Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your host today, Rene Vanguestaine. Thank you. Please go ahead.

Thank you, Amber. Hello, everyone, and thank you for joining us today. Aurora'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. Fei Chen, President; and Mr. Shan-Nen Bong, Chief Financial Officer. Following their prepared remarks, all three 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. Future 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'd now like to turn the conference over to Mr. Luo. Please go ahead.

Thanks, operator. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's fourth quarter and full year 2020 earnings call. The year 2021st marks the 10th anniversary of Aurora Mobile. Looking back, we are extremely proud of what we have achieved in the past decade in helping all our mobile APP customers in China to improve their operational efficiency, helping each and every one of them improve their operations, grow, and now monetize. I still see vividly everybody remember the very first JPush product we developed for mobile APP developer's way back in 2011 and we have come a long way since. Over the - of this past decade to in-house innovation, technical progress, and relentless pursuit of excellence. We have reached many milestones. We started with one JPush product in 2011. And over the years, we developed seven additional products for mobile APP developers meeting their different and evolving optional needs. Cumulatively as of December 31 of 2020, we have worked with more than 591,000 APP developers, representing more than 1.7 million APPs in total. Our developer service SDKs have been installed more than 46.7 billion times. In the fourth quarter of 2020, on average, every month there were more than 17,000 new mobile apps joining and using one or more of our developer services. I would like to use this opportunity to thank all the mobile APP developers who have been alongside us, trusted us and co-operated with us over these 10 years. I believe the next 10 years will be even greater for our customers, thanks to the new exciting and innovative product and service offerings from Aurora Mobile. The year 2020 was a very extraordinary year in which an unexpected pandemic reshaped the world and changed how people live their lives and…

Thank you, Chris [ph] Let me start the discussion of different revenue streams within the SAAS businesses. Our SAAS form Developer Services shine continuously from the first quarter to the fourth quarter of 2020, and was the biggest revenue contributor within our SAAS businesses in fourth quarter 2020. For the quarter ended December 31, 2020, we recorded RMB52.5 million in revenue for Developer Services, which represented 46% growth on a year-over-year basis. The significant revenue growth in Developer Services was fueled by 28% and 14% growth in customer numbers and ARPU respectively. For Subscription Services within the Developer Services, we continued to see more customers signing up to our suite of Developer Services. New and the renew customers include, among others include, Farfetch, [indiscernible] and the Ping An Bank Subscription Services revenue was RMB35.1 million, an increase of 6% year-over-year and 16% quarter-over-quarter, primarily driven by the increase in customer numbers. Value-Added-Services within Developer Services, which include revenues from JG Alliance services and Advertisement SaaS, recorded another strong quarter, as revenues grew by 29% quarter-over-quarter and 432% year-over-year. The value-added-services full year revenue grew from RMB3.3 million in financial year 2019 to RMB52.5 million. The 15X annual revenue growth demonstrates the large potential market opportunity and growing demand of our value-added-services. In the fourth quarter, the revenue from value-added-services was RMB17.4 million compared to RMB3.2 million in the same quarter a year ago. This 432% year-over-year revenue growth is attributable to the growth in both the supply and demand sides of the JG Alliance. On the supply side, we continued to see many APPs joining our JG Alliance traffic network. The total number of APPs and DAU within our network exceeded 200 APPs, and 130 million DAU in the fourth quarter, representing 100% and 30% growth from third quarter 2020,…

