Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the uCloudlink Group Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jillian Zeng of Investor Relations. ahead. go Please

Jillian Zeng

well joining year for is our quarter ir.ucloudlink.com fourth available surveys. Thanks, earnings us call full as at website XXXX our release our today. and newswire on everyone IR on as The now earnings

Tan introduction a Yimeng Financial Chairman Zhiping Director and Sales. our uCloudlink Board and our our Shi Co-Founder, of Chief Directors; is Chief I Peng brief management Zhu of our Officer. is is President will our Marketing Officer; to give is Executive Co-Founder of team. Vice Chaohui Chen and

of Chen company’s XXXX Our begin cover on CEO, Chaohui will which website. outlook, business with the uCloudlink’s an and IR overview presentation posted our the highlights earnings will recent business

results. Our company’s CFO, Yimeng Shi, financial then will discuss and operation highlights

statements as forward-looking required in The to result not please market uncertainties any as forward-looking Reform otherwise, or Litigation statements involve new results, a based qualified current with the by statements SEC. implied note or may factors performance expectations actual by forward-looking safe results, on or call of except filings the to to that management’s company’s does information, proceed, company of forward-looking statements the observations assume with details performance pursuant of the or provisions this cause company’s not be the of Private and expectations effective in contain obligation harbor are unknown achievements events, XXXX. by known These that we statement from statements. conditions the the and control, may made are any of different update law. under All the Act company Securities other Before company’s these which future entity change materially forward-looking revise expressly risks their and and the

press reconciliation unaudited press financial non-GAAP to earnings contains non-GAAP this as an a unaudited of an discussions the as comparable that call and of GAAP information release unaudited measures. unaudited Please also UCloudlink’s GAAP most conference directly includes uCloudlink’s well release note an measures measures.

to over Co-Founder Chaohui Please I Chen. will go CEO, Mr. our and call turn now ahead. the

Chaohui Chen

and period/year joining year-end morning, We a time. Jillian was by XXXX overcoming XXXX achieving for truly today. challenges. success characterized you, Year uCloudlink good and appreciate Thank Thank on [ph] us everyone’s you earnings our great everyone. call tremendous for

pleased are of XXXX, cash achieved XX, the million a December our have We significant company. for milestone to positive flow operating year-end US$X.X for

diversity with As COVID-XX this during overcome have opportunities. time first is the well faced our increasing of its as resilience Having the working as since we difficulty pandemic the the pandemic. we done business and strengthen COVID-XX to growth the new

We to are company’s well believe growth positioned excited be are an long-term about we and prospects, industry leader. the

we which is key the our international a will which to services a driver growth business, be connectivity believe tends X.X data one, be of and lines margin uCloudlink the to continue for higher business, company.

During year the revenues fourth uCloudlink XX.X% X.X XXXX, US$X.X increased to quarter million. business, of year-over-year

was million. year, XXXX, year traveler For of accompanied and business markets the This X.X by reflection the of to XX.X% is a business active course terminals year-over-year our increased quarter increase X.X daily fourth over major This US$XX.X for international recovering revenues improvement during average XXXX. an in the full uCloudlink year. across uCloudlink

than to we wireless XXX services data network Average in the have mobile XX.X% international and high-quality connectivity assess reliable daily more In XG available than operators in industry more enabling countries operator XXX entry provider year-over-year XXXX. provide point roaming active terminal global XXXX, network in continued a increased networks. solution to and become single leading have

of X.X XXXX. growth revenue a which our data been uCloudlink year business, is local has connectivity driver services since significant

their including help continued SaaS patent on and have data operators Asia, connectivity – technology Japan, presence where partners and we market based America, Southeast North past years, strengthen we have data and improve our PaaS connection in two problems our processing our through we services technology the where HyperConn platform Over to and resolve like business solutions.

year US$X.X from in XXXX. Our uCloudlink up million US$X.X business in X.X report revenues, year XX.X% XXXX million in

of realize improve reduced with needs. our to and the side, explore for Internet we IoT costs our of can experience we customers solutions, Things, connectivity IoT this were the data continue IoT where On opportunities able and applications cutting-edge technologies to through operating partners broaden

