On August 29th, Aurora Mobile Limited (NASDAQ: JG), a leading customer interaction and marketing technology service provider in China, announced its unaudited financial results for the second quarter ended June 30, 2024.
Overall, in this quarter, Aurora's overseas business continued to expand rapidly, with an increased sequential growth rate, and its global competitiveness became increasingly prominent. At the same time, Aurora's core business saw comprehensive growth, especially in the subscription service business, which achieved double-digit growth in both year-over-year and sequential revenue. In terms of profitability, Aurora has achieved profitability for four consecutive quarters, essentially validating its ability to sustain profitability.
As of today, the performance of most companies in the SaaS industry is still in a loss-making state, and profitability is not only an important goal for industry companies but also a "value yardstick." According to market data, since 2023, among the leading SaaS companies that have made attempts to go public on the Hong Kong Stock Exchange, the vast majority of companies are still mired in losses and have not achieved profitability since their establishment.
This further demonstrates that Aurora has a relatively high-quality basic outlook and has become a scarce SaaS company that cannot be ignored.
Aurora's founder and CEO, Luo Weidong, said, "In the second quarter of 2024, we continued our strong growth momentum and achieved excellent performance, as follows:
1. First, we carried forward the strong performance of the first quarter, and the ADJUSTED EBITDA metric achieved profitability for four consecutive quarters, which is a historic achievement since our public listing in 2018;
2. Second, developer subscription service revenue increased by 14% sequentially and 19% year-over-year;
3. Third, our gross profit achieved good growth in both year-over-year and sequential terms;
4. Fourth, our net loss narrowed by 50% sequentially and 95% year-over-year."
I. EngageLab and GPTBots.ai are becoming more and more stable in the international market, with all business lines advancing in tandem.1. EngageLab's cumulative customer growth rate reached 75% quarter-on-quarter, becoming a globally renowned product.
In the second quarter, EngageLab and GPTBots.ai, products and solutions under Aurora's umbrella targeting the global market, advanced side by side, further opening up the international market and earning international acclaim.
Among them, EngageLab showed strong performance, gradually becoming a globally recognized overseas messaging service platform. Its customers not only cover industries such as technology, internet, mobile phones, video, media, automotive, and finance but also span multiple countries around the world. The latest data also shows that EngageLab's business reach has extended to 29 countries and regions globally, an increase of 7 compared to the previous quarter, indicating significant market development achievements.
It can also be seen that in the second quarter, EngageLab's customer base expanded to 390, with a nearly 75% quarter-on-quarter growth and a 290% increase compared to the third quarter of 2023; the cumulative contract amount reached 31 million yuan, with a nearly 30% quarter-on-quarter growth and a 210% increase compared to the third quarter of 2023, further reflecting the continuous expansion of its business territory.
In terms of business layout, in this quarter, EngageLab's platform officially completed the deployment of the Hong Kong data center in China, which is its fourth data center launched after Singapore, the United States, and Europe; EngageLab's AppPush has optimized the Android push strategy specifically for user interaction in the Asia-Pacific region, which is expected to further enhance Aurora's service capabilities in Asia, meet the compliance requirements and operational needs of different enterprises globally, and better support business expansion.
GPTBots is a no-code AI Bot construction platform specifically built for enterprises. With its easy-to-use and powerful features, it has successfully reduced the threshold for enterprises to apply AI and is attracting more and more users to join. As of the end of March 2024, the number of registered users of GPTBots exceeded 19,000, with a quarter-on-quarter growth of 90%, of which more than 85% of users come from overseas. Data also shows that its registered user base has spread to more than 160 countries and regions worldwide, fully proving that its global layout has been fully unfolded.
It is also not difficult to foresee that with the continuous advancement of technology and the continuous expansion of application scenarios, AI will play an increasingly important role in various fields, and AI empowerment will become an indispensable element in promoting social progress and industrial upgrading. GPTBots has anchored this huge and certain market demand, realizing market positioning earlier, and its potential is expected to be gradually released.
2. Subscription service revenue grew by 19% year-on-year and 14% quarter-on-quarter, with business momentum soaring.In the second quarter, Aurora's total revenue rebounded rapidly to 79.4 million yuan, representing an 8% increase year-on-year and a 23% increase quarter-on-quarter. This also marks the best revenue level for Aurora for five consecutive quarters.
At the same time, a breakdown of the revenue composition shows that Aurora's cornerstone business, subscription services, continues to improve, achieving double-digit growth on a high base, and all other businesses have seen a significant recovery, demonstrating strong development momentum.
In the second quarter, Aurora's developer service business achieved a total revenue of 56.4 million yuan, accounting for about 71% of the total revenue. Among them, subscription service revenue was 48.1 million yuan, with a year-on-year increase of 19% and a quarter-on-quarter increase of 14%; value-added service revenue was 8.3 million yuan, a quarter-on-quarter increase of 245%, reaching the peak for the past four quarters.
The reason for this is that the essence of subscription is to establish and maintain relationships with customers. As Aurora expands its market and upgrades its products and services, it drives rapid expansion of customer numbers and continuously strengthens customer stickiness, significantly expanding the customer base. In particular, Aurora has benefited deeply from overseas expansion.
