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Aurora Mobile Ltd (JG) Q2 2021 Earnings Call Transcript

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Aurora Mobile Ltd (NASDAQ: JG)
Q2 2021 Earnings Call
Sep 09, 2021, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by and welcome to the Aurora Mobile second-quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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, Mr. Rene Vanguestaine. Thank you. Please go ahead, sir.

Rene Vanguestaine -- Investor Relations

Thank you, Rohit. 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 will follow.

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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.

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.

Weidong Luo -- Chairman and Chief Executive Officer

Thanks, Rene. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's second-quarter 2021 earnings call. This is the second quarter where we have been operating under the pure SaaS business model since the beginning of 2021.

We delivered strong results and I am pleased to kick off this call now to share with you our business progress and key business metrics achieved in the second quarter of 2021. Before I comment on our Q2 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website for your reference. You may refer to the deck as we proceed with the call today. Let's begin our review with highlights of our key operating and financial performance for the second quarter of 2021.

As a reminder, we completely exited target marketing at the end of 2020 and our business is now 100% focused on the SaaS business, which include developer services and vertical applications. For apples-to-apples comparison, numbers present here exclude contribution from the legacy target marketing in the prior year. In the second quarter, we continue to apply our companywide focus and concerted efforts to grow our SaaS business and it has paid off. Here is a summary of the strong results for Q2 2021.

The number of paying customers increased to 2,634 from 2,281 a year ago, up 15% year over year. Revenue were RMB 89 million, up 34% year over year. Group gross margin was 75.7%, which is more than 1.8 times compared with 41% from a year ago. Gross profit was RMB 67.4 million, up 33% year over year, and adjusted EBITDA was negative RMB 13.3 million, a substantial improvement of 27% from a year ago demonstrating our strong operating leverage.

Revenues from our SaaS business continued their strong growth momentum this quarter mainly due to the 34% growth in both the developer services and vertical applications. The successful transition into the pure SaaS business model since the beginning of 2021 has helped us to deliver two consecutive quarters with gross margin above 75%, a significant improvement from 41% a year ago. The strong gross profit growth of our SaaS business was mainly driven by revenue growth of 34% year over year. Here, I would like to take a moment to give an update on our latest product, JG Unification Messaging System, JG UMS, and JG Video-as-a-Service, which is JG VaaS.

We continue to see strong market demand for our new products, mainly JG UMS and JG VaaS since their respective launches. The total contract value for UMS and VaaS has crossed over RMB 3 million. The current and potential customers for these products came from a wide and diversified number of industries including finance, medical and healthcare, media, short video content provider, social networks, e-commerce platforms and more. For example, we recently partnered with UU Paotui, an online consumer errands and delivery platform.

They started implementing our AI-powered JG UMS to help optimize their smart operations and drive intelligent solutions to expand user reach. Through this partnership, UU Paotui was able to replace manual operations such as sending messages on different platforms and different channels with JG UMS integrated messaging platform to reduce costs and increase operational efficiency with flexible routing management. Going forward, we will continue to help our customers jointly build an extensive value chain of their existing services. When we provide better and more customized solutions, we are able to create deeper and closer connection with our customers.

We recently have also launched a new public cloud version of UMS, which provides free basic UMS services for mobile developers. Mobile developers can use this free version as a quick access and meaningful trial of JG UMS integrated multi-channel messaging services upon registering for an account without additional costs. In turn, this will help us to convert these mobile developers into fee paying VIP customers. For customers with higher requirements for multichannel push notification and user management, they can upgrade to the VIP version of JG UMS and enjoy unlimited channel management, have API call frequency limits and other exclusive VIP services.

As we discussed before, we need to continue to push innovation in our R&D efforts in order to meet evolving customer needs and new requirements, which in turn will continue to drive our business growth. Our motto is to continuously promote innovations for our R&D organizations which remains at the top of our priority. I would like to take a few minutes to share with you the progress of some of our product innovations during the quarter as a result of our relentless efforts and focus to stay ahead of the game. There are continued iterations developed for UMS and VaaS products.

