Aurora Mobile (NASDAQ: NASDAQ:JG) announced a robust performance in its Third Quarter 2024 Earnings Conference Call, with CEO Weidong Luo reporting record-breaking revenues and significant growth in its EngageLab business and overseas markets. The company experienced a 7% increase in total group revenue year-over-year, surpassing RMB 15 million in quarterly revenue for the first time. Developer subscription revenue saw an 11% rise, contributing to a core business subscription revenue of RMB 51.7 million. The company's strong financial position is also reflected in its net operating cash inflow and cash reserves, with the former reaching the highest in 16 quarters.
Key Takeaways
- Aurora Mobile's total group revenue grew by 7% year-over-year.
- Developer subscription revenue increased by 11%, with core business subscription revenue at RMB 51.7 million.
- EngageLab customer numbers rose by 42%, with revenue nearly doubling year-over-year.
- Net operating cash inflow hit a 16-quarter high at RMB 12.3 million.
- Cash reserves exceeded RMB 101 million as of September 30, 2024.
- Total (EPA:TTEF) deferred revenue remained strong at RMB 134.8 million for the 11th consecutive quarter.
- Operating expenses increased slightly, primarily due to sales and marketing costs.
- The company repurchased 29,000 ADS in Q3, totaling 246,000 since the program began.
Company Outlook
- Aurora Mobile's overseas expansion strategy, initiated 18-20 months ago, has led to five consecutive quarters of positive adjusted EBITDA.
- Plans for potential future office expansions are based on customer growth and revenue in new regions.
Bearish Highlights
- General and administrative expenses surged by 92% year-over-year.
- Selling and marketing expenses increased by 3% due to higher commissions and travel costs.
Bullish Highlights
- The EngageLab business segment achieved nearly 100% revenue growth year-over-year.
- The company's overseas expansion strategy has been effective, with significant revenue generated from developer subscriptions.
Misses
- Despite overall growth, the company faced increased operating expenses, particularly in sales and marketing, and general and administrative areas.
Q&A Highlights
- Shan-Nen Bong confirmed the presence of offices in Singapore and Kuala Lumpur to support growth in Southeast Asia.
- The company is considering additional office expansions in regions like the Gulf, contingent on customer numbers and revenue growth.
- The management stressed the importance of execution in achieving positive adjusted EBITDA and record revenues.
Aurora Mobile's third-quarter earnings call underscored the company's successful expansion and growth strategies, particularly in its EngageLab business and developer subscription services. With a consistent increase in revenues and customer base, the company is poised for further growth, supported by its strong financial position and strategic international presence. Aurora Mobile's management remains focused on execution and cost-saving measures to sustain its positive trajectory, with potential expansions on the horizon to tap into new markets.
InvestingPro Insights
Aurora Mobile's (JG) impressive third-quarter performance aligns with several key metrics and insights from InvestingPro. The company's record-breaking revenues and growth in its EngageLab business are reflected in its impressive gross profit margins, which stand at 69.3% for the last twelve months as of Q2 2024. This robust margin underscores the efficiency of Aurora Mobile's business model and its ability to generate substantial profits from its sales.
The company's strong financial position, highlighted by its net operating cash inflow and healthy cash reserves, is further supported by an InvestingPro Tip indicating that Aurora Mobile holds more cash than debt on its balance sheet. This financial stability provides the company with flexibility for future investments and expansions, as mentioned in their outlook for potential office openings in new regions.
Despite the positive revenue growth and market expansion, it's worth noting that Aurora Mobile is currently trading at a low revenue valuation multiple, according to another InvestingPro Tip. This could suggest that the market has not fully priced in the company's recent performance and growth prospects, potentially presenting an opportunity for investors.
The company's stock has shown strong performance recently, with InvestingPro data revealing a remarkable 60.22% price total return over the last three months and an even more impressive 97.24% return over the past six months. This aligns with the company's reported success in its overseas expansion strategy and consistent positive adjusted EBITDA.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 13 more tips available for Aurora Mobile. These additional insights could provide valuable context for understanding the company's financial health and market position in greater depth.
Full transcript - Aurora Mobile Ltd (JG) Q3 2024:
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile Third Quarter 2024 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. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Christian Arnell. Thank you. Please go ahead, sir.
Christian Arnell: Thank you, Michelle. 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 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 would now like to turn the conference over to Mr. Luo. Please go ahead.
