UCL - Earnings call transcript Q3 2020

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Operator

Good morning, and good evening, ladies and gentlemen. Thank you for standing by and welcome to uCloudlink Group Incorporated, Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After prepared remarks by the management team, there will be a question-and-answer session. Today's conference call is being recorded. to call like host to now Mr. today, would turn over the your I IR the Manager Senior Shen, Bob of Company. Please go ahead.

Bob Shen

Thanks on call everyone our third quarter us for XXXX today. joining earnings

website newswire services. is on now Our as earnings via our release IR as well at available ir.ucloudlink.com

our a Directors; is and Chaohui Chief our Director and I Chen, Zhiping our give uCloudlink Executive team. the Yimeng Officer. Shi, Financial Officer; Chief Chief Xu, and Du, Operating Director introduction is Chief brief Here Chairman is Officer; our of to Inc. our Peng, Sales Co-Founder of our Xinquan Zhigang Board Co-Founder, is Officer; is

Our CEO financial presentation results our Shi IR will of This cover our company will section our will website. one discuss And posted overview on then two introduction CFO, earnings our and and Yimeng in the the highlights. with begin three. business section section an of

comparable the results, control, statements are results materially expressly qualified performance Company's cause statements, statements. the their to looking call pursuant current factors forward of by any unknown forward result press Securities cautionary forward uCloudlink's Mr. and implied by looking risk we market observations Please call that this uncertainties audited the update contain forward as Please unaudited measures go of XXXX. management's SEC. also measures. are details and All non-GAAP Chen. looking proceed, looking or that information, provisions of events, of achievements which the over the known involve that unaudited of by the not earnings now GAAP reconciliation I Company discussions Harbor may and may risks, looking other Safe non-GAAP otherwise CEO, required The expectations and statements uCloudlink's These as turn Co-Founder note statements financial different law. in assume of release the under obligation revise will information made this to or GAAP most based a performance statements contains and the and Reform release with factors and any or Chaohui as the Act well the on note please changes expectations Litigation call measures. actual financial Before filing to press be new and conference future directly except from an Private as include our conditions these the to a Company of entity forward ahead. does to unaudited Company's not in the

Chaohui Chen

Chen. I'm Chaohui Yes,

to of X, contents of in X will turn similar repeat detail Please turn our this earnings I and Page of is to I mission. let's Page also quickly. vision presentation pass our So quarter will year our and through now second XXXX.

working connection we our vision. mission basically I So people anywhere so the best network and anytime are and think consumer our company for let for this is

in our So we Era. is and XG X, this about because so also build technology, instant is the Cloud on e-vital QX to Cloud mobile so X, turn first marketplace the to please SIM in the Cloud QX becoming these leading be SIM data our sharing Page so to use traffic technology world's marketplace, we technology, Page is the launched of engine the switching the technology and

So XG early. accelerating computing Cloud [indiscernible]

model you the about also and assist model. the three management. very Cloud PaaS/SaaS wherein one business agenda, the with technology is business we this means to business become expert partner our models and Page to always of flow business the business SIM some and [Indiscernible] model in the and and they are are very coping worldwide. our We so and PaaS/SaaS our our partner, stage model go which about mature of is technology our own of normally evolution of For X, has

see model the a for in SIM Cloud our let's technology. X, is about So Page innovation three-stage,

look it for the for can you information, technology. the here So

have our, very strategy is is our across X, Page clear So business growth we model.

We have three business models stages. different for

So in is international the X.X on uCloud in X.X have perceptible roaming service. very business. focused uCloud history, in we

provide app for go in hand our is And and local is worldwide. global local users a business, service including second the uCloud X.X. tune we know business. medium who So marketplace outside. you uCloud local Nonetheless, mobile local full business, X.X This about hand business the we travel fourth app, XG. we XG, in the local marketplace X.X will well to

X So X Page from quarter two. let's, to Page like is similar

XX. to please So Page turn

is opportunities change and we for is XG than and XX strategic important pandemic third XXXX the made. this to quarter about of page the progress year updated Page our COVID-XX most longer The of steeper linger business. So continued the and anticipated. our investments the shows which

