Aurora Mobile Limited (JG) Q4 2020 Earnings Call Transcript

Aurora Mobile Limited  (NASDAQ: JG) Q4 2020 earnings call dated Mar. 18, 2021

Corporate Participants:

Rene Vanguestaine — Investor Relations Contact Officer

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Fei Chen — Co-Founder and President

Shan-Nen Bong — Chief Financial Officer

Analysts:

Brian Kinstlinger — Alliance Global Partners — Analyst

Ryan Roberts — Navis Capital Partners — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Aurora Mobile Fourth Quarter and Fiscal Year 2020 earnings conference call. [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.

Rene Vanguestaine — Investor Relations Contact Officer

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 to the conference over to Mr. Luo. Please go ahead.

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Thanks, operator. Good morning and good evening to everyone one the call. Welcome to Aurora Mobile’s fourth quarter and full year 2020 earnings call. The year 2021 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 growth, and now monetize.

I still vividly remember the very first JPush product we developed for mobile app developers way back in 2011 and we have come a long way since. Over the — over this past decade, through 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 operational needs. Cumulatively, as of December 31st of 2020, we have worked with more than 591,000 app developers representing more than 1.7 million apps in total.

Our developer service SDK is helping install 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 eight developer services.

I would like to use this opportunity to thank all the mobile app developers who have been alongside us, trusting us and co-operating 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 how companies conduct their businesses in so many ways. During the crisis, we persistently carried out our core strategy to serve our developer customers by helping them with their business operations, user growth and the monetization of their user base.

Based on the solid business foundation build with our developer subscription services, we ventured into new business territory by innovatively creating our JG Alliance business lines to help our developer customers better monetize their user traffic. The JG Alliance became a great success as we achieved a phenomenal 15 times growth year-over-year in revenue and DAUs grew rapidly from nil to 130 million in merely five quarters.

Meanwhile, we completed the wind down of our targeted marketing business. Despite being the largest revenue contributor in 2019, we felt that targeted marketing business did not fit with our Company’s long term direction. I’m proud to announce that by the end of the fourth quarter 2020, our business transition was 100% complete and we have successfully transitioned our Company to a pure SaaS based business model.

During the year, we also put great emphasis on product development and innovation. We successfully launched three new heavy-weight products. First, we enhanced our JG Alliance product portfolio by adding a new In-App message product. And in our developer subscription business, we launched the Unification Messaging Service or UMS and Video-as-a-Service or VAAS, products to address new critical needs from developers.

On the customer front, we have formed partnership with numerous well known and key customers across almost every industry vertical, as you have seen from the press releases we issued from time-to-time. Cooperation with these KA customers has kept us better penetrating to different industries. Check the New Energy Vehicle structure for example. After our cooperation with the world’s leading new energy vehicle manufacturer in BYD, as of this week, we now have 39 customers within the auto industry, of which 19 are still free.

We are replicating the success of the EV market expansion model in other industries, such as short video, education, gaming, finance, telecom, e-commerce and [Indecipherable] through this domino effect where we leverage our existing operational relationship with the market leaders of each industry. With video we can and we will quickly sign-up more customers to ramp-up or increase our market share.

For the year, we also upgraded our talent pool by hiring a number of the senior executives across R&D sales operations and HR, both have rich management experience accumulating from Tencent, BABA, ByteDance and Huawei.

We optimized our business operations so we can run the business more efficiently and create execution certainty, continue the talent acquisition with targeted — with wide performance-based incentive scheme put in place and fine-tuning the way we manage our organizations will lay a solid foundation for our future sustained business growth and success.

Before I comment on our 4Q results, I would like to take this opportunity to remind everyone that we have uploaded a quarterly earnings deck on our IR webpage for your reference. You may refer the deck as we proceed with the call today. Let me continue with our key operating highlights for the fourth quarter of 2020 other than those I have mentioned earlier.

First, the number of monthly active unique mobile devices we cover continue to grow and reached 1.395 billion in December of 2020 from 1.36 billion in December 2019. Often 90% of mobile devices in China have at least one on more Jiguang SDK installed.

Second, during the quarter, we saw the number of paying customer go out to 2,420 from 2,131 a year ago. I would like to focus the discussion on our SaaS business, which include only the Developer Services and Vertical Applications businesses, as we have officially exited the traditional targeted marketing business on December 2020.