Weidong Luo: Thanks, Christian. Greetings to all. Welcome to Aurora Mobile's 2024 third quarter earnings call. Before I comment on our Q3 results, I would like to remind everyone that, the quarterly earnings that is available on our IR website. You may refer to that, as we proceed with the call today. As we did in the past, based on the Q3 numbers, the appropriate a description I will use for the Third Quarter result is record breaking for the following reasons. Firstly, we are writing our own history. We are on a road. In this quarter, we record the fifth consecutive quarterly press release adjusted EBITDA. Secondly, developer subscription revenue record both 7% growth quarter-over-quarter and 11% growth year-over-year. More importantly, the quarterly revenue has exceeded RMB15 million for the first time in history, yet another record-breaking event in this quarter. Thirdly, our EngageLab business continues to shine in terms of customer numbers and cumulative signed contract value, where they grew 42% and 23% quarter-over-quarter, respectively. Firstly, we record net operating cash inflow of RMB12.3 million being the highest level in the past 16 quarters bringing the cash balance above RMB101 million as of 9/30, 2024. These are the net shots of the great numbers we have achieved in this quarter. Now let me expand further. Our total group revenue has grown 7% year-over-year fueled by the strong numbers from developer services. Within the group revenue, developer subscription service and financial risk management record 11% and 29% year-over-year revenue growth, respectively. Development services revenue, which consisted of subscription services and value-add services, increased by 12% year-over-year and 2% quarter-over-quarter. Subscription revenue has been recording great numbers where it increased by 11% year-over-year and 7% quarter-over-quarter. Value-added services revenue grew by 20% year-over-year but decreased 30% quarter-over-quarter. Our core business subscription services revenue of RMB51.7 million grew strongly by 11% year-over-year and 7% quarter-over-quarter. The year-over-year and quarter-over-quarter revenue growth was mainly driven by increase in ARPU. As mentioned earlier, we brought our own quarterly revenue record in this quarter where we had for the first time in history. Subscription revenue is RMB50 million in a single quarter. This is a remarkable achievement. I would like to take a moment to thank all our customers in trusting our products and services and our G1 teams for working hard and deliver great service to our customers. Another major contributor of this impressive revenue growth was the solid performance of our EngageLab business. The EngageLab business has contributed strong revenue growth in this quarter. On a year-over-year basis, the recognized revenue for EngageLab has grown close to 100%. I shall share more on EngageLab business shortly. Within subscription revenue, some of the notable new and renewable customer in this quarter include, but not limited to, world's largest heavy company for their Chinese operations, BYD (SZ:002594) and ShunFeng Express, Kimichai Mingshot and Gwanda Credit Card, just to name a few. Value-added services revenue were RMB5.8 million, decreased by 30% quarter-over-quarter but increased by 20% year-over-year. The sequential decrease was due to the new YouYabao [ph] online shopping festival in Q2, but was non-existent in Q3. This revenue trend in Q3 was within our expectations. Next (LON:NXT) is the most exciting part of the business in terms of its growth and future perspective. Allow me to spend the next few minutes on our EngageLab business this quarter. Firstly, we continue to acquire more overseas customers in Q3. The contracted customer numbers has reached 513, representing a 32% sequential growth. Secondly, the cumulative signed contract value of engagement has grown by RMB6 million quarter-over-quarter as of December -- as of September 30, 2024. The total signed contract value stood at approximately RMB48 million. We are truly pleased with this result. Further, we expand our global reach to two additional countries in this quarter by September 30, 2024. Our engagement products and services was sold to customers in more than 31 different countries and regions globally. In summary, since we expanded overseas, more than 513 customers from 41 countries has tested, convinced and brought our multichannel engagement services to help them improve their user engagement effort and to do it in a more cost-efficient manner. Meeting and existing the clients' expectations is what we believe to be the key to our success globally. We will certainly not be sitting on our laurels. We will continue to work hard and harder. We have high hopes to achieve greater things overseas. Internally, we can properly fulfill and prepare the detailed execution plans and allocate our resources accordingly. This is an ongoing process where we will make continuous adjustment and steps as and when necessary. Yes, the overseas expansion is not easy, but with the track record we have had for the past six quarters, I'm very hopeful yet committed to ensure we can and we'll continue to bring great customers from around the world every quarter. As of today, apart from our Singapore office, we have set up our current Colombo office. In Colombo, we now have local sales school, have great local knowledge on the ground and can better serve the local markets and the neighboring countries and customers. As a matter of fact, I was in Colombo last week for the short one-week business trip there. I was overwhelmed with the great responses from our potential customers in Colombo. They were very impressed with the multichannel engagement services we have and are converting to subscribe our services. Our services are indeed very suited to the local market and customers' needs. Therefore, we are building a very strong sales pipeline in Malaysia, and we are looking more resources to increase both the market penetration and market share deal. With the success cases we have in both Singapore and Malaysia, we are going to replicate this conversion of new customers' acquisition experience to other countries in Asia Pacific region. I believe there will be more great success story than I am able to share with you in the next earnings call. With that, I will now pass the call to Shan-Nen, who will share more about the vertical applications and other aspects of our financial performance for this quarter.