We recently introduced a smart push version for our JPush services, which added a new post-push analytical functionalities to the integrated platform. App developers are now equipped with multi-platform, multichannel analysis of the push message cycle. For example, developers are given message delivery data including total number of messages sent, total messages reached to end users and click-through rates with the ability to visualize the data from different levels. These statistics helps developers identify key issues more accurately and efficiently in realtime.

For push message delivery details, developers can also utilize all detail analysis functions to detect the data from the full message delivery cycle and from there, they can uncover the root cause of any undelivered messages. With the help of this post push functionalities and the push strategy recommendations, this feature can help developers effectively increase the delivery rate and click-through rates of their push message by providing a much more accurate push strategy based on learning from the past results. We believe that this new functionality will help developers to create more reliable, comprehensive, and intelligent toolkits and these toolkits will in turn greatly assist developers in improving delivery rates of notifications and click-through rates of the push message. Now, I will turn the call to Fei who will discuss the Q2 performance in greater detail.

Fei Chen -- President

Thank you, Chris. Let me start the discussion on different revenue streams within the SaaS businesses. In the second-quarter 21st, revenues from developer services reached RMB 61.2 million, a robust 34% and the 17% growth on a year over year and quarter-over-quarter basis respectively. The year-over-year revenue growth was fueled by strong growth of 22% in subscription services and 57% growth in value-added services.

Subscription services revenues were RMB 37.5 million, an increase of 22% year over year, primarily driven by new customer acquisition. In addition, we continued cross-selling various non-push subscription products such as JVerification, JSMS, JAnalytics, etc. to our customers in an effort to increase our subscription uptake via multiple product lines. This effort has delivered solid results as the revenue contribution of non-push notification products increased to 38% from 32% a year ago and the non-push notification products achieved a higher ARPU of RMB 38,100, resulting in the overall ARPU for subscription services increasing by 5% to RMB 16,200, compared with RMB 15,500 a year ago.

New and renewed contracts of notable customers in the quarter include China Everbright Bank, UU Paotui, So-Young International, Yonghui Superstores and so on. In this quarter, value-added-services within developer services, which include revenues from JG Alliance services and advertisement SaaS, once again delivered a set of impressive results where revenues grew by 57% year over year to RMB 23.6 million from RMB 15.1 million in second-quarter 2020 and by 26% quarter over quarter from RMB 18.8 million in first-quarter 2021. We continued to see very strong and solid demand for our JG Alliance products. On the supply side of the JG Alliance, during the quarter, we continued to apply our resources to sign up more mobile apps in order to grow this traffic pool.

The total number of apps within our network exceeded 340 apps compared to 280 in first-quarter 2021, representing a 23% growth quarter over quarter. As a result of apps growth within this traffic pool, the DAU within our network has increased by 20% to 180 million from 150 million in first-quarter 2021. On the demand side, we continued to see strong demand from mini-program developers who contributed close to 40% of JG Alliance's revenues. To further expand market reach and shorten the go-to-market process, we have used ad agencies to help us cover a broader customer base while our direct-to-sales team focused on serving large KA customers.

In second quarter, ad agencies contributed more than 50% of JG Alliance revenue stream while the revenue came from direct customers. Major customers of JG Alliance in the quarter consisted of repeat customers, the market leaders across many industry verticals. They include, but are not limited to, Weibo Mai Tran WeSing, Alipay, Taobao, Du Xiaoman, TravelGo, etc. Now, let's move on to the discussion of vertical applications.

Vertical applications revenues which include financial risk management, market intelligence, and iZone grew by 34% year over year as demand continued to recover from the impact of the pandemic with the majority of the revenue growth coming from the financial risk management business. In the financial risk management segment, revenues increased significantly by 42% year over year with the help of the 55% growth in ARPU. This quarter, we recorded the highest quarterly revenues compared with the results since the beginning of COVID-19 in first quarter of 2020. We continued to see strong demand for this product from KA customers such as banks and licensed financial institutions.

