Q3 2020 Ucloudlink Group Inc Earnings Call
Good morning, and good evening, ladies and gentlemen, thank you for standing by and welcome to you probably group incorporated third quarter 2020 earnings Conference call.
At this time, all participants are in and listen only mode. After.
After prepared remarks by the management team there will be a question and answer session.
Today's conference call is being recorded and.
I like to turn the call over to your host today, Mr. Pops and senior.
Our manager of the company. Please go ahead.
Thanks, everyone for joining us on our total quote on plenty of funding already called today and earnings release is now available on how high all website at <unk> Dot Hill coatings dot com and well have to be on news wire services here I gave a brief introduction to our you called and team.
True pin pad is our co founder and chairman and offer bought off directorships.
How we try and it's our co founder director and Chief Executive Officer true.
True going to is our director and Chief operating officer.
In better shape is our chief financial Officer.
She is true I shoot me is our chief sales officer.
Our C O will begin with the introduction of our company overview and business highlights. This will come about section one and a section to <unk> earnings presentation posted on our IR website, and that and how I see Oh Im not sure well discuss how if I'm not sure without sector and street.
Before we proceed. Please note that this call may contain forward looking statements made a price went to the safe Harbor provision.
On a private Securities Litigation Reform Act off from 1995. These forward looking statements are based on management's current expectations and observations that involve known and unknown risks and uncertainties and other factors not under the call price control, which may cause actual results.
Performance, and achieving that South Dakota, and <unk> to be materially different from those out performance on expectations implied by these forward looking statements.
All forward looking statements on expressly qualified India entirety by the caution and other statements risk factors and I did hear almost on the call price fighting with the FTC.
The company does not assume any obligation to revise or update any forward looking statements and their bids out all from new information future events trend, you're seeing the market conditions or otherwise except as required by law.
Please also noted that you cloud Inc.'s earnings press release, and this conference call include a discussion of and audited GAAP financial information as well cash and automated and non-GAAP financial mattress.
Cloud inks press release contains a reconciliation and I'll be and audited and non-GAAP Naturists two day and all day tried it and most directly comparable GAAP measures.
I would now tend to call over to our co founder and CEO Mr. Chow weighted Chen. Please go ahead.
Yeah and.
Oh wait trends so from the page and pool total patron non yeah, Simeon on content [laughter] ER and eat not presentation outlets second quarter, Oh, Yes, 1000 tonnes, a day I will know and repeat in detail and I will pass true quickly piece tend to that page pool.
He picked up on all our vision and mission. So all companies are basically I think so.
Basically I think we are looking for people.
People on consumer connection anytime anywhere and Paula that's and and walk so that's all.
Ah I mean, we should and so a couple of page and why.
So well use the so called Skinny technology, so to be on the wall and leading more bad day touch hopping Sheri Mccoy crazy because all the technology and easy to to be on these are not safe [laughter] I'm also pleased and put up.
Hey, just sake, it's about you know Oh Wow, a cloud, let's see if that switches and technology. So innocuous range, We're launching trust me and deep technology.
Yes, I mean, the engine Oh, no no five key cloud email on so [laughter] Federated and five cheap cloud computing pond copper line all right.
On a page [laughter] pages seven assets.
I'll, let me bring you shouldn't have called it seems to be safe and mono no money. We have three pieces from all docking. The state you. One we feel you know we went on to see.
To see if they fall and up low lot technology and the and.
And the pieces and model, namely our partner and and channel where coal can you speak this model worldwide.
Somehow popping up so early on when they become mature and what do you and economic trouble and I was also what do you and you know it's Bert.
I'll I'll pass on the SaaS, then and we go to the pasta sauce and model so net pretty model in a three stage well Hey I'll.
I'll I'll walk you know wage and clothing technology. So you can look at the pet fallout or inflammation.
Well the technology [noise].
Hello, [laughter] pitch and nine [laughter], if at all if and when I wasn't clear.
Yep.
Gross 20 calls up if it's a model we have three Bcf a day.