So on this and results. consequently our XXXX negative [ph] quarter impact international tourism third year

achieving. international recover will launch expect effective we the However, and the travel with COVID-XX the of and testing vaccine

very local a line of steady second business quarter and XXXX, for The X.X with channel service and Wi-Fi year was the continued connectivity business mobile the online service important of the and distribution to partner. in uCloud our during third terminals Our data be quarter sales off and us. so

stable. quarter the offset business from So two of quarter mobile Wi-Fi and three, X.X becomes

the through connectivity uCloudlink in cooperation operator, Global data the network X.X potential mobile MNO, network and and globally. business call player the has great market we service Alliance business mobile partner with local operator our So and major

States. the Beijing wireless in mobile invest of from service that's operator, Co, virtual mobile the network major such Technology We mobile Japan, have Mainland further as alliance alliance increase Ltd, virtual Mainland of one mobile Lianxin with platform operator network MVNO in the and MVNO, the China. an number mobile licensed operators further subscribers. of users huge as We our We in will we United to ecosystem China, the carriers one network the and leverage wireless operators of connected region Huaxiang believe certain operators with in in NTT network already established carriers scale

operators, and local operators network mobile mobile such develop business to continue as will cetera. with partners Asia, States, United Europe, We in strategic virtual alliance in more network et

connectivity provide SaaS carriers enhancement pursue data we instant their service us. our as of in can AR/VR improve efficiency service cloud switching in network and for As great launch networks. superior connectivity and to provides investment computing. SIM of business of PaaS autopilot, such to XG XG and or ecosystem, carriers The XG opportunities technology recent Era our We Cloud uCloud coverage, accelerates Cloud help partners. platform and the

for in XG Mobile for CPE under low trend commercial device Our into connectivity expensive the band flow development future. sign coming service mobile in whole near mobile for XG We users. low end believe in various and to application that due of is a phone series four XG trials reality latency the potential back and network in for Wi-Fi, coverage great network of

to We of facilitate the can order XG. potential, greatly in with X.X believe mobile United our order in In service Cloud milliseconds. functions platform are early seconds of key uCloudlink, time the seconds the such X.X establishment our also our streamlining across our user efforts our instant we satisfaction. train, interpret SaaS and leading to improving as SIM optimizing specific X.X, States, in technology it SaaS contribute of E-commercial recent growth we we enhancing high stage and local of position to network call the PaaS overall network elevate which markets website team switching more in our technology, our switching to for Also reduce experience launch XX position. and leading Cloud than and to continue call The SIM XX Europe,

IoT is both network technologies technology cargos, Vehicles, SIM switching to as car these applications, advantages as unique autopilot, brings highly of such other instant Things, such Internet logistics, Cloud Internet and scenarios Our and with compatible equipments. of various

China we as appointment of role as efficiency, vehicles management we goods marketing effect IoT Technology, on as about positions aspects we renowned Page track our to Gao, previously strategic officers. consumer XX. appointed The see our Officer in the and with products, business, cross-border Chief believe Xu our better addition partner turn corporations three all such especially assumes industry. XX, to these was various senior developing to in of the Sales. Huawei progress We transportation more railway his I and Yes, efforts is our of to with of progress next executive the companies. XXXX. potential business. explore and extensive of such restructure one year September such and with leadership operating and Marketing This deep We the cross-industry senior are Strategy highlights. of align growth. strategic Please of Recently, the to background in mobile Xu Xinquan XX. high phone performance continue Mr. changes global designed record including Internet, mobile Zhu learn the assumes cargo CSO we opportunities and as the in in President roles role role business for where railway applications Vice and improve please of This sustainable operational Wen cooperating had Page is the Mr. Tan the Incorporations. and and turn business of our JD.com have make senior Sales. for deliver and growth. development move These as opportunities Chief experience telecommunications, He future, took various phones management of transportations, possesses restructuring to new marketing Marketing team. President of Sales famous strong

as So partners. the our becoming and terminal the hand from of the daily the stable. second A of XXXX left certain The slide the derived shows from COVID-XX terminal shows year portion DAT data the impact XX, is usage of of quarter the XXXX. third DAT the business data active and per September of side