New and renewed customers include Mashang Consumer Finance, Tsushima Financial and 360 DigiTech. Revenues from our Market Intelligence products increased by single digit year over year. The lack of meaningful growth was due to a few customers delaying customized projects with us due to recent macro environment. However, we continue to see strong renewals with many large corporate customers including TravelGo, NetEase Media, ITE, and so on.

And lastly, while the new product transition is still underway, our iZone business delivered a solid result during the quarter with significant double-digit revenue growth. This was mainly due to the completion of a few large scale one-time contracts. With that, I will now pass the call over to Shan-Nen.

Shan-Nen Bong -- Chief Financial Officer

Thanks, Fei. I'll go through some of the key expenses and balance sheet items. On to the operating expenses, total operating has expenses increased by 7% year over year to RMB 105.3 million. In particular, R&D expenses increased by 16% to RMB 54.3 million mainly due to the increase in staff costs as we continue to invest in our R&D department, higher bandwidth and cloud expenses to support the SaaS business expansion.

Selling and marketing expenses increased by 1% to RMB 27 million mainly due to the increased customer visits and offline marketing and promotion activities. G&A expenses decreased by 4% to RMB 23.9 million mainly due to year-over-year reduction of RMB 1.2 million in bad debt provision, which was a result of our companywide focus on strict financial control measures. Adjusted EBITDA, calculated as EBITDA excluding share-based compensation and change in fair value of foreign currency swap contracts, improve 27% year over year to negative RMB 13.3 million from negative RMB 18.3 million in Q2 2020 and this was the best adjusted EBITDA performance since Q1 of 2020. For the second quarter of 2021, we delivered another set of solid financial results.

For the year-over-year comparison, the key highlights for this quarter include our SaaS businesses revenue increased significantly by 34%, group gross margin improved from 41% to 75.7%, a direct result of Q2 2021 gross margin being 100% contributed by high margin SaaS businesses. Opex, however, increased by only 7%. As a result, our adjusted EBITDA improved by 27%, which continues to demonstrate the scalability of our business model and this is the second quarter where we have delivered SaaS business only results and we are very pleased with the results we have achieved and we believe that the growth momentum from Q1 and Q2 2021 will continue to bring more solid results in the coming quarters. On to the balance sheet, I'll start with two key very important KPIs that we closely monitor.

Firstly, the ARR turnover days decreased significantly from 59 days in Q2 2020 to 38 days this quarter. This was similar to the trends seen last quarter due to both the shift away from the legacy targeted marketing to focus on SaaS business and the companywide focus on improving collection. Secondly, the total deferred revenue balance, which represent cash collected in advance from customer for the fifth consecutive quarter has exceeded RMB 100 million at quarter-end. As of June 30, 2021, the balance was at RMB 111.5 million.

Next, total assets were at RMB 642.7 million as of June 30, 2021. This includes cash and cash equivalent of RMB 297.2 million. The reduction in cash balances over the quarters was mainly due to the redemption of the convertible notes of $35 million in April 2021. Accounts receivable of RMB 38.1 million, prepayments of RMB 8.4 million, fixed assets of RMB 75.5 million, and long-term investment of RMB 168 million.

Total current liabilities were at RMB 260.5 million as of June 30, 2021 and this includes short-term loan of RMB 150 million, accounts payable of RMB 13.7 million, deferred revenue of RMB 106.3 million, accrued liabilities of RMB 90.6 million. And on to business outlook, our new full-year 2021 revenue guidance is now in the range of RMB 342 million to RMB 360 million, representing growth of 33% to 40% year over year, compared with last year and the guidance for our full-year gross margin remains above 70%. The update is primarily due to the revised outlook for our JG Alliance business. The use of third-party agents for our developer services value-added services business has caused a change in accounting method for our revenue from gross revenue to net revenue, net of any agent rebates under U.S.