Thanks, Fei. Since Chris and Fei already talked about our top line numbers for this quarter. I'll go through some of the other P&L and balance sheet items. And let me summarize the key takeaways and highlights for - on the P&L items for this quarter. First, the SAAS businesses' revenue and gross profit contributions recorded solid double-digit year-over-year growth in all four quarters in 2020. Second, the value-added-services achieved revenue growth of 432% year-over-year in Q4, 2020. Third, we recorded yet another record high group gross margin of 56% in Q4, 2020, up from 47% in Q3, 2020. With the business becoming pure SaaS based, we anticipate our gross margin to be above 70% in 2021. Fourth, 98% of our current quarter gross profit was contributed by the SAAS businesses. Lastly, Targeted Marketing business has completely wind down by 12/31/2020. And we are now beginning a new chapter in the Aurora Mobile story, so from January 2021 all our revenue will be 100% contributed by the SAAS businesses only. We are demonstrating that operationally and financially that this transition is beneficial and healthy to our financial performance as a whole. Onto operating expenses, the total operating expenses increased by 3% year-over-year to RMB106.5 million. In particular, R&D expenses decreased by 8% to RMB40.6 million, mainly due to decrease in staff costs, as a result of lower headcount and no severance payment in Q4, 2020. Such reduction was due to the restructuring that took place in Q4, 2019. Selling and marketing expenses decreased by 27% to RMB22.3 million, mainly due to the reduction in salary costs, as a result of lower headcount and lower offline marketing expenses due to the COVID pandemic restriction. G&A expenses increased by 51% to RMB43.5 million, mainly due to the RMB10.9 million impairment charge related…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line and Brian Kinstlinger from AGP. Please ask your question.

Great. Thanks for taking my questions. Could you remind listeners the benefits of mini program is joining the JG Alliance? And then maybe which verticals are you seeing the greatest adoption versus which verticals maybe are taking a little bit longer to adopt the technology?

Hey, Brian. Are you asking about the JG Alliance network, right? On the demand side, mini program, okay.

Right.

Yeah. So yes, as you know, the mini program has been in proliferation over the past couple of years, right. So many mini program developers, once they build their mini program, you know, the account, the mini programs, they need to acquire users. So currently most of them can only rely on, you know, the WeChat internal traffic, right for the user to search to find - to find the mini programs. And the traffic within the WeChat is limited. So if they want to, you know, continue to grow, they have to look for additional resources, additional traffic. So that's where - that's why we come into the place. Because for the JG Alliance network, our product, the - we have two products, right, for the in-app messages, as well as the light push messages. These two actually media format, you know, worked very well to direct the traffic through the WeChat mini programs. So that's why over the past year, this mini program developers, the demand from mini program developers have been very strong for our traffic. And the last quarter, we had over 30 - about 39% of the revenue is generated by these mini program developers. And for example, like, you know - in terms of the vertical, actually on the e-commerce, like the travel, also the financial, these sectors actually currently where the demand is coming from.

Great. and my follow up is, in terms of the subscription services, can you talk about how fast you're able to convert the premium into paid customers, and what has been the biggest obstacle to converting these customers right now?

Yeah. So, actually, you know, in terms of the conversion, right, so, currently, we have about 60,000 premium customers, who actually enjoy our free service, and as the paying ratio is relatively low about 3% - less then, a little bit less than 4%, right. So there's still room for - to increase the conversion. So, what we are trying to do, basically we need to put a few mechanisms in place. We need to have the sales organization basically to go through the list of the premium customers, and have an engagement with them, and basically to educate them, you know, the difference between the paying and the non-paying rather benefits t they can get by paying a little bit, you know, monthly fee, right. So this is ongoing, and these efforts, actually, you know, this year, we basically intensified for the great efforts into this effort, right. And the second is, we also look at, basically to do the current paying customers, the profile analysis, to identify, you know, the common features of these paying customers, why they like to pay, right, how big is the view [ph] how many messages they typically send, right. So we come to basically - you know, basically, it's just like doing a user profile, right. So, based on this profile, we can more accurately select those premium customers who are more likely to be converted, right. So this work is being done by the R&D operation, and also sales operation, right. So that when the sales go talk to the premium customer, they can be more effective. Yeah, so, these are the approaches we are currently undertaking.

Great. Thanks for answering my question.

Thank you.

And your next question comes from Ryan Roberts from Navis Capital. Please ask your question.

