uCloudlink Group Inc. Price & Performance (UCL)

And thank you for joining us on Yucilin's fourth quarter and full year 2024 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir. Joining me on today's call are Mr. Zhu Ping Peng, Co Founder and Chairman of the Board of Directors Mr. Xiaogui Chen, Co Founder, Director and Chief Executive Officer and Mr. Yi Mengshi, Chief Financial Officer. Mr. Chen will begin with an overview of our recent business highlights Mr. Shi will then discuss our financial and operational highlights. For the quarter. They will all be available to take your questions in the Q and A section that follows. Before we proceed, please note that this call may contain forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and observations that involve known and unknown risks. Uncertainties and other factors not under company's control. Which may cause actual results, performance or achievements of the company be materially different from the results performance or interpretation implied by these forward looking statements All forward looking statements are expressly qualified in their entirety by the quarterly statements [indiscernible] and the details of the company's filings with SEC The company does not assume any obligation to reverse or update any forward looking statements as a result of new information future events, [indiscernible] in market conditions, or otherwise except as required by law.

Please also note that Yucleen's earnings press release and this conference call include discussions of undoubted GAAP financial information and undoubted non GAAP financial matters. Yucatan's press release contains our reconciliation of the unaudited non GAAP measures to the most directly comparable and diluted GAAP measures. I will now turn the call over to Mr. Chen, Please go ahead. Thank you, Tanya, and good morning or evening, everyone. We closed out the year with a solid performance as our expanding global ecosystem continues to gain growth momentum. Revenues in year 2024 increased 7.1% year over year to US91.6 million dollars with net income US4.6 million and net cash flow from operations of US9.2 million dollars representing a significant from 41.2 increase from the last year. Total revenue during the year from the Mainland China region in particular, increased 97.4% year over year. Indicating that our new uCloudlink one point zero international data connectivity solutions have been more widely adopted by Chinese consumers. And strengthening our leading petition in the long term market. Total revenue during the first quarter, which is typically [indiscernible] by seasonality, if you see the third quarter with peak summer activity. Maintaining a consistent upward growth [indiscernible] Year twenty twenty four marked the ten years anniversary since our funding, our comprehensive connectivity services powered by Cloud Sync and HyperCard solutions cover over 150 more countries across six continents.

We have served 02/1980 at 818 business partners in 62 countries and regions. Indicating a growing ecosystem of global meat solutions for daily use While these impressive we have much more installed for year 2025. [indiscernible] continues to thrive as we broaden our portfolio of solutions to service a wider [indiscernible] of user needs as artificial intelligence AI becomes more widespread we have begun deploying internally to enhance operational efficiency and integrated it into a number of our solutions to improve users' experience ensuring seamless connectivity for users globally. In addition to AI, we're leveraging our proprietary [indiscernible] to block barriers in connectivity, creating innovative solutions led enhanced digital experience worldwide. And revolutionize connectivity for IoT, people and pets, At MWC, twenty twenty five, we showcased this new and exciting technologies that has been integrated in into innovative solutions that we are further strengthen the tailwinds behind our broader series of glaucomy and glaucomy inside solutions. Furthermore, at the CES year twenty twenty five, [indiscernible] was honored with the best of the CES twenty twenty five, breakthrough award by Android Authority. Underscoring our commitment to innovation, in a significant milestone, one of your uCloudlink subsidiary was among the first batch of the 13 foreign investor companies alongside [indiscernible] of renowned [indiscernible] operations such as Deutsche Telekom, Siemens, Airbus and HSBC.

To receive approval from China Ministry of Industry and Information Technology MIIT, for pilot operations of value add telecom telecommunication services. [indiscernible] ability to provide Internet access and information services in China, making pivotal steps in expanding our global footprint and delivering cutting edge connectivity solutions.