GAAP. In addition, due to the recent macro environment uncertainties, some of our potential JG Alliance partner has temporarily delayed joining and integrating with our traffic supply network. However, the long-term outlook for the JG Alliance remains unchanged and we are still expecting it to be our main growth driver going forward. Please note that, for meaningful comparison purposes, the prior year revenue number used to calculate the revenue growth percentage excludes revenue from targeted marketing business.

The above outlook is based on the current market conditions and reflects the company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change. And lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended June 30, 2021, we did not repurchase any shares. As of June 30, 2021, cumulatively, we have repurchased a total of 921,000 ADS since the start of our repurchase program.

And this concludes management's prepared remarks. We are happy to take any questions now. Operator, please proceed.

Questions & Answers:


Operator

[Operator instructions] We have the first question. This is coming from the line of Jacob Silverman from Alliance Global. Please go ahead.

Jacob Silverman -- Alliance Global Partners -- Analyst

Hi, everyone. Thanks for taking my questions. Are there any additional details you can give us on why partners are delaying joining and maybe when can we expect customers to stop delaying decisions. Also, around the accounting methodology, for reported gross margin, will that have any impact on reported gross margin for JG Alliance?

Fei Chen -- President

Hey, Jacob. This is Fei. I will answer the first question and Shan-Nen will answer your second question. So as you know, recently, the macro regulatory environment has changed, right and because of this, it has resulted a temporarily delay in integration for some of our potential JG Alliance partners to join our traffic supply pool because many of the app developers -- many of the app developers in the pipeline are now focusing on getting compliant for their own mobile apps in terms of the privacy issue, the data collection issue, which is required by the government to rectify their own -- these issues, right.

So they will slow down the cooperation with the third-party partners, including us. So however, once their compliance work is finished, they will renew the collaboration process. So that's why we say the longer-term outlook for this business will remain unchanged and we still expect the JG Alliance to be the growth driver for our business going forward, right? Despite the revision actually for this business JG Alliance, we still expect this year to have a growth close to 100% which is already very high, which is a great achievement we are going to have. And Shan-Nen will answer the second question.

Shan-Nen Bong -- Chief Financial Officer

Jacob, on the gross versus net accounting and the impact on the gross margin, yes, it will impact some of the margin downward adjustment but it's not expecting to be major because if I look at the example that we used before, $100 versus $106 gross revenue, the impact is only 2%. So the answer to your question is yes, there will be some deterioration in gross margin, but we do not expect it to be material.

Jacob Silverman -- Alliance Global Partners -- Analyst

OK. And then the delays, they are mostly on customers ends. Are there any delays on your ends for getting customers on JG Alliance?

Fei Chen -- President

No, there's no delay from our side. Yes. It's all from the other side, the customers side. Yes.

Jacob Silverman -- Alliance Global Partners -- Analyst

OK. So it sounds like also -- you go ahead.

Fei Chen -- President

No, no. I'm done.

Jacob Silverman -- Alliance Global Partners -- Analyst

OK. So it sounds like your relationships with publishers are improving. After 6 18, should we expect that success to continue for maybe Singles' Day or given the recent regulatory environment, maybe your relationship with publishers will improve maybe more in the next year, in 2022.

Fei Chen -- President

I think we'll start to see the improvement starting from the fourth quarter, right? Because the regulatory -- the reactivation for these assets is an ongoing process. So some of the partners, they are close to the end of doing the [Audio gap] book with the revised the guidance, right. So actually, we are going to expect a flattish quarter-over-quarter growth for the third quarter. So actually, this isn't normal.

In a normal situation, if you look at our past year, right, in 2020, actually we are seeing a flattish seasonality from the third quarter to the second quarter, right. So because of the slowdown, we are seeing a similar flattish trend, but if there is no slowdown actually, we were expecting a higher quarter-over-quarter growth, right? But that said, since some of the supplier in the pipeline, they finished their work, their regulatory work and they will start collaboration with us. So we do expect the traffic to continue to grow in the fourth quarter and also we do expect the Singles' Day, Double 11 will have a positive impact to the JG Alliance business from the demand side. So that's why our full-year guidance actually already reflect it the quarter-over-quarter growth from the fourth quarter to third quarter.