Shan-Nen Bong: Thanks, Chris. Next, I'll go over the revenue of our vertical application that includes Financial Risk Management and Market Intelligence. Overall, vertical application had a relatively quiet quarter, where revenue decreased by 6% quarter-over-quarter and 4% year-over-year. Nevertheless, we did a relatively quiet quarter. We still saw a great number from Financial Risk Management, where it recorded a 29% growth in revenue year-over-year and relatively flat quarter-over-quarter. They were the star performer within vertical applications. The 29% year-over-year revenue growth was mainly due to a strong 28% growth in ARPU. The trend we have seen in Q3 was existing customer have increased their consumption of our financial risk management product and services. And this is very important, and it provided a very solid foundation for the revenue numbers every quarter. This also demonstrate that, our products are widely used and well received by the financial sector customer in their own risk model. The customers that we sign up or renew in Q3 include, but not limited to, Ningbo Ligong, Zhendu Ligong [ph] Haier Xiaoxing, Ping An Xiaoxing and many other more licensed credit and financial institution throughout China. Market Intelligence revenue decreased by 41% year-over-year and 22% quarter-over-quarter, due to the continued weak market demand for Chinese APP data. This is in line with our expectation. In Q3 of 2024, we did manage to sign renewal contracts with some well-known large customers. And within Market Intelligence, from product perspective, we have recently launched a global ranking of APP service, where customers can now have access to multidimensional indicators, including app penetration rate, active user and new users of global key APP across different countries and different regions. Since its launch in September, we have seen good trial accounts registration rate, and we believe it will give a good and new set of independent source of data to enterprises and investment customers for them to make informed investment decision. Next, I'll go through some of the key expenses and balance sheet items. On to operating expenses. Our Q3 operating expenses was at RMB57.1 million, representing a slight 4% increase quarter-over-quarter and 5% decrease year-over-year. The majority of the increase was attributable to our sales and marketing department. As we expand overseas, this has no doubt required additional resources allocation. Also, the increase in revenue and cash collection in this quarter also resulted in additional commission and expenses. These are all within our expectation. And so, as long as the revenue and gross profit are growing at a faster pace than OpEx, the end result will be a plus to the financial statement. I'll now go through the individual OpEx category. For R&D expenses, it decreased by 26% year-over-year to RMB24.2 million mainly due to lower headcount that reduced salary cost and associated share-based compensation and a decrease in data analysis and technical service expense. Selling and marketing expenses increased by 3% year-over-year to RMB22.4 million mainly due to the increase in sales commission and traveling expenses, as we continue to expand overseas. G&A expense increased by 92% year-over-year to RMB10.4 million mainly due to the one off RMB7.6 million gain from disposal of fixed assets in last year that was not existing in Q3 of this year. Other G&A expenses movement was within expectation. Onto the balance sheet. I'll share two very important KPIs that we closely monitor. We continue to maintain a healthy AR turnover day at 48 days. We'll continue to work hard to ensure we actively collect cash from customers and at the same time mitigating the risk of bad and doubtful debts. Secondly, one of the key KPI for tracking performance of SaaS company is a total deferred revenue, which represent cash collected in advance from customers for future contract performance, which remain high at RMB134.8 million. And this is the 11th quarter -- consecutive quarter where our deferred revenue balance was has exceeded RMB130 million. On the cash flow, we are very pleased with the team's diligent cash management in the operating activity this quarter. For the quarter ended September 30th, we have recorded net operating activities cash inflow of RMB12.3 million, which is the highest level for the past 16 quarters. Next, total assets were $351.7 million as of September 30th. This includes cash and cash equivalent of RMB $101 million, accounts receivable of RMB 40.5 million prepayments and other current assets of RMB20.2 million, operating lease right of use assets of RMB20.9 million, fixed assets of RMB3.2 million, long-term investment of RMB112.5 million, goodwill of RMB37.8 million and intangible assets of RMB14.7 million, resulting from the Sand Cloud acquisition in March 2022. Total current liabilities were at RMB238.3 million. This includes accounts payable of RMB27.1 million current operating lease liability of RMB5.4 million, deferred revenue of RMB134.8 million, accrued liabilities of RMB68 million. Now let me take a few minutes here to recap Q3 of 2024 that we just had. In this quarter, our developers' subscription services recorded solid and impressive revenue growth year-over-year. And more importantly, we achieved a RMB50 million revenue quarter for the first time in history. Number two, we are making history again in this quarter where we had the fifth consecutive quarters of positive adjusted EBITDA. Number three, our EngageLab business recorded customer number growth of more than 32% quarter-over-quarter and cumulative contract value increased by more than RMB7 million between the quarters to more than RMB38 million and we recorded net operating cash inflow of RMB12.3 million and lastly, before I conclude, I shall give an update on the share repurchase plan. In the quarter ended September 30th, 2024, we repurchased 29,000 ADS. Cumulatively, we have repurchased a total of 246,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. We're happy to take your questions now. Operator, please proceed.