Therefore starting from January 1st of 2021, all our revenue will be contributed by the SaaS business. Our SaaS business continue to record impressive results this quarter with revenue of RMB76.6 million, which was at the higher end of our guidance range, representing 17% growth year-over-year and 18% growth quarter-over-quarter; and gross profit of RMB58.5 million, growing 29% year-over-year and 20% quarter-over-quarter quarter.

On our SaaS businesses basis, the total revenue grew 70% year-over-year, mainly due to the strong 46% growth in developer services, partially offset by the decline in vertical applications which have been impacted by the COVID-19. Nevertheless, revenue from vertical application have seen solid sequential growth for three consecutive quarters as customer demand in this segment continue to recover.

On a quarter-over-quarter basis, SaaS business revenue records sequential growth of 18% to RMB76.6 million. In Q4, 2020 our SaaS business contributed 72% of total revenue, up from 60% in Q3 2020. Going forward, SaaS business will contribute 100% of our revenue.

On a SaaS business basis, gross profit has also saw strong growth of 28% year-over-year to RMB58.7 million for the quarter and year 2020, due to both the revenue growth of 70% year-over-year and margin expansion from 70% to 76% year-over-year, we expect our gross margin in 2021 to remain above 70% throughout the year.

For Q4 2020 SaaS business contributed 98% of the gross profit, up from 96% in Q3, 2020. Going forward, SaaS business will contribute 100% of our gross profit.

Here, I would also like to take a moment and share with you our new product initiatives. We have recently started the launch of both the JG UMS and JG VAAS products after conducting thorough market analysis with our app developers and customers to understand their needs and pain points.

JG UMS, which stands for Unification Messaging System enables businesses to engage with their target customers more efficiently and cost effectively through one integrated messaging management platform, therefore improving operational simplicity while reducing costs with flexible routing strategy management.

In the past two years, with the proliferation of many user engagement channels such as mini programs, WeChat public accounts, Ding Ding [Indecipherable] user engagement has become much more complex than ever before. UMS therefore comes to the market as the right product at the right time to address such pain points. UMS is not only suitable for app developers, but also suitable for business that do not even have a mobile app. Pretty much all the business in China will need this product as long as they have a sizeable customer base and utilize multiple channels to reach their own customer region.

JG VAAS which stand for Video-as-a-Service, on the other hand, enable mobile app developers to provide relevant user friendly short video content in their apps, therefore improving their user experience, increasing user engagement and stickiness, and enhancing monetization capability. It’s a distributed way for users to consume short videos anytime and anywhere, rather than have to go to a dedicated short-video apps to view short videos in a centralized fashion.

Both UMS and VAAS are offered in a subscription fee-based model, where our customers pay us annual fees based on the features they like to enjoy. We believe both products can greatly expand our paying customer base and ARPU for our developer subscription business over time. We anticipate that these two products will start generating revenues in the second quarter of 2021.

Now, I will turn over to Fei, who will discuss the Q4 performance in greater detail.

Fei Chen — Co-Founder and President

Thank you, Chris. Let me start with a discussion of different revenue streams within the SaaS businesses. Our star performer, 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 31st, 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 the 14% growth in customer numbers and ARPU respectively.

For subscription services within the developer services, we continue to see more customers signing up through our suite of developer services. New and the renewal customers include, among others, include [Phonetic] FARFETCH, Segway-Ninebot, Tiger Brokers, Douban 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 includes revenues from JG Alliance services and the 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 15 times annual revenue growth demonstrates the large potential market opportunity and the growing demand for 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 the demand side of the JG Alliance.

On the supply side, we continue to see many app 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 a 30% growth from the third quarter 2020 respectively. The notable new members of JG Alliance on the traffic side mainly include large and the popular mobile apps from different industry sectors such as utilities, education, and the financial. The continued growth in the number of apps and the DAUs is proof of the strong market demand for JG Alliance products.

On the demand side, mini program developers continue to play a pivotal role as traffic consumer of JG Alliance by contributing 39% of revenue in the quarter. Notable customers of JG Alliance included but not limited to Weibo JD, Pinduoduo, [Indecipherable] and Baidu’s Du Xiaoman Financial.

Our JG Alliance ever increasing traffic report results and the innovative and the unique advertising formats have given our customers a brand new effective and a different media for user acquisition needs and dormant user retargeting needs.