Jacob Silverman -- Alliance Global Partners -- Analyst

OK. And then switching gears, how is Video-as-a-Service and UMS been progressing in recent months such as the pace of new sign-ups?

Fei Chen -- President

Yeah. So for the -- actually for the VaaS and UMS, right, basically these two products when I look at the number, the contract signing progress, actually the recent data shows is close to 400 million -- or 4 million. 4 million contract value has already been signed up, right, which is actually last quarter, when we were having the call, it was like a 2 million. So actually, t already doubled.

Already doubled. So we are continuing to make major progress in these two products. And actually, for the contracts that we just signed up actually, with very famous actually, meaningful big customers such as China Merchants Securities, right? So with these household names as our new customer, we can use this as a case study to continue to push to the similar customers in the same industry, right. So we do expect these two business to continue to gain momentum in the following quarter before the year-end.

Jacob Silverman -- Alliance Global Partners -- Analyst

And one last one for me. Maybe to further monetize video-as-a-service, are you considering offering maybe any ad placements, ad sharing capabilities in combination with the subscription that you are already offering?

Fei Chen -- President

Yeah. Actually, we thought about this right. I think that's likely two very different business model. Currently what we are offering is a true SaaS model, right.

Actually, it's a subscription fee, we charge a subscription fee, which is pretty much a pure margin, right, it's a software type of margin. But once we offer like as a kind of like similar to JG Alliance business model, which we are certainly we will need to pay the media fee and also, as well as actually we need to pay the bandwidth costs, right, so the margin will be dramatically lower than current JG Alliance business model. So for the time being, we actually opt not to choose this way of monetizing and we want to continue to focus on the subscription-based model first before -- once we have gained massive -- a good size of this subscription model, then we can think about it later on. Chris, do you have anything to add?

Weidong Luo -- Chairman and Chief Executive Officer

Also, this is actually two different directions. So first of all we want to focusing on some vertical industry for example, financial industries the bank and those apps, they have make a huge budget to invest in these VaaS content, but they are not willing to add any advertisement within their apps. So in this case, they are willing to pay in the SaaS basis model but for some like Internet companies, those companies, they monetize by the advertisement. So in that case, they will probably like to do the traffic revenue share model, but in the first case -- in our stage, we want to focus on the SaaS business model and because the bank and financial industry, they have huge budget and we are very familiar to what we said in past push services.

Jacob Silverman -- Alliance Global Partners -- Analyst

All right. Thanks so much, everyone.

Operator

Thank you. We have the next question, which is coming from Ryan Roberts from Navis. Please go ahead.

Ryan Roberts -- Navis Capital -- Analyst

Hi. Good evening, management. Thanks for the update. A couple of questions coming from my side.

Kind of the first one is, it's really, you talked a bit about the supply side kind of JG Alliance I guess some of the apps are undergoing rectification so on and so forth and are kind of slowing down their integration with you guys. What about demand? What are you seeing there? It sounds like your current DAUs are about 180, which is a nice step-up from last quarter, or from Q1 rather and your target for the year-end I thought was around 160. So it seems like you guys are doing well on DAUs, which would make me think that you have some pretty solid revenue generation capability. I just want to hear what's happening on the demand side of that?

Fei Chen -- President

Hey, Ryan. This is Fei. So actually, from the demand side, it's never an issue, right, because there's always customers who want to acquire new users, more new users and also in large Internet companies, they want to wake up their dominant existing older users, right. So our size of this business for the time being even with the expectation of the third quarter, fourth quarter revenue, it's going to be close to 100 million, right, revenue.

