Q2 2021 Ucloudlink Group Inc Earnings Call
And welcome to you Cloud Link Group, Inc.
<unk> quarter 2021 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.
Call is being recorded.
I would now like to turn the conference.
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 second quarter, 'twenty or 'twenty one earnings call.
Today. The earnings release is now available on our IR website at IR about your colleague Dot com as well as via Newswire services.
I will give a brief introduction to our new colleagues team.
Sure Peter Peng is our co founder and chairman.
Conference of board of directors.
Triton is a co founder director and Chief Executive Officer.
Sure It is our chief financial Officer.
Sure.
As our vice president of marketing and sales.
Our C E.
Oh, we'll begin with an overview of our company and business highlights.
I'll cover exceptional one of the earnings presentation posted on our IR website, our CFO in their shoes.
<unk> will then discuss our operation highlights and financial results.
Ted.
At the infectious two and three.
Before we proceed.
Please note that this call may contain forward looking statements made pursuant to the safe Harbor provisions.
Private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and observations that involve known and unknown risks and <unk>.
Ts and other factors not under the company's control, which may cause actual results performance.
Achievement of the company to be materially different from the results.
Performance.
Spectation implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cautionary statements.
Well I can risk factors and details of the company's filings with the S. E C.
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.
Otherwise, except as required by rule.
Please also note that you called Inc's earnings press release, and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.
Oh audio 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 Chin. Please.
Please go ahead.
Thank you Bob.
I went to the phone.
Company overview section.
Yeah similar content.
The.
Presentation.
Quote her Oh, yeah 2021.
Okay.
On our technology update and recent developments.
Let's move to page six.
Which shows the.
Courage and congestion.
Major challenges.
While rates in epilepsy.
On the left hand side the white card.
Coverage of circle on the left.
[laughter] side shop.
Those data connection areas and the Shadow area.
Weak signal.
And reliable data connection.
Even for good coverage it is easy to.
Congestion.
In a few times.
On the right hand side, you can see Wi Fi and mobile figuring that I see.
Very recent.
When penetrating worse.
This is open the cause of indoor pool courage.
Operator, crinone guaranteed indoor coverage.
Why a user has strong demand of high quality indoor data connection.
To improve unbalanced indoor and outdoor.
Courage for Wi Fi and mobile data collection.
Operators need very high Capex and Crinone, So all data connection.
Yes.
So our technology, we can help operators software two major challenges.
Sprint great opportunities.
Let us move to the page seven.
Which shows our solution for such programs.
While our cloud Siem technology through our Paas and SaaS platform.
The type of account solution.
We can have.
Changing and reliable data connection to more reliable data connection.
Similar to installing navigation plus.
Electronic toll pass for traffic.
Immigration can automate automatically identify network congestion and actively chose a battle.
And electronic toll pass allows users to avoid long Q1 switching between the mobile networks.
It works intelligently.
Any waiting data connectivity and user experience.
We are able to provide seamless.
Coverage for end users solves pinpoints such as alarming.
Courage and congestion.
<unk> improved our law.
Network efficiency and affect all available networks worldwide.
By bringing reliable connections to formally and reliable connection areas, we have operators elevate users mobile broadband and fixed broadband such as home broadband.
Data kind of team spirit.
Lower in China like churn rate.
And improving.
Network efficiency.
Yes.
Page nine.
Our cloud Siem technology has been developed to the hype.
On stage.
Definition of hyper connectivity.
Basically includes level, one which is that any way.
Valuation uplift connection quality of various wireless access network, including Wi Fi and mobile operators.
<unk>, which is a network selection and optimization based on our cloud technology and.
And the level, three which is optimizing and.
Acceleration of application routing.
After one year's development.
<unk> products are highly.
Compatible with fast development of two business TMI mobile broadband and fixed broadband.
Indication autopilot etcetera.
Our hyper connectivity solution would redefine the mobile network and Wi Fi.
<unk> user experience.
And facilitate data choppy marketplace users.
Users data connectivity experience is affected by various factors such as signal interference and logging bandwidth and delay.