Covering IP camera and vehicles. application like electric a WiFi router, scenario

global working uCloudlink XXXX. roaming position year to beginning strengthening market solutions since data continue in We international our business, X.X the of leading close our the

tourist World levels, We XX% have which will international recover expects a us. Nations opportunity Travel about an observed The XXXX United XX% significant travel. presents accelerated number Organization international to pre-pandemic arrival recovery in for of

the moving away partner, quickly meet and solution we the policy improving subsequent to us and travel from act China, at for data of in borders, national upside many greater provide zero-COVID-XX represent the to recovering X.X a our opening business year We Singapore. airports, believe and establish in allowing uCloudlink environment agents the macro coverage and airlines XXXX. uCloudlink of Roamingman Malaysia China, X.X demand a for business Following

customers will industries. our launch users satisfy products uCloudlink various in solution solutions as solutions X.X eSIM continue and position spending and and we the leading such as to provider And roaming multi a of needs the XG our

SaaS have have business, and the more to platform For our we X.X PaaS industry continued gained and ecosystem. recognition expand uCloudlink

continuing for nature like a establish uCloudlink relationship markets a key X.X business in North and customer While America. to Japan existing

to uCloudlink more gotten China, which industry in is recognition business accelerate have growth. expected X.X We

and Department Centers Technology Mainland, to for a technologies of momentum Intelligent technology data presence XXXX, Technology testament year Research connectivity by of We a Engineering was brings our in new one In the January believe serves Province Engineering advancement Wireless and Province. as our to our recognition and Guangdong Connection Guangdong China Science as in beyond. continued expand approved Technology and this Multi-Network uCloudlink market of Center mobile Research the the

mobile network superior, solutions. reliable company side, IoT more existing the with serve the partners In continues to our

virtual AR, new exploring scenario electric new opportunities reality, and cetera. application vehicles, et proactively While in augmented industries VR including and reality,

field. connectivity to check expect a in experience we in ecosystem, where partners presence, in platform we success breakthrough which data sharing of to their key of the mobile believe is our further have Japan the strong SaaS market a development our long-term remain meet on We data the and improve PaaS helping IoT business to We marketplace.

our to available With app. a and would X.X sharing building to and network near-term Global on that, X.X I like models. user our data on application mobile anywhere efforts This base anytime touch GlocalMe initiative. X.X marketplace traffic uCloudlink based any users to connect the and uCloudlink to a in initiative utilizing device through enables uCloudlink scalable marketplace

Wi-Fi solution, is application GlocalMe GlocalMe without up GlocalMe data scenario of to terminals, We traffic et cetera the where build day-to-day limitation various third customers, the to operators, by mobile and our rental, can data go device, shared data HyperConn via including SIM, aim GlocalMe designed traffic for device, marketplace and and a support backed X.X application be CloudSIM, GlocalMe market top web active app behavior. eSIM, a The technologies. and party Inside go and only users efficiently simply

make marketplace an to state-of-the-art application such the more continue to basis, system investments ongoing launch optimizing blockchain Once into technologies near operating technology. we a on future, expect this

et development and scenario, technology expand continuous video to our innovative various application to HyperConn plan solutions cetera. live of CloudSIM media, committed conference, are solutions including broadcasting, We and to also

GlocalMe things. need to the more launch solutions these to solutions, supporting of we Once and innovative I technology the mentioned that app enterprise the innovative various smart expect of in diverse application, and connectivity CloudSIM on earlier, of – which – covering individual year Based type product once HyperConn customers hardware XXXX. need set of data various on

will for Finally, briefly the year I discuss XXXX. guidance

For an XXXX, of and to between total US$XXX XX% million XXXX. we increase XX.X% up US$XX to compared year expect revenues million, representing

a position better to more future. the operational and solid build financial see results to expect in We