First, let me start with our Glocomialife and Pet connectivity solutions. Where we just unveiled platform at MWC twenty twenty five. A revolutionary addition to the digital ecosystem. The world first smartphone for pets offers for pet offers funds. API pet interaction, safety including the six tech global positioning, [indiscernible] guardians and the community engagement, global pet community. According to Morgan Stanley, annual spending growth in the pet industry could reach 7% by year 2030. Year by year, I think. Translating into the total industry spending will increase to 1 point RMB261 billion reflecting the enormous opportunity we are tapping into with solution. [indiscernible] met a great addition [indiscernible] [indiscernible] [indiscernible] [indiscernible] into our portfolio. Turning to global Internet of Things IoT. [indiscernible] where we are [indiscernible] all in one IoT solution at MWC year twenty twenty five Our cloud computing is a revolutionary plug and play IoT solution designed to deliver instant global full speed four gs and five gs connectivity for IoT and smart devices. These innovative solutions can seamlessly integrate into existing device with the same car slots such as smartphone, [indiscernible] and IoT enabled hardware by simplifying inset cloud SIM kit into the SIM slot. Users can unlock global connectivity without the need for additional hardware or software [indiscernible] Make it an ideal solution for a wide range of applications and scenarios.

With combination of the cloud theme kit our pioneering software uCloudlink SIM technology. And our innovative sim card solutions global needs IoT offerings now comprehensively address the connectivity challenges across all IoT scenario. Whether for the existing legacy devices or new incremental markets. Our solution provides seamless, reliable and scalable connectivity. This breakthrough not only enhance the vitality of IoT application but also significantly expand the market potential for global meat. Positioning us as a leader in Glocomey IoT connectivity solutions. Following the success small scale commercial application of our software theme, film technology with several leading manufacturer in the security camera, dashboard camera, other related sectors The commercial application of our global IoT solutions scale up a significant during the first quarter. GloTomi IoT user numbers are growing rapidly and are expected to ramp up going forward. Allowing us to demonstrate the strength and the capabilities of our solutions to an even broader audience across IoT sectors. For our local Mi SIM business, we just unveiled [indiscernible] at MWC Year twenty twenty five a revolutionary leap in SIM technology. [indiscernible] as the best second SIM card can have. It has [indiscernible] both domestic and international carrages providing consumers with a single SIM solution.

For seamless local and global connectivity. [indiscernible] it empower Tier two Tier three operator and the mobile watch operator by addressing challenges such as poor network performance, limited international roaming, [indiscernible] and inability to build independent networks enabling them to deliver superior services and expand their market. Reach. [indiscernible] the need for costly international roaming and provides users with reliable high speed connectivities across mobile network operator networks. Lastly, for our people centric connectivity, our global mobile fixed broadband business line where we just unveiled the [indiscernible] G50 Max had a hypercon five gs mobile WiFi hotspot with AI driven sky to ground connectivity at MWC twenty twenty five. This mobile Wi Fi hotspot improves network quality with AI powered real time congestion detection offering a seamless and better connection experience regardless of where you are. Our advanced hypercon technology delivery local and global Internet access ensuring users have high speed connections reliable network whether wherever they go. Without a limitation, of the traditional loaning or carrier restriction. At MWCE twenty twenty five, we unveiled the revolutionary upgrade U40 capable of delivering speeds three times faster than traditional four gs device. [indiscernible] integrate Wi Fi networks across home, airport, cabin, office, cafe and mall, while also spring being the world's first device to support in flight Wi Fi connectivities We also make breakthrough in developing retail channel for our Glocomie Mobile Fixed broadband and live solution [indiscernible] By signing cooperation agreements with North American largest airport retail channel and making them widely available across air retail located in North America.