<unk> location.
Hi.
Type of connectivity to connect cross networks.
And technology systems, various themes form factors, such as easing and sub setting of its fine.
Various.
Fiscal boundaries, such as Wi Fi various radio technology.
Sure.
By countries and regions.
We plan to achieve a global <unk>.
Identification more Italy and optimizing to further.
By user experience in a data connectivity market.
In June 2021, we unveil our new.
Technology and product.
At the moment.
First a hyper competitive mobile Wi Fi and the journey of tablet <unk> tablet device.
In an official virtual product conference during the mobile World Congress, Barcelona, and obviously.
But alone.
Going forward, we will launch more innovative products and services.
Let's move to the.
830.
New accounting 100 volt has a strong track record of high gross margins and profitability.
New phone going close attention.
According to the publication of the World Tourism organisation.
And tableau T O in much ear 2021.
International Tourism is Betty.
Two.
Terrific.
Gradually during the year 2021, compared with your 2020.
We expect less.
The recovery of international Tourism, we have benefits our one business.
We intelligently with packaging to minimize data.
Unit costs.
Our packages of single operator, all class of mobile network operators mobile virtual operators has a lot of price difference and we repatriated.
From wholesale to repair.
We have the largest syncarp pool.
And the way.
<unk> has acquired data package at a wholesale price at a local price for operators from operators to partners.
We provide high quality data collection services.
And antibodies user experience of users and business partners, So Martin megawatt.
Selection and company.
Okay.
Which shows our difference.
You'll probably one point of obesity is monetization model in cruise retiring to see rental or selling to end users.
Wholesale to be for business partners, and our Paas and SaaS services such as CRM.
BT management device settings, and rental management et cetera.
For wholesale two feet.
We can be re seller.
<unk> provides commission surveys.
To our business partners, we allowed our fitness partners shared data traffic pool.
And our Paas and SaaS platform and charged commission fees.
We believe.
While the COVID-19 pandemic has negatively impacted our one point of obesity.
It has also created opportunities for potential growth.
Including.
Through increased demand for mobile data such as travelling checking resignation tickets a passport and COVID-19 testing report also we see fewer competitors in the market after COVID-19 pandemic.
Recovery of that in our nation.
In Britain.
We are planning for a two hour one hour basically.
Such as the U S market during the second quarter of year 2021.
We expect our one one point of our business we are known.
Ah.
Recovery.
Hello.
With new development with innovative technology and products.
Let's Motorola page 14.
New accounting two point of our business.
Become a new driver of growth.
During year 2020.
Our coupon to our business.
Shows greater resilience with proven high demand and growth potential during the pandemic.
If feeling less net income.
You were planning to the op business monetization model is similar to less of your clouding, one point of op business.
With the mass debris potential local user base.
We have operators improve service and soft data connection program, so our paas and SaaS.
During the COVID-19 pandemic for example, remote work and learning also should require high.
Reliable data collection services.
Alliance with mobile network operators and mobile handset manufacturers, we should be able to embed more local meat inside GMI in smartphones such as smartphones.
<unk> also.
Call it bring us great opportunities.
Wood River.
Cheap cloud era.
And applications, such as AR, VR cloud computing and the older pilot et cetera.
The high quality of <unk> application data connection we also sprint.
So users high requirement and awareness of data connectivity quality.
Further we make progress through hyper connectivity solution with mobile and fixed broadband business.
And there are various applications in areas such as home <unk>.
We also in.
Tend to proactively explore opportunities in new industries, and various Iot applications scenarios.
Despite the continued impact of the COVID-19 pandemic, our global economic.
We demonstrate.
Commercial resilience.
And the business.
While parity in the second quarter of year 2021.
Generating revenue of U S dollar 19.2 million.
Above the top end of our guidance ranges.
With a revenue mainly coming.
Florida, Japan, U S and men and mainland China market.
In the Japanese market.
<unk> successfully launch and start to ship a new tablet target.
Patient industry.
A new tablet comms equipment equipment with cognizant technology.
Enabling.
Seamless.
