Aurora Mobile Limited American Depositary Shares 2026 Q2 Earnings Call

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. 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'd now like to turn the conference call over to Mr. Luo.

Please go ahead. Thanks, Christian.

Hi, everyone. Welcome to Aurora Mobile's 2026 second quarter earnings call. Before I comment on our Q2 results, I would like to remind everyone that we have uploaded the quarterly earnings deck on our IR website. You may refer to the deck as we proceed with the call today. As we've done in the past, the suitable description that I would give to the second quarter of 2026 is our RMB 100 million revenue quarter. The reason for this narrative is obvious. Our achievements in the second quarter of 2026 are as follows. Firstly, for the third time in our history, we recorded SaaS business revenue in excess of RMB 100 million in a single quarter. This was fueled by the highest Developer Services revenue in history of RMB 79.9 million in this quarter. Secondly, our global flagship product, EngageLab, has its best quarter yet.

The EngageLab's ARR for June 2026 has scaled to a record high of $14.6 million, representing 170% year-over-year growth. Thirdly, gross profit grew by 16% year-over-year. Gross margin improved by 197 basis points between the years. Having top-line growth alone is not enough. In this quarter, we delivered the fifth consecutive quarters of US GAAP net profit. Last but not least, operationally, we brought in net cash inflow of RMB 23.3 million this quarter. This marks a strong second quarter performance building on our Q1 results released in May. Taken together, the first two quarters of 2026 validate our robust growth momentum, and we remain on track to deliver against our target for a highly promising full year 2026. Let me now share more on the business aspects. RMB 100 million revenue a quarter. Yes, we made it again. This milestone came one quarter earlier than what we previously anticipated.

We are very pleased with this early pleasant surprise. Our total Q2 group revenue reached RMB 101.2 million, representing a strong 13% year-over-year growth. This RMB 100 million of quarter revenue is a very important milestone for us. It signifies a few key messages that I think are important that I share with you all today. Firstly, the RMB 100 million quarterly revenue milestone marks a landmark validation of Aurora Mobile's pure SaaS strategic transformation, forming a durable, larger revenue foundation. Secondly, top-line expansion is anchored by high-margin recurring Developer Subscription Services revenue supported by solid customer retention and rising enterprise demand. Thirdly, dual growth engines, domestic developer ecosystem, and fast-growing global EngageLab business jointly drive scalable cross-market revenue expansion. Fourthly, greater revenue scale improves operating leverage, underpinning our consistent profitability trend and long-term path of sustainable shareholder returns.

In this quarter, Developer Services recorded a great 24% revenue growth year-over-year, but vertical applications revenue decreased 16% year-over-year. Developer Services revenues, which consist of subscription service and Value-Added Services, delivered excellent performance in this quarter. Our core business, Developer Subscription Services, delivered another historic high quarterly revenue number of RMB 70.7 million, representing growth of 32% year-over-year and 9% quarter-over-quarter. The year-over-year and quarter-over-quarter revenue growth was mainly driven by increases in both customer number and ARPU. In short, the momentum of this business is very strong, and I do have high hope of the continued growth in many more quarters to come. Now, let's move on to the update on our global flagship product, EngageLab. EngageLab, being the jewel of Aurora Mobile's growth engine, has again brought in excellent numbers every quarter since its launch.

In this quarter, the highlights include, firstly, EngageLab recorded another quarter of tremendous growth where the ARR reached a new milestone of $14.6 million as of June 2026. This represents a 170% year-over-year growth. Secondly, EngageLab broke another record where the cumulative signed contract value has exceeded RMB 200 million by the end of Q2 of 2026. This speaks volume in terms of the market acceptance and total addressable market for this product. For sure, we are very pleased with this achievement. Nevertheless, we will continue to work hard and smart to conquer more markets and winning more contracts. In Q2 alone, we inked more than RMB 27.4 million worth of new contracts. Certainly, more and more new global customers are being converted and switched to EngageLab. The EngageLab customer number has exceeded 2,100 as of the 30th of June 2026.

The expansion of EngageLab across the globe has been very successful. Fourthly, the recognized revenue for EngageLab in Q2 of 2026 reached RMB 27.5 million, representing an outstanding 186% growth year-over-year. Also, in this quarter, there was a new addition to the EngageLab family where we officially launched Silent Auth, an advanced password-less authentication solution designed to complement existing SMS OTP services and elevate identity verification for the global market. Silent Auth provides a more dependable approach to phone-based authentication across three key use cases, namely firstly, faster registration and login. Secondly, secure verification for high-risk operations. And thirdly, marketing fraud prevention. We view the launch of Silent Auth not only enriches EngageLab's omni-channel customer engagement portfolio, but also reinforces Aurora Mobile's commitment to providing global enterprises with stable, efficient, and intelligent solutions.

Going forward, it is my goal that EngageLab will continue to leverage advanced technologies to help businesses build stronger trust-based customer relationships and accelerate global growth. Within subscription revenue, some of the notable wins in this quarter include, but are not limited to, Bank of China (Hong Kong), CXMT, DeepSeek, Mingshun Zhenzhen, and HashKey. Value-Added Services revenues were RMB 9.2 million, up 36% quarter-over-quarter, but down 15% year-over-year. The quarter-over-quarter spike was mainly attributable to the traditional quarterly online shopping of 618 in Q2. I think it is also time for me to provide an update on the progress and updates we have on our enterprise AI agent platform, GPTBots.ai. Recently, we released a major production-grade upgrade to GPTBots.ai, tackling the key industrial limitations whereby conventional AI agents only support conversations and demos, lacking deep business system integrations and end-to-end task execution.

The upgrade centers on three pillars. A graph-enhanced knowledge base for context-aware business analysis, autonomous workflow automation across 14 communication channels via agent collaboration, and robust enterprise governance with audit trails, runtime safeguards, and mandatory human validation for live deployments. This product advancement supports GPTBots global expansion through the following. Firstly, transforms the platform into a production-ready solution to improve overseas sales conversion. Secondly, native compatibility with global channels, including WhatsApp, Slack, and Microsoft Teams, extends market reach across North America, Europe, and Southeast Asia. Thirdly, strengthened governance satisfies international data compliance requirements, enabling deals with multinationals and regulated sectors. Fourthly, optimized knowledge processing reduces customization and onboarding costs for global clients and improves project gross margins. We believe the upgrade puts Aurora Mobile in a strong position to capture market share as enterprises worldwide transition from AI testing to large-scale deployment of agentic AI.

As you can see, besides growing the business globally, we have been busy on the R&D fronts. Our team has not taken our eyes off the need to continue to upgrade and create new products and services to supplement our entire suite of service to our customers. This is important because we will not rest on our laurels amidst our achievements to date. We must remain attuned to the latest developments across global markets and implement necessary product upgrades, adjustments, and innovations as circumstances demand. Only by doing so can we stay relevant and meet the evolving needs of our global customer base. Collectively, these efforts form critical building blocks to sustain ongoing revenue growth and advance our path toward improved profitability. Now, let me pass the call over to Shan-Nen Bong, who will take you through the metrics on vertical applications and financial performance for this quarter.

Okay. Thanks, Chris. For vertical application, that includes Financial Risk Management and Market Intelligence. Overall, 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 remained flat quarter-over-quarter. We are still 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, Shanghai Pudong Development Bank, Ping An, WeBank, 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. This result is in line with our expectation. Coming to the other P&L items.