Q4 2020 Ucloudlink Group Inc Earnings Call
<unk> and gentlemen, thank you for standing by and welcome to you Cloud Link Group, Inc. Fourth quarter and full year 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.
I would now like to turn the call over to your host today, Mr. Bob Shen Deputy Investor Relations Director of the company. Please go ahead.
Thanks, everyone for joining us on our fourth quarter and full year tiny tiny earnings call. Today. The earnings release is now available on our IR website at IR Dot your colleagues dot com.
I'll ask via Newswire services.
Yeah, I gave a brief introduction to our U Cal Linkedin.
True of Ping pen is out of our co founder and chairman of the board of Directors Charles Chang as our co founder director and Chief Executive Officer.
True gone too is our director and Chief operating officer.
She is our chief financial Officer.
She is our chief sales officer.
The C O will begin with an overview of our company and the business highlights, which will cover section one of the earnings presentation posted on our IR website, and then our C. F O E share will discuss our operational highlights and the financial results.
In the section two and of section three.
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 day.
These forward looking statements are based on management's current expectations and observations that involve known and unknown risks.
Certainties and other factors not under the company's control, which may cause actual results performance or achievements of the company to be materially different from the results performance or expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cadre of neuro statements risk factors and the details of the company's filings with the SEC. The company does not assume any obligation to revise or update.
Any forward looking statements as a result of new information future events changes in market conditions or otherwise, except as required by law.
Please also note of that you clouding, earning press release and the this conference call include discussions of unaudited GAAP financial information as the.
Well as unaudited non-GAAP financial measures.
Crowdings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.
I will now turn the call over to our co founder and CEO. Mr. Chao Chen. Please go ahead.
Okay and Jeff.
Yeah, similar content of the earnings presentation.
<unk> of the third quarter of year 2020, I will focus on patient safety page nine.
Edwin Paycheck tab.
On page <unk>.
That's the Motorola on page six.
Which shows navigation.
Turning on whole pie.
The concept applies for the data connectivity of serving the market.
The wide coverage of circle.
On the lesson on site chat.
For data connection areas.
And the shadow areas on reliable data connection to the soft touch net wealth connection concern it is not enough.
To adjust the construct of hardware of network because net of what the courage required to install and the investments.
There are always the shadow area with pool net work colleagues.
<unk>.
More of our network operators invest in increasing infrastructure such as the base stations.
The right hand side chart shows our solution for such openness.
Our cloud technology group.
Our paas and SaaS platform, we can have changed.
Both data clinician to more reliable data explanation.
Installing navigation.
The Chinese Paul path for traffic now vacation can automatically identify congestion and actively choose the best Hello.
China the poll.
And allow users to avoid loans conquer one switching amount of more of our networks and intelligent free.
Data connectivity and user experience for.
For example, if one operator.
Bottleneck of courage during peak time or less connection signal for certain location.
We can use our navigation to include the courage by intelligent today switching to another operator, NAV and provide better service courage to users.
Our business the enabled users and the business partners to select and connect to the high quality mall by a net of recoveries.
For the company's location.
Our paas and SaaS platform also looks like.
Any of the toll pass, let enables faster and efficient operation management and the <unk>.
The connection.
By changing on reliable condition areas for more reliable connection areas. We can have any rate users the more bad debt.
<unk>.
And in Peru, our law net.
The efficiency.
Which also improves carriers return of.
On.
Return on investment.
Hi.
Yeah, great potential applications in areas, such as more of our network operators data connection services.
For your patient industrial again remote working.
Industrial automation.
[noise] central of page nine.
So net.
Let's take a look at all of our innovative cloud technology.
So.
The second the first and the.
Before I just controller.
The new concept for hyper connectivity for data traffic not pay for as part of the destination of hyper connectivity basically includes the level, one which is the.
Valuation uplift connection quality of various wildly.
The networks.
Never too, which is net of luck selection and optimization based on the cloud technology and never free which is optimizing and acceleration of application looting such hyper connectivity solution. We have met users applications get.
Better condition experienced which have realized net vacation.
China whole path.
Our hyper connectivity solution.
We received final of more of our net user experience and facilitate data shopping marketplace.
Data kind of thing with the user experience is affected by various factors such as the signal in the theaters and do the team.
The way and delay and silver location.
In the <unk> apply navigation.
Tony the toll pass the concept or the more of our network to our users and business partners in mobile data connected with the market.
Our hyper connectivity technology through price.
Paul.
We focus on is temporary thing.
Capo Lampo, Sir network of commission with the security for our pacings partner on users.
New cloudy.
Type of connectivity.
On to connect plus all the networks and technology and clinical systems cost, whereas the thin form factors came from factors, such as EP and sort of theme across the various.
Media, such as Wi Fi and the various video technology, etc.
Countries and per region.
We are achieving the <unk>.
By the identification monitoring and optimization to further elevate user experience in the data connectivity market.
Our cloud the same technology facilitates a valuable service for both users and carriers.
As of December 31, 2020, we had.
74 patent pool of 17, nine patent pending for globally.
Approval globally.
Chris.
Most of the page 11.
Which shows led our cloud technologies group Paas and SaaS platform.
For the half multi network operator and then.
Decrease their churn lake the.
The quality of multi data connectivity is the major factor, which influenced the use of switching more by of network operators for it.
Simple according to China Academy of information and communication technology sales.
AI HDD.
Research.
And as such in men reason for China users of mobile number portability, so which net of what our operators are seeking better coverage cheap.
Cheaper pricing and better and better data package.
According to the public information certain mobile network operators in mainland China had a net loss of our.
10 million mobile network of subscribers during year 2020.
At the moment as mentioned above it is orally has shadow areas of unreliable Commission and the it cannot be fully stall by mobile network operators.
We can elevate.
Users experience.
Such as operators on with Apple condition and no connection area.
More reliable connection service level, which avoid the loss of such more of our net subscribers.