X.X middle X.X DAT The uCloudlink decrease DAT of due service. attributable data XXXX COVID-XX. the the breakdown total You third to during quarter the X.X and can the uCloudlink shows from see year the by connectivity slide is decrease of to mainly service of

X.X business. in the launch of and expect a benefit and will vaccine the our well. regions countries XG uCloudlink driver other China IoT and for are both as We

impact uCloudlink showing mobile been data traffic the other development hand, COVID-XX. On X.X local steady has and is our less by

from service total a percentage turn revenue, Our business year global XXXX. the per September our business. XX business. XX% X.X usage, daily our diversify the globally. X.XX of of global continued as gig total revenue in to of year Page China, XX, shows and during data as about of Please diversified and accounted average we diversification to DAT terminal revenue the our is third decrease Mainland Page increase quarter XXXX, uCloudlink around was

continued our We be to regions. and partners business ecosystem countries our with in various

have As of of the total China. year come from XXXX, outside the third Mainland XX we quarter revenue

network to in mobile operators, investment we China, third the growth. market operator revenue. mobile and just year gain of, Lianxin with During After XXXX contribute the China virtual has quarter XX% we in believe continued quarter the the network share total cooperation of Chinese Huaxiang

and we the will Phase Looking of from and China expect and other market lead benefit our in vaccines the the recovery launch accordingly. International to traveler ahead, the of clinical X regions to to business countries

opportunities XXXX. will our expect new of uCloudlink We such all X.X year business further these develop in business potential as

dedicated in now also sustainable to technology growth through Shi, sales Yimeng new, further highlight bring for and prospectors with our who the will are I R&D will marketing to greater financial We Please. in go our section. in investment a turn traditional, it us CFO, innovative to future. the

Yimeng Shi

Mr. everyone. you, Thank Hello Chen.

XX, service of percentage Page was million related million X.X was $XX a a and during international to the service because Service three September September On third second from our XX.X% PaaS local prolonged decrease $XX.X from revenues the million primarily increased ended XX, XX.X% terms mainly connectivity decreased other total of quarter in of This decrease million in extent, COVID-XX. or of quarter in hand, of Let's third data XXXX the XX.X% impact to to months pandemic data the revenue quarter attributable XXXX. in from now as million X.X $XX.X and months not by of of certain it period is impacted XXXX. times is $X.X representing the to three $X.X million continuous revenue the international XXXX. the $X.X from XXXX of in the XXXX, partially from by SaaS of XXXX to ending which from were And connectivity same data three the in XX, and Revenue increased for service. third quarter in a revenue XX.X% to connectivity service by service turn decrease revenue around offset COVID-XX. our decrease

connectivity data and local X.X our started have we far, China So Japan. in service

meantime, period from We of markets last to decrease the COVID-XX as affected. was sales connectivity year. XX.X% States, our same international service, SaaS In service will $X.X a partner expand the the United Revenue $XX our connectivity $X.X Asia, This from the COVID-XX local were the primarily used impact the PaaS/SaaS in continuous provide same million data Revenue decreasing that from et negative not partner of $X.X our was of to XX.X% service. data million such were from European, all the decrease primarily due PaaS cetera. This in million to potential million representing service impact the period and to year. due of are from negative pandemic. business demand last products decrease

the ended total decreased September months ended from XX, nine months XX, September from from from the nine $XX.X months XX, in XXXX. from in XX.X% to by nine the XX, XX, million the [ph] service Our XXXX $XX.X in XX, the products decreased XXXX. XX.X% in Revenue $XX.X nine by X.X% million months September revenue ended ended by sales ended XXXX months million $XX.X $XX.X nine in to XXXX. September XXXX September ending to $XXX.X in million September months million [ph] Revenue decreased million nine

sales Let us Page to business XX, which service revenue and of products. our revenue segments, two breakdown show literally from move

