Prepared remarks
Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile First Quarter 2026 Earnings Conference Call. Operator instructions: please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Christian Arnell. Thank you. Please go ahead, sir.
Thank you. Hello, everyone, and thank you for joining us today. Aurora Mobile'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. 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/or 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 statements 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, Christian. Hi, everyone. Welcome to Aurora Mobile's 2026 First Quarter Earnings Call. Before I comment on our Q1 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 simple description that I would give to the first quarter of 2026 is: a good spring brings a good year. Within this first quarter of 2026, our achievements are as follows: Firstly, in this quarter, the group recorded revenue of RMB 93.3 million, representing a solid 5% year-over-year growth. Secondly, our global flagship product, EngageLab, continues to shine. The EngageLab ARR for March 2026 surged to a record high of USD 11.7 million, representing 172% year-over-year growth. Thirdly, gross profit grew by 13% year-over-year. Gross margin improved by 490 basis points year-over-year.
Along the way, we delivered the fourth consecutive quarter of U.S. GAAP net profit. I trust you would agree with me that the Q1 we have delivered was indeed a fairly good set of financials, and this is a great way to kick off a brand-new 2026 financial year. Let me now share more on the business aspects. Q1 of each year is always the tough quarter for the majority, if not all, of businesses. Just to share, within the first quarter of the year, we have the shorter month of February, coupled with the long Chinese New Year holidays; business activities tend to be slower at this time of year. Despite the slower quarter of the year, we worked harder and smarter and managed to pull through with relatively excellent results. Our total Q1 group revenue reached RMB 93.3 million, representing a solid 5% year-over-year growth. In this quarter, Developer Services recorded great 15% revenue growth year-over-year, but Vertical Applications revenue dipped 19% year-over-year.
Developer Services revenues, which consist of subscription services and value-added services, delivered strong performance with 15% growth year-over-year but decreased 6% quarter-over-quarter. Our core business, developer subscription services, delivered another quarter of excellent revenue numbers of RMB 64.9 million, representing growth of 21% year-over-year and 5% quarter-over-quarter. The year-over-year revenue growth was mainly driven by increases in both customer number and ARPU. In this quarter, subscription revenue recorded its highest level in history yet at RMB 64.9 million, surpassing the RMB 61.9 million high level in Q4 of 2025. Now let's move on to the update on our global flagship product, EngageLab. As we have seen in the past 12 to 18 months, EngageLab is now the indisputable primary driver of revenue growth for Aurora Mobile, and it is on a great acceleration path. First, EngageLab ARR has refreshed its own record and achieved a new milestone of USD 11.7 million as of March 2026.
For the second consecutive quarter, we recorded very remarkable year-over-year ARR growth; in this quarter, the growth was 172%. Secondly, EngageLab continues to record another strong quarter. Cumulative signed contract value amounted to RMB 185 million by the end of Q1 2026. In Q1 alone, we won and signed about RMB 28 million worth of new contracts. It has again shown great growth momentum for this business. Thirdly, we continue to witness the influx of new global customers signing up to purchase EngageLab. In this quarter alone, we have converted and won over 223 new customers all over the world. The customer number has grown by 120% year-over-year to 1,864. We are very pleased with the new wins. Fourthly, the recognized revenue for EngageLab in Q1 2026 reached RMB 24 million, representing an outstanding 210% growth year-over-year. We continue to see great strength in EngageLab business expansion.
The revenue growth, new wins and great ARR numbers were all a result of the great work done by the team to meet and exceed overseas customers' needs and expectations quarter-over-quarter. We saw more customers converted to using the EngageLab platform due to the superior suite of products we have to address their needs. Equally important is our service-oriented mindset to attend to and resolve customers' issues on a timely basis. Let me take a few minutes to share with you our Aurora Mobile competitive advantages based on what I have witnessed for the past 18 to 24 months and why we can grow the EngageLab revenue with strength quarter-over-quarter. Firstly, over the years, we have built mature, highly concurrent and elastically scalable underlying infrastructure polished through years of commercial operation. This infrastructure supports massive data processing, real-time delivery and global traffic scheduling for our customers.