Connect two beds available mobile and fixed.
<unk> profit.
And all the time.
In the U S market, we continue to expand and deepen cooperation with online and offline distributors and recall.
<unk>, a new 12 month high.
While I'm not in a quarter.
We also saw.
Stinker inflation year over year increase in order in order demand for international data connectivity service in the U S market.
Compared with the second quarter of years.
2020.
In the Chinese market, we steadily increased our number of mobile broadband fixed broadband related product installations.
In cooperation with major mobile network operators in sensors.
<unk> installations.
To elevate.
So experience and scale our potential user base.
In area, such as home broadband service services.
Given us.
Our food reference case for further business development with a mobile network operators across other cities in China.
Yes.
Thank you everyone.
Let us turn to page four.
And in presentation, which shows our recent admission.
We have redefined our mobile data connectivity experiences.
Allowing users who can assess.
Mobile data traffic allowance share by network operators.
Our marketplace.
Our technology for a steady pace carriers and use this.
I think operator entry point.
Its all available local and global network.
And would enable.
To me poultry you with more potential profit pretty.
Anytime anywhere.
Briefing.
We expect to eventually cover all available networks from operators cooperate with the recovery of COVID-19 pandemic.
The bulk.
To fund our business and eventually a full global marketplace of mobile data traffic.
We believe less connected to <unk>.
Is that 10 of <unk> information era, and we would enable all phases.
And internet users to have a better data connectivity.
Our innovative technology.
So they paid us to interpret our leading technology position of our Paas and SaaS platform in the early stage of five key and wheat that he paid to promoting.
<unk> pipeline connection to everyone.
I will now turn.
Our our CFO.
MS <unk>, who will go through the business and financial highlights section.
Thank you Mr. Chen Hello, everyone makes us from 10 to 2016.
In our minds.
That's it for the second quarter of 2021 shows that.
Impact from COVID-19 is churning.
The left hand side of the small insurance actually determinants.
Our June 32021.
Equally to service a permit.
A month around 8% of total <unk> during the second quarter of champion Europe, our reach steady theater usage of terminal one nine gigabytes in June than anyone.
Please turn to page 17, which shows global diversification.
Vacation of our Venice mainland China revenue as a percentage of total revenue increased 8% during second quarter attempt any one compared to 6% here in the first quarter of 10, Gigawatts and we had 92% of total revenue from our assignment in China.
During the second quarter print anyone Japan contributing to 53% of total revenue and it continues to be the single largest market for fairness for.
So all of our countries revenue the U S market has the largest contribution to us.
Fitness unit thinking quarter pinpointing.
We had 80% of total revenue coming from mainland China, 86% of total revenue came from Japan, and Facebook to the revenue coming from on the country and the region.
Please turn to page 19, our go through our financial highlights of the second quarter tend to anyone.
Social related revenue as a percentage of total revenue increased from 46, 9% in the second quarter of 2020 to 48, 5% during the second quarter of <unk> revenue from Pos on a soft service increase.
Hundreds and a nine 5%.
From half a million dollar in the second quarter of 2020 to $3.2 million in the second quarter of tenant and what the increase was.
I'm really due to the increase arpin as panna.
Our Pos our service to provide local center connectivity service.
While revenue from <unk> as a percentage of total revenue also increased to 15, 4% during the second quarter of trying to kind of walk compared with.
<unk>, 9% during this first quarter of attempts anywhere.
Let us move to page 20, which shows that.
The breakdown of our two business segments Menomonee revenue from service and the sales products given our second quarter 10, 21 revenue from service and a stair products accounted for 49, 5% and 51, 5% of total revenue respectively.
Our total revenue decreased by eight 5% from $21 million in the second quarter 2020 to $19.2 million dollar second quarter kind of a new one.
Revenue from services was $9.3 million, representing a decrease of five.
Revenue, 5% from $9.9 million below the same Paris authentic country.
This decrease was primarily due to lower revenue from international and the local data connective service, partially offset by increased revenue from Pos and a SaaS service.
Our total revenue increase.
<unk> eight point of 7% compared to.