Terminals. products then XXXX, quarter service the to percentage have which demand second The PaaS/SaaS revenue the our are we partner can business Compared respectively. the up and of increasing total from sales our our XX% service XX% from third more connectivity of local and revenue that see that the transfer for revenue PaaS/SaaS service platform. of the data shows business of we XXXX, accounted increasing During partner with also from of of quarter to our connected sales

turn margins business. for gross XX, now Let’s Page to of our

mitigate in quarter impacted efficiency third because respectively. the of of of The uncertainty XXXX mainly gross reviewed margins. was to third the Our XX.X% comprehensively of revenue overall we COVID-XX, were cost improved margins XXXX. XXXX, and the during the the gross service second service and the of cost during gross margins quarter pandemic. margins, To also structure overall gross the to increased pandemic our and our compared at and quarter XX.X% prolonged and XX.X% XX.X% we It the in

on going to We cost optimize continue will work to our forward. structure measures

to operating XX, move Page a us our shows Let which of expenses. breakdown

bonus by deferred debt the provision special certain for second couple third XXXX quarter of operating increased revenue. of cash mainly of million We of Excluding mainly and due compensation to the This of to share during the the total XXXX. quarter COVID-XX. and third quarter the increased third a was during Total quarter to flow the from third was XX.X% bad risk as such comprehensive the measures overall based third as to in to a offset expenses took XX% a cost decrease the quarter XXXX $XX.X control, to the percentage from customers decreased expenses expenses Compared others, systems. million operating of negative due XXXX payments XXXX quarter liquidity total impact $XX.X of operating XXXX. and management of revenue during from during of caused because pandemic of and mitigation the XX%

with We leading project in key continue to long optimized dedicate to efficiency our position outputs run. the R&D to in keep

included. Excluding expenses debt operating $X.X compensation share overall during XX% account the for accounted G&A R&D million bad of of quarter others for provision based operating with total receivables XXXX. accounted and our of XX% third expenses, expenses expenses

third to to negative XXXX. quarter during positive Page flow turn during was million quarter now of Let’s the $X.X $X.X XX. compared third cash million Operating the XXXX

September Our XX, normal sufficient with cash at equivalents cash flow cash as and was XXXX.

third compared XXXX revenue percentage as X.X% the third expenditures. quarter XXXX. the decrease third total of million during It third mainly X.X% decreased X.X was of million to a $X.X of quarter from quarter $X.XX was XXXX. to due during during uCloudlink XXXX of to quarter CapEx the CapEx during of Our the

million was the the Let to negative income quarter third EBITDA negative us to move positive XXXX Adjusted third $X.X during XXXX the $X.X during XXXX. Page of to was $X.X quarter quarter million compared during positive XX. third compared quarter XXXX. $X.X Net million of of million during third the

optimistic. are Looking we ahead, cautiously

campaign sales marketing and key We e-commerce continue markets. increase promotional and as such R&D in investment to in

With operational structure opportunities the with opportunity more our to we presentation. future. optimize our and continue business abovementioned our will improve to efficiency, business you start we’ll in increasing new opening cost that, intention session. the together growth business with With facilitate globally, and and of the revenue we today's conclude performance Thank Operator? Q&A

Operator

ahead. Partners. comes Tigress Aaron go Thank from you. The today first Please Instructions] with [Operator question Ju

Aaron Ju

is management questions. you this taking Thank had I team Hi, my for Aaron. questions. two

business. international The question side the about of the first is

pace you does connectivity in this X.X question the did So services second think local how And is your the strategy international my travel? the about the pandemic and business. of recovery outbound about how change data

this outbreak in So use COVID-XX share? to business the of any metrics prior and versus you COVID-XX post how performed can sequentially China you. Thank

Chaohui Chen

of CEO the Chen, Chaohui I’m uCloudlink.

