Earnings Call Transcript
Aurora Mobile Ltd (JG)
Earnings Call Transcript - JG Q1 2025
Operator, Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile First Quarter 2025 Earnings Conference Call. 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, sir.
Rene Vanguestaine, Host
Thank you, Heidi. 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 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 and 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. Securities and Exchange Commission. 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 would now like to turn the conference over to Mr. Luo. Please go ahead.
Weidong Luo, CEO
Thanks, Rene. Greetings to all. Welcome to Aurora Mobile's 2025 first quarter earnings call. Before I comment on our Q1 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. As we did in the past, based on the Q1 numbers, I have a suitable discussion for the first quarter results, which is a quarter of accelerated growth driven by globalization for the following reasons. Firstly, our EngageLab business had a phenomenal quarter, where we closed out more than CNY 63 million worth of contract value in just one quarter. This is unprecedented in our history. This brings the total cumulative EngageLab contract value in excess of CNY 110 million by March 31, 2025. Secondly, the group's revenue this quarter of CNY 89 million, achieving a remarkable 38% growth year-over-year. This CNY 89 million was the highest Q1 quarterly revenue we had since the transition to pure SaaS. EngageLab's recognized revenue also grew by 127% year-over-year. This Q1 revenue number exceeds what we have previously guided in Q4 of 2024. Thirdly, our Financial Risk Management business had its best quarter in its history, recording highest quarter revenue of CNY 22.2 million, revenue grew by 64% year-over-year. Fourthly, gross profit grew strongly by 27% year-over-year, while achieving the highest gross profit for the past nine quarters. Gross margin has also improved 520 basis points quarter-over-quarter. Fifth, we recorded another adjusted EBITDA profit in this quarter. This marks the seventh consecutive quarterly positive adjusted EBITDA we have had. Overall, it was a great quarter where all the business lines have outperformed the targets we have set for them. This has undoubtedly set great momentum for the rest of 2025. Equally important, the progress in our performance and our solid financial position enable us to invest more resources into the development of our enterprise AI agent platform and its global expansion. Now let me share more on the individual business performance. Our total Q1 group revenue has grown 38% year-over-year, driven by the impressive numbers from Developer Services. Within the group revenue, all business segments, mainly Developer Subscription services, Value-Added Services, and Financial Risk Management, all outperformed and recorded significant year-over-year revenue growth. Developer Services revenues, which consist of Subscription Services and Value-Added Services, increased by a strong 39% year-over-year and decreased 12% quarter-over-quarter. Subscription revenue has been recording great numbers, where it increased by 26% year-over-year and decreased 2% quarter-over-quarter. Value-Added Services revenue grew by an incredible 269% year-over-year and decreased 46% quarter-over-quarter. Our core business, subscription services revenue of CNY 53.5 million, recorded growth of 26% year-over-year and decreased 2% quarter-over-quarter. The year-over-year revenue growth was mainly driven by a 22% increase in ARPU, carrying on the great momentum we had in Q4 of 2024. Our subscription revenue recorded its third consecutive quarter of CNY 50 million plus revenue. For Subscription Services, we had recorded year-over-year revenue growth in both the domestic and overseas markets. In particular, our EngageLab revenue grew by 127% year-over-year. This remarkable number was a result of the hard work by the team to convert many notable wins in the overseas markets. Both the customer numbers and ARPU have solid growth year-over-year. With the great products and services we have, I believe we can scale this business globally to get more customers and new wins in many quarters to come. Next, I shall elaborate more on our EngageLab business this quarter. This business always gets me very excited when sharing with you. Firstly, the total contract value we have signed has broken the CNY 110 million milestone in Q1 of 2025. Just to recap, the total contract value was only CNY 10 million at Q3 of 2023. Six quarters later, this amount has grown 10x. This is a remarkable achievement by the team. Secondly, customer acquisition continues to be the driving force behind the success of this business. The customer number has increased by 25%, reaching 848. Thirdly, the revenue recognized for the EngageLab has again recorded great growth of 127% year-over-year. Fourthly, our EngageLab products and services are now sold to customers in more than 40 different countries and regions globally. I'm truly pleased with the team's execution effort, results, and the momentum of EngageLab. I believe that it will be the engine of growth for us in the next 24 months. Within subscription revenue, some of the notable new and renewing customers in this quarter include, but are not limited to, DeepSeek, BYD, SF Express, Monsha AI, and Hangzhou Ben, just to name a few. Value-Added Services revenue was CNY 8.9 million, increased by 269% year-over-year but decreased by 46% quarter-over-quarter. The substantial year-over-year growth we have seen was mainly due to the recovery of advertiser spending we have seen in Q1. For the same period, the advertiser spending increased more than 200%, which fueled the revenue spike year-over-year. The sequential revenue decline was mainly due to the Double 11 and Double 12 online shopping festivals in Q4 that were not present in Q1. Let me pass the call over to Shan-Nen, who will share more about the Vertical Applications and other aspects of our financial performance for this quarter.