uCloudlink We are achievements team our you extend delegations pleased their to heartfelt and and like efforts all in to XXXX members strengthening I company. for a thank with our would to the

feel throughout serve in XXXX, our look technology portfolio opportunities advanced of We more to leveraging in mature market. to challenge of and continuing the experience our and commercial customers forward global offerings our and and partners confidence ahead us

a focus company's long-term on the we scaling build and which our remains model operation marketplace, and user data sharing constantly to growth. improving the mobile uCloudlink technology build base business traffic

over I Yimeng to our the call CFO, Shi. will turn now

Yimeng Shi

Thank daily usage active which Average will for over highlights go fourth a financial reflective operational of operating I each a an is DAT, the – everyone. year customer trend period, Chen. the of you, and is XXXX. our full of terminal, environments. measure important Hello, quarter trend for uCloudlink Mr. [ph] and [indiscernible] as for the metrics

quarter in up quarter of were terminal active company owned XX.X% owned fourth by XXXX, X,XXX In fourth XXX,XXX XXX,XXX the by average which XXXX. of daily the the our business partners, of and from XXX,XXX

the of was during XX.X% December quarter usage terminal XXXX. gigabytes X.XX daily Average service uCloudlink fourth for around X.X accounted data XXXX. DAT the in total per of

Total US$XX.X in fourth revenue representing of an same XX.X% from in increase XXXX. quarter an Revenue quarter same XX.X% from services for US$X.X of of the XXXX. period from the US$XX.X XXXX million million million, of period the in US$XX.X the million, were XXXX fourth were of increase of

same up as a XX.X% from the XX.X% period was during during of the Revenue quarter of fourth XXXX. services of from XXXX, percentage total revenue

approximately the During XXXX, fourth XX.X%. of contributed Japan quarter

to in XX.X% of Mainland same period XX.X%, margin to on XXXX. of of of same revenue, contributed XXXX. XX.X% of XX.X% in fourth X.X% and service period compared to and regions the total same to X%, XXXX, quarter of our period XX.X%, quarter China the gross margin the respectively to XXXX, gross in fourth the in compared contributed compared And in and other improved country increased XXXX. XX.X% XX.X% the Overall

total operating compensation of fourth revenue. XXXX revenue million of million, the compared XX% total share-based of or or US$XX.X in of US$XX.X to XXXX. Excluding decreased the our XX% expenses In quarter period total same to

proud negative of a the fourth positive in flow of and of of same fourth We operating million to XXXX decreased the of million result which the improved favorable a business compared XXXX, quarter US$XX.X period Similarly of XXXX. loss million same during mix million more cash XXXX. which of we have US$X.X during fourth compared the quarter a during a US$X.X As loss period achieved net XXXX, to million same adjusted US$X.X US$X.X compared the XXXX. as net quarter million in to negative were to to operating US$X.X report in period EBITDA significantly of narrow expenses the

and data US$XX.X up XXXX, during XXXX percentage from US$XX.X an for service. connectivity million XX.X% XXXX of were sales Total XXXX. the million, financial and US$XX.X increase products, of XXXX primarily due in US$XX.X partially to to decrease result. certain The an as decrease revenue service service during was XXXX. compared was Revenue XX.X% for to from increase data XX.X% for million, a local from related by Revenue were Moving million revenue offset terminal from international in of in total XXXX.

revenue from the XXXX international services services data was by In were connectivity XX.X% connectivity attributable mainly respectively year-over-year. connectivity to a the local local of services. million development data gradual continuous service were connectivity and in from and million, data This US$X.X increasing travel the US$XX.X international and data XX.X% of recovery revenues increase

primarily XX.X% to XXXX service larger XX.X% XXXX, improved XX% business gross in of in service, compared margin. which compared have mix, data increased more margin gross was attributable proportion margins The Overall to of international margin XX% with to from a tend to XXXX. revenue And favorable to gross connectivity XXXX. a higher in coming during gross to our in increase service XXXX

which During operations operating business XXXX reduced led significant we expenses. to our streamlined