Starbucks fibers.
With the cloud the thing technologies through our Paas and SaaS platform such as the reached the launch of our Smart marketing network re selection technology.
Could the facilitate more partner for operator, improving net.
Sure.
And the efficiency.
<unk>.
And the weight loss service for users, which would have reduced train length.
Screening for leaning at all where the two carriers to meet users' requirements for better more patents of condition.
The alliance with the mobile network operators and the cooperation with the mobile handset manufacturers globally.
High growth potential in the data connectivity so with market.
Let's move to the page 12.
Which is the most important page shows the progress of the fourth quarter of year 2020, and update of the change of wing mate.
Despite two of two.
2020, being a challenging years.
We demonstrate the resilience.
Attunity at the.
Certainty during the COVID-19 pandemic.
Simulating the.
In fourth quarter revenue of.
U S dollars 17 million.
Non with our quarterly budget.
In the Chinese market that is terribly segment of a strategic partnership with Samsung price.
Of China Unicom.
Was the important divestment for.
For our local business, which we expect we are ahead of us.
Broaden our use of space more quickly and efficiently.
We further invest in Beijing, <unk> technology sale of LTV, which is one of the off net licensed mobile virtual network operator in China that's the.
We look to as we look to.
The proactively.
And enhance our Paas and SaaS.
Put the phone ecosystem and join the new industrial business partners in various aspects of Iot applications, we sign of milestone strategy cooperation.
Agreement with the China vehicle interconnecting sales capacity technology sales L. T D C. We keep it.
In the Japanese market, we cooperate with the numbers.
And the mobile network operators such as NTT.
For further invest local mobile broadband service and strengthen our existing relationships, which country due to continuous growth momentum.
In the U S and Europe of market, we optimized our website to enhance our <unk> brand E commercial effort as a part of our global expansion strategy there.
Is the launch of three flow coming products represent our effort to offer more wide ranging solution in order to connect the users of <unk> worldwide in the U S. Our CRO from the plant had 100% uptake in its traffic to its local e-commerce.
Asia side and set a new record high of man, which is the use of <unk>.
Expect led the widespread what's the what's the nation, we have cross border activities and international tourism recover creating more new growth opportunities in year 2021 with for example, our Utah, Utah Youll, probably two points.
Our local business.
Looking ahead, we continue to focus on our experience and one way we are developing.
It is true our navigation plot it on.
Tony the toll pass service on.
Our mobile network, while our hyper connectivity technology through Paas and SaaS platform.
We are also looking to capture additional of basic opportunity such as mobile network operators mobile, albeit improving net of what the courage for carrier and also elevating user experience.
<unk>, we are targeting opportunities related to net of wealth management.
Such as remote working and each of patients and the <unk> opportunity for product and service our cloud the same technology.
As a marquee net awards reflection of technology will reduce the net of what the cost and time to many second.
If he is up.
And a thorough at acre of fancy cloud applications and the.
Ready for commercial use.
And believe our technology is highly compatible with various applications scenarios, where high quality explanation is necessary for example, Intel.
Net of weak hope for.
Economists driving.
We are cargos and losses and cloud computing.
With hyper connectivity we.
Dedicated to of protein and connecting with all local networks and technical assistance improve.
Improving the user experience by optimization of all layer, including assess coating and application layers.
We expect all of her opportunity we have further extended our paas and SaaS ecosystem with continued for from Alliance.
And strengthened cooperation with more of our network operation operators and more of our water operators and business partners per operator.
It's temporary leading technology position of our.
The Paas and SaaS platform during the key trial of the Elan.
So.
That's the 10th of a page 17 recently, we announced recent low change of for senior management <unk>, Our Chief R&D officer assume the low of the Chief R&D Officer, and the Chief supply chain officer, replacing.
So on ship one in the left alone.
These changes taking effect on January 27 2021 the.
<unk>.
Structure management of those was designed to be to better align the senior leadership additions with the strategic development of our business as we continue to improve operational efficiency.
Elevate supply chain management and delivery of 10 of those.
I will now turn it on.
Our two of our CFO email sure who we are close to the business of financial highlights of election.
Thank you Mr.
Okay.
Excuse me there seems to be an interruption.
Yeah.
I'm not sure why it was muted.
You go ahead.
Thank you Mr. Chen.
Okay.
Thank you Mr. Chen Hello, everyone, let us turn to page of 15.
Our business highlights the data for the third and fourth quarter of 2020 shows the impact from COVID-19, It became stable the left hand side of the slide shows the active terminal the tea.
As of.
December.
So the first 2020, you can see from the middle of the slide showing the breakdown.
Breakdown by equaling 1.0 and to point out that the connectivity service. In addition, our crowding of too low.
Local mobile data traffic is showing steady development and has been less impacted by COVID-19.
<unk> two point of service around for around 67% of a total of tier two during the fourth quarter of 2020 average daily data usage per terminal was two point of one gigabyte in December 2020 for the full year of 2020 average daily.
The active terminal were around 246000, representing an increase of 31 point of 3% from around 187 balance and Tucson 19, we expect the launch of vaccine in 2020 one.
The benefit to our business strategy and Iot a burst of driver for you kind of in the one point now as well.
Most of tend to page 16, which shows global diversification of our goodness.
And China is the revenue or the percentage of best of the total revenue continues to decrease as we diversify our global business. We continue to build our ecosystem with our business partners in various countries in the regions.
First quarter 2020, we have 95% of the total revenue from outside of mainland China. During the fourth quarter 2020, Japan can be contributed to 47 of the total revenue.
The increase of percentage of other country is the menu and because of the expansion of of goodness and development is in related market such as the United States. After.
After the Investor investment in and then a portion of the machine and the cooperation with <unk> China.
China Unicom in Shenzhen, We believe China market will regain its growth looking ahead, we expense all of this new opportunities such as regarding to the openness. We have further developed our business potential in 2020. One we are also dedicated to our R&D with the further investment.