$17.7 million U S dollar in the first quarter of 'twenty.
Sure.
Let's turn to page 21 for gross margin about Dennis.
Our service gross margin increased to 45, 4% and now.
<unk> gross margin increased to 28, 1% in the second quarter with Tucson, 'twenty, one compared to 35, 4% and 36, 2% during second quarter of 2019, respectively. The.
The increase our service gross margin during this call.
They are tending to want and is primarily due.
Due to the increase of our <unk> revenue, which is a higher gross margin over the other fitness revenue.
Let's move to page 22.
Which is shown as a breakdown of our operating expenses, excluding share based compensation and others excluding share basis.
Overall compensation operating expenses.
<unk> total revenue decreased from 71% during the first quarter of 2022, 61% during the second quarter of 2010 to one and we will continue to improve operation efficiency.
Oh goodness.
Yes.
Turning to page 23.
Operating cash flow was elected.
1% of millions during the second quarter 'twenty one.
Compared to negative $2.8 million dollar during the second quarter of 2020.
Cash flow was loma with sufficient cash cap equipment at June 30.
Anyone.
Our Capex was <unk> 3 million U S. Dollar during the second quarter of 201 compared to 2 million U S dollar during.
During the second quarter of 2020 Capex.
Capex as a percentage of total revenue increased 1% during the second quarter of 2022 to one 3%.
During the second quarter I think in the world.
Moving to page 24.
Net income during the second quarter of <unk> was elected $8.2 million compared to negative $41.6 million U S. Dollar during the second quarter of 2020.
Adjusted EBITA for selected five.
5 million dollar during the second quarter company, one compared to negative $3.1 million, let's call. It.
Second quarter of 2010.
With that let me conclude today's presentations. Thank you and then 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 were using a speaker phone.
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 press Star then two.
For the benefit of all participants on today's call.
If you wish to ask your question to management in Chinese please.
Please immediately repeat your question in English.
Again it is.
Star then one to ask a question.
At this time, we will pause momentarily to assemble our roster.
Okay.
Yeah.
The first question comes from Vivien <unk> with Diamond equity.
Please go ahead.
Good evening. This is Vivian from time magazine research. Thanks for taking my question. So.
So we see the company just the launch of new Hopper call in April.
In Japan.
So can you update more information about this product and its market inflation are there any comparator.
Or this concept in the market.
And my second question is regarding the overseas expansion can you provide more colors on the reasons partnerships you got in the.
Second quarter. Thank you.
Yeah.
Yeah.
Yeah.
This is tangible.
Speaking here.
We have launched our product.
And then with.
The hyper call feature.
Yeah.
And in Japan, and there was some article.
And we have.
Two products, one or does it mean.
The tablets.
And another one is we call Newman Newman to five G.
Mobile Wifi.
And what would be viewed as the hour.
She is the first wedding and the world.
So to have this feature.
And we do not have a main income.
It is.
In this domain.
Because of our hyper com.
Connecticut to any kind of their network in the war.
Like go Wi Fi or E mail and mobile networks.
Jimmy Choo nationally you may have.
Sure.
Multiple connections.
For example, why one Wifi connections and internationally savant.
And mobile network and we can switch from one network with another one on the Chi. This is between the Wi Fi and the mobile metal or from one of my mobile metals.
So the auto network.
We believe this is quite unique.
Feature.
Let's see.
Yeah and the.
Rich.
To our end users these two.
Dave.
More.
More reliable connection to our consumers. So for example, if at all.
Okay.
Consumer use the mobile Wifi for remote learning.
Or just like us to have a low.
Conference call or video conference call they will have on mobile.
The connection was bad.
Either one.
Ewen.
One base station shutdown.
Yeah.
Because of that is critical for example.
And then we can go with this.
Which we maintained remains one of the other.
As a result.
Interruption.
The conference.
Okay.
And clear.
Yeah.
My second question is regarding your overseas expansion can.
Can you provide more colors on the race in partnership they are getting the second quarter.
Okay.
Yeah.
Oh, Oh Oh.