We are now actively negotiating to expand this partnership across Europe soon and looking to replicate these process through other channels to expand their exposures to a broader audience Following our successful launch at MWA we all four product lines are now market ready. With strong interest from partners including global pet store chain, [indiscernible] high level discussion [indiscernible] significant market expansion potential. Our goal is to aggressively promote [indiscernible] a full marketplace vision. Kokomi Life including the platform, aims to for tens of millions of users Global global midstreams and IoT target hundreds of millions [indiscernible] driving driving impactful growth across all business lines. With this innovative business lines, increasingly creating new revenue streams feeding into our marketplace. Our user base is diversified and scaling up we have been an exciting year 2025 ahead of us with many more solutions in the pipeline where we are we will further consolidate the convenience secure and premium connectivity between mobile Internet fixed broadband, WiFi and satellite communications with centralized AI management. With all these innovative solutions, increasingly contributing to a new revenue streams and further scaling up our user base I'm confident we are on the right track to build an integrated and comprehensive global mobile data traffic sharing marketplace that will create long term sustainable value for the shareholders.

With the optimism for the future in mind I will conclude with our guidance for the next quarter and the year. For the fourth quarter of year twenty twenty five, we expect total revenue to be between U. S. Dollar US80.2 million dollars and US 90,500,000.0 representing an increase of 0.6% to 7.7% compared to the same period of year 02/2004, For the year 02/2005, we expect total revenue to be between US dollar US95 million dollars and US dollar 130,000,000 representing an increase of 3.7% and to 41.9% for the long year 02/2004. I will now turn the call over to Mr. Thank you, Mr. Chen. Hello, everyone.

I will go over our operational and financial highlights. For the first quarter and full year 2024. Average daily active terminals is an important operating metrics for us as it measures customer usage trends over each period. Which is reflective of our business performance Average daily active terminal DAT, is fourth quarter or RMB300000 and RMB380 million of which 54.3% were from the Equilink one point zero international data connectivity service. 45.7% were from Yucatan Link two point zero local data connectivity service. Average daily data usage per terminal was 1.55 gigabytes in December of twenty twenty four, As of December 31, 2024, the company has served 2,818 business partner in 62 countries and regions. The company had 185 patents with 165 proof and 20 pending approval. Why the pool of SIM cards are from 3,091 MNOs globally. As of 12/31/2024. Total revenue for the fourth quarter were $26,000,000 representing an increase of 19.5% from US21.7 million dollars in the fourth quarter of twenty twenty three. Revenue from service was US50 million dollars representing an increase of 0.6% from US14.9 million dollars in the same period of 2023. Revenue from service as a percentage of total revenue was 57.8% during the fourth quarter of twenty twenty four, compared to 68.7% during the same period of 2023.

Geographically speaking, during the fourth quarter of twenty twenty four, Japan contributed 33.6%, Mainland China contributed 20%.

Loss America contributed 12.1% and other country and regions contributed the remaining 4014.3% compared to 43.116.524.361% respectively in the same period of 2023. Overall gross profit was RMB11.2 million in the fourth quarter twenty twenty four, relatively stable when compared to RMB11.3 million in the same period of 2023. Overall, gross margins was 43% in the fourth quarter of twenty twenty four. Compared to 52% in the same period '23. Gross margin on service was 58.6% in the fourth quarter of twenty twenty four, compared to 60.1% in same period of 2023. [indiscernible] Gross margins on sales of products decreased to 21.7% in the fourth quarter of twenty twenty four, from 34.2% in the same period of 2023. Excluding share based compensation, total operating expenses in the fourth quarter of twenty twenty four were US13.9 million dollars or 53% of total revenue. Compared to $11,600,000 or 53% of the total revenue in the same period in 2023. Net loss was US1.5 million dollars in the fourth quarter of twenty twenty four, compared to $1,800,000 in same period 2023. Adjusted EBITDA was negative $2,300,000 in the fourth quarter of twenty twenty four compared to a positive US1.5 million dollars for the same period of 2023. [indiscernible] Moving on to [indiscernible] 2024 full year's financial results.