And sales and the margin expansion capability to bring us sustainable growth in the future.
Let's turn to page 18.
It goes through our financial highlights of the fourth quarter 2020 for for years 2000, Twenty's financier of please refer to our only release.
On a global revenue decreased by 68, 3% from $53 7 million you saw there in the three months ended December 31st 2019 to 17 million dollar in the three months ended December 31st 2020.
Revenue from the service was $9 million, representing a decrease of 63, 3% from $24 6 million U S. Dollar for the same period of 2019. The decrease was primarily attributable to the decrease in revenue from international data.
Connectivity service on the POS sales service to certain extent, mainly because of continues on the per loan impact of pandemic of COVID-19.
Service related revenue as a percentage of the total revenue increased from 45, 7% in the first quarter of Tucson, 19 to 52, 9% during the fourth quarter of 2020 on.
On other hand, our two point of local data connectivity service were less impacted by COVID-19. So far we have started our two non local data connectivity service in Japan, and we saw the continuous development of about two point of local data connectivity service.
In 2020 one.
We are further expand to all of the potential markets, such as the United States, Europe, and Asia et cetera.
Revenue from parts of massage service for one 9 million representing a decrease of 47, 3% from three point of 5 million installer in the same period last year.
This decrease was primarily due to the collective impact of COVID-19.
Palmer not use a pause of service to provide in the national data connectivity service in the meantime, the demand of our local data connectivity service business partner are relatively steady.
Revenue from sales products were eight point.
Zero million dollar decrease of 70.
72 point of 5% from 29 point of $1 billion.
In the same period last year. This decrease was primarily due to the continuous collective impact of color on 19 pandemic on.
Total revenue decreased by 43 point of 4% from why don't you for a point of for many startup in 2019 to $89 6 million dollar in 2020.
Revenue from service decreased by 49, 3% from 91 1 million U S. Dollar in 2019 to $46 2 million spelled out in the 2020.
Revenue from sales products decreased by 35, 5% from $67 3 million installer in 2019 to $43 $4 million in 2020. This.
So I'll move to page 19.
<unk> share the revenue breakdown of our two business segments, namely revenue from service and the sales products. During the fourth quarter of 2020 revenue from service on the sales products accounted for 52, 9% and the 47 point of 1% of two of the revenue respectively.
You can see that the percentage of revenue from service increased compared with 45, 7% in the fourth quarter of 2019, we will continue to improve and optimize our revenue structure the for <unk>.
Related business growth on the performance.
Let's turn to page 20.
For gross margins of our business our service gross margin of our raw gross margin will increase to 41, 2% and 31, 4% in the first quarter of 2020 compared to 36, 6% and 31 point of 3% in third quarter of 2020, respectively.
It was mainly because we improve efficiency Arabian of cost structure. During the first quarter of 2020 also increase of power source of revenue, which has a higher gross margin contributed to the increase in the service gross margin during the first quarter 2020, compared with the third quarter of 2020.
On the pandemic impact our service gross margins on overall gross margin during the year 2020 to mitigate the prolonged impact on <unk>.
Certainty of COVID-19, we reviews comprehensively at our cost during the pandemic, we will continue to work on measure to optimize our cost structure going forward.
Moving to page 21 with sure the breakdown of our operating expenses, excluding share based compensation and others total operating expense decreased 14, 5% from 16 $6 million the startup during the first quarter 2019 to $14.
2 million U S dollar during the first quarter of 2020.
Two comprehensive mitigation measure such as the risks and of course can true liquidity and the cash flow of management to offset the lack of impact from COVID-19, total operating expense as a percentage of total revenue increased from 31% during the fourth quarter, 2019% to 83% gearing.
The fourth quarter of 2020. This was mainly due to the decrease of overall revenue.
We continue to dedicate to R&D with optimize efficiency and key project approved the tip of our leading position in the long range excluding share based compensation on August our R&D expenses accounted for 27% of overall operating expenses during the fourth quarter of 2020.
G&A expense accounts for 46% of <unk> operating expenses during the fourth quarter of 2020, which consist of some one off expense like certain professional service fee of around one point of for <unk>.
Yes dollars and the write down of accounts receivable for the $80 million.
Let us turn to page 22.
Operating cash flow of selective five 5 million dollar during the first quarter of 2020 compared to presented one of $1 billion dollar during the fourth quarter 2019, our cash flow was normally with the sufficient cash on cash equivalents.
At December 31st 2020.
Capex was point of.
$4 million during the first quarter of 2020 compared to $9 million during the first quarter 2019, compared with the third quarter of 2020 increase capex during the fourth quarter of 2020 was mainly because of certain license fee for software.
Capex as a percentage of the revenue increase from one 7% during the first quarter 2019 to two 2% during the first quarter of 2020.
It's mainly due to the decrease of the revenue.
Let us move to page 23.
Net income here in the fourth quarter of 2024 for decades.
Pointed for millions of dollar compared relative to.
$2 1 million U S dollar during the first quarter 2019 of.
Adjusted EBITDA was selected from seven $9 million dollar during the first quarter of 2020 compared to positive $2 9 million installer. During the first quarter of 2019. Looking ahead, we are focused on improving and optimizing our revenue on the cost structure was aberration of efficiency.
The <unk> management system, as well as standardize and of Systemize the process.
We believe all of this opportunity and optimizing efficiency measure will facilitate the deliver about 2021 guidance with that let me conclude the presentation. Thank you and we start our Q&A session.
[laughter].
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speaker phone.
Please pickup your handset.
For pressing the keys.
If at any time your question has been addressed.
You would like to withdraw your question.
Please press Star then two.
For the benefit of all participants on today's call if.
If you wish to ask your question to management in Chinese please.
Please immediately repeat your question.
English.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Harris, Ken with Lincoln Partners.
