Aurora Mobile Limited — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing; the supplied filing does not provide separate Q4 financial results. Financial statements are prepared under U.S. GAAP. Amounts below are in RMB unless otherwise stated.
Business context and key metrics
Aurora provides mobile app developer services, targeted marketing, and data-analytics SaaS products in China. Targeted marketing generated 76.8% of FY2019 revenue. Its consolidated VIE contributed 99.3% of consolidated revenue.
| Metric | FY2019 | FY2018 | Change |
|---|---|---|---|
| Revenue | RMB906.5 million (US$130.2 million) | RMB714.1 million | +26.9% |
| Targeted marketing revenue | RMB696.2 million | RMB572.8 million | +21.5% |
| SaaS products revenue | RMB210.3 million | RMB141.3 million | +48.8% |
| Gross profit / margin | RMB256.9 million / 28.3% | RMB197.1 million / 27.6% | Margin +0.7 percentage points |
| Operating loss | RMB147.2 million | RMB92.8 million | Loss widened |
| Net loss | RMB109.8 million (US$15.8 million) | RMB66.2 million | Loss widened |
| Basic and diluted loss per share | RMB1.43 (US$0.21) | RMB1.57 | Loss per share narrowed |
| Operating cash flow | Use of RMB25.8 million | Use of RMB97.9 million | Cash use decreased |
| Investing cash flow | Use of RMB89.0 million | Use of RMB139.2 million | Cash use decreased |
| Cash and cash equivalents | RMB431.5 million | RMB576.6 million | Down RMB145.1 million |
| Total assets / liabilities | RMB939.9 million / RMB432.1 million | RMB992.1 million / RMB390.4 million | Assets down; liabilities up |
Material changes and notable items
- Revenue growth was driven by higher targeted-marketing customer spending and SaaS customer growth. Targeted-marketing average spend per customer rose 61.0%; paying SaaS customers increased 35.6% to 2,645. Targeted-marketing customers declined from 1,074 to 811.
- Cost of revenue increased 25.6%, slower than revenue growth, and gross margin improved to 28.3%. Operating expenses rose 39.4% to RMB404.1 million, including R&D of RMB176.2 million, sales and marketing of RMB118.5 million, and G&A of RMB109.3 million.
- G&A included a RMB13.7 million increase in allowance for doubtful accounts. The total allowance reached RMB28.5 million, versus RMB9.3 million at year-end 2018.
- Other income rose to RMB38.8 million, including RMB12.5 million in government grants and RMB24.1 million in realized and unrealized equity-investment gains. These items materially offset operating losses.
- FY2019 share-based compensation was RMB47.3 million, up from RMB24.6 million. The company repurchased 851,151 ADSs during 2019; cumulative repurchases under its US$10 million authorization were approximately US$5.9 million by year-end.
- Cash used in financing activities was RMB33.9 million, primarily reflecting share repurchases. The company held RMB431.6 million in cash, cash equivalents and restricted cash at year-end.
Debt, liquidity, outlook and risks
- Debt: US$35 million of zero-coupon convertible notes, due in 2021, were recorded at RMB230.0 million net carrying value at year-end. The notes are convertible at an initial price of US$11.7612 per share, subject to adjustments. Specified default or acceleration events can trigger 15% interest.
- Liquidity: Management said existing cash and cash equivalents should meet current and anticipated general corporate needs for at least 12 months. Cash is concentrated in China and largely denominated in RMB; currency controls and limits on moving funds from the PRC may constrain access. The VIE’s assets and cash are not directly owned by the listed holding company.
- Outlook: Management expected revenue to continue increasing and planned continued investment in R&D, infrastructure, sales and marketing, and expansion. It did not provide numerical FY2020 guidance. Management cautioned that costs were expected to rise and profitability was not assured.
- COVID-19: The filing, signed April 29, 2020, describes early-2020 disruption and uncertainty. Management said the effect on revenue and financial results could not then be reasonably estimated; advertising-budget reductions, delayed collections and bad debts were identified as potential impacts.
- Business and regulatory exposure: Advertising demand, access to mobile data, publisher inventory and customer collections are key risks. Three suppliers represented 57.7% of advertising costs in 2019. Data privacy, cybersecurity, licensing and evolving PRC rules—including uncertainty around the VIE structure and financial-risk services—could adversely affect operations.
- Other contingencies: The company reported underpaid PRC employee social-insurance and housing-fund contributions and accrued estimated amounts; additional contributions, late fees or fines may be required. Certain offices and leases also had registration or documentation issues. The company reported no material legal proceedings in the supplied text.
- Accounting and controls: ASC 606 adoption increased 2019 revenue by RMB3.1 million and opening retained earnings by RMB4.6 million. Management stated the previously identified material weakness in financial reporting controls had been remediated and controls were effective at year-end; the auditor did not audit internal controls. The financial-statement audit opinion was unqualified.
- Shareholder structure: The dual-class structure gives Class B shares ten votes each. Founder and CEO Weidong Luo held 77.0% of total voting power as of February 29, 2020. No cash dividends were planned for the foreseeable future.
Important facts for investors to verify
- Whether revenue growth, particularly targeted-marketing growth and customer spending, can continue while targeted-marketing customer count has declined.
- Cash conversion and credit quality: receivables turnover reached 55 days, the doubtful-account allowance increased substantially, and operating cash flow remained negative.
- The sustainability of reported results excluding investment gains and government grants, alongside rising operating expenses and share-based compensation.
- Convertible-note repayment or conversion terms and the company’s liquidity after repurchases and planned investment.
- Actual effects of COVID-19 on advertising demand, collections and subsequent-period results; this filing does not quantify them.
- Compliance and enforceability risks relating to the VIE, PRC data and licensing rules, employee-benefit contributions, and restricted movement of cash.