Now I would like to provide a brief update on the legacy targeted marketing business. The revenue and the gross profit contributions from target marketing have both declined from 40% in Q3 ’20 to 28% in 4Q and from 4% in third quarter ’20 to 2% in fourth quarter ’20 respectively. The fourth quarter of 2020 is the last quarter where we recognized revenues from targeted marketing. This business has ceased its entirety by December 31st 2020. Therefore, starting from first quarter 2021, revenues will be 100% from our SaaS businesses which include only developer services and vertical applications.

Now let’s move on to the discussion of vertical applications. The combined revenue from vertical applications, which include market intelligence, financial risk management and iZone, increased by 10% sequentially from RMB21.9 million in the third quarter of this year to RMB24.1 million. Revenue from vertical applications recorded a sequential growth every quarter in 2020.

Revenues from our market intelligence products increased by 16% year-over-year. We continue to see strong growth from corporates, with more than 60% revenue contributed by corporate client. New corporate customers included Douban, Huawei, Itel, Baidu.

In the financial risk management segment revenue increased by 23% quarter-over-quarter as demand for this business has recovered strongly from the impact of COVID-19, since the first half of 2020. Solid and the continued demand from banks and licensed financial institutions has pushed both the ARPU and the customer number to grow by 15% and 7% respectively, sequentially.

And lastly, our iZone business is still facing challenges as a result of COVID-19 impacting on the demand for location-based products. This business unit is still undergoing a number of new initiatives in product transitions. We recently launched a joined the product with Country Garden called [Indecipherable]. This product will not only provide the foot traffic analysis for properties up for sale, but also help property developers to identify and the target potential property buyers. We expect such product could help renew the growth in iZone over time.

With that, I’ll now pass the call to Shan-Nen.

Shan-Nen Bong — Chief Financial Officer

Hey, 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 other P&L items for this quarter.

First, the SaaS businesses revenue and gross profit contribution 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’s story that 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 to fixed assets due to our growing Cloud project in 2021. Under the U.S. GAAP, we booked the impairment charge for the service to be retired or made redundant. Other factors contributed to the increase including increase in professional fees and bad debt provision.

Adjusted EBITDA improved 22% to negative RMB17.1 million from negative RMB22 million in Q2, 2020. In addition, Q4, 2020 was a quarter where we achieve the best quarterly adjusted EBITDA results in year 2020. The company will continue working hard to improve this number going forward.

Onto the balance sheet items. Account receivables turnover days continue to improve and show great results as it decreased significantly from 70 days in Q4, 2019 and 45 days in Q3, 2020 to 37 days in Q4, 2020. This was attributable to management’s greater effort and emphasis on stringent customer credit granting policies, outstanding accounts receivable monitoring, along with aggressive and timely collection during the quarter.

Furthermore, the decline of targeted marketing business during the quarter also contributed to the shortening of AR turnover days. The deferred revenue balance, which represents cash collected in advance from customer increased significantly by 41% year-over-year, to RMB109 million as of December 31st, 2020. This is in line with our shift to the SaaS businesses where most customer are required to prepay their annual contract fee upon commencement of service.

In the fourth quarter of 2020, our operating cash flow was, once again, positive. This is the third consecutive quarter since Q2 2020 that we have recorded net operating cash inflow. All of the above KPIs show that our transition to focusing on SaaS business is generating more cash and granting fewer AR credit base than we have had under the targeted marketing era. The improvement in each of these balance sheet items were primarily driven by our shift to SaaS business model and we are very pleased with this improvement over the quarters.

Next, total assets were RMB787 million as of December 31st, 2020 and this includes cash and cash equivalent of RMB436 million, account receivables of RMB44 million, prepayments of RMB12 million, fixed assets of RMB73 million, long-term investment of RMB168.5 million. Total current liabilities were RMB460 million as of December 31st, 2020. This includes accounts receivable of RMB16.6 million, deferred revenue of RMB109 million, accrued liabilities of RMB109 million, convertible notes of RMB225 million.

And for the financial year ending December 31st, 2021, the Company expect the total revenue to be between RMB380 million and RMB400 million, representing a year-over-year growth of approximately 47% to 55% and a gross margin to be above 70% for the full-year 2021. However, please note that for meaningful comparison purposes, the prior year revenue numbers used to calculate the growth percentage here excludes revenue from targeted marketing business.

And the above outlook is based on the current market condition and reflects the Company’s current and preliminary estimate of the market and operating conditions and customer demands, which are subject to change.