Model for different stage, so even though he's total he would have worked on say Oh, you'll cloudy and one point, though you think you'll coty once on the old its focus on the entire nation on low me a sublease. So we've called White local me global low called me on the Soviets fall on the U.S. and travel outside and true you called.
And 2.0 business.
On the local business local.
On more by being local force you flashy leasing extremely well on a local.
Local business and outlet we weigh on goes what I can tell you called U sleep on total swiftly and I'll get a whole lot price, including weak you would be up [laughter] second and must take a little while so lets a lot page from page four page nine is suddenly a lot like on a quota to [noise].
So we tend to do.
Hey, [noise].
So and it's a ball our strategic investment and I see on <unk> <unk> business and.
[laughter] pitched and it's the most important page, which shows the cool Oh.
So the so called her ultra yeah of course elephant hunting and the uptake on a change that we made no.
<unk> and my team and then make continue to make and go longer and deeper Len and anticipate salty.
Its negative impact on international that's what we use on it and the consequent pretty Oh, so quota, yes, what's always on results.
Hello.
We expect and.
Our nation and Sandra will recap, what we launch all black hole were 19 blessing and effective testing and the changing are you calling pool points Oh no call dates on Kinda Haven T cell based on continued to be very important based on its <unk>.
Net sales more.
Moving my wife, I told me a lot less and so it was steady and the during the second quarter and the so called Oh, Yes of course I wasn't true on non non distribution channel with all pieces pantano. So from that caught the two and three Oh said more my wife I took on the Opex and <unk> economy.
Stable.
So more NAV to one operator, we call and.
No on them.
Major player in the local day talks and the team and you start with Nike and Oh, and you'll quality and 2.0 piece. It has great potential true Global Alliance and the cooperation with the more pad and so operator and basis popping up globally.
We had a really tough race and Elias ecosystem waste and while I'm on financial operating such assets and key in Japan.
One is also a major multinational oil price in mainland China, and so kind of region Wow risk area in your 90 day well.
And well done to you that in Beijing and wash out.
Yes, she took a non it your C O L T net.
And we and low windup for license and won't buy a watch on operator, and we and Oh in men and China.
We believe.
Last week, the more financial operating and more by a watch on methanol price is where you thought that increase net scale EUSA connected to offer and high school. That's a weighted average of from apparently is huge and I'll start with subscribers.
We will continue to keep that strategic.
And with the mall mobile network operators well by net watch all net operated and local basis patent on such as in Europe, and United States Asia et cetera.
So when you push you in high some and I'll hop and saw on ecosystem and profit wise superior data connectivity. So we used to carry it and basically on us.
Finally, cheap co why.
Great opportunities.
We can carry on include lay on coverage and I see with yourself and.
Invest them and efficiency in fact, she networks.
And I recently and.
Oh, Wow instead of switching NAV to walk technology on your cloud on cloud the scene.
On Saturday night, five cheap clout, the loans, such that autopilot and Oh, yeah, and the cloud computing.
Oh from let's say every that's off balance sheet won't buy why fight.
C P and the so called me and assign in Israel, various and I'll pass to you and asking more powerful on and that's the that's something on flow.
Total commercial trial in near future.
Leap.
Let's see on great potential fall application for loans device in five T Mall, Bob Hope and on that same with yourself waste.
Which were low NAV to walk latency and ER.
[laughter] fancy net to walk how Richard and use this week.
We also believe it accounts that's sitting tight.
To integrate the leading technology to petition.
I'll I'll pop and Sop price falls in the early stage five T [noise].
And Oh, the true anyway.
And you make our low cost that was the right way.
We are enhancing our E commerce true assets instead, they keep my case weight high gross pager Sosh assets that you and I guess day, you will all optimizing our web site.
And stream and and streamline all assets function and team in order to continue improving the user experience and overall satisfaction [noise] right.
Recent announcement on our instead switching nashwauk technology, we call you'll cloudy.
Called cloud the scene a true.