Secondly, we have completed global market layout at an early stage and have established solid brand recognition in overseas digital service sectors. Thirdly, we possess exclusive capabilities, helping our customers to unify their full life-cycle user data, covering acquisition, activation, engagement, retention and conversion. Fourthly, our products are equipped with self-developed native AI technology, deeply embedded in full product scenarios together with standardized automated workflow engines. Our solutions help customers boost operational efficiency, realize intelligent management and cut labor costs significantly. Fifthly, we have spent considerable effort ensuring we fully comply with global stringent data regulations, including privacy protection, cross-border data transmission and regional data residency rules, meeting market access requirements across Europe, America, Southeast Asia and other key regions.
Equally important is our lightweight architecture, which features easy access and low development barriers to developers and enterprise technical teams for cloud integration and launch. At the same time, it lowers potential customers' integration barriers and greatly improves market replication efficiency. I believe these competitive advantages will no doubt solidify our position in the global user engagement space and market. These advantages are pivotal to long-term revenue acceleration in the years to come. On our global expansion roadmap, we made great progress in Q1 2026. Within the first three months of 2026, we managed to sign up and finalize nine new overseas partners. These overseas partners will help us to sell into local customers in their respective countries. As of now, we have 26 independent partners globally working together to help us further expand our reach and footprint to more overseas customers.
Within subscription revenue, some of the notable wins in this quarter include, but are not limited to, the largest TV company in the world for their China operations, SF Express, Guo Securities, Du Security and JG International. Value-added services revenues were RMB 6.7 million, down 53% quarter-over-quarter. The decrease was mainly attributable to the absence of the traditional quarterly online shopping festivals, mainly the Double 11 or Double 12, in Q1. 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, Christian. Next, I'll go over the revenue for Vertical Applications that includes Financial Risk Management and Market Intelligence. Overall, Vertical Applications revenue decreased year-over-year and quarter-over-quarter. Within Vertical Applications, Financial Risk Management revenue decreased 18% year-over-year and 29% quarter-over-quarter. The recent regulatory updates within the financial industry have resulted in more headwinds for this segment of the business, but we are making necessary adjustments in terms of products and go-to-market approach to move forward. Despite the tough operating environment, we still managed to win new contracts as the demand for our products and services remains. The customers that signed up or renewed in Q1 include, but are not limited to, Filxai, Ingniu, Xing and many more licensed credit and financial institutions throughout China. Market Intelligence revenue increased by 3% quarter-over-quarter, but decreased by 25% year-over-year due to the weak market condition and reduced demand for Chinese app data, and this result is in line with our expectation.
Coming to the other P&L items: Our gross profit recorded another good quarter with 13% year-over-year growth. The RMB 66.3 million gross profit that we had in Q1 paves a great foundation for the rest of 2026. Our gross margin also recorded significant improvement by 490 basis points year-over-year. This again signifies the healthy business model that we are operating. With this healthy level of margin, we are poised to record good bottom-line numbers going forward. On net profit, following the great momentum that we had in 2025, we started 2026 with another GAAP net profit quarter. This is a great achievement as Q1 is a cyclically slow quarter each year. On to operating expenses. Q1 OpEx was RMB 66.1 million, down 3% quarter-over-quarter, but up 9% year-over-year. The OpEx is within our forecast, and we are happy with the level where they are. I will now dive deeper into the individual OpEx categories.
For R&D expenses, it increased by 17% year-over-year to RMB 28.7 million, mainly due to higher staff costs and associated expenses. Technical service fees also contributed to the year-over-year increase. Selling and marketing expenses increased by 11% year-over-year to RMB 25.9 million, mainly due to higher staff costs driven by overseas business expansion. G&A expenses decreased by 9% year-over-year to RMB 11.5 million, mainly due to the decrease in bad debt provision resulting from improved collection efficiency. Next, I'll share three very important KPIs that we closely monitor. Our net dollar retention rate, a commonly used KPI for SaaS companies, stood at 103% for our core developer subscription business for the trailing 12-month period ended March 31, 2026. This is the third consecutive quarter where the NDR number has exceeded the 100% threshold, and this is the best testimony to the great products and services we are selling.