Please go ahead.
Good morning can't hear me on this is Kim Brown integrity financial partners. Thank you for taking my questions I have two questions. The first the question is about the international expansion of the business account for why it's more colors on the recent partnerships, including Nucor.
Wireless in the U S sure of access and the H K and to expand the southeast Asia business and the mine.
Second question is regarding the future of revenue mix weighted with the.
To understand how you see the trend line for the future of global to your old Britvic our revenue mix.
Excuse me the speaker location currently on mute when you're ready.
Yeah.
Okay.
Okay.
Okay. Please go ahead I can see the activity go ahead.
Okay. Good morning, Joseph can from Tigress financial partners. Thank you for taking my questions I have two questions. The first scratch on its now the international expansion of the day to day count.
I'll provide more colors on the recent partnership including the new core of barely sure axis and the H K M.
And the matrix, maybe you can provide like the AG on daily usage growth. My second question is regarding the future revenue mix.
For the lock to understand how you see the trend line for the future of global geographic revenue mix.
Joe.
So none of them, Jeff So let me answer your first question about our AR.
Business expansion globally, so for of Japan. So.
The net.
In Japan in the in the most countries because of pandemic of Covid.
COVID-19, so one point of obesity is the it doesn't matter of our business and the partner business are impacted by COVID-19, I think lack of in Japan, a lot of our local partner they tend to local business. So you can see we can see our business growth. So.
That's the one.
I asked that so lack of in Japan. So we were on.
Traditionally we our one point of our international business, we major working with working with the the air pole rental business travel Wi Fi rental and now we for local business now.
Working with the local partner of like a mobile operator, and operator and the.
On a multi network operator of mobile watch of operator together. So you can see our local business is close we believe when the.
The COVID-19, a recovery in the future.
We were in Japan, we were the colleagues for inflammation of business and local business. So lets for the Japanese and of for U S.
Go to the U S is the Semina you ask now with most of the local business and with our partner and also so we already recently, which has unwound the news when you're working with the local Lula area operators and some channel the together for local business lack of for education remote.
Multiplication assess.
The assess of a radio assessed similar solutions. So we can see the growth posted in the in the online site and the offline side.
That's in U S in the southeastern Asia, assuming neither in the.
In Indonesia, we explain our business hours of local partners for local business and the Mad idea is the same we are partnering offsets and on a local business and the way our mall working with the local partner net operator on the.
On the mobile watch of operator.
And all sorts of like of in in in Europe is similar situation. So most of our business now is tied to the local business also that we are not the payer for the international business no longer businesses.
And we believe the end of this for years and the other.
At the COVID-19, so from Q3 international business the way of gradual recovery.
The next year will be much more of a recovery so of DCF on the quarter. Three we started out of carry that's the Florida business in our traditional part also as we had new business like Iot.
Iot business, we will start in China and in Japan, we start the.
The Iot business within the local partner of yours.
The major is the focus on the local basis like a waste.
With the local mobile broadband and the local.
Let the vehicle company.
This part of business.
So for the second question regarding the revenue mixture.
I understand this the second questions.
On.
To breakdown the revenue as a mixture of so in.
On the first quarter of 2020, and the total revenue was 17 mirroring Astana our revenue from the service was 9.0 millions.
Millions of Stella, including this $9 million.
Five.
Millions of dollar from in the National day that kind of get the service and the one 2 million Stella from local data connectivity service on <unk>.
Also we are we have had $1 $9 million from the Pos platform of service for.
For the whole year's two.
2000, Twenty's revenues, the mixtures and the total for the whole year.
Revenues for the $89 6 million.
Yes.
Of which $46 2 million U S dollar from.
Service.
Within this of $46 $2 million the.
The 38 million you start of revenue came from international debt of connective service <unk>.
So we are we generating.
43 point of for many of US dollar for sales of products.
Okay.
The tie to growth.
This is the Barber Shen our artisan points for your two questions.
First one on regarding your first of question.
It is our international expansion, Yes, you are right. We are international company and we are dedicated to diversify our revenue with.
Our global <unk> business partners, so as the.
There are as we did before on a per hour in order to elevate our local service brand we are enhancing our on.
E Commerce of airports in strategic key markets, such as are the United States Europe et cetera.
And we did a lot of airports such as on average.
The average elevate here at optimizing our website and also on streamlining of our sales function and the tips.
Are they in their local market and other.
Other two all continue to improve.
The overall uva over our years of experience and overall satisfaction of globally for.
For the South East Asia. Yeah, you are right you name the same business partners that we already had actually a strength in our cooperation and arise with this.
The business partners and also we are dedicated to cooperate with more of our new business partners for we have any new cooperation of alliance, we will release in our official IR news or the.
Regarding your second question, yes.
As of our CFO.
Yeah for mentioned that yes, we will have this uh huh.
Our diversification in our global expansion for <unk> I want to mention data you can see from the charter debt during.
During the fourth quarter of for.
'twenty 'twenty, however, China on Megafon made in China on a revenue takes around 5% of the AUM.
For our revenue, which of the same with our third quarter of 2020.
But with the our.
Cooperation such as our cooperation with China Unicom, Shenzhen actually we are exploring more new business models and of cooperations with the right amount of OS and the mobile phone manufacturers and we want to put.
All business partners, such as M of note and the mobile phone manufacturers for.
Our ecosystem globally.
Okay. So with.
Was this a strategic.
Strategic alliance at of cooperation in mainland China, We expect that this year are kind of 801 hour of China.
Revenue are we all the getting Brooks.
Okay. Thank you.
Okay.
Thank you.
Yeah.
As there are no further questions now.
Like to turn the call back over to management for closing remarks.
Thank you once again for joining us today, if you have any.
Further questions. Please feel free to contact you Crowdings Investor relations sure to counteract the information provided on our website or TPG Investor Relations.
Yeah.