Shan-Nen Bong, CFO
Thanks, Chris. Next, I'll go over the revenue for Vertical Applications that includes financial risk management and market intelligence. Overall, Vertical Applications had a very strong quarter, where revenue increased by 35% year-over-year and 20% quarter-over-quarter. And within Vertical Applications, financial risk management recorded a 64% growth in revenue year-over-year and 36% growth quarter-over-quarter. Financial risk management had its best and biggest quarter ever, recording Q1 revenue in excess of CNY 22 million. This 64% year-over-year revenue growth was mainly due to the strong 19% growth in customer numbers and 38% growth in ARPU. As I mentioned in the prior quarter, our team has fine-tuned and upgraded the service and products. The result is simply stunning to say the least. The upgraded products and services were in high demand amongst the financial industry vertical. The new and existing licensed financial institutions are buying and consuming our products and services. Apart from Developer Subscription revenue that Chris mentioned earlier, financial risk management presented itself as the next growth engine in early 2025. We are certainly very pleased to see the resurgence of this business in this quarter and beyond. The customers that we have signed up or renewed in Q1 include, but are not limited to, various licensed credit and financial institutions throughout China. Market Intelligence revenue, on the other hand, decreased by 26% year-over-year and managed to record a modest 4% growth quarter-over-quarter due to the continued weakness in market demand for Chinese APP data, and this result is in line with our expectations. Next, I'll go through some of the key expenses and balance sheet items. On to operating expenses. The Q1 operating expenses were at CNY 60.6 million, representing a 14% increase year-over-year and remained flat quarter-over-quarter. The majority of the increase was attributable to our sales and marketing department. In a snapshot, our Q1 revenue grew by 38% year-over-year. Gross profit grew by 27%, while OpEx only grew by 14%. Overall, we are very pleased to see how OpEx has been trending in view of the revenue and gross profit growth we have achieved. This is a sustainable growth model for the long-term. I'll now go over the individual OpEx categories. For R&D, expenses increased 8% year-over-year to CNY 24.6 million, mainly due to the increase in staff costs and associated expenses. Cloud costs have also contributed to the year-over-year increase in R&D expenses. Selling and marketing expenses increased by 34% year-over-year to CNY 23.3 million, mainly due to the increase in sales commissions and traveling expenses in line with our revenue growth and cash collection recorded in this quarter. G&A expenses decreased by 2% year-over-year to CNY 12.7 million, mainly due to the reduction in professional fees as a result of our continuous disciplined management of expenses. 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 96% for our core Developer Subscription business for the trailing 12 months ended March 31, 2025. This high NDR percentage reflects that we have a high customer retention rate, coupled with the ability to increase revenue from upsells through upgrades and expansions. This is another great quarter with such an impressive 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 had a record high of CNY 156.9 million, and this is the historical record where our deferred revenue balance has exceeded CNY 150 million. Thirdly, we continue to maintain a healthy accounts receivable turnover days level at 53 days. These are slightly higher than what we had in Q4, simply due to the extended holiday during the Chinese New Year period, which typically slows collection compared to other quarters. We will continue to work hard to ensure we collect cash from customer activity while also mitigating the risk of bad and doubtful debts. On to the balance sheet. Net total assets were CNY 376 million as of March 31, 2025. This includes cash and cash equivalents of CNY 113.6 million, accounts receivable of CNY 54.1 million, prepayments and other assets of CNY 17.4 million. Operating lease right-of-use assets of CNY 15.9 million, fixed assets of CNY 4.3 million, long-term assets of CNY 113.5 million. Goodwill of CNY 37.8 million and intangible assets of CNY 12.8 million resulting from the Zanroo acquisition in March 2022. Total liabilities were CNY 261.6 million as of March 31, this includes accounts payable of CNY 34.1 million. Current operating lease liability of CNY 4.2 million, deferred revenue of CNY 156.9 million, and accrued liabilities of CNY 66.4 million. Now let me take a few minutes here to recap the description of a quarter of accelerated growth driven by globalization that Chris used at the beginning of this call. In this quarter, our revenue year-over-year grew strongly by 38%, reaching CNY 89 million. This was the highest Q1 revenue since the transition into a pure SaaS model. Our Developer Subscription service had another CNY 50 million revenue quarter with CNY 53.5 million. Secondly, our EngageLab had a very strong quarter. Revenue grew to close to CNY 127 million on a year-over-year basis, and cumulative contract value increased by more than CNY 63 million in Q1 alone, bringing the total signed contract value to exceed CNY 110 million. Both gross profit and gross margin have improved along with our global expansion efforts. We have a seventh consecutive quarter of positive adjusted EBITDA. This was undoubtedly a very strong growth quarter for Aurora Mobile. We started the year with a great first quarter and believe the momentum will carry on to the other quarters of 2025. Now let's turn to the business outlook. Based on the current available information, the company sees Q2 2025 revenue guidance to be in the range of CNY 87.5 million to CNY 90.5 million, representing a solid 10% to 14% year-over-year compared to the same quarter of 2024, and the above outlook is based on current market conditions and reflects the company's current and preliminary estimate of market and operating conditions and customer demands, which are all subject to change. Lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended March 31, 2025, we repurchased 16,000 ADS. Cumulatively, we have repurchased a total of 295,000 ADS since the start of our repurchase program. This concludes our prepared remarks, and we're happy to take the questions now. Operator, please proceed.