In summary, customers continue to increase their spending with us over time. Secondly, another financial KPI for tracking the performance of a SaaS company is total deferred revenue. This represents cash collected in advance from customers for future contract performance and it stood at RMB 173.9 million as of March 31, 2026. This high deferred revenue balance is the best proof that the SaaS business model we are in is working well. In short, we have secured RMB 173.9 million worth of future revenue as of March 31, 2026. Thirdly, we continue to maintain a healthy level of AR turnover days at 42 days. These low turnover days ensure we have great cash liquidity while mitigating the risk of bad and doubtful debt. Cash collection is one of the key KPIs for our sales team. Let us now recap on Christian's comment on "a good spring brings a good year" at the beginning of this call. In view of the slower quarter in Q1 each year, we have achieved and delivered a terrific set of Q1 numbers.
Firstly, we achieved GAAP net profit in the very first quarter of 2026, and this marks our fourth consecutive quarter of net profit. Secondly, our core developer subscription business achieved a historical record high of RMB 64.9 million revenue this quarter. Third, our flagship product, EngageLab, continued to scale rapidly across the globe. Our EngageLab business exceeded its past record in this quarter. The ARR in March reached USD 11.7 million. This represents a stunning 172% year-over-year growth. Fourth, gross margin grew by 490 basis points year-over-year, the highest it has been for the past eight quarters, and gross profit grew by 13% year-over-year. Last but not least, our net dollar retention for core developer service stood strongly at 103%. Although Q1 has been a tough quarter, we have been resilient and managed to navigate through these challenges. In the Q1 2026 results that we have presented today, we delivered revenue growth and our EngageLab business continued to scale to new highs.
This lays a solid foundation for the rest of 2026. We are very committed to expanding the business on a global level and continue to be highly disciplined in our spending. We believe this combination is the appropriate strategy to bring the business forward. Lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended March 31, 2026, we repurchased 42,000 ADS. Cumulatively, we have repurchased a total of 441,000 ADS since the start of our repurchase program. And this concludes our prepared remarks. We are happy to take the questions now. Operator, please proceed.
Questions and answers
And the first question comes from the line of William Chun from S Capital.
Based on the Q1 numbers you have released earlier today, it is a really good set of financial statements. We have revised and reanalyzed the company performance for the past five quarters, and it appears that things are moving in the right direction operationally and financially. The revenue, especially EngageLab, has been showing great growth momentum. Gross profit and margins are pretty solid. Most importantly, the company turned full-year profit in 2025 and again in this quarter. So my question for management is: how should we look at Aurora Mobile for the financial year 2026?
William, let me take this question. Yes, you are right; we are very pleased with the Q1 results at the beginning of 2026. You are right to point out that for the entire financial year of 2025 and Q1 of 2026, we have been consistently delivering solid financial numbers quarter-over-quarter without fail. This has proven that the business model and the execution capability of management are standing up to the test quarter-over-quarter and year-over-year. In the call earlier, you heard Christian share Aurora Mobile's competitive advantages in the market that propel the growth that we have seen today. These competitive advantages are real and continue to fuel our growth acceleration in the future. Customers are switching to us and buying our services because of these advantages. At this point, I would like to add that maybe it is time now to relook at our overall valuation and why it is time to invest.
There's no doubt that the current valuation is on the low side, but let me share with you our long-term valuation logic. I believe our valuation logic includes the following aspects: one, our solid and foundational domestic core business delivers stable cash flow and strong cyclical resilience. Secondly, through our global flagship product, EngageLab, our scalable global SaaS expansion brings clear predictable long-term growth curves. Thirdly, through GPT bots and in-depth native AI integration, we empower our business to gain premium pricing and valuation re-rating upside. Fourth, our exclusive full-scenario contextual platform builds a replicable competitive moat and operational defensibility. Equally important is the alignment with outcome-based enterprise software trends, which significantly enhance our long-term monetization capability and profit elasticity. What all this means is that Aurora Mobile should not be valued purely as a traditional infrastructure company nor purely as a single-point AI tool.