Good evening. Couple from me. Maybe Shan-Nen, this is kind of better directed to you. I'm curious what the bad debt provision is, kind of we saw in this quarter, and also the breakdown on the impairment a little bit. I think that was in the slide deck that you guys mentioned is Going-Cloud. I'm kind of curious what the - maybe more of that project, because I think, around the IPO time, one of the kind of the points, the positive points with your network of servers across the country, and how quickly you could perform the push services, push notification, which is what kind of a differentiating factor. And so I was wondering the context of Going-Cloud, what that mean for your infrastructure and service level? So I guess I'll just start with those two.

Thanks, Ryan. Okay, I'll take your question, on the bad debt. Yeah, we will - we'll now go into specifics of particular debtors. But in overall, those are the debtors pertaining to the legacy Targeted Marketing business that we are winding down. So those are the one that has been lingering with us for a couple of quarters. That we are thinking that is no longer able to recover the debt. So those are the ones that we have made provision, 100% provision. So meaning that going forward into Q1 2021, we have first - a base of the concerts of going forward. And secondly, the question you asked about the impairment, yes, there was in relation to the Going-Cloud project that we had. So based on the current projection, we are expecting to complete this Going-Cloud project by sometime in second quarter of 2021. And the reason why we do this is, throughout the years, we have managed to see, besides the fact that we are able to build our own infrastructure, we are taking advantage of the technical advancement of this cloud service provider, because they have the ability to help us to leverage on their infrastructure, I am trying to say, it will only help us to improve our service delivery and stability going forward for our - or our developers.

Are you going to replace kind of a lot of your infrastructure, a lot of your servers with cloud?

No, no. Ryan, let me answer that. So actually, we are not replacing everything, we are just replacing a part of, okay, which we think we all benefit from the Going-Cloud, okay. So basically, you know, those servers might be better managed by the cloud service provider instead of, so we can focus on a path level, instead of we put, you know, resources on the data center management, right, server management, you know, those type level or type of dirty work, right. So that's the whole focus there.

Okay. And then maybe just kind of on the numbers, and the last one, so you put pretty chunky impairment on the long-term investment with about RMB44 million, kind of curious what that is?

Yeah, again, those are investment that we have made in the past, pertaining to a few investees. Again, those are the ones that we have made - the investment we made with the intention of helping us in the positive marketing era. We thought of the fact that we will be able to have some synergy to this investees. And the fact that now we are winding down the Targeted Marketing business. So we didn't - there's no longer any value for them to keep on going forward. And the fact some of them are not performing well, operationally. So based on the US GAAP on the ground of conservatism, so we make a full provision for a couple of them.

Okay. So it's not like it's mostly Targeted Marketing related, okay. Okay. And maybe if you could tell us, just get a sense of - on the new product side, I think you guys have launched some new kind of - new products recently? I just wondered if you can maybe share some early kind of feedback from customers and clients. I think it sounds like there's a lot of R&D effort upfront to kind of - to develop these, you know, solve these pain points and develop these packages. Obviously, I am curious so far how is the reception been? And also, how does that factor into your outlook, kind of for the year? I think the guidance was 380, 400, which is - was up 80% somewhere on there Y-o-Y. And so I'm curious if you're expecting a lot of contributions from the new products or currently that's mostly reflecting kind of JG Alliance. I am trying to get a sense of what maybe some of your assumptions are in there?

