On August 29, Aurora, China's leading customer interaction and marketing technology service provider (NASDAQ:JG), announced its unaudited financial report for the second quarter ending June 30, 2024.

Overall, in this quarter, Aurora's overseas business continued to expand rapidly, with an improved growth rate compared to the previous quarter, and its global competitiveness is also increasingly prominent. At the same time, Aurora's core business grew comprehensively, especially in the subscription service business, achieving double-digit growth in revenue on a year-on-year and quarter-on-quarter basis. In terms of profitability, Aurora has achieved profit for four consecutive quarters, which confirms its ability to sustain profitability.

However, as of today, the performance of most companies in the SaaS industry is still in a loss state. Profitability is not only an important goal for industry companies, but also a "value yardstick". According to market data, since 2023, most of the top SaaS companies that have made attempts to go public in Hong Kong still remain in a loss state and have not achieved profitability since their establishment.

This further reflects that Aurora has a relatively high-quality foundation and has become a scarce SaaS enterprise that cannot be ignored.

Aurora's founder and CEO, Weidong Luo, said: "In the second quarter of 2024, we continued our strong growth momentum and achieved excellent performance, as follows:

l First, we continued the strong performance of the first quarter, and the ADJUSTED EBITDA indicator achieved profit for four consecutive quarters in this quarter, which is a historic achievement since our listing in 2018;

l Second, the revenue from developer subscription services grew by 14% on a quarter-on-quarter basis and 19% year-on-year;

l Third, our gross profit achieved good growth on a year-on-year and quarter-on-quarter basis;

Fourthly, our net loss has narrowed by 50% and 95% respectively compared to the previous period and the same period last year.

First, EngageLab and GPTBots.ai are growing steadily in the international market with all businesses progressing side by side.

1. EngageLab's cumulative customer base has grown by 75% compared to the previous period, making it a globally recognized product.

In the second quarter, EngageLab and GPTBots.ai, the products and solutions under Aurora Mobile targeting the global market, are advancing together, further opening up the international market and gaining international recognition.

Among them, EngageLab has shown strong performance and has gradually become a globally renowned overseas messaging service platform. Its customers not only cover industries such as technology, internet, mobile, video, media, autos, and finance, but also span multiple countries around the world. The latest data also shows that EngageLab's business footprint has expanded to 29 countries and regions globally, an increase of 7 from the previous quarter, demonstrating significant progress in market development.

(EngageLab overseas customer distribution map; source: Aurora official website)

Furthermore, in the second quarter, the number of EngageLab's customers has expanded to 390, a nearly 75% increase compared to the previous period and a 290% increase compared to the third quarter of 2023. The cumulative contract amount is 31 million yuan, a nearly 30% increase compared to the previous period and a 210% increase compared to the third quarter of 2023, further demonstrating the continuous expansion of its business portfolio.

(EngageLab's phased achievements in going overseas; source: Aurora official website)

In terms of business layout, during this quarter, EngageLab completed the official deployment of the data center in Hong Kong, following the launch of the fourth data center after Singapore, the United States, and Europe data centers; EngageLab's AppPush has optimized the Android push strategy specifically for interactive situations of users in the Asia-Pacific region, aiming to further enhance Aurora Mobile's service capabilities in Asia, meet compliance requirements and operational needs of different global enterprises, and better support business expansion.

GPTBots is a no-code AI Bot construction platform designed specifically for enterprises, which has successfully lowered the threshold for enterprise AI applications with its easy-to-use and powerful features, attracting more and more users. As of the end of March 2024, GPTBots has exceeded 19,000 registered users, with a 90% increase compared to the previous period, and over 85% of users are from overseas. Moreover, data shows that its registered users are distributed in more than 160 countries and regions worldwide, fully demonstrating its comprehensive global layout.

Equally foreseeable, with the continuous progress of technology and the ongoing expansion of application scenarios, AI will play an increasingly important role in multiple fields. AI empowerment will also become an essential element to drive social progress and industrial upgrading. GPTBots, targeting this vast and certain market demand, achieved market positioning relatively early, with the potential to gradually unleash.

2. Subscription service revenue grew by 19% and 14% month-on-month, showing a promising business momentum.

In the second quarter, Aurora Mobile's total revenue rebounded rapidly to 79.4 million yuan, with respective increases of 8% and 23% compared to the previous period. This also marks Aurora Mobile's best revenue level in the past 5 quarters.

(Group total revenue chart; data source: Aurora official website)

At the same time, the breakdown of revenue shows that Aurora Mobile's anchoring stone business subscription service continues to improve, achieving double-digit growth on a high base, and other businesses have also shown obvious recovery, demonstrating strong development momentum.

In the second quarter, Aurora Mobile's developer services business achieved a total revenue of 56.4 million yuan, accounting for approximately 71% of total revenue. Among them, subscription service revenue was 48.1 million yuan, with a month-on-month and year-on-year growth of 19% and 14% respectively; value-added service revenue was 8.3 million yuan, with a month-on-month increase of 245%, reaching a peak in nearly four quarters.

(Group developer services business revenue chart; data source: Aurora Mobile official website)

As for the reasons, the essence of subscription is to establish and maintain relationships with customers. As Aurora Mobile expands the market, upgrades products and services, it drives rapid expansion of customer base and strengthens customer stickiness. Especially, Aurora Mobile has benefited greatly from overseas expansion.

As for value-added services, this business is closely linked to the internet advertising industry, and it restarts growth with the recovery of the internet advertising market. According to data from QuestMobile, the scale of China's internet advertising market in the second quarter is expected to recover to 159.34 billion yuan, with a year-on-year growth rate of 8.1%.