Our corporate framework should reflect platform synergy, global SaaS growth and AI upside altogether. I believe the above is a better way to view and value Aurora Mobile as a whole for now. I hope this answers your question, William.
Our next question comes from the line of Jackson from Gilongy Research.
I'm Jack from Gilongu Research. I look at the Q1 earnings with one particular focus on EngageLab. We have been seeing EngageLab growing every quarter with good numbers from customer numbers, contract value signed and impressive ARR growth. My question for management is: how much fuel is left in the tank for EngageLab? In other words, how long can this EngageLab growth be sustained?
Jack, let me take this question too. This is a good question, but it's a very tough one. My short answer is: yes, we still have a long way to go in terms of EngageLab's growth. You're right; a lot of people have been saying our EngageLab business has been growing since its launch about three years ago. As of now, after three years, we're still growing, but we are only gaining a fraction of the market globally. Let me answer your question in two aspects. Firstly, geography: if we zoom into the Southeast Asia market, where we generate about 40% of EngageLab business, we are nowhere near a market-dominant position. That means the room for growth even in Southeast Asia is huge. Overall, the global user engagement market is vast. Besides Southeast Asia, other markets are sizable too — for example, the broader Asia Pacific region including Australia and New Zealand, the Middle East and European markets.
Right now, we are just at the tip of the iceberg. The market is so huge that we believe it can provide many years of growth to come. The second aspect is the industry we are selling into. As of now, we have not dominated any particular industry vertical. In fact, the majority, if not all, businesses in most industry verticals need to engage with their users. Let me share some actual examples. One, all apps need to send notifications to users, be it promotional or to inform users to update the latest app version. Two, online merchants send notifications to users on the timing of deliveries. Three, coffee apps such as Starbucks and Luckin Coffee, both are our clients, informing customers that their orders are ready to pick up. Four, airline companies need to inform passengers about upcoming flights, check-in times or boarding gates. These are real-life examples where notifications are deployed daily.
Notification and user engagement are simply omnipresent for most enterprises across industries. Therefore, the market is there for us to capture. So, back to your question, there's still a lot of runway left for our EngageLab business. The EngageLab market landscape remains vast, which equips us with substantial multi-year growth headroom to penetrate more markets and drive steady revenue growth. I hope this answers your question.
We are now going to take our next question. This question comes from the line of Mike Ting from Baric Research.
Congratulations on a great quarter. Just a quick question for me. I've noticed that from a year-over-year perspective, both revenue and gross profit growth rates seem to have fallen a bit compared to the fourth quarter. Can you talk about some of the reasons behind that?
Sure, Michael. Thanks for your interest in Aurora Mobile and the question. Probably you appreciate Q1 is a traditionally slow quarter among the four quarters within the year. We still managed to see good results from our core developer subscription business, where year-over-year revenue achieved a solid 21% growth that Christian talked about and reached an all-time high of RMB 64.9 million. Also in this quarter, gross profit rose by 13% year-over-year. The overall slower growth that you mentioned was mainly attributable to revenue from other sectors, which are the value-added services and Vertical Applications. Let me share the reasons. One is the fact that advertising business was pressured by seasonality and Q1 is traditionally a slow season for the industry. Without traffic catalysts such as e-commerce shopping festivals, and coupled with the long Chinese New Year holidays, marketing spending by brand clients remained slow, leading to the current market condition you saw in Q1.
Secondly, the slower demand for Vertical Applications: macroeconomic headwinds have softened our clients' overall demand, in particular our Financial Risk Management business was impacted by recent regulatory adjustments. But for the remaining three quarters of 2026, our core developer subscription business is poised for substantial growth with meaningful revenue expansion. Meanwhile, our overseas business, EngageLab, is expected to accelerate and benefit from our global footprint being further unlocked and realized. I hope this answers your question, Michael.
There are no further questions for today. I will now hand the call back to Christian Arnell for closing remarks.
Thank you, everyone, for joining our call today. 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 evening, and thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.