Total revenue for 2024 increased by 30.1% to US91.6 million dollars from US85.6 million dollars in 2023. [indiscernible] driven primarily by the revenue increase from data connectivity service [indiscernible] Revenue from Data Connectivity Service were US47.6 million dollars representing an increase of 1.9% from $46,600,000 in 2023. Within that connectivity service, revenue from international data connectivity service rose to US39.5 million dollars in 2024, from $37,900,000 in 2023. Driven primarily by the continued recovery of international progress. Which was partially offset by a decrease in revenue from local data connectivity to service to $8,100,000 in 2024, from $8,800,000 in 2023. Overall gross margin was 48.4% in 2024, stable when compared to 49% in 2023. And our gross margins on service increased to 60.8% in 2024 from 58.5% in 2023. Excluding share based compensation, total operating expenses in 2024 were $40,800,000 or 45% of total revenue, compared to $34,600,000 or 40% of total revenue in 2023. We achieved a net income of US4.6 million dollars in 2024 up from $2,800,000 in 2023. Adjusted EBITDA was US7.1 million dollars compared to $9,800,000 in 2023. For the full year 2024, our capital expenditure were US4 million dollars compared to US2.1 million dollars in 2023.

For the full year 2024, we achieved positive operating cash flow of $9,200,000 compared to US6.5 million dollars in 2023. [indiscernible] Moving on to balance sheet items. Our cash and cash equivalents increased to US30.1 million dollars as of December 31, 2024. Compared to US27.7 million dollars as of 09/30/2024. We remain committed to enhancing the company's financial positions over the course of the years. And are well positioned to continue growing our business. With that, operator, let's open up for Q and A. Thank you. We will now begin the question and answer session. The first question today comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.

Yes.

Thank you very much.

My first question is about the PetPhone. And what I'd like to know is what's the benefit of of the Pet Phone and what will it allow me to do?

Yes. So on the Pet phone, I think we enable pet [indiscernible] they can use the smartphone to call their the other dog or other pets or their owners to express their needs, they are moody. Such as, for example, they are hungry, they are thirsty, they want to go outside. And they are missing their friends So they can use their body languages they can use their special tone, to express this message or calling to their different brands, different pet and their owners. [indiscernible] [indiscernible] So that no matter the owner or friend [indiscernible] they are, so they can contact their pets. They can express their caring each other. So that's quite unique So a creation point That's why in the NWC twenty twenty five, we get many, many attraction from the local seven, I remember it's seven TV and a lot of very famous like this [indiscernible] I think is approaching us to understand this product. It's not only just interaction with the people and pets, but also we create I think, pets community social. For example, if the dog with our platform [indiscernible] So if another dog is approaching, so the platform the light will flash and the [indiscernible] will give reminding, oh, your new friend coming or you have good friend coming or you have a bad friend, you give like friend, coming.

So we can make this happen So this is quite attractive. Also, we have security. We have six positioning. We can fight [indiscernible] Airtech chrono five because we have six positioning technology by Unica. We already proved in last years. So and finally, we have also the geo fencing. We have sports, and we can understand they are moody and we can monitoring, we can alert these if something wrong or improper behavior. So that's quite unique for this product. So we believe [indiscernible] So that's quite we bring out [indiscernible] By the way, I think that we get very a lot of the carrier like our product. So we are not just selling our this product we launched in April. But we are not just launching this this product in the open market. But more important, we successfully attract carrier because we bring we have carrier create revenue not only from people and IoT, but more important, we create a new market like pet market is a growing market so they can sell out their subscriber they can sell the SIM card. That's quite important to the carrier. In such competitive market.

It's very interesting. You may have inadvertently answered my next question, but of the items you've introduced at MW the PetPhone, eSIM, Trio, uCloudlink kit, and Hypercon, do you think the Petphone is going to have the biggest impact in 2025 of those?