3. Industry application revenue showed strong momentum with a monthly and year-on-year growth of 8% and 16%.

In the second quarter, Aurora's industry application business revenue was 23 million yuan, with a year-on-year and quarter-on-quarter growth of 8% and 16% respectively. Among them, the financial risk control business continued to grow, with a year-on-year increase of 34% and a quarter-on-quarter increase of 28%, fully demonstrating a good development trend.

(Aurora industry application revenue chart; data source: Aurora official website)

Behind this, the economic operation in the second quarter fluctuated but showed a positive trend. The pace of transformation and upgrading of traditional industries in China accelerated, and strategic emerging industries continued to grow, potentially leading to structural increases in customer data usage. Aurora, with its professional advantage in the data services field, responded to market demand and further enhanced its brand influence. For example, in the second quarter, Moon Fox Data was invited to attend the 8th FMCG Retail Consumer Goods Digitization Summit and gave a speech, continuing to enhance its internal driving force.

Second, the gross margin remained at a high level of 66.4%, ensuring high profitability and steady development.

In the second quarter, Aurora's gross margin was 66.4%, an increase of 1.3 percentage points year-on-year, and a slight decrease quarter-on-quarter, but still maintained 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 listed Chinese SaaS companies. 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 gross margin was 68.7%. Huang Shangneng, Chief Financial Officer of Aurora, also revealed in an interview that based on the current trend, it is believed that Aurora will also be in a leading position when similar reports or analyses are published in 2023.

The year-on-year growth of gross margin in the latest quarter reflects Aurora's continued leading position and lays a good foundation for overall performance in 2024.

In addition, thanks to the significant growth on the revenue side, Aurora Mobile's total gross profit reached 52.8 million yuan, achieving double-digit growth year-on-year and quarter-on-quarter.

(Aurora gross profit chart; data source: Aurora official website)

Thirdly, Adjusted EBITDA has been profitable for four consecutive quarters, demonstrating resilience and scarce operational capability.

In this quarter, Aurora Mobile continues to actively control cost expenditures to achieve cost reduction and efficiency improvement, further ensuring stable overall profitability. Its Adjusted EBITDA is approximately 1.6 million yuan, and it has achieved profitability for four consecutive quarters.

(Aurora Mobile Adjusted EBITDA chart; source: Aurora Mobile official website)

As mentioned at the beginning, this essentially confirms that Aurora Mobile has the ability to sustain profitability, which is a scarce capability in the SAAS industry where profitability is generally not achieved. This will continue to enhance Aurora Mobile's brand strength and contribute to its stable operation, including attracting more customers and partners.

In addition, combined with the net income indicators for further verification, we can also see the trend of continuous strengthening of Aurora's profitability. In this quarter, Aurora's net loss was 1.3 million yuan, both on a year-on-year and a quarter-on-quarter basis. Based on this, Aurora may not be far from achieving overall profitability.

(Aurora Net Income Chart; Source: Aurora Official Website)

1. Operating expenses decreased by 15% year-on-year, driven by cost fine management to increase efficiency.

In the second quarter, Aurora's total operating expenses were 54.8 million yuan, a 15% decrease year-on-year and a slight increase quarter-on-quarter, but the growth rate was much lower than the growth rate of revenue. This reflects that Aurora is able to drive market development at a relatively low cost level, and has a certain market influence.

Furthermore, Aurora's R&D expenses remain high. The reduction in operating expenses mainly comes from the contraction of sales and marketing expenses, indicating a decrease in customer acquisition and maintenance costs, and improving the rationality and efficiency of expenses. Behind this, Aurora has implemented meticulous cost management, such as strict budget management system and cost control measures, actively controlling various cost expenditures, and driving the improvement of the cost-to-output ratio.

(Aurora Total Operating Expenses Chart; Source: Aurora Official Website)

In terms of Adjusted OPEX (the cash portion of operating expenses), it remained at a low level, with data for this quarter at 51.5 million yuan, a decrease of approximately 6% compared to the same period last year.

(Aurora Mobile adjusted OPEX chart; source: Aurora Mobile official website)

2. Deferred revenue has remained above 100 million yuan for 17 consecutive quarters, demonstrating a stable and positive development trend.

In the second quarter, Aurora Mobile's deferred revenue representing customer prepayments was 0.135 billion yuan, flat compared to the previous quarter. This marks the 17th consecutive quarter that Aurora Mobile's deferred revenue has exceeded 0.1 billion yuan, consolidating its positive development trend.

(Aurora Mobile deferred revenue chart; source: Aurora Mobile official website)

On one hand, deferred revenue serves as a leading indicator in the SaaS field, providing a window for observation. Its stable performance brings more certainty to Aurora Mobile's future revenue and demonstrates market recognition for Aurora Mobile's products and services, as customers are willing to cooperate with the company in the long term and make early payments. On the other hand, the increase in deferred revenue brings actual cash flow to Aurora Mobile and contributes to its long-term healthy development.

IV. Conclusion

Overall, Aurora Mobile's fundamentals are increasingly high-quality, continuously unleashing the potential of both revenue and profit. The overseas market continues to expand, subscription service revenue continues to grow, profitability continues to strengthen, and the continued excellent performance of operating expenses and deferred revenue all confirm that Aurora Mobile's business model has greater adaptability and competitiveness.

A more stable and forward-thinking Aurora Mobile has taken shape. Next, Aurora Mobile may be able to enter a new stage of value creation.