So this is still relatively small versus -- compared to the huge, huge market size of this -- for the advertising mobile, advertising industry, right? So that's why -- and also, for our JG Alliance service, actually this is a completely new media format, which doesn't really compete directly with the existing service providers, right, which serves to our advantage. So we see all this pent-up demand and the bottleneck has always been and will be the supply side, right. So that's why we need to wait a little bit until the macro regulatory process has settled. Then we can renew the growth.

Ryan Roberts -- Navis Capital -- Analyst

Right. And then talk to me a little bit about the ad loads. I think that was one of the things a little value can turn for monetization. What's the current ad load looking like JG Alliance?

Fei Chen -- President

Yeah. So ad load is still about 50%, right. Exposure divided by the denominator is basically the DAU, right. So ad load hasn't really been our focus yet, hasn't been our focus yet.

We want to continue to acquire as much traffic as much DAU as possible before we do the fine tuning of the ad load and certainly, we are working on it OK. From the product perspective, we actually launched SSP 2.0, which we will offer the functionality that for per DAU, we will be able to offer multiple exposures right. And the product got launched in July and it has been -- actually has been in the entire process with a few apps and the result actually, is pretty encouraging. For the same DAU, we are able to increase the ad load basically by 25%, right.

So we also have already established a migration plan to migrate our existing apps in our network into this SSP 2.0. So we will start with the smaller DAUs first and when they become stable and achieve the results that we wanted, then we will move on to those apps with greater DAUs. So we expect such migration process to be ongoing and a continuous efforts and we hope to be able to finish the majority of the acquisition before the end of fourth quarter. So this in addition to the organic traffic acquisition, DAU acquisition this will help the total exposure so we can leverage in the coming quarter.

That's why we already built in the assumption for the traffic to continue to grow in the fourth quarter because fourth quarter, you will expect seasonal quarter-over-quarter growth of JG Alliance.

Ryan Roberts -- Navis Capital -- Analyst

And kind of blue-sky scenario. What's your ad load target in Q4?

Fei Chen -- President

I think it maybe increase by 10%.

Ryan Roberts -- Navis Capital -- Analyst

So you're going to increase from 50% to 55% or you mean 50% to 60%?

Fei Chen -- President

Yeah. 55% to 60%, somewhere in that range.

Ryan Roberts -- Navis Capital -- Analyst

OK. Understood. OK, that's helpful. Thanks.

And then maybe another question is I think you were talking a bit about the kind of cross-selling and progress there. I'm wondering if you guys have any analysis kind of about on a customer cohort kind of basis for kind of your VaaS business because that's what we kind of expect to see deliver some explosive growth as we've talked about in the past, a lot subscription growth is nice, but VaaS is really kind of where we think there's a lot more potential there. Do you have any data you can share yet in terms of how many -- the average revenue kind of recurring revenue rate might be or kind of the -- some of those typical SaaS metrics I think that maybe some other companies that you're aware of are following? Can you share some of those updates or some of those data points if you have them?

Fei Chen -- President

Yeah, we do. Actually, we do have those metrics right that because SaaS, kind of like a matrix. So we actually segment our Subscription business -- Subscription-based customers into two buckets, right. One is the KA customers, which is the top 1500 Internet companies based on the DAU, right.

So for these customers actually when we look at the customer, the retention, dollar based -- actually India, OK in net dollar retention, OK. And over the past several years, it's been in the range of 100% to 120%, which is a very sticky, OK. And then, for the second buckets, basically those customers of more like SMB wallet type of customer. For these types of customers, as you know, in China every year -- actually every day on the apps come in and go, right, for the smaller ones, they tend to -- by nature, they cannot survive after a certain period of -- a certain time of operation.

So, for these segments of customers, when we look at -- to India, actually they are in the range of around 70%. So this is a natural year. And it's very difficult to kind of like increase the India for these types of customer unless we don't want to deal with these customers, right. So that's sort of on the current situation.