And we have actually you may notice that the Oh I'm Mark sure.
Our business in United States are you can you can see.
The SG&A increase.
I think.
This is one market.
Right now our market.
The largest market of ours is Japan, and we believe that Mexico wireless should be United States.
Yeah.
Then.
For the Asia Pacific and also rural.
We also.
More human resource sales in that region.
We think that we will get some more market share.
Yeah.
This guidance.
Okay. Okay, great. Thank you for the additional detail.
Right.
Yeah. This is a bug or Sharon I think Uh huh.
Adding point.
For your first question regarding the hydro car solution. So I have no doubt that we already yeah.
Our hypersound Solutia and <unk> related products and services. So apart from a Japanese market that's free off of other markets that we also.
During beta program.
Sure our hyper connectivity solution with it.
Mobile and fixed broadband business, which we call our M. D E F V P.
Areas application scenarios.
Oh, that's a child in the Chinese market for a home.
A lot event and we received very positive feedback of our five G and foggy a millisecond a multi network the best selection technology et cetera, and therefore your second question yeah.
As you know that are we.
Probably shifts.
Press release regarding some.
Uh huh.
Partnership.
In the South East Asia, and Europe, and also in the U S market.
And.
As you know the U S.
And.
Europe, we are continuing to get better.
I also made in China.
Our major market as well.
And for the partnership.
We actually and are ready to cooperate with the house.
Trust me.
Mobile phone handset manufacturer.
He chairs that battery our innovative.
Business model for Us and we believe that such kind of a corporation, who will give us more business development potential and also it will help us to scale up our user base.
Through our pop N a SaaS platform I know we are continually.
Spending our profit in the south our ecosystem globally. Okay. Thank you.
Okay.
I'm, sorry, I'm, just I'm, a long time and so forth.
Because we already finished the first.
Delivery off now you know a hyper controller such as temporary.
Lumen Nobody's.
That's the only use of it is supposedly so and if I could.
That's as opposed to a pizza in the second photo you'll for your second question is I have some more coming.
Come in because you know you said it was.
Uh huh.
Japan, Japan, Japan market.
In China.
The two faster growth market and also as a partner.
Uh huh.
It's a small country now even under law you know.
COVID-19 impact so another.
Progress is passed as a revenue increase.
Increased much faster than before so that's the kind of information.
Great Great. Thank you for the information congratulations on the quarter.
Yeah.
The next question comes from.
Lisa Thompson with Zacks investment research. Please go ahead.
Hi, good evening.
So.
I had a few questions about your future revenue concept.
Guidance.
I believe.
Believe that you talked about having some large education contracts, where the tablet in Japan.
It doesn't look like that's going to happen next quarter could you tell us what what happened to that business has it have they cancel the orders are they going to do it next year or is it just going to be delayed.
And talk a little bit about what's going on there.
Yeah.
Okay.
Hello.
Yes, I am.
Uncertain.
Because they will respond momentarily okay, sorry, so you never know.
No its not okay. So.
Yeah, we can see the tablet impact you know the phosphates COVID-19, you know slowed down, but you know slow down the everything I eat throw down everything like in Japan. So it's progressed.
Certain slowdown so we believe the requirement is land.
And even more time this firsthand.
The second.
Most often you're not shortage of law chipset and.
And that's a prime of chipset.
<unk> tightened and price going up less than a certain impact.
The third is.
Everything product you know a little bit.
Delivery of our product a little bit later about one month later so let's.
All of these are you know these futures impact our Q3 four type rig, but we believe the market is there and we are.
Our.
Order in our in our in the in our first quarter.
So you said first quarter of 2020 to adjust.
Just just delay even though no no.
The decrease in AD or display of law in the auto market.
And we're pretty much a filler and gleevec, we're in lots of the market. So.
So Chattanooga Hum and also some you know to overcome that the primary issue.
Okay.
Okay. That's good that it doesn't matter that it's the middle of the school year, you didn't miss the whole year.
[noise].
Now we are not under Mr. <unk>. He is our yeah. Just we are there.
Why the delay.