EBITDA total US$XX.X to US$X.X XXXX. to XX% revenue [indiscernible] Excluding million million US$XX with US$XX.X million million compensation compared decreased revenue to share-based In compared was expenses which million in million negative in XXXX of XXXX. XXXX [indiscernible] total US$XX.X in or or net compared delay significant operating loss of XX% in negative Adjusted to XXXX during XXXX. total US$XX.X

During million was US$X.X XXXX, XXXX. million to compared our in CapEx US$X.X

cash compared full flow XXXX. achieve to negative during million million the year XXXX, US$XX.X For operating positive US$X.X we of

Move balance item. on to sheet

well XX, pleased the and at cash to equivalent near-term. XXXX, over our financial stressing growing course to cash position at We're to company and December to of million XXXX. in business Our short-term XXXX deposit million our continue compared US$XX.X position increase have and XX, December the US$X.X

up open let's Q&A. it for operator that With

Operator

And Litchfield will Research. Hills Please question Instructions] [Operator O'Neill our come from go first ahead. Theodore of

Theodore O'Neill

gross profit. Thank you very the much. is My first about question

why You're improving insight us in sequentially profit showing and here? give into I nicely year-over-year wondering if could gross margin, improvement you some and that's so was

Yimeng Shi

generally mixture so and connectivity locals is Yimeng highest service – Theo. colors service from more have give will revenue, of margins. and connectivity well. improvements as on PaaS disclosed margins this statement, a Yes in gross international margin Thanks international the is as service Yes it a more than the we Shi, our total came higher gross we we profit service Yes. improvements have I connectivity significant gross And also SaaS and mix, in gross the this service. service our have this portion a portions in a

also data consumption this the in past years and put this usage. to and we offers So control research and on have we have developments

And site commercials also commercial on and we can keep put some the stable pricings controls on levels. these

the compare the gross with is gross the service So and margin whole let's service margins that's whole year whole in overall group the a us XXXX year XX% to margins, coming improving and give years labors XXXX year. the back history pick-up to with the

service. We margin gross this trend expect for for this higher

as this have revenue year trends in from of We international keep portions will connectivity with this this trend compares will materially, expect we last well. as we the service increase year same and XXXX

Theodore O'Neill

balance And my question you. sheet. the about Thank is next

a there? going showing Can decline year-over-year in explain large on accounts receivable. You're what's you

Yimeng Shi

correct, from put we significant selling. also, the efforts from collections receivable backward current account receivables put XXXX years the the cash year we And [ph] yes. from That's on agent’s XXXX savings. In account the on XXXX, Yes. AFS

lot accounts the quite balance decreasing because put the from customer on a cash this side. collections significance effort receivables of account So receivables, we

this So market I the well. well. a also year, customer same the from U.S. market on the And this think from Japan’s good have cash keep pools as we quickly we and side customers’ selling to as from collect will AFS

our cash business us So Thank operations growth. to very this for quick you. cash a the and is have support collections inflow – cycle important to

Theodore O'Neill

you much. Thank very

Operator

go The question comes Diamond Vivian ahead. from Zhang Please next Research. of

Vivian Zhang

morning. is congrats taking and Thanks for Equity. This Zhang achievements you Good Vivian Diamond last from my questions on year. made

rebound is that lifted travel It’s question December policy and travel that and So as further expected zero-COVID recover will international well. pandemic China in last first a my restrictions year.

revenue and beyond? you will your business affect how think XXXX this in So, do your and company’s

Chaohui Chen

Yes. I’m Chaohui uCloudlink. CEO Chen, of

border. whole including to China yes, world, the open So so we see can the

can rebound rebound from wave think have fourth the COVID-XX, rebounds the the think New from festival will fourth in we Labor is be spring So, from This Chinese the the to see COVID-XX. – May China we – [indiscernible] – the I a Year. But smaller wave May the Day of X. make the I of of X,

recovery needs So because some year, the whole we period. China, think in everything

XX they happen. everything, in year, be So this next we recovery. XXXX including I the – And already, that may XX% recovery around believe think visa [ph], year the that passport, did year of China, only full will China

So XX%. around this year,

on XXXX that’s our this So based and based our is on our forecast year forecast – based on this assumption.