Operator, Operator
We will take our first question from Calvin Wong at Spicer Capital. Please go ahead, your line is open.
Unknown Analyst, Analyst
Good evening, management. Thank you for taking my question. I have one question related to EngageLab. First of all, congrats on the EngageLab business achieving breakthrough contract value of RMB 110 million in Q1. If I work back the calculation correctly, the total newly signed contract value was more than RMB 60 million in Q1. I would appreciate it if management could provide some guidance on the outlook for the EngageLab business going forward?
Shan-Nen Bong, CFO
Okay. Thanks, Calvin. Let me take this question. I guess your calculation is spot on. So at the back of achieving this CNY 60 million contract in a single quarter, there are a few matters that I would like to share with you and everyone on the call. One is the fact that we have proven to have the ability to win big contracts on a global stage. Just to clarify, this newly signed CNY 60 million contract in Q1 2025 was from different customers outside of China. Second, our product and services are indeed meeting the needs of global customers. Customers are willing to sign multi-year contracts with us, which is another testament to the superior quality of our services and product. If you ask me whether we'll get another CNY 60 million new signed contract in Q2, I guess my frank and honest answer is unlikely at this stage, which is a realistic expectation. But this CNY 60 million a quarter taught us a few very useful lessons to achieve significant wins going forward. It shows that we have the technical capability and the know-how to win big contracts. Our products are superior to competitors in the market. With our growing presence on the global stage, other overseas customers will start to look at EngageLab differently. Maybe this CNY 60 million new contracts a quarter is not too far away after all. I hope this answers your question, Calvin.
Unknown Analyst, Analyst
Very clear. Thanks.
Operator, Operator
We will now take our next question. It comes from Marco Zhang at Gelonghui Research. Please go ahead; your line is open.
Unknown Analyst, Analyst
Hi. This is Marco from Gelonghui Research. Congrats to the company on another strong quarter. I have one question for the management. So this quarter, your revenue grew 38% year-over-year, gross profit grew 27% year-over-year, and your adjusted EBITDA is on the seventh consecutive quarter of positive numbers. However, the company is still recording a net loss. So my question is, when do you think we can expect your quarterly net profit?
Shan-Nen Bong, CFO
Thanks. Hi Marco, let me take your question. You are right to point out a few key numbers. Let me recap that in this quarter, we have revenue growing by 38%, gross profit growing by 27%, and our OpEx only grew by 14%. This business model has a perfect relationship to generate profitability. In short, you may conclude that we earn more than we spend. But if I peel a little deeper, one very important finding that I'll share with you and the others on the call is that there are certain expenses that we need to spend now in order to maintain our continuous growth trajectory. Let me explain more. For example, for R&D, it is vitally important that we continue to research and develop and fine-tune our product. A great example is financial risk management, where the business grew by 64% year-over-year. This is mainly due to product upgrades that we made. This upgrade resulted in more customers using and consuming our products. Therefore, we achieved 64% revenue growth. On the flip side, if we stand still and have no intention to increase our R&D activities, our product will not evolve, and we will not achieve that revenue growth. Secondly, marketing expenses are crucial for any company needing to spend in order to broaden reach and expansion globally. We need to have the EngageLab brand name known worldwide. Because of our marketing campaign, we were able to grow the business without borders into 40 countries and regions by March 31, 2025. As a matter of fact, if you want net profit next quarter, I believe we can achieve that. All we need to do is freeze our R&D and marketing expenses. However, this would come at the expense of product development and continuous market competitiveness, and this would certainly hurt our ability to grow revenue in the near future. Therefore, we need to strike a balance between spending diligently enough to fuel our continuous revenue growth in the next 12 or 24 months. So long as we continue to scale our business, the results will come sooner or later. And I hope this answers your question, Marco.
Unknown Analyst, Analyst
Yes, thanks. Congrats again, and we look forward to seeing another strong quarter. Thanks. I have no more questions. Thank you.
Operator, Operator
There are no further questions. I would like to hand back to Rene Vanguestaine for closing remarks. There are no further questions. I'll hand back to Rene Vanguestaine for closing remarks.
Rene Vanguestaine, Host
Thank you, Heidi. 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.
Operator, Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.