Aurora Mobile Limited — FY2020 Form 20-F
Period clarification: This is an annual report for the fiscal year ended December 31, 2020, not a standalone 2020 Q4 filing. It does not provide a clear set of Q4-only financial results. Financial statements are prepared under U.S. GAAP; amounts below are RMB unless otherwise stated.
Business context
Aurora provides mobile app developer services and data-driven vertical applications in China, including market intelligence, financial risk management and location-based intelligence. Management reported approximately 1.4 billion monthly active unique mobile devices in China in December 2020. The company wound down targeted marketing during 2020 and said it would operate and earn revenue solely from SAAS Businesses beginning January 2021.
Financial results and liquidity
| Metric | FY2019 | FY2020 |
|---|---|---|
| Revenue | RMB906.5m | RMB471.6m, down 48% |
| Gross profit / margin | RMB256.9m / 28.3% | RMB206.2m / 43.7% |
| Operating expenses | RMB404.1m | RMB396.0m |
| Operating loss | RMB147.2m | RMB189.8m |
| Net loss | RMB109.8m | RMB225.1m (US$34.5m) |
| Operating cash flow | RMB25.8m used | RMB75.8m provided |
| Cash and cash equivalents at year-end | RMB431.5m | RMB356.1m |
- FY2020 revenue comprised RMB258.0m from SAAS Businesses and RMB213.7m from targeted marketing. On the filing’s revenue table, SAAS revenue rose about 23% year over year, while targeted marketing fell about 69%. Developer services revenue was RMB173.5m versus RMB93.6m; vertical applications revenue was RMB84.5m versus RMB116.7m.
- Gross margin expanded primarily because targeted marketing, which carries advertising inventory costs, became a smaller share of revenue. Despite lower operating expenses overall, operating loss widened as gross profit fell.
- At December 31, 2020, current assets were RMB530.2m and current liabilities RMB460.1m, implying a current ratio of approximately 1.15. Cash, restricted cash and short-term investments totaled approximately RMB436.2m. The filing cautions that cash mobility is affected by PRC restrictions and the VIE structure.
- The US$35m zero-coupon convertible notes were classified as current at year-end, with a reported carrying amount of RMB225.2m and principal of RMB228.4m. They matured in April 2021 unless converted; conversion was at the holders’ option, subject to terms.
- Total liabilities were RMB466.2m, total assets RMB787.4m, and shareholders’ equity RMB321.2m. No dividends were planned for the foreseeable future.
Material changes and unusual items
- The revenue contraction reflected the deliberate exit from targeted marketing; SAAS revenue growth only partly offset that decline. Management identified SAAS as the higher-margin focus.
- FY2020 included RMB39.2m of impairment on long-term investments and RMB4.5m on loans to investees. A further RMB11.0m impairment of property and equipment was associated with the “Going-Cloud” transition to third-party cloud infrastructure.
- Accounts receivable, net, fell to RMB44.9m from RMB135.4m, while deferred revenue and customer deposits increased to RMB109.2m from RMB77.6m. Management attributed the positive operating cash flow partly to these working-capital changes and the business transition; it should not be read as evidence of profitability.
- COVID-19 affected demand in some customer industries and contributed to uncertainty around receivable collectability and investment valuations. Management said customer demand gradually recovered from Q2 and the business and financial condition saw sequential growth in the second half of 2020.
Outlook, risks and controls
- No quantified revenue, earnings or cash-flow guidance is provided. Management expects SAAS Businesses to be the sole revenue source from 2021 and identifies customer growth and spend, product development, data access and technology, and margin improvement as key drivers.
- Material risks include reliance on the PRC VIE contractual arrangements—which generated 98.6% of consolidated revenue in 2020—uncertainty in PRC regulation and enforcement, data privacy and cybersecurity exposure, and the possibility of needing additional licenses for financial risk management activities.
- Other significant risks include ongoing losses, competition, dependence on mobile data and third-party infrastructure, foreign-exchange and cash-repatriation restrictions, and the potential for U.S. trading restrictions or delisting if the PCAOB cannot inspect the auditor. The filing also notes that founder Weidong Luo held 76.5% of voting power as of February 28, 2021 through the dual-class structure.
- Management concluded internal control over financial reporting was effective as of year-end. The auditor gave an unqualified opinion on the financial statements but did not attest to internal control effectiveness. The filing states the company was not required to obtain that auditor attestation as an emerging growth company.
Key facts for investors to verify
- Review subsequent results to assess whether SAAS growth can replace targeted marketing revenue and support a path to lower losses.
- Check the outcome and settlement of the April 2021 convertible notes, including any conversion, repayment or refinancing.
- Assess the sustainability of positive operating cash flow after the FY2020 working-capital movements and whether reported liquidity is accessible across the group.
- Track receivable quality, investment and loan exposures, and any further impairment charges.
- Monitor changes in PRC data, licensing and VIE rules, as well as developments concerning PCAOB audit inspections and U.S. listing status.