Yes. That's why I think we have become very famous in Spain. Because there are seven QA broadcast approaching us and a long time interview with our guys. That's why recently we just about after the MWC several days later, we already had a successful meeting with the with a biggest pet channel in Spain. So in the past, that's unbelievable. But now it do happen. So that's [indiscernible] quite unique. We create these new device and follow new market. So that's first. Also, our second start product is the [indiscernible] Because we enable from the user to subscribe subscriber side if the end user use our eSIM Trio or our SIM kits that means they will no more courage issue roaming issue. Congestion issue. So that's why in this case, we have a very unique It's a long term I think people will need a second SIM card, a second SIM card for permanent, I think, use because we can solve such three program that force the SIM card we are facing these three challenges. And also, we are also more important, we enable a Tier two, Tier three carrier They no longer have this [indiscernible] Congestion issue. Coverage issue.

That means they can use our [indiscernible] and the SIM kits across the SIM kits to solve [indiscernible] to build their to gain their business and service. So with our technology, I don't see in the domestic they can use the other carrier network to build their business without coverage without revenue. But now we changed the situation. We can have a Tier two, Tier three carrier. So use the other carrier network for roaming and for domestic roaming and international roaming. For transition and for college as well. [indiscernible] So also a lot of Tier two, Tier three carrier approaching us They are quite interesting because we can share their spending in the base station building. They are no longer need to immediately to deal local and domestic coverage So there are no risk pressure anymore. They can quickly expand their business [indiscernible] the future, they can build their own base station based on their need. And their data. So by the way, also we have the third product last year, we just show our Uniqore product So now we have three products for the unit core. List family. We are offering so a cable with a power charge [indiscernible] also with four gs capability in this cable, just $5 more for our [indiscernible] We have a middle tier level that's very compact we call compact model.

You can screw up your wire [indiscernible] extremely portable So for battery inside, for MiFi inside, [indiscernible] [indiscernible] extremely portable. So extremely good for your business. And your car [indiscernible] because positioning will always your neighbor missing the car, you can find your car always, your neighbor losing your your luggage, also get the data. And anyway, it's good for your portable it's true portable for your cable, you need a cable for power. So also we have another we call multi purpose multi functions [indiscernible] This is high end. They can provide high speed for eight people use or five people use Internet data charge and also can be a computer dock So and we are not occupied the Type C is also with the battery and with the partitioning. So you never lost your goods, your property. So just one table, we can solve the safety convenience and easy your trip and safety your product. Your property. So that's the third product. The final product is about our we provide [indiscernible] technology and satellite connection into our traditional MiFi product, mobile hotspot worldwide. So that means our our traditional mobile Wi Fi only be applied into the unit people travel outside.

So to provide a multi user mobile broadband worldwide, at a high speed at a high quality, at a high five gs. That's our quite unique position. But now we expansion this function not only four gs five gs but also we can manage all the WiFi network This WiFi network including the satellite WiFi or the airport WiFi [indiscernible] or I think the cabin air flight cabin Wi Fi. [indiscernible] so you still need the new device. Because one device you never need to change the condition. And there was for example, if normally our handset go to the outside, you need to connect four gs, five gs, to the airport, you need to go to the connect to airport Wi Fi, go to home, you go to your home Wi Fi. That is extremely inconvenient. So for our mobile WiFi, [indiscernible] choose the suitable network for you. At home, at office, you still have enjoy serving with the WiFi high speed and free, but also we guarantee the reliability for four gs and five gs [indiscernible] To robust network So in the airport, in the flight cabin Wi Fi, you don't need to scan and connection to the cabin Wi Fi again.

So we can automatically switch to the cabin Wi Fi for you. So one device for every scenario not at home or the outside is extremely convenient. So that's why all our four product become more and more attractive and quite unique in MWC year 2025. We are currently purely unique We have met the life more easily, more convenient and connection more better and more safety.

Okay. Well, thank you. My last question is about international travel. In your forecast for full year revenue, I'm wondering what assumptions you may have made about international travel going going up or down. And the reason I'm asking is because and it may be too soon to tell is that Delta Airlines last week said they're seeing a drop off in in flyers. In their forecast. And I was wondering what you if you've made any assumptions about international travel in your full year 2025 forecast?