Operator: Thank you. Our first question comes from Calvin Wong with Spica Capital. Your line is open.
Calvin Wong: Thank you for taking my questions. I really appreciate that the management has deliver another quarter of very impressive results. I'd like to recap what I head you say, you have five consecutive quarters of positive adjusted EBITDA and your core developer subscription business revenue of more than RMB15 million and finally EngageLab business is growing significantly every quarter. So, I really appreciate management could provide more colors on all these three great achievements. Thanks.
Shan-Nen Bong: Let me take this question. For many, including yourself, would appreciate achieving this -- any one of this within a quarter is not an easy task. And for us to do it with three great milestone that you mentioned in one quarter, I think it's remarkable to say the least. And if there's one thing that I can attribute this to, I would say, it will be the effective execution that help us bring these numbers. I mean, you can spend as much time and energy in the planning and preparation stage, but I think the key to any success is how well you execute your plan. And probably, as you know, we started the plan to go overseas about 18 months to 20 months ago. And by then, it was a rough road ahead of us, and we have to start everything from scratch. And we did not just buy an overseas company, who has operation overseas. We did it the hard way, but on the way, we learned a lot. We tackled all the issues ourselves. For instance, when we venture overseas, we need to sort out, where we should store our customers' data and which overseas cloud service provider that suit us best and suit our customers best. And also, which IT structure should we have to serve our customers across 31 countries, that Chris mentioned. And the best answer to this can only be had through on field execution. And also, because we executed the growing overseas plan really well, and we are able to have a RMB50 million revenue quarter for developer subscription service, and this is the highest single quarter revenue for this segment in our history. And this will now be achieved by simply having really good plans. At the same token, having a RMB50 million revenue quarters worth developer subscription revenue itself will not automatically achieve positive adjusted EBITDA. We have to properly execute the business expansion and cost saving plans simultaneously, and all these are interrelated. So therefore, in conclusion, it is clear that, we, the management has an execution skill and determination to manage the business and managing it well. So only when we effectively executed this plan that we have, we can achieve a record-breaking quarter that Chris mentioned at the beginning of this call. I hope this answers your question, Kevin.
Operator: Thank you. Our next question comes from Jack Sun with [ph] Jirongu Research. Your line is open.
Unidentified Analyst: Congratulations on a strong quarter. I'm Jack Sun from -- Research. I have a question for management. I heard Chris mention during the call that for the overseas expansion, you have offices and staff in both Singapore and Malaysia. To support overseas business growth, are we expecting more offices around the world in the near future? Thanks.
Shan-Nen Bong: Yes. Thanks, Jack. Let me take this question too. Yes, you're right. We now have offices in both Singapore and in Kuala Lumpur, which is in Malaysia. And we make conscious decision when selecting these two cities to have our offices. For the immediate, we believe these two offices are strategically well located to help us expand in the Southeast Asia and beyond. Currently, a good portion of our overseas revenue are derived from customers in the Southeast Asia region. Therefore, having local teams to support this region is key. And also, we need to have -- we need to be there when customers have issue that needs addressing, or when they have plans to buy more of our services. And we believe, there are a lot of opportunities in the Southeast Asia countries that we can harvest in the near future. And so, with teams in KL and Singapore, it is only a short trip for them if they need to be in, say, Bangkok, Taipei, Jakarta or even any cities within the Southeast Asia region. As a matter of fact, our Singapore team has flown to Taipei this week for meetings with the customers and ISV there. Looking ahead, we certainly will be considering more offices when there is a good reason to have -- take for example, should the business in terms of customers' number and revenue in the Gulf region is becoming material, we'll certainly be open to having our offices in Doha, Dubai or even Abu Dhabi to serve the customer in that region. So, if I may, the short answer to your question is that, the need to have more offices overseas is solely dependent on the numbers. So long as the numbers add up, we have, i.e. we have enough customers and enough revenue, we definitely will set up overseas, more overseas offices in the near future. Hope this answers your question, Jack.
Operator: Thank you. There are no further questions at this time. I'd like to turn the call over to Christian Arnell for closing remarks.
Christian Arnell: Thank you. 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 great evening, everyone. Thank you.
Operator: Thank you for your participation. This does conclude the program. You may now disconnect. Good day.
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