In terms of value-added services, this business is closely linked to the internet advertising industry and has restarted growth with the recovery of the internet advertising market. According to QuestMobile data, the scale of China's internet advertising market in the second quarter is expected to recover and grow to 159.34 billion yuan, with a year-on-year growth rate of 8.1%.
3. Industry application revenue increased by 8% year-on-year and 16% quarter-on-quarter, showing strong momentum.
In the second quarter, Aurora's industry application business revenue was 23 million yuan, with a year-on-year increase of 8% and a quarter-on-quarter increase of 16%. Among them, the financial risk control business continued to grow, with revenue increasing by 34% year-on-year and 28% quarter-on-quarter, also fully demonstrating a good development trend.Behind this, the economic operation in the second quarter showed fluctuations but still maintained a positive trend. The pace of transformation and upgrading of China's traditional industries has accelerated, and strategic emerging industries continue to grow, which may structurally increase the demand for customer data calls. Aurora, with its professional advantages in the field of data services, responded to market demands and further enhanced its brand influence. For example, in the second quarter, Aurora Data was invited to attend the 8th FMCG Retail Consumer Goods Digitalization Summit and delivered a speech, continuously strengthening its internal momentum.
II. The gross margin maintained a high level of 66.4%, ensuring high profitability and stable development
In the second quarter, Aurora's gross margin was 66.4%, an increase of 1.3 percentage points year-on-year, and decreased slightly quarter-on-quarter, but it remained at a relatively high level.
According to the report issued by Ernst & Young, Aurora's gross margin is significantly higher than the average level of Chinese SaaS companies listed in China. In 2022, the average gross margin of Chinese SaaS companies listed on the A-share, Hong Kong stock, and U.S. stock markets was 57.8%, 53.6%, and 57.8%, respectively, while Aurora's was 68.7%. Huang Shangneng, Aurora's Chief Financial Officer, also revealed in an interview that based on the current trends, he believes that when similar reports or analyses are released in 2023, Aurora will also be in a leading position.
The year-on-year increase in the latest quarter's gross margin reflects Aurora's maintenance of a leading position and also lays a good foundation for the overall performance in 2024.
In addition, thanks to the significant increase in revenue, Aurora's total gross profit reached 52.8 million yuan, achieving year-on-year and quarter-on-quarter growth.
III. Adjusted EBITDA has been profitable for four consecutive quarters, demonstrating tenacious and rare operational capabilities
In this quarter, Aurora continued to actively control cost expenditures to achieve cost reduction and efficiency enhancement, further ensuring stable overall profitability. Its adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) were approximately 1.6 million yuan, which has been profitable for four consecutive quarters.As stated in the opening, this fundamentally confirms that Aurora has the ability to sustain profitability, which is a rare capability in the context of SaaS companies that are generally not yet profitable. This will also continue to enhance Aurora's brand power, aiding in its steady operations, including attracting more customers and partners.
Furthermore, by examining the net profit margin indicator, one can also observe a trend of increasing profitability for Aurora. In this quarter, Aurora's net loss was 1.3 million yuan, which was significantly narrowed compared to the same period last year and the previous quarter. Based on this, the time for Aurora to fully achieve profitability may not be far off.
1. Operating expenses decreased by 15% year-on-year, with refined cost management driving efficiency growth
In the second quarter, Aurora's total operating expenses were 54.8 million yuan, a decrease of 15% year-on-year, and there was a slight increase quarter-on-quarter, but the growth rate was far lower than the increase in revenue. This reflects Aurora's ability to promote market development at a relatively low cost level, indicating a certain market discourse.
Moreover, Aurora's R&D expenses have continued to account for a high proportion, and the reduction in operating expenses mainly comes from the contraction of sales and marketing expenses, indicating that Aurora's customer acquisition and maintenance costs have been reduced, enhancing the rationality and efficiency of expenses. Behind this, Aurora has implemented refined cost management, such as enforcing strict budget management systems and expense control measures, actively controlling various cost expenditures, and driving the improvement of the cost-to-output ratio.
In terms of Adjusted OPEX (the cash portion of operating expenses), it also remains at a relatively low level, with this quarter's data at 51.5 million yuan, a decrease of about 6% year-on-year.
2. Deferred revenue has remained above 100 million yuan for 17 consecutive quarters, solidifying a good development trendIn the second quarter, Aurora's deferred revenue from customer prepayments stood at 135 million yuan, remaining flat quarter-over-quarter. This marks the 17th consecutive quarter where Aurora's deferred revenue has exceeded 100 million yuan, further solidifying its positive operational development trend.
On one hand, deferred revenue serves as a leading indicator in the SaaS sector, providing a window for observation. Its robust performance brings more certainty to Aurora's future revenue and indicates that the market recognizes and values Aurora's products and services, willing to engage in long-term cooperation with the company and prepay for it. On the other hand, the increase in deferred revenue brings tangible cash flow to Aurora, which is conducive to its long-term healthy development.
In conclusion, Aurora's fundamentals are becoming increasingly strong, continuously unleashing potential on both revenue and profit fronts. The continuous expansion of overseas markets, the sustained growth of subscription service revenue, the ongoing enhancement of profitability, and the sustained excellent performance of operating expenses and deferred revenue all confirm that Aurora's business model has stronger adaptability and competitiveness.
A more robust and future-oriented Aurora has taken shape. Moving forward, Aurora may be poised to enter a new phase of value creation.
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