Yes, of course. The guidance for the for the year is 2025 is the range is $95,000,000 to US130 million dollars We factoring the [indiscernible] [indiscernible] carry on in the year 02/2025. So that's [indiscernible] assumptions 20% to 20% of the growth powered by the recovery of the international travel. And also, we factoring the new business lines growth as Mr. Chen mentioned, we launched so attractive and innovative new solutions and attract a widespread market attentions. So we we expect the new business like platform [indiscernible] [indiscernible] will expanding this year from the starting point of view.

So both new business and the legacy [indiscernible] [indiscernible] provide [indiscernible] for the year 02/1975. So that's a background we We disclosed the guidance this year.

Thank you very much. That answers my questions.

The next question comes from Vivien Zhang with Diamond Equity Research. Please go ahead. Hello, everyone. Thank you so much. Most of my questions have been answered, but I still have two. The first one is that can you elaborate on the trends in your cost structure? Because we have seen a significant increase in sales and marketing expenses over the past year. Will this trend continue this year?

Yes. As you you've seen this, our disclosures for the year 2024.

The [indiscernible] a lot on new business. So we have three new bidders. [indiscernible] [indiscernible] in the second half of the year of 2024. So we invest a large budget spend a larger budget on promotion and market exposure for the new business. So that's compared with the year of 2017, we invested US5 million dollars more than last year. I think these investments will gain return in the year [indiscernible] As we just talking about the guidance range for the top lines, the top lines of the 4Q we we We try to deliver our new business and grow our new business from this year I think we returned it, but it's [indiscernible] will be come back for this year's So that's for this year, we we will carry on investments on the new business So we we expect the sales and marketing budget this year will have the growing greens [indiscernible] Compared to the year 2025. So I think that's very important for our long term growth. And very important. We invest on future.

To gaining our user number from now is [indiscernible] To 10 millions level in the next couple of years.

So investments from now will going forward to invest on our future. Thank you.

Yes. I think basically last second last year and this year is our very important year. So we are start from a major company become 2C and also more focused on 2C company. That's why we need to build a team of capability I think also to say need a more heavy investment in promotion. And branding.

Okay, got it. I see. So my last question is that what was the key drivers of revenue growth from Mainland China last year? And how do you expect it to evolve in the current quarters?

For last year, the 02/2024, [indiscernible] the revenues growth rate was nearly 100%. [indiscernible] by the other bond the Chinese other bone traveling. So there's more more Chinese more Chinese overseas travelers, their booking our service. So our [indiscernible] [indiscernible] [indiscernible] For Chinese outbound travelers. We are in the leading positions So that's achieving our growth for the Mainland and China. As we also disclosed we just [indiscernible] got approval of pilot operations as a value added telecom service. In Mainland China recently The last quite [indiscernible] a huge momentum for our business to expand in Mainland China. Domestically not only for [indiscernible] but also for inbound business as well. That's a greater potential for our grow our business. In Mainland China domestically and internationally.

Yes. So I have some more comment. You can see in China, domestic travel to the worldwide. So our market share last year is growing. And we also so last year, we have a Chinese New Year we have very successful branding and promotion and give and user emphasize our five gs full speed and our service quality compared with China traditional operator like a China mobile roaming service. So our quality and our service is much better So now we are gradually build our brand long in brand for five gs high quality service is exceeding is far more better than China Telecom. And also the telephone the global travel seat. So this becomes very successful. In the Chinese New Year, we are almost more than 50% increase compared to year 2024. So we are confident we will attack more market share from traditional operator and global SIM card roaming market So we believe we can grow the 3% to 5% to 6% this year. [indiscernible] more than 10%. So we have confidence we can achieve that.

Okay. Thanks for the details that helps a lot. So that's all my questions. Thank you. That's all. This concludes our question and answer session. I would like to turn the conference back over to Daniel Gao for any closing remarks Thank you, Wenzer Yin.

For joining us today. If you have further questions, please feel free to contact Yixin's Investor Relations through the contact information or speak to Investor Relations Form Christensen Anniversary. We look forward to speaking to you all again our next quarterly call.

Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Thank you.