<unk> is a deliberate.
That's a product due to revenue.
Transfer.
Friction somehow.
So that the demands of what the demand via their demise.
Is the is our increasing asset as a win it so.
It will come back.
It came back.
And then in the future.
Okay. So do you feel then that.
Q4, this year is going to be similar to Q3.
Yes.
Progress where it is Congress does your Q4.
Guidance are that makes it makes that yeah.
Cool.
Yeah, we were where we gave a collapse at that time.
Now we are we have we gave the guidance for the third quarters and we went to deliver this at the.
Third quarter guidance.
As a as we are.
As we are as we saw at the close.
That's our pockets of where folks on.
Alright. It can you just give a current update on the.
Status of the distribution of your five G products like where are they being sold now and when do you think there'll be sold and new other geographies.
So we are you know we just.
Just launched a fatty product lumen.
In August so about one month delay.
Our operating plan for.
The feedback from the user in a partner and also channel partner.
Mobile network operator partner.
His proposals have passed.
Because youll notice if high end product.
His were strong content and with the hype.
Solution is a best of five <unk> and Wi Fi.
Our hospital and Kurt can provide a bedtime connection for the five <unk>. So the feedback is very good.
And because it's high end product and the price is.
Very high I think it's mainly for enterprise and.
Indication.
And the industrial Internet, that's and that's for high end applications.
The proton AR position.
And therefore are coming for coming.
Yeah.
The quarter in the fourth quarter, we were launching though.
And finally product recall.
The second type of.
Perhaps a product we call five.
Five zero.
Wearable and after a year, so more and more.
<unk> put that we have available.
Those will come down the price and we are more competitive.
So we believe a <unk> event.
Eventually we get a pick amongst here and get a better quality. So that's the four hour five key product strategy. So for you for <unk>.
We all understand it is quite high and marquee enterprise applications for the industry.
Well he environment application.
And that's the target market.
So if I wanted to buy a new man, where can I buy one what countries.
So you can buy.
In the Amazon you know like a <unk> in.
In Japan in Europe, and China.
Also as online and offline.
And you're not the United States, because it tastes a United States region.
So we couldn't nobody in our in the Amazon United States.
For alumina.
We have provided later Wednesday radio.
Please be ready and will be launched in the United States.
Okay great.
Thank you.
Okay. One last one last question I noticed that the gross margin went down considerably.
Product.
What happened what's happening there is that just because of the startup costs of the five G.
And they're sticking Cortez.
Uh huh.
Yes.
Gross margin product.
The product set.
Went down a bit.
Yes.
The main reasons.
As our product mix.
There are a mix of we are we sold some.
No of course module for that.
Second quarters.
<unk>.
For instance is.
Uh huh.
No of course margins.
I watched right angle.
In Egypt to one Japanese customer.
And there's.
Every every product.
Well provide opportunities.
Device connected to a powerhouse.
So you you would find that we have oh sorry.
We have offset by increasing.
Pasta sauce, a service which gave.
Give us a higher crush margins.
Service gross margins.
Second quarters so.
The product is.
You just gave us.
Half.
More opportunity to connect the consumer to our pasta platform. So we are we will.
Haven't been tanks.
Our product sales.
Is that should the vote of course the largest portfolio.
So without that.
This.
Train is inflation not cannot be predictable.
Japan. So we are there is that product mix, how we see things in there.
Followings.
In the following periods.
Yeah, another impacts come from you.
You know chipset price going up a little bit.
Yeah.
Uh huh, okay, great. Thank you that makes sense, that's all my questions.
[noise] again.
If you have a question. Please press Star then one.
Yeah.
[noise] as there are no further questions now I'd like to turn the call back over to management for closing.
In March.
Thank you once again for joining US today. If you have further questions. Please feel free to contact you crowding investor relations through the contact information provided on our website.
TPG Investor Relations.
[noise].
Sure.
Yeah.
This concludes the earnings conference call you May now disconnect. Your line. Thank you.
Yeah.
Yeah.
Yeah.
[music].
[music].
Yes.
[music].