Lastly, before I conclude, I’ll give a quick update on the share repurchase plan. In the quarter ended December 31st, 2020, we did not repurchase any shares. As of December 31st, 2020, cumulatively, we have repurchased a total of 921,000 ADS since the start of our program.

And this concludes the management prepared remarks and we are happy to take the question now. Operator, please proceed.

Questions and Answers:

Operator

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

Brian Kinstlinger — Alliance Global Partners — Analyst

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

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Hey, Brian, are you — are you asking about the JG Alliance network right on the demand side on the mini program?

Brian Kinstlinger — Alliance Global Partners — Analyst

That’s right.

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Okay. Yeah. Yeah, so yes, as you know, the mini programs has been profit — has been profit generation over the past couple of years, right. So many mini program developers, once they build their mini program, the account, the mini program state and to acquire users. So currently the, most of them can only rely on the WeChat internal traffic, right, for the users to search — to find the needed programs. And the traffic within the WeChat is limited. So if they want to continue to grow, they have to look for additional resources, additional traffic. So that’s where — that’s why we come into the play, because for the JG Alliance network, our product, the — we have two products, right, for the in-app messages as well as the live push messages.

These two actually media formats worked very well through direct traffic to the WeChat mini programs. So that’s why over the — over the past year on 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 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.

Brian Kinstlinger — Alliance Global Partners — Analyst

Great. My follow-up is in terms of the subscription services, can you talk about how fast you’re able to convert the freemium into paid customers and what is the biggest obstacle to converting these customers right now?

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Yeah. So, actually in terms of the conversion, right. So currently we have about 60,000 freemium customers who actually enjoy our free service and the paying ratio is relatively low, about three — and it will be less than 4%, right. So there is still room for — to increase the conversion. So what we are trying to do, basically we need to put a few mechanism in place.

We need to have the sales organization basically, to go through the list of the freemium customers and have engagement with them, and basically to educate them the difference between the paying and non-paying the benefits they can get by paying a little bit monthly fee, right. So this is ongoing and this efforts, actually this year we basically intensified for the greater efforts into this effort.

And the second is, we also look at basically to do the current paying customers, the profile analysis to identify the common features of these paying customers, why they like to pay, right. How big is their DAU, how many messages they typically send, right. So we come to basically — basically it’s just like doing user profile, right.

So based on this profile, we can more accurately select those freemium customers who are more likely to be converted, right. So this — and this work is being done by the R&D operation and also sales operation, right, so that when the sales go talk to the freemium customer, they can be more effective, yeah. So these other approaches that we are currently undertaking.

Brian Kinstlinger — Alliance Global Partners — Analyst

Great, thanks for answering my question.

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Thank you.

Operator

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

Ryan Roberts — Navis Capital Partners — Analyst

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

Shan-Nen Bong — Chief Financial Officer

Hey, thanks Ryan. Okay, I’ll take your question on the bad debts. Yeah, we will not go into specific 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 ones that has been lingering with us for a couple of quarters that we are thinking there is no longer able to recover the debt. So those are the one that we have make provision, 100% provision. So meaning that going forward, in Q1 2021, we have a fresh page of the accounts receivable going forward.

And secondly, the question you asked about the impairment. Yes, that 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, it’s because they have the ability to help us to leverage on their infrastructure. Trying to say is, it will only help us to improve our service delivery and stability going forward for all our developers.

Ryan Roberts — Navis Capital Partners — Analyst

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

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

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 have benefiting from the going cloud, okay, so basically those both servers might be better managed by the cloud service provider instead of — so we can focusing on the PaaS [Phonetic] level, instead we put resources on the data center management, right, server management those ICE level of type of dirty work, right. So that’s the hope.

Ryan Roberts — Navis Capital Partners — Analyst

Okay. And then maybe just kind of on the numbers and the last one, I see a pretty chunky impairment on the long-term investment looking about RMB44 million, about RMB44 million. Kind of curious what that is?

Shan-Nen Bong — Chief Financial Officer

Yeah. Again, those are the investment that we have made in the past pertaining to a few investees. Again, those are the one that we have made — the investment we made with the intention of helping us in the targeted marketing era. We thought of the fact that we will be able to have some synergy through this investees, and the fact that now we are winding down the targeted marketing business, so we deemed as no longer any value for them on to Jiguang going forward. And in fact, some of them are not performing well operationally. So based on the U.S. GAAP on the ground of conservatism, so we make a full provision for a couple of them.