On Oh Wow.
Which is great great sorry, with de was close and more financing walk switching time from loan and so to your second or in the cloud in comedy encompassing one point, though 62nd too.
And 2.0 media sectors.
Oh, so contribute <unk> herpes them and our leading position.
I will close the same technology and soccer instead of switching NAV to what technology is both Heidi compatible with the well and really is unique and other one page is to various internet Oh see is I always see applications.
Scenarios such Oh.
I will internet weak.
Well without a pilot cabos northeast.
And all these pics.
And on the comp it quick on that.
We are cooperating with basis popped on a in that area.
Oh, I always <unk> application and Saatchi cargo week.
And close the Baldor railway transportation, and where we see hypatia <unk> business.
We met program with one of the all flow famous China, rather wait times, a patient companies [noise].
I believe all these assets and progress we have seen more opportunities in the future, especially if on the necessary well on next year gross.
Please turn to page.
Page 11, and he says Oh on new appointment I'll say, Oh, and the stock true Oh senior management team.
Recently, we appointed Mr. sheet Shimon changed she and our Chief says Oh Pizza and.
And then on marketing and sales mix.
Mr. She and process. These strong track the recall in the Red Oak and strategy global marketing push on local was such that the more classical growth.
In addition to east, Tennessee, and deep across industries that long and.
The list and such as the Internet.
And he called me patients more baffling industry. He previously [laughter] senior.
See me up it's actually when he lows in battery and we're not really no call operations, including <unk> technology, JD Dot com incorporation.
Hi, Andrew assume no.
The low off the wife, pets, and Montana and South.
Wasn't Gol Calvin assuming the low on the chief strategy and all pieces.
And changes [laughter], if that on September 25, yes, 1000 tonnes a day.
Moving to London restructure management know was well these on to better non senior leadership, Patricia and waste and strategic deep breath, and then Oh isn't it.
And we continue to improve.
Operational efficiency.
For all marketing opportunities and they leave so tenable gross.
[noise], yeah, pre pays and tons for the page 13 leases about how our business has on this and.
Operating highlights.
[noise] sold on data on from lets take on unless of course her on plug in 2020 shows no impact from low COVID-19, it's become even stable less and insight health net slides show steady and.
He told me low P 80 assets offset tens so T. Yes, 1020 assets and portion on the 80 and the data usage autonomy and all.
You're right on pace is positive for us.
You can see from the middle of last July shows the A.T. breaks down by you cloudy and one point, though and 2.0. They took on that team to sublease that'd be crazy Oh blog posts on the 80 Jodi and the so called her yes, 1000 tonnes. A day is many and she'd be with I think it would total.
<unk> decreased on your cloudy one on to also ways due.
Due to cold and 19.
We expect the launch an awful lot were seen in China, and other countries and regions, where Fannie and <unk> are basically.
I see and I always yeah, Boes, a day, so I, though well, you'll probably 1.0, that's the way.
On the on Dan Oh, and you probably in 2.0 local mobile data traffic is showing steady development and has been less impacted by COVID-19 Oh.
Well, you cloud and coupon to also waste.
I don't think from around 74%, although total <unk> duty and the so called Oh, Yes 1020.
Average data daily data usage on how do we know was true on a.
So he he.
Sometimes I guess 1000 Tonight.
Please turn to page 14 here.
He is a ball Pcs and revenue increase and diversifying globally.
Page 14 shows go vote I watch diversification of our business.
And then in China.
Revenue.
Percentage of total net revenue continued to decrease as we diversify our global business, we continue to be our ecosystem with all pieces parts on us in various countries and regions.
[laughter] quarter, Oh, Yes, 1020, we have 95 on the total revenue will come from outside men and China do and in the so called her Oh, Yes of course, and just 1000 tons. He kept on continued to contribute contribute 50% of the total revenue.
I'll tell you that and immobile butcher on net well price a watch on me and she in China and coal operations waste the Chinese.
Mobile and if all operators.
We believe channel market share we have weekend gross.