[music].
Good morning, and good evening, ladies and gentlemen, thank you for.
I think by and welcome to use Cloud Link Group, Inc. Second quarter 2021 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.
<unk> conference call is being recorded.
I would now like to turn the conference.
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 second quarter, 'twenty or 'twenty one earnings.
But as of today.
This is now available on our IR website at IR colleague Dot com as well as via Newswire services.
I will give a brief introduction to our new colleagues team.
Sure Peter Peng is that local found us.
Earnings Club Man of board of Directors Ciao.
Chokwe Chetan <unk> co founder director and Chief Executive Officer.
Sure It is our chief financial Officer.
True Pang is our vice president of marketing and sales.
Our.
T O will begin with an overview of our company and business highlights, which well cover exceptional one of the earnings presentation posted on our IR website. Our CFO email shoot will then discuss our operation highlights and financial results.
Exactly.
And in section two and three.
Before we proceed. Please note that this call may contain forward looking statements made pursuant to the safe Harbor provisions.
Private Securities Litigation Reform Act of 1995.
These forward looking statements are based on management's current expectations and observations.
Ralph known and unknown risks and <unk>.
Nothing tastes and other factors not under the company's control, which may cause actual results performance.
And then to achievement of the company to be materially different from the results.
Performance.
Our expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entirety by the cautionary statement.
Well I can risk factors and details of the company's society, where the S E T.
Company does not assume any obligation to revise or update any forward looking statements as that moves out of new information future events changes in market conditions.
Or otherwise except as required by rule.
Please also note that you called Inc's earnings press release, and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.
You Crowding press release contains a real time separation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measure.
I will now turn the call over to our co founder and CEO Mr. Chao Chen please.
Okay.
Thank you Bob.
Uh huh.
Before the company overview section.
Yeah similar contents.
The.
Presentation of the first quarter of year 2021.
We are focused.
Please go to our technology update and recent development.
Let's move to page six.
Which shows the.
Courage and congestion.
Major challenges.
While recent NASA Wally.
On the left side the white collar.
Amit you circle all along.
[laughter] sidetrack.
Europe always data connection areas and the shadow area.
Weak signal.
And reliable data connection.
Even for quick coverage it is easy to have a network congestion.
Cobre Panama.
On the right hand side, you can see Wi Fi and mobile they.
A very recent.
When penetrating worse.
This is open cause of indoor pool coverage.
Operator, Crinone, Ken and Keith good in golf car.
While U S has strong demand a high quality indoor data connection.
To improve unbalanced indoor and outdoor.
Courage for wildfire and mobile data collection.
Operators need very high Capex and no salt all data connection.
Cobras.
So our technology, we can help operators solve two major challenges, which sprint great opportunities.
Let off the Motorola pages seven.
Which shows our solution for such Copeland.
While our cloud Siem technology through our pasta and sauce headphone.
The hyper convert solutions.
We can help.
Changes and reliable data condition to more reliable data condition.
Similar to installing navigation plus.
Electronic toll pass for traffic.
Navigation can auto.
Automatically identify network congestion and actively chose a battle.
Loud and.
An electronic toll pass allows users to avoid long Q1 switching between the mobile network.
[noise] intelligently.
Any waiting data connectivity and user experience.
We are able to provide seamless.
Coverage for end users solves pinpoints such as lonely.
Courage and the congestion.
In Peru.
It works by law network efficiency.
<unk>.
Available networks worldwide.
By bringing in reliable connections to formally and reliable connection areas we have operators.
Great users of mobile broadband and fixed broadband such as home.
Home broadband data connectivity experience.
Over in China, like churn rate and improving.
Network efficiency.
Yes.
Page nine.
Our cloud Siem technology has been developed to the hype.
Come stage.
Definition of hyper connectivity.
Basically includes level, one which is that any way.
Valuation uplift connection quality of various wireless access network, including Wi Fi in all mobile operators.
<unk>, which is a network selection and optimization based upon the cloud has been technology.
And the level, three which is optimizing and.
Acceleration of application routing.
After one year's development.