Okay. Ryan, let me take your questions. So regarding the new product, the progress with the new product go into market, right. So first of all, you know, these two new products, the UMS and VAAS, were launched in the later part of fourth quarter. So after Chinese New Year, and then starting from beginning of this year, and also, you know, particularly the Chinese New Year, so actually right after Chinese New Year, actually the real, the fieldwork started, you know, kick it off. And in a very short period of time, about a month, we actually already built very good pipelines. Yeah. So, for the UMS actually, we already you know, have 19 credible pipelines. And the customers, we are in the constant dialogue with the customers, and these 19 customers represent a few million dollars renminbi. And actually and tell you good news, actually, as we speak, actually, yesterday, when I asked our sales head, and she told me, she just signed one contract, UMS contract, and we have already received the money. So, which is great, right. And for the VAAS, actually it's in a very similar situation. And after Chinese New Year, we mobilized our sales force. Currently, we already built 12, very credible sales pipelines. And again, you know, these 12 pipelines account for a few million RMB. So, based on this initial feedback, we are very encouraged. And we - and based on the analysis, we also think these two products will have a higher ARPU, actually a much higher ARPU than our traditional path business, such as JPush, right. So we believe over time, over the course of a year, we think, you know, these two businesses will become new growth, actually like for our subscription business. And we also actually put the KPI on these two products to our sales organization. So it's not that you know, they are not encouraged to sell, actually they are very incentivized to push these two products out. And the market reaction, as I just mentioned, is very positive and promising, okay. So, next quarter, maybe I can give you more data, more progress on these two, new two products. And also, you asked our overall guidance, right, we guided RMB380 million to RMB400 million, which represents 47% to 55% year-over-year growth. And you are rights, you know, actually the most of the growth is now - it's going to be driven by the JG Alliance, as we talk about, you know, last time and before, actually JG Alliance has the characteristics that can have explosive growth, right. So we are expecting, you know, JG Alliance to continue to have triple digit growth this year. And for the subscription business, as I just mentioned, which, you know, typically is going to be around 30%-ish. This is same true for the vertical application. So, net-net, you will see about, you know, 55% growth for the entire year.

Okay. And if I could just check one last one, if you allow me. One of the things we kind of talked about, I mean, on previous call, I mean, one of the one prior, were kind of the efforts to kind of bring back some of the targeted marketing clients to the new kind of JG Alliance, that product, that kind of - you've got the new advertising inventory, and you have kind of companies that need advertising. I guess, the COVID-19 situation aside, it sounds like you have this new advertising service and you could sell to people that you already have a relationship with. And I think if I recall, I think you were trying to do some of that. And I'm just kind of curious, you can share any updates on how it's going and bringing back some of those old accounts to spend on your new kind of - the new JG Alliance products?

Hey, Ryan, actually when I compare the customer base, right, actually, they're very different. The customers who currently use our JG Alliance network actually are very, very, very fundamentally different from those customers who use our Target Marketing business. So for the Target Marketing, actually, before, you know, most of our advertising customers are coming from the financial sectors, like those lenders, okay, per se. But for these, you know, our mini programs, actually, as I mentioned in the press release, if you recall those names, right, those are, you know, very large Internet companies. And regardless whether they are trying to go through our JG Alliance network to reactivate their dominant customers, or they are trying to, you know, increase their user base for their mini programs, actually, most of them are very well known, you know, Internet leaders. So the nature of these customers, you know, they have basically, one, they are very credit worthy, right, that's little chance, they can be default, right? Then, you know, when compare to the Target Marketing customers, right. And the second, they have a deep pocket, the budget is not an issue, as long as we have enough traffic, you know, they will say, okay, give it all to me, okay. So that's, that's a good thing. So - and also, to share with you a data, I look at the cohort analysis, right, starting from last July, for every month, the new customers joined our JG Alliance, as the demand side, you know, when I look at their revenue contribution for the second month, for the third month, for the fourth month, and the following, and so on. And it's all above 100%, okay. So, which means the customer retention is - you know, the stickiness is very, very high. It's unlike the Target Marketing business before, if I show you this number, it's going to be below 100%, maybe 50% next month, okay. So that's the drastic difference. So this is - you know, gives us so much confidence that this product really, really shines, really has a strong value proposition and these customers they are happy with the performance, we are able to deliver these customers, they are happy with the volume we are able to deliver. So, yeah, that's why we are so confident about the growth trajectory of this JG Alliance in 2021.

Understood. Thank you very much. I think it's very helpful. Appreciate it.

Yeah, sure.

[Operator Instructions] Right, there are no further questions. I'll now turn the call back to Rene for closing remarks.

Thank you, Amber. 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 good night. Thank you, all.

Bye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.