Okay [laughter], we spent the lounge awfully low but seem from a clinical phase three total market in China and other countries and the reach is we're ready to non recalibrate international traveler and up and if it's obviously, it's a policy and <unk>.
We expect all of these new opportunities as you probably and 2.0 business. We are thought to be a basis potentially in years 2021.
We are also dedicated to our on fee income traditional a new innovative technology, we use so the investment on the itself and marketing to bring.
Great.
Well back and forth tend to both growth in the future.
I will now turn on a two hour said Oh, you might sort of who we are supposed to do and financial highlights section.
Thank you I missed the chain and Hello, everyone and they tend to pay 16 Oh.
Total revenue decreased by 59.2% from 44.1 million and you're starting in a three month ended September 30, twos on 19 to 18 million and get started out in a three mile and de sometime S 90 twos on trending.
Revenue from service or 9.8 million gross dollar representing a decrease of 60.8% from.
On a 5.1 million guest on that but the same period. In 2019. This decrease was primarily attributable to the decrease in revenue and from National data connectivity service and the POS All service <unk> excuse me.
Mainly because continues on a per low impact on pandemic carbon and team.
And the related revenue on Sept offended total revenue increased from 46.9% and the second quarter and trying to be trendy to 54.7, plus and different so quarter I'm trying to try and get on other hand, Oh 2.0, low Coke data connectivity service was not impacted.
Alright, COVID-19, and a decent revenue increased by around three times from points, Dave and many guests on it and so quarter to sign on T. Two 2.5 million and guest on that in the quarter on 2020, which partially I'll say that decreased a one point, though international that.
Connectivity service.
So far we have started our 2.0 no code data connectivity service from China, and Japan will expand on the penetration markets such on Asia, United States European et cetera range.
Revenue from power and saw service, one quite and 5 million against on that representing a decrease.
30 point and 3% from 2.1 million U.S. dollar and the same period last year. This decrease was primarily due to the electorate in past calls on 19 on upon now not use our Pos saw service to provide international that's kinda give service and the mean.
On the demand of our low coat that connectivity service then huh on not affected range.
Revenue from the sales product, well 8.2 million guests and all that decreasing.
50 steam and putting the war and Hussain from 19 million and guess BARDA and the same period last year.
This decrease was primarily due to the continued negative impact on COVID-19 and dynamic.
Total revenue decreased by 30.7% from Y and your full points it and many years, though that in the nine months ended September 30, just on 18 to 72.4 on really just on that in the nine month ended September 32 Sun 20.
Revenue from services decreased by 44.2% from 66.6 million just on that in a nine month and <unk> September 32019 to 37 point and one meeting is delta in the nine month ended on September 32, and you're trying to revenues from sales and production.
Decreased by 7.1% from 38 point and 1 million and gets caught up in my mouth and be September S. 90, twos on 19 to 35.4 million and start up and the nine month ending September 30 2020.
And they also move to page 17.
Which share revenue breakdown, our two business segments lending revenue from service and the sales products.
During the quarter, Tony trendy revenues and service and the sales products accounting for 55% and and 45% tied to revenue respectively.
Compared with the second quarter trying to try and D., we can see that percentage of all revenue from service increasing our.
Are there and that we have moved and his partner, which trust flow to local data connectivity and.
Connect to our past sauce profit on the increasing demand from our partner and our past saw service also shows off sales of terminus net.
I'll turn to page 18, gross margins and openness, how service gross margins and overall gross margins increased to 36 point and 6% and 31.3% in the third quarter attorney trendy compared to 35 point and 1% and 26 and.
One point, the thing and the second quarter I'm trying to be trendy respectively.
And what many because we improved efficiency on revenue and cost structure during the quarter trying to try and do the pandemic impact and also with gross margins and also the overall gross margins to mitigate that poor long on certainty of COVID-19, we reviews comprehensive and.
And I'll call during the pandemic well, we'll continue to work on measures to optimize our cost structure going forward.