Ryan Roberts -- Navis Capital -- Analyst

OK. Understood. That's helpful to hear that the KAs are kind of 100%, 120%, that's sticky, that's good. And then maybe kind of adjacent to that, you mentioned kind of realignment of the sales process a little bit, having internal stack focus on KAs and having agents to everyone else.

Where do you kind of draw that line with respect to kind of the WeChat mini-programs? Is that going to be agents holding -- handling that business for you or alternatively, you're going to continue that in-house? Is there a potential at some point, where these -- with the advertising side of it could kind of sell itself? I realize signing JG Alliance customers for supply is maybe a very labor-intensive thing, but eventually ultimately, there must be kind of a targeted site where an advertising client can kind of purchase inventory -- sorry, purchase exposure themselves, right, which would make a lot of this much more scalable.

Fei Chen -- President

Yeah. So actually -- currently, from the revenue perspective, right, revenue split already over 50% of our JG Alliance revenue actually are coming from the ad agencies. So most of these ad agencies, they will do the customer acquisition basically at a customer acquisition themselves and then, they were even -- a lot of them, they will do the ad placements, actually operation on themselves as well. So actually, we only of the platform for them to work on, right.

So for this set of agencies, actually already, it's very kind of like the automatic and it doesn't really require our internal the labor or whatever resource, right. So going forward, we expected these ad agency kind of like the revenue pie will continue to grow because we -- our direct sales force, their main mission is to serve a few -- a very large customers such as Weibo, right, such as we've seen. These are very large customers, right. On these customers, we need to deal with them directly because they have actually maybe pretty -- a more complicated request or demand on each, right.

So for majority of the customers, we were left the agencies to do it. So the scalability is not an issue in our opinion. We never budget. We are -- we will build a very massive ad operating team and add the sales force, OK.

We will -- we don't need to do that. It's not in our strategy.

Ryan Roberts -- Navis Capital -- Analyst

So, could we potentially see some of the sales and marketing spend kind of come down a bit or is that likely not in the cards?

Fei Chen -- President

Yeah, yeah. It's our goal to actually to continue to generate a leverage in the expense line items, right. So certainly, the sales and marketing needs to go down as a percentage of total revenue. I think for this JG Alliance business, we think that the leverage is pretty high, but we are continuing to go up, OK.

And what we need to do is actually work on is actually to get the leverage for the subscription business. Subscription business, actually, I had the revenue. It's still not in the ideal range yet, OK. So that's why we -- going forward actually, we are actually going to have -- actually already building sort of the key customer and like a sales team, which does not exist before.

And this key customer, they were first, the industry basically verticals, vertical by vertical, and the first companies like China Merchants Securities, right, such kind of customer. They can generate 1 million revenue also, right? So this is a where the sales efficiency will come from by serving the large customers, right? And so, this is an ongoing process. And not only on the sales marketing, also our R&D, we will continue to drive the efficiency, OK? We we are continuing to optimize our resource utilization rate. We are continuing to allocate the resource into -- the human resource into new product innovation, OK? And although we are cutting back the resource originally devoted into the older products, right, legacy product, push products, right.

So that's sort of an ongoing process we are -- currently are implementing. So I think going forward, we should continue to see our operating leverage.

Ryan Roberts -- Navis Capital -- Analyst

OK. And then, a couple of two last quick ones, very quick from me on kind of the numbers side of things. Just I'm curious, could you remind us what that other income line is on the P&L and also for the prior share buybacks, what was the average buyback price and then I'm done.

Shan-Nen Bong -- Chief Financial Officer

OK. Let me take a look. So the other income is mainly on the government bonds that we get, the subsidies to get from the Shenzhen Government.

Ryan Roberts -- Navis Capital -- Analyst

Yes. OK. And roughly speaking, what was the prior buybacks, what were those prices per ADS?

Shan-Nen Bong -- Chief Financial Officer

I need to get back to you, because we have not been repurchasing for at least four quarters. So I don't have the numbers readily available.