The conference call has now concluded. Thank you for attending today's presentation you may now disconnect.
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Good morning, and good evening, ladies and gentlemen, thank you for standing by and welcome to use Cloud Link Group, Inc. Fourth quarter and full year 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 I.
I would now like to turn the call over to your host two day, Mr. Bob Shen Deputy Investor Relations director of the company.
Please go ahead.
Thanks, everyone for joining us on our fourth quarter end of full year, Tony of 'twenty earnings call. Today. The earnings release is now available on our IR website at IR.
Your colleagues dot com as well as via Newswire services.
Yeah, I gave a brief introduction to our U Cal Linkedin true.
<unk> is our co founder and chairman of the board of Directors Charles return as our cofounder director and the Chief Executive Officer.
<unk> gone to is our director and Chief operating Officer.
You mentioned it is our chief financial Officer change for an issue is our chief sales officer.
Our CEO will begin with the overview of our company and the business highlights, which will cover section one of the earnings presentation posted on our IR website, and then our CFO eamonn share will discuss our operational highlights and the financial result.
In section two kind of section three.
Before we proceed. Please note that this call may contain forward looking statements made of pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
The forward looking statements are based on management's current expectations and observations that involve known and unknown risks.
Certainties and other factors not under the company's control, which may cause actual results performance or achievements of the company to be materially different from the results performance or <unk>.
Spectation implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cadre of neuro statements.
Risk factors and the details of the company's filings with the SEC. The company does not assume any obligation to revise or update any forward looking statements as a result of new information future events changes in market conditions.
Or otherwise except as required by law.
Please also note of that your cloud Inc. 's earnings press release and the this conference call include discussions of unaudited GAAP financial information.
Oh asked and audited non-GAAP financial measures.
<unk> press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures.
I will now turn the call over to our co founder and CEO. Mr. Chow the churn. Please go ahead.
Okay and Jeff.
Similar content as the earnings presentation of the third quarter of year 2020.
We are focused on pages six page nine.
Edwin Paycheck tab.
On page 13.
That's the Motorola page of snakes.
Which shows navigation class Tronic colt hub concept applies for the data connectivity with the market.
Why coverage of circle on the left hand side chart, a reliable data connection areas.
And the shadow areas, a reliable data of condition to soft such net connection concern it is not enough.
To adjust the construct hardware of net walk because network coverage require Pam based off of and the investment.
There are always shadow area with poor network coverage.
If more of our network operators invest in increasing infrastructure.
Base stations.
The right hand side chart shows our solution for such programs.
Our cloud technology group.
Our paas and SaaS platform, we can have changed.
Both data of clinician to more reliable data connection.
Lack of installing navigation class.
The toll pass for traffic now vacation can automatically identify congestion and actively choose the path of low and electronic the poll.
And allow users to avoid loan conquer one switching amount of more of our networks.
<unk> per day.
Data connectivity of user experience for.
For example, if one operator both.
Bottleneck of courage during peak time or less connection is the bigger know for certain location.
We can use of our navigation to include the courage by intelligent today switching to another operator now for work and provide better service and courage to users.
The business enabled users and the business partners to select and connect to the high quality mall by a net of what recoveries.
The companys location.
Our paas and SaaS platform also looks like.
One of the toll pass that enable faster and efficient operation management and the SP.
Connection.
By changing on rely.
Condition areas for more reliable condition areas.
You can have any rate users the more path data connectivity experience and improve our law net.
The efficiency.
Which also improves carriers return of.
On.
Return on investment.
The great potential of application scenarios, such as more of our network operators data connection services.
The patient industry, Ken remote working.
Industrial automation.
Automation, and autonomous driving et cetera, which require better net connection.
Great. Thanks for the page nine.
So net.
Let's take a look at our innovative cloud based technology.
So.
The second the first.
Is the lack of before.
Thanks Rhonda.
The new contacts for hyper connectivity for facilitate data traffic marketplace for this part of the definition of hyper connectivity basically includes level, one which is the.
Evaluation of the connection quality of various wildly asset networks now.
For two which is net of walk collection and optimization based on the cloud technology and level, three which is optimizing and acceleration of application looting such hyper connectivity solution. We have met users applications get better.
The connection experience.
<unk>.
Realized navigation.
Electronic whole path.
Yes.
Our hard for connectivity solution.
We received final of more of our net user experience and facilitate data shopping marketplace.
The data kind of tell you what the user experience is affected by various factors such as the signal interference and lose him by the way and delay.
Silver location.
In the <unk>.
Navigation craft electronic toll pass the concept or the more of our network to our users and business partners in more of our data clinically with the market.
Our pipeline connectivity technology through part of in stock price.
So we focus on is temporary thing.
The BOE level set net commission with security for our business partner on users.
New cloudy.
Type of connectivity to connect Cros, all the networks and technology and chemical systems cost, whereas theme for factors came from factors, such as <unk> and sort of thing.
Most of the various media such as Wi Fi and the various video technology, etc.
Countries and beverages.
What do we are active.
By identification monitoring and optimization to Florida, and the rate user experience in the data connectivity market our.
Our cloud the same technology facilities are valuable for both.
Users of carriers.
Of December 31.
2020, we had seven.
74 pesos, a pool of 17 nine patent pending for globally.
Approval globally.
Chris.
Net motor of page 11.
Which shows that our cloud technologies through Paas and SaaS platform.
For the hip multi network operator, and then.
Decrease that channel at the.
The quality of multi data connectivity is the major factor, which influenced the use of switching more of our network operators for it.
Simple according to China Academy of information and communication technology sales.
AIA sticky.
Research.
As such in men reason for China users of mobile number portability, so which net of.
Operators are seeking better coverage.
Chief of pricing and beta of better data package.
Our net of lost.
10 million more by a net loss of subscribers during year 2020.
At the moment as mentioned above.
<unk> has the shadow areas of unreliable Commission and the he cannot be 40 store by mobile network operators.