Let's move to page 19, which shows a breakdown on our operating expenses.
Excluding share based compensation and all this total operating expenses decreased 17.5% from 14.3 million and U.S. dollar during the quarter to sign and team to 11.8 million or you're still that you and the so called <unk> attorney Trinity we to comprehend.
And say from mitigation measures such as the risk and of course can true low commodity and the cash flow and management to I'll say the elective impact from COVID-19 total operating expenses as a percentage of total revenue increased from 32% during the quarter to sun and team to 75% and.
During the so called the trendy trendy this was mainly due to the decrease and overall revenue compared to the second quarter of trying to be trendy and increased operating expenses in the so called the attorney trendy, what mainly because bad debt provision due to that.
So payment of a couple of cost and that caused by a pandemic and especially up on us for certain testing.
We can do you need to day to get to R&D will optimize efficiency and key project output was to keep our leading position in the long range, excluding share based compensation and all this R&D expenses accounted for 24% of a role and operating expenses during the quarter true.
And trying to do and <unk> expenses accounted for 44% I'm turning to operating expenses with that 1.3 million and yes dollars of accounts receivable God day preparation and cricket.
Based on tend to pay to try and be operating cash flow was negative price.
And for many years, Florida during the third quarter of a 2020 compared to <unk> point Threemillion you start out there and so caught that 2019 and cash flow was non that with sufficient cash and cash equivalent at September 30 2020.
Our capex was pointing to 14 mailing list on that Darren so called to try and trying to compare to 1.2 men and just started up during second quarter 2019, Capex as a percentage of total revenue decreased from 2.7% day.
During the third quarter 2019, 2.8% during the quarter trying to be trendy and wasn't mainly due to the decrease you calling on one point, though expenditures.
Moving to page 21 day.
Income during the quarter trying to try and eat what liqtech $9.7 million compared to positive 3.8 minutes just on that during.
During the so called on 2019.
Adjusted EBITDA was collected 1.0 million just on that during this quarter of 2020 compared to a positive four point and 6 million guests on that doing so called on to Sun and team. Looking ahead. We are cautiously optimistic we continue to.
Increased investment in R&D, and sales and marketing and such as E Comm mouse and promotional campaign in key markets with the intention of opening more on EWP and this opportunity globally, we will continue to improve and optimize our revenue the cost structure with increasing operations.
We should see together with <unk> of the nation business opportunity to facilitate out there and its gross and performance in the future with that let me conclude today's presentation. Thank you and I will start a Q and a session operator.
Thank you we will now begin the question and answer session and.
Ask the question.
Star then one on your touched on sound.
And using a speakerphone please pick up your handset before pressing the keys.
What's your all your question. Please press Star then too.
For the benefit of all participants on today's call. If you wish to ask your questions and management and Chinese. Please immediately request repeat your question and English, we will pause momentarily to assemble our roster.
The first question today comes from Air and you, let Tigris partners. Please go ahead.
Hi, This is there and thank you management team for taking the questions.
Two questions. The first question is about the international side on the days and if so how that you spend and make changes on international strategy and holidays, you're thinking about the pace on the recovery and Oh about travel.
And my second question is on the true point on local data connectivity services business. So how these business performed sequential and in China post and the called me and 19 outbreak and burst the price and probably and I think and any yourself mattress you can share. Thank you.
[noise] [noise] Uh huh.
Oh wait and see all of the ULE clothing for 1.0 as I mentioned before it is impacted by the Kobe 19.
On a current and UK and also you can you can see DSIC and away and subway is heavily in Oh, not it's a piece of a global a total so it couldn't just net spendings profit couldn't newest thing and so we are now can see at least you know what's seen from.
On China on U.S. now become a you know and.
Become more clear so I believe and this year incentive because incentive.
And in some.
Ah condition and more and more.
Well, a possibility I think and recovery from a from a cold and IP. So we expect the.
And then second half and years of low cost 19 will gradually become better because I've seen and a you know ER and not comfortable so let's.