Ryan Roberts -- Navis Capital -- Analyst

Yeah. OK. If you can follow-up offline, that'd be great. OK.

Thanks very much guys. Appreciate it.

Shan-Nen Bong -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] We have the next question from Thomas [inaudible] a personal investor. Please go ahead.

Unknown speaker

Hello. [Foreign language] OK. Thank you.

Weidong Luo -- Chairman and Chief Executive Officer

[Foreign language]

Unknown speaker

[Foreign language]

Weidong Luo -- Chairman and Chief Executive Officer

[Foreign language]

Unknown speaker

OK. [Foreign language]

Weidong Luo -- Chairman and Chief Executive Officer

[Foreign language]

Unknown speaker

[Foreign language]

Fei Chen -- President

[Foreign language]

Unknown speaker

[Foreign language] OK, thank you.

Operator

Thank you. [Operator instructions] We have the next question. This is coming from the line of Ryan Roberts from Navis. Please go ahead.

Ryan Roberts -- Navis Capital -- Analyst

Hi. I actually had a follow-up from the maybe, the previous caller, actually had an interesting point about kind of maybe user experience in potential ad overload if you cooperate with a couple of the different platforms. So if an app developer cooperated with multiple platforms, that could lead to a kind of a deterioration of experience. If you're showing an ad and Tencent shows an and so on and so on.

Is there any -- we're looking at kind of the app load and kind of overall performance. I'm just kind of curious, is there any kind of way you can monitor that from a kind of a user experience perspective and kind of the ad developer probably, it's probably a more of a concern for them. But then again, if you're kind of providing some of the advertising service for them, I would wonder, if you have a -- maybe an element of concern there, because that could impact ROI. I would think from your advertising clients, if the inventories maybe saturated.

And then just I'm curious how you guys approach that problem.

Fei Chen -- President

Yeah. So actually, the beauty of this product is the user experience is actually not -- it's never an issue for us for the time being, right, because first of all, for the app loads currently is very low. It's actually per DAU a day only generates, we only show 0.5 the ads, right? So versus the typical funding tool or any -- the media, the fees out of ads, they are going to show like a 10 to 20, right? So this is immaterial compared to the traditional way of showing ads. And that even though we increased the app loads by 100%, which is one exposure per DAU, which is still very limited.

And second of all, we've actually have done a few analyses with the developer to analyze whether our -- this new format has any impact to user behavior, such as whether we are called increased number of users to delete the app, right? So we have done all these sorts of analysis. Actually, we never -- we will never be able to find any evidence that links to users with the deletion of the app because of the app developers used our JG Alliance and the product. And in some cases, actually, it also improved that there are actually the user retention, which is very, very, very surprising to us as well. So net-net, basically, there is no negative user experience and that we never received any user complaints as well since we launched this product.

Weidong Luo -- Chairman and Chief Executive Officer

Yeah. Actually, product-wise, basically Weibo provide the AB test for the app developers. So basically, we can do our AB test for a group of users that will show our advertisements and in other group, they don't show any advertisements. So basically, from the data and the result, those two -- they have no difference of these two groups of users.

Ryan Roberts -- Navis Capital -- Analyst

Yeah, no statistical difference. Got it. Got it. OK.

OK. All right. [Foreign language] I'm good. Thank you.

Operator

[Operator instructions] We have no further questions at this moment. I would like to hand the conference back to our host, Mr. Vanguestaine. Please take over, sir.

Rene Vanguestaine -- Investor Relations

Thank you, Rohit. Thank you, everyone, for joining our call tonight. If you have any further question and comments, please don't hesitate to reach out to the IR team. This concludes the call.

Goodbye.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

Rene Vanguestaine -- Investor Relations

Weidong Luo -- Chairman and Chief Executive Officer

Fei Chen -- President

Shan-Nen Bong -- Chief Financial Officer

Jacob Silverman -- Alliance Global Partners -- Analyst

Ryan Roberts -- Navis Capital -- Analyst

Unknown speaker

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