Elevate.
Users experience.
Such as operators on with Apple clinician and no connection area.
More reliable connection of service level, which had avoid the loss of such more of our net of what our subscribers.
With the cloud of the thing technology through our path of SaaS platform such as the recent launch of our Smart marketing network re selection technology.
Could the facilitate more partner for operators.
Improving net.
Alright.
And the efficiency and.
Elevate last surveys for users, which would have the reduced train of lake.
Premium for any at all where the two carriers to meet users' requirements for better more patents of condition.
The alliance with the mobile network operators and the cooperation with the mobile handset manufacturers globally, we expect high growth potential in the data connectivity so with market.
Let's move to the page 12.
Which is the most of important page shows the.
Progress of the fourth quarter of year 2020, and update of the change of we make the.
Bye.
2020 been of challenging years.
We demonstrate the resilience.
Agility at the.
Certainty during the COVID-19 pandemic.
Cumulated net.
In fourth quarter revenue of <unk>.
S dollar of $17 million in non with our quarterly project.
In the Chinese market that is terribly from one of our.
Australia is the partnership with center on price of.
Of China Unicom.
What the important development for.
For our local business, which we expect we are ahead of us.
Broaden our use of space more quickly and efficiently.
We further invest in Beijing, Guangdong nation technology sale of LTV, which is one of the licensed mobile virtual network operator in China that's the.
We look to as we look to.
The proactively expand and enhance our path of SaaS.
<unk> ecosystem and join the new industrial business partners in various aspects of Iot applications, we signed a milestone strategic cooperation framework agreement with the China vehicle interconnecting since pulp capacity technology sales.
The we keep it.
In the Japanese market, we cooperate with the numbers of <unk>.
And the mobile network operators such as OTT.
For further kiva local mobile App, all based service and strengthen our existing relationships, which contribute to continuous growth momentum.
In the U S and Europe of market, we optimized our website to enhance our <unk> brand E commercial effort at the.
Part of our global expansion strategy.
As the announcer of three growth coming products represent our effort to offer more wide ranging solution in order to connect the users of <unk> worldwide in the U S. Our total from a Brent had a 100% uptake in its traffic to its local e-commerce.
Si and set a new record high of mine received the user is.
During the third quarter of year 2020 weighted.
We expect net the widespread what's been what's the nation, we have cross border activity and international tourism recover creating more new growth opportunities in year 2021 with for example, our new cloud you'll.
The hotel Youll, probably two points of local business.
Looking ahead, we continue to focus on our experience and one way we are developing.
It takes us through our navigation plus.
Electronic toll past service on.
Or more of our network wire.
The hyper connected with the technology through part of SaaS platform.
We are also looking to capture addition of basic opportunity such as more of our network operators mobile, albeit improving net of what the courage for carrier and also elevating user experience.
Addition, we are targeting opportunities related to net of wealth management, such as remote working and the education and the <unk> opportunity for product and service our cloud the same technology.
As a marquee NASA work reflection technology will reduce the net of what the cost and time to manage.
If he is up.
A steroid acre of five key cloud applications and ready for commercial use.
We believe our technology is highly compatible with various application scenarios.
High quality explanation.
Necessary for example, internet of Waco autonomous driving.
We are cargos and logistics and cloud computing.
With hyper connectivity.
Dedicated to of protein and connecting with all local network and technical assistance.
Moving the user experience by optimization of all layer, including assess looting.
Vacation layers.
We expect all upper opportunity, we have further extended our Pos on cloud ecosystem.
With continued for from Elias.
And strengthen cooperation with the mobile network operators operators and more of our water operators and business partners are operating two is temporary leading technology position of.
Our path in the SaaS platform building the five key cloud era.
So the.
Tangible of page 13 recently announced recent low change of for senior management through the pay our Chief R&D officer assume the low of the Chief R&D Officer, and the Chief supply chain officer, replacing.
So on <unk> in the let alone the.
These changes taking effect on January 27 2021 the.
On the Motorola restructure management loans was designed to be to better align the senior leadership additions with the Australia AT&T regimen of our business as we continue to improve operational efficiency.
The elevated supply chain management of deliveries of tenable growth.
I will now turn it over to our CFO <unk>, who we are close to the business of financial highlights for next year.
Thank you Mr. Chen Hello, everyone, let us turn to page of 15.
Our business highlights the data for the third and fourth quarter of 2020 shows the that impact from COVID-19, It became stable the left hand side of the slide shows the active terminal.
As of December 30.
So the first 2020.
You can see from the middle of the slide showing the 80.
Breakdown by Ecolab, Inc, 1.0, and.
To point out that our connectivity service. In addition, our U crowding of two local mobile data traffic is showing steady development and has been less impacted by COVID-19.
Your colleague to point of service around for.
Around 67% of total <unk> during the fourth quarter of 2020 average data usage per terminal was two one O. One gigabyte in December 2020 for the full year of 2020 average daily active terminal will around 200.
The 46000, representing an increase of 31 point of 3% from around 187 balance and Tucson 19, we expect the launch of vaccine in 2020 one.
The benefit to our business strategy and Iot are best of driver for you kind of in the one point, though elsewhere.
Most of tend to page 16, which shows global diversification of our business.
And in China, as the revenue or the percentage of best of the total revenue continues.
Chris as we diversify our global business, we continue to build our ecosystem with our business partners in various countries in the regions.
Fourth quarter 2020, we have 95% of the total revenue from outside of mainland China. During the fourth quarter 2020, Japan can you contributed $2 47 of the total revenue the increase of percentage of other country is the menu and because of the.
Pension of of business and development in related market, such as the United States.
After the Investor investment in and then I'll pass on the engine and our cooperation with China.
China Unicom in Shenzhen, We believe China market will regain its growth looking ahead, we expense all of this new opportunities such as the according to the openness. We have further developed our business potential in 2020. One we are also dedicated to R&D with the further investment.