For by X.X traveler. see heavy and wave of the you impacted third global is its second it impact as I mentioned business Currently, the can wave before, COVID-XX.

bad can So and news news. vaccine now good now China release become news, U.S. clear. from But for from think has a more good that’s we that's I of see

believe, are COVID-XX. condition I in distance I some from terms, and So, possibility next in year think in the we recovering some more

So, years gradually COVID-XX expect become the the the because and better next of vaccine we of the will half control. second

the is global recover. and our that expectation year travel So, COVID-XX half will from of we gradually second will for X.X believe impact reduce next

already You like and Kong see, Hong recently Singapore happened. and bubble travelling can some

the think news good I us. that's for

control of is course, on it dependent think I and X.X COVID-XX So, vaccine.

So, from senior that’s our, uCloudlink. the from team judgment

X.X business, in is China China, telecom control widening in control in X.X is other because countries [indiscernible] so For business. for

who also network mobile mobile with key operator one player get, in can Lianxin, the Huaxiang the are working why local, and one. this mobile domestic the the of that barrier that's invest, in we can operators, why the from the because regulation, when the why we market is overcome we in is So, with is we watch

the existing faster or user mobile watch we from operator. from Another, currently growth subscriber can incumbent carrier the

that's So, consideration. our

You many past came from business local, the can see in international. our quarter not from in China business only the our Chinese next

So local them, network growth because from of working the we quarter, with and Chinese regain can next watch mobile we the for business. mobile local progress the operator with believe operator the

Bob Shen

Bob Aaron. Shen. is This Hi,

Let me put comments two your questions. more on

question the progress. your of first heard more regarding news think besides good international First, I research travel, we vaccines, the better

for some into shows can news you looked regions example, they we Hong trying people quarter XXXX. example, from also compared Singapore see not any we began quarter trying bubble to need they increasing, Kong that And travel For means and bubble. cross-border regarding price has the international the to open of to can do the that see more become also the gradually They then and that country And and increase that third gradually now travel quarantine. the has the to are Hong to also and a see international been more international that Kong occupancy reports they that. been are the rate you airport Singapore, to If trying can and travel are open see, hotel warm, travel activities. the to travel build do which bubble has from to established for second

also international travel. So news good for which is

open I more countries travel and their and activities. think believe established bubbles we more will be more and will more cross-border eventually,

International business. benefit will X.X our that So

and alliance local regarding your have MNOs our with our wide also China, X.X from apart aspects. for MVNOs because question Secondly local think, business business the in very second I

phone For of which handsets. is in global with example, embedded various we brands mobile also GMI meetings have

near related the the in mobile the in are such future. process for and phones development negotiating trials commercial more, with as and We the of XG of

more to in publish are mobile me mobile is called later four mentioned, equipment, these with on, that our phone the in also famous and PR regarding also our XG, the which XG manufacturer, us I our and products formerly want will here, confirmed. GMI mention series we MiFi, brands commercial trials Wi-Fi handset we but which of being manufacturer have call cooperate news of the also because we all if is call to near for And development future. we So also much a customer mobile Wi-Fi, pretty which also CPE his just will

will and news business a to all better these Mainland, develop faster So in further, good China. help our

for regain So XXXX we new will our that our and year next business. will be we believe market growth China expect a milestone

Aaron Ju

you. Thank

Operator

[Operator management call turn like the Instructions] to for no closing any I'd to appears back questions. further There be remarks. to over

Bob Shen

thank you today. for once Okay, joining us again

free through feel you If website uCloudlink the have information our or contact Investor please the Investor on TPG any provided to Relations. further questions, contact Relations

Operator

earnings concludes This conference call. the

now Thank may You you. lines. your disconnect

Chaohui Chen

you. Thank

Yimeng Shi

you. Thank

Bob Shen	Senior IR Manager
Zhiping Peng	Co-Founder and Chairman of the Board of Directors
Chaohui Chen	Director and Chief Executive Officer
Zhigang Du	Director and Chief Operating Officer
Yimeng Shi	Chief Financial Officer
Zhu Tan	Vice President of Marketing and Sales
Xinquan Xu	Chief Sales Officer and President of Marketing and Sales
Aaron Ju	Tigress Partners

uCloudlink (UCL) 16 Nov 202020 Q3 Earnings call transcript