased 44,000 ADS. Cumulatively, we have repurchased a total of 485,000 ADS since the start of our repurchase And this concludes our prepared remarks. We are happy to take your question now. Operator, please proceed.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 11 again. And the first question comes from Calvin Wong with Spiker Capital. Your line is now open.

Good evening, management. Thank you for taking my question. Based on the numbers released today, we note that you have a very, very strong Q2 quarter. So can I get the management to shed some light on the Q2 quarter and perhaps maybe some hints on how Q3 and Q4 will fare for 2026? Hi, Kelvin. Thanks for your question. Let me take your question today. Yeah, you're right. The Q2 number that we just had was a good quarter for us. If I may take a few minutes, or probably just one minute to summarize here, the three key highlights for Q2 of 2026 would be, number one, our quarterly revenue exceeded Ramin-P 100 million mark. Number two, we recorded the fifth consecutive quarters of U.S. gap profit. And number three, operating activities brought in net cash inflow of revenue be twenty three point three million and hitting all these three milestone in one quarter is significant it reflects a thriving business where revenue is at a high level we are delivering gap profitability while we also generate net cash inflow which is very important and Chris and I are very pleased with how this quarter has unfolded as you look into the rest of 2026 our stance remains cautiously optimistic we're encouraged by the business growth trajectory with the global English lab business delivering stand-up momentum meanwhile we'll continue to exercise strict cost discipline even so we'll still allocate resources selectively to high-priorities initiative that we believe are critical to driving durable and long-term sustainable growth and And I hope you answered your question, Kevin. Very clear. Thank you.

Thank you. And our next question is going to come from Jack Sun with Galangui Research. Your line is open.

Thanks, management, for taking my question. I'm Jack Sun from Galangui Research. I noticed from the press released by the company and the commentary made by Chris during the call. We are launching various new services such as silent auth and model links together with some upgrades to GPT-BOTS. My question is, are they necessary and how do they benefit the company as a whole?

Hi, Jack. Good to hear from you. Let me take this question. Those services and upgrades that you mentioned are purpose-built upgrades built upon our existing customers' engagement and AI platforms. They are not disconnected new ventures, and this is an important differentiator when compared to others in the space. We are not building all these new tools or services just to follow the flavor of the month trend. Instead, every single new capability ties back to our core business. I think, for example, sign-off, they expand English-led value proposition beyond traditional messaging. It reduces user lock-in drop-off. It strengthens the fraud defense and gives us high-value authentication revenue from our existing global enterprise client. And for Model X that you mentioned also, it addresses the fragmentation enterprise phase juggling different AI model vendors. It acts as our unified AI model gateway, cutting integration overheads for customers, And it simplifies billing and operation and feeding multi-model capability directly into the GPT bots to make our AI agent more powerful for end-user. And just to share, even our own internal IR team, we use Modelix to prepare the Q2 ER deck that we're uploaded to the IR website today. It's simply because Modelix has so many different large language models that we can pick and choose from within one single platform. There's no need to switch between different large language model accounts for different companies. It is also very easy to use. So I will sincerely encourage everyone on this call to try out Model X2. As for our GPT-BOTS platform upgrades, it advances our enterprise AI agent offering. It expands multi-agent orchestration, multi-model workflow and no-code tooling. And this drive upsells among our large existing customer base and attract new client-seeking production-ready AI automation and not just AI prototypes. So if I may summarize, collectively, I believe these upgrades or new product that you mentioned, they reinforce our integrated platform strategy where deeper stickiness within our current account, It helps higher our average contract value, and also this represents a new revenue stream while leveraging our existing global sales compliance and infrastructure footprint. And I hope this answers your question, Jack.

Yeah, yeah, that's very clear. Thanks a lot. Operator, I have no more questions.

Thank you.

Thank you. and as a reminder to ask a question please press star one one on your telephone yeah I am showing no further questions at this time I will now turn the call back over to Christian for closing remarks thank you everyone for joining the 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 evening thank you very much thank you this does conclude today's conference call. Thank you for participating and you may now disconnect.