And sales and the margin expansion capability to drill us sustainable growth in the future.
Let's turn to page 18.
It goes through our financial highlights of the fourth quarter of 2020 for for years 2020, a financier of pleased to refer to our only release.
Global revenue decreased by six 3% from $53 7 million, yes, Dara in the three months ended December 31st 2000, $19 million to $17 million of Stella and of three months ended December 31st 2020.
Revenue from the service was $9 million, representing a decrease of <unk> <unk>.
63, 3% from $24 6 million dollar for the same period of 2019 the.
The decrease was primarily attributable to the decrease in revenue from international data.
Activity service on the Pos sales service to certain extent.
Mainly because of continuous and the per loan impact of pandemic of COVID-19 service related revenue as a percentage of of total revenue increased from 45, 7% in the first quarter of Tucson, 19 to 52, 9% during the fourth quarter of 2020.
On other hand on.
<unk> local data connectivity service were less impacted by COVID-19, So far we have started our two non local data connectivity service in Japan, and we saw the continuous development of our two point of the local data connectivity service during 2020, where we're further.
Expand to all of the potential market size.
The United States, Europe, and Asia et cetera.
Revenue from parts of the soft service were $1 9 million dollar representing a decrease of 47, 3% from three point of 5 million installer in the same period last year.
This decrease was primarily due to the negative impact of COVID-19 on up.
Panna not use a pause of service to provide in the national data connectivity service in the meantime, the demand of our local data connectivity service business partner are relatively steady.
Revenue from sales products were eight point.
Zero million U S dollar decreasing of <unk>.
72 point of 5% from $29 1 million dollar.
In the same period last year. This decrease was primarily due to the continuous collective impact of COVID-19 pandemic. Our total revenue decreased by 43 point of 4% from why aren't you for a point of for many startup in 2019 to $89 6 million.
S dollar in 2020.
Revenue from service decreased by 49, 3% from $91 $1 million of startup in 2019 to $46 2 million you spelled out in the 2020.
Revenue from sales products decreased by 35, 5% from $67 3 million installer in Tucson, 19 to 43 point in the 4 million Stella in 2020. This.
Next I'll move to page 19.
<unk> share of the revenue breakdown of our two business segments, namely revenue from service on the SaaS products. During the fourth quarter of 2020 revenue from service and the sales products accounted for 52, 9% and the 47 point of 1% of of total revenue respectively.
You can see that the percentage of revenue from service increased compared with 45, 7% in the fourth quarter of 2019, we will continue to improve and optimize our revenue structure for <unk>.
Business growth and the performance.
This has turned to page 20.
For gross margin our Dennis our service gross margin of overall gross margin will increase to 41, 2% and 31 point of 4% in the first quarter of 2020 compared to 36, 6% and so the one 3% in third quarter of 2020, respectively.
It was mainly because of we improve efficiency of revenue or cost structure. During the first quarter of 2020.
The increase of the power source of revenue, which has a higher gross margin contributed to the increase in the service gross margin during the fourth quarter of 'twenty 'twenty compared with the third quarter of 2020 the.
The pandemic impact our service gross margins on overall gross mature in the year 2020 to mitigate the prolonged impact and uncertainty of COVID-19, we reviews comprehensively at our cost during the pandemic. We will continue to work on measure to optimize our cost structure.
Going forward.
Moving to page 21 with sure the breakdown of our operating expenses.
Crude in share based compensation and others.
Operating expense decreased 14, 5% from 16 6 million U S. Dollar during the fourth quarter 2019 to $14 2 million U S. Dollar during the first quarter of 2020.
With two comprehensive mitigation measure such as the risk on of course can true liquidity and the cash flow of management share offset the negative impact from COVID-19.
Other operating expense as a percentage of total revenue increased from 31% during the fourth quarter, 2019% to 83% during the fourth quarter 2020. This was mainly due to the decrease of overall revenue.
We continue to dedicate to R&D with optimize efficiency in key project group the tip of our leading position in the long range excluding share based compensation on all of this our R&D expenses accounted for 27% of overall operating expenses during the fourth quarter of 2020.
G&A expense accounted for 46% upturn operating expenses during the fourth quarter of 2020, which consist of some one off expense like certain professional service fee of around one point of $4 million on the write down of accounts receivable.
The $8 million.
Let us turn to page 22 of.
Operating cash flow of selective $5 5 million dollar during the first quarter of 2020 compared to positive one point of $1 billion dollar during the fourth quarter 2019 on.
Our cash flow was normally with the sufficient cash on cash equivalents.
At December 31st 2020.
Our capex was planned for.
For millions of installer during the first quarter of 2020 compared to $9 million of stellar during the first quarter 2019, compared with the third quarter of 2020 increase capex during the fourth quarter of 2020 was mainly because of certain license fee for software.
Capex as a percentage of total revenue increased from one 7% during the first quarter 2019 to two 2% during the first quarter of 2020.
It's mainly due to the decrease of the revenue.
Let us move to page 23.
Net income here in the fourth quarter of 2012 point of 4 million U S dollar compared relative.
Two point of $1 million dollar during the first quarter 2019, adjusted EBITDA was elected $7 $9 million dollar during the fourth quarter of 2020 compared to positive $2 9 million installer. During the first quarter of 2019 looking ahead, we are focused on improving and optimize.
<unk> of revenue in the cost structure was aberration of efficiency.
The <unk> management system, as well as standardize and of Systemize the process.
We believe all of our business opportunity and optimizing efficiency measure will facilitate the deliver about 2021 guidance with that let me conclude todays presentation. Thank you and we start our Q&A session.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please.
Please press Star then two.
For the benefit of all participants on today's call if.
If you wish to ask your question to management in Chinese please.
Please immediately repeat your question in English.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Paris, Ken with Lincoln Partners.
Please go ahead.