Ryan Roberts — Navis Capital Partners — Analyst

Okay. So it sounds like it’s mostly targeted marketing related, okay. And then maybe, maybe it’s kind of — just to get a sense of, on the new product side, I think you guys have launched some new kind of new products recently. I’m just wondering if you can maybe share some early kind of feedback from customers and clients.

So I think it sounds like there’s a lot of R&D effort upfront to kind of to develop these — to solve these pain points and develop these packages. I’m just kind of curious so far how’s the reception been? And also, how does that factor into your outlook kind of for the year?

So I think the guidance was RMB380 million to RMB400 million, which is 60% somewhere around there Y-o-Y. So I’m curious if you’re expecting a lot of contribution from the new products or principally that’s mostly reflecting kind of JG Alliance. I’m trying to get to sense of what — maybe some of the assumptions are there?

Weidong Luo — Co-Founder, Chairman and Chief Executive Officer

Okay, Ryan, let me take your questions. So, regarding the new product — progress with the new products go into market right. So first of all, these two new products, the UMS and VAAS were launched in the later part of the fourth quarter. So after Chinese New Year, and then starting from beginning of this year and also quickly there is Chinese New Year. So actually right after Chinese New Year actually the real — the sales work started, kicked off and in a very short period of time, about a month, we actually already built a very good pipelines. Yeah, so for the UMS, actually, we already have 19 credible pipelines. And the customers, we are in the constant dialog with the customers and these 19 customers represents a few million dollars renminbi.

And actually, to tell you a good news, actually, as we speak, actually yesterday you know when I asked our sales head and she told me, yeah, she just signed one contract, UMS contract, and that 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 these 12 pipelines account for a few million RMB. So, based on these 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 PaaS business such as the G push, right.

So we believe over time, over the course of a year, we think these two business will become new growth, actually legs for our subscription business. And we also actually put the KPIs on these two products to our sales organization. So it’s not that 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 detail and more progress on these two — new two products. And also, you ask about the — our overall guidance, right. We guided RMB380 million to RMB400 million, which represents 47% to 55% year-over-year growth. And you are right, actually, most of the growth is now — it’s going to be driven by the JG Alliance. As we talk about the last time and before, actually JG Alliance has the characteristics that can have an explosive growth, right.

So we are expecting JG Alliance to continue to have a triple-digit growth this year. And for the subscription business, as I just mentioned, which typically is going to be around 30%-ish. This is — same is true for the vertical applications. So net-net, you will see about 55% growth for the entire year.

Ryan Roberts — Navis Capital Partners — Analyst

Okay. And maybe if I could just tack one last one, if you’ll allow me, what are the things we kind of talked about in a previous call I mean, and 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 that you’ve got the new advertising inventory and you have kind of companies that need advertising. And 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 if you can share any updates on how it’s going on bringing back some of those old accounts to spend on your new — the new JG Alliance products?

Fei Chen — Co-Founder and President

Hey Ryan, actually, when I compare the customer base, right, actually, they are very different. The customers who currently use our JG Alliance network actually are very fundamental different from those customers who use our target marketing business. So, for the target marketing actually before most of the, our advertising customers are coming from the financial sectors like those lenders, okay, per se.

But for these mini programs, actually, as I mentioned in the press release, if you recall those names right those are very large internet companies. And regardless whether they are trying to go through our JG Alliance network to reactivate their dormant customers or they are trying to increase their user base for their mini programs. Actually, most of them are very well known Internet leaders.

So, the nature of these customers, they have basically — one, they are very creditworthy, right. There is a little chance they can be defaults right than — when you compare to the target marketing customers, right. And the second, they have a deep pockets and the budgets is not an issue. As long as we have enough traffic, they will say, okay, give it all to me, okay. So that’s a good thing.

So — and also to share with you a data, I looked at the cohort analysis, right. Starting from last July for every month, the new customers joined our JG Alliance as the demand side, 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 gives us so much confidence that this product really, really shines; really, 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.

Ryan Roberts — Navis Capital Partners — Analyst

Understood. Thank you very much, Fei. That’s very helpful. Appreciate it.

Fei Chen — Co-Founder and President

Sure.

Operator

[Operator Instructions] All right, there are no further questions. I will now turn the call back to Rene for closing remarks.

Rene Vanguestaine — Investor Relations Contact Officer

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.

Operator

[Operator Closing Remarks]