And maybe things if we better the so and more result. will believe better go better get will more since – more we go

the like Japan the like as from that’s Southeast in are So and Korea, Asia, as early China they open in Europe, United and States.

year, this And we XX% least think Asia recovered. East That’s China, recovery. I our major to XX% and next from we get fully are year, expectation. at

Vivian Zhang

will If question any can the to launch products so, about or XXXX? company them? plans briefly My update Mr. product. Chen. you, introduce next in Thank be there you Okay. Are

Chaohui Chen

Yes.

last R&D a challenging So, investment in – highway even side. create we our year, year, but R&D is have we the the

our So we leading will roaming XG product you – industry. one the see launch the the commercial only network This can product not leading only build in will the can traveler. world. Currently, less these for XG in almost business years, all it’s the position

best international that’s one market. believe that’s So for side. – That’s the we connection experience

more term, were next product, creative world’s side, product. we launch we month, Another small will – we in in will a near just

So [indiscernible]. we call

around be near in term. will this So

credit – So that’s than very smaller another just creative card. product. a It’s

smallest in a it’s – the really it’s world. So

improvement the roaming. and creative another product. for for caring that’s for local easy It’s and the network the So international

some app X.X fixed XG the viable fixed for one the – up different app. mobile CPE, requirements for we user can not And were products year, launch near more this marketplace other also new in will we just have these Also And term meet cap broadband launched broadband high also. CPE roaming, convergence and product for and of the solution for network CloudSIM. and mobile X.X only Then we convergence. and of marketplace and another this for were

– So travel. meet for various customer all also find we the so can need almost we of kinds

So catalog segment. customers attract more provide we – more then can more attach a customers’ and and

also roaming will customer the for increase So this solution. our appointment influence our and

So that’s another for new software as product, we launch, well. will that’s and hardware

So to I at as that’s also product a can for new the basically, end launched year have we other we so term, launched XXXX. some of the the show products you year, we near in the

which the our also solution, statement can side, launches The cetera. into product the systems, maintenance IoT like et launch product reliability cost and and reliable like By advantage a industry supply provide like that sense connection, and so and courage lot of save camera, network. Yes. the product CloudSIM new network will the we are IP the of also solar more the the have the impact power IoT embed a a for way, better costs more more and power and we an and costs also enhance and also IoT cost motor

in So some of the quite there’s especially we new gained marketplace a that’s software solutions, years. our – and these some launch lot

Vivian Zhang

Okay. information. Got you detailed Thank for it.

like global hardware not sure projects USA will Just Japan something just to right? or launched and updates be these certain markets, to make or right, markets some

Chaohui Chen

Yes.

technology way, I the yes, will by will – more So be government. by Chinese our recognition we think –

our we for more like product. think I I user in and more on Japan believe So partner new – think and market, of wider We and the recognize get, IoT technology year application can this also by more more XXXX. growth for

Vivian Zhang

Go ahead.

Yimeng Shi

Yes.

global the to along the and to well. will launch but market we will market product new the whether as market Japan’s global market, is that, deliver U.S. the question the go will asked it You

market. target the for global So that’s the

Vivian Zhang

thank Okay, you.

Thank That’s questions. all. my all that’s you. So

Operator

would This conference Jillian to our question-and-answer the concludes remarks. back session. over any for to closing I turn Zeng like

Jillian Zeng

Thank again you today. us once for joining

contact please the you you. questions, information Investor Relations further have again contact to firm, website next The Relations free speaking or call. to through contact Equity our look you on on to If We forward Group. of quarterly the Thank uCloudlink’s feel provided Investor our

Chaohui Chen

Thank you.

Operator

has you you concluded. conference for attending may disconnect. presentation now today’s The now Thank and

uCloudlink (UCL) 15 Mar 232022 Q4 Earnings call transcript