Good morning, Karen this.
This is Ken from Tegra as financial partners. Thank you for taking my questions I have two questions. The first the question is about the international expansion of the business.
For wide more colors on the recent partnerships, including Nucor wireless in the U S sure of Axis, and the HK and to expand the Southeast Asia business and then my second question is regarding the future of revenue mix, we would love to understand how you see the trend line for the for.
Future of global what's your old graphic the ground.
On your mix.
Excuse me the speaker location currently on mute when Youre ready.
Yes.
Okay.
Yeah.
Okay. Please go ahead I can see the activity go ahead.
Hey, good morning, Jacob Kam from Tigress financial partners. Thank you for taking my questions I have two questions. The first question is about the international expansion of the day to day.
I'll provide more colors on the recent partnership including the new core of barely sure axis and the HK an.
And the matrix, maybe you can provide like the AG.
Oh, Hey, the usage growth. My second question is regarding the future of revenue mix with the lock to understand how you see the trend lines for the future of global with your revenue mix.
No.
So Jeff Let me answer your first question about our.
Business expansion globally, so for Japan so.
I think the.
In Japan in the in most countries because of pandemic.
COVID-19 so.
One point of our business it doesn't matter of our business on the partner business are impacted by COVID-19.
I think lack of in Japan, a lot of our local partner they tend to local business. So you can see with the AR.
Can see our business growth so that's the one.
The last that so lack of in Japan. So we were on.
Traditionally we are one of our international business, we major working with working with the the airport rental business travel Wi Fi rental and now we for local business. We're on now.
On working with the local partners like on more by what the operator operator.
And then.
Multi network operator of mobile virtual operator, together. So you can see our local business is growth we believe when the call.
COVID-19, a recovery in the future. We are in Japan, we were the colleague for inflammation of business and local business. So let's for Japanese and of for U S health of the scope.
Total U S is the seminar.
Now with most of the local business and with our partner and also so we already recently, which has unwound the news when you're working with the local Lula area operators and some channel the.
Together for local business lack of for education remote.
With location.
Assess of a radio assessed similar solutions so are we.
We can see the growth posted in the in the on ISI on the offline side.
So that's in U S in the southeastern Asia, assuming on that.
In the Indonesia, we spent our business hours of local partners for local business and the non ICR is sustained we are.
And offsets and on a local business and the we are more working with the local partner like operator on the.
On the.
Mobile watch of operator.
And all sorts of lack of in E. In Europe is similar situation. So most of our basis not as tons of on a local business also that we are now prepared for the international business normally these things.
And we believe the end of this years and the.
The COVID-19, so for Q.
Q3 international business the way of gradual recovery.
The next year will be much more of a recovery so of DCF on the quarter three we started out of the current.
For the business in our traditional part also of the we had new business like.
Iot business, we will start in China and in Japan, we start the.
On the Iot business based on the local part of where major is the focus on the local basis lack of waste.
With the local mobile pumping and the locale.
Let the vehicle company.
This part of business.
For the second question is regarding the revenue mixture.
I understood the second questions.
On.
To breakdown the revenue.
Mixtures.
The first quarter of 2020.
The total revenue was 17 mirroring Astana our revenue from the service was 9.0 millions of Stella, including this $9 million.
Five.
Millions of Scala from International day that kind of get the service and the one 2 million Stella from local data connectivity service on.
Also we have had $1 $9 million from the Pos platform of service.
For the for the whole year's Tony.
2000, Twenty's revenue the mixtures and the total for the whole year.
Revenues for the $89 6 million.
Yes.
Of which $46 2 million U S dollar from.
Service.
Within this of $46 $2 million the.
The 38 million you start of revenue came from international data connective service non.
$9 2 million dollar from local the community service and also $5 7 million U S. Dollar from the past sales platform service.
So we are we generate.
43 point of for many installer for sales of products.
Okay.
Hi to growth. This is the Baba Shen our Addison points for your two questions.
First one regarding your first of question.
It is our international expansion, Yes, you are right. We are international company and we are dedicated to diversify our revenue with.
Our global business partners, so as the as we did before on it in order to elevate our local service brand we are enhancing our.
Our e-commerce of airports in strategic key markets such as the.
The United States, Europe et cetera.
And we did a lot of airports such as.
Average day rate here on optimizing our website and also on streamlining our sales function and the teams.
Are they in their local market.
In order to continue to improve.
Overall, you of our overall use of experience and the overall satisfaction of globally.
For the South East Asia, Yeah, Youre right.
Name of the Sim business partners that we already had actually a strength in our cooperation and arise with this.
The business partners and also we are dedicated to cooperate with more of our new business partners for we have any new cooperation of Elias we will release in our official higher on news.
Regarding your second question, yes.
As the CFO.
Yeah for mentioned that yes, we will have this.
Our diversification in our global expansion of boat I want to mention data you can see from the chart to Dutch.
In the fourth quarter of for.
Turn it on tea.
One of China, Megafon made on China revenue takes around 5% of the overall revenue of which are the same with our third quarter of 2020.
But with the our.
<unk>, such as our cooperation with China Unicom, Shenzhen Akshay, we are exploring more on new business models and of cooperations with the right amount.
And the mobile phone manufacturers and we want to put.
All business partners, such as <unk> and the mobile phone manufacturers for.
Our ecosystem globally.
Okay. So with.
With this.
The strategic alliance out of cooperation in mainland China.
Tax of debt this year kind of hit on.
One of our China.
The revenue we are getting Brooks.
Okay. Thank you.
Okay.
Thank you.
Yeah.
As there are no further questions now.
Like to turn the call back over to management for closing remarks.
Thank you once again for joining us today, if you have any.
Further questions. Please feel free to contact <unk> Investor Relations sure of contact information provided on our website or TPG Investor Relations.
Yeah.
The conference call has now concluded. Thank you for attending today's presentation you may now disconnect.