Taishan for 1.0, we believe from a second half next year.
On a common non <unk> impact, we average use and a global EBITDA were gradually recover it you can see and though recently.
And that that's a whole home and that's and got coal and us on a you know a and about Oh, you know travel or yeah. I think that's the good news for us.
So I think one point, though of course, it depends on up Carbonite and console and and let's see so there's a lot you know Josh and I'm, probably a you know a senior management team from you're calling for two point on business. So because you know in China, you know 2.0 and other countries.
It's a breath and then they stay you know a comfortable in China is widening.
I will follow on you know.
Fall kind of companies and.
So.
Well, that's why we invest in.
And.
Hi, Josh on the and sheet.
Who is the more about virtual operator, and also why we've walking waste and I can go on to keep that in local and in that in the domestic market with the mobile went off on a more nimble operators because that's why we can't get up and not no. We can't get that you're not what total kinda barrier fallout.
From an <unk> no duration, that's one and not on a weekend.
Foster growth from the calendar EBIT 15, you know or you use a top subscribers from the incumbent or carry on all mobile operator, so, let's all constellation and you can see and all Corona and this quarter, our business in China and local not only in the past our Chinese business and many.
And from the international so low cultural or and this quarter, we believe because all flow programs to waste. The you know mobile and watch operator, and Ah Ah moment and it'll operates on walking with and then we can you know weekend that gross or four Chinese snowcapped business.
Hi, Erin a this is a Bob Shan or let me put on all comments on your two questions first regarding your first a question off the international travel I think or we thought a mall.
Talk a good news decided to divest things how does such progress. For example, we are looking at you can true to some.
I heard reports regarding the international travel and that shows that average international price SPIC and gradually increase.
Now from sort of caught up now compared to two at a second quite often and attendee and also are there.
And see it out at the hotel occupancy and say right I had to be increasing which means that our international travel has gradually become a war on and we can't say that and also you can see are we on a fit and use that to more walk and the country and the readdress the I try and to open and Cross bought act.
Every day said they have tried and true opened up on for example, Hong Kong, Hong Kong, and Singapore, and the I tried and true or travel Bubba.
If would that buyback how about Bible has to be established.
Therefore on people from Hong Kong day travel to Cushing part and they do not and you to do and currency, So which is a good and use for our international travel I think from we believe for more and more trouble Bubba and well be established and then eventually on more and more countries and we'll open day on cross.
Bought activities, so that will benefit our 1.0 international Hod business.
On the right.
For your second question regarding our local business in China, I think on apart from the alliance with <unk> and man hours and the N.V. and those also because how Oh 2.0 local business have better wired a aspects.
For example, we also have a cut off from me inside a gym buyer, which is embedded in various sub brands out from a mobile phone handsets. We are in the process off on Dick O'shea with a more such as a five day by day to mobile phones.
And the development.
And for all come on your child in the near future. So later on real real a half a mall brands all fall off pretty much on a mobile phone manufacturer and stuff and manufacture to cooperate with us, which we will publish a pea on new York's therefore that being up and fund and also regarding.
And fiveg, so I won't be off on measuring here because our force the outer yourself for Fiveg mobile why fight or what share. We also caught me flat, but from a day recall mobile wife, I and also cost up on pretty much. If it came and which has caught I C. P and Oh Gee I might hard and also just mesh and.
Hardys ER products hop and that they're behind that that development to fall cutback on trials, if and you have your true so already gotten years real help to develop profit a faster and about how our business day made on China. So we believe that how China and October older getting gross and.
No we expect and next year are tiny tiny one well be on new milestone for our business.
Thank you.
Again, if you have a question. Please press Star then one.
There appears to be no further question I'd like to turn the call back over to management for any closing remarks.
Okay. Thank you once again for joining US today, if you have any further questions. Please feel free to contact and your coatings and Investor Relations true to contact information provided on our website or TPG Investor Relations.
This concludes the earnings conference call you May now disconnect your lines. Thank.
Thank you. Thank you.
Yeah.
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