<unk> products.
Our highly compatible with fast divestment of coupon business, TMI mobile broadband and fixed broadband.
Indication autopilot etcetera.
Our hyper connectivity solution would redefine the mobile network and.
By user experience and facilitate data choppy marketplace.
Data connectivity experience is affected by various factors such as signal interference and logging.
And a week until late in a location.
Yeah.
Is hyper connectivity to connect cross networks.
And technology systems, various themes form factors, such as easing and Subservicing fee.
Various physical.
Fiscal boundaries, such as Wi Fi various radio technology, etc.
And why five countries and regions.
We plan to achieve global.
Identification monitoring and optimizing to further alleyway user experience in a data connectivity market in.
June 2021, we unveil.
Our new hyper com technology and products.
Adam Newman the workforce, the hyper competitive mobile Wi Fi and the <unk> are tightly the hype contemporary device.
In an official virtual product conference during the mobile World Congress.
Donna and tablet.
But alone.
Going forward, we will launch more innovative products and services.
Let's move to the.
13.
New accounting one <unk>.
Has a strong track record of high gross margins and profitability.
With ongoing growth potential.
According to the publication of the World Tourism organisation.
And tableau T O in March 2021.
International Tourism is Betty.
Two.
Yes.
To recover gradually.
In the year 2021, compared with your 2020.
We expect less.
The recovery of international Tourism will benefit our <unk> business.
We intelligently with packaging to minimize data.
Profit unit cost.
It's our packages of single operator, all class of mobile network operators mobile operators has a large price difference and we repatriated.
From wholesale to repair.
We have the largest syncarp coupe.
Data acquired data package at a wholesale price at a local price for operators from operators to partners.
Further we provide high quality data connection surveys.
And the antibody user experience of users and business partners to multi megawatt reflection.
In combination.
We choose our difference.
Probably one point of obesity monetization model in cruise retiring to see rental or selling to end user wholesale.
<unk> four business partner, and our Paas and SaaS services such as.
And the win BD management device settings, and rental management et cetera.
For wholesale two feet.
We can be re seller.
<unk> provide commission surveys.
To our partners.
Allowed our business partners are sharing data traffic pool.
Through our Paas and SaaS platform and charged commission fees.
We believe.
While the COVID-19 pandemic has negatively impact our one point of obesity.
Oh.
Also create opportunities for potential growth.
Including.
Increased demand for mobile data such as travelling SEC.
<unk> resignation tickets, a pothole and COVID-19 testing report.
So we see fewer competitors in the market after COVID-19 pandemic.
We expect recovery of international.
However.
We are a benefit to our one <unk> business such.
Such as the <unk>.
U S market during the second quarter of the year 2021.
We expect our 1.1 part of our business we are not just a simple.
Recovery.
Okay.
For those with new development with innovative technology and products.
That's Motorola page 14.
New accounting coupon to our business.
Become a new driver of growth during year 2020.
Our coupon to our business.
Nathan It shows greater resilience with proven high demand and growth potential during the pandemic and experienced less negative impact.
You were planning to the op business monetization model is similar to less of your clouding, one point of our business.
With that must be really potential local user base.
We have operators improve surveys and soft data connection program through our Paas and SaaS.
During the COVID-19 pandemic for example, remote work and learning or subsidiary.
So it would require.
High quality reliable data connection services.
Alliance with mobile network operators and mobile handset manufacturers, we should be able to embed more local meat inside CMI in smartphones such as smartphones.
Gotcha.
She also sprint us great opportunities.
We would accelerate the arrival of the five key cloud.
And applications, such as AR VR cloud.
Cloud computing and the older pilots et cetera.
A high quality of <unk> application data connection we also.
Sprint users high requirement and awareness of data connectivity quality.
Further we make progress through hyper connectivity solution with mobile and fixed broadband business.
There are various applications in areas such as home for pain.
We also.
We intend to proactively explore opportunities in new industries, and various Iot applications scenarios.
Despite the continued impact of the COVID-19 pandemic.
Global economic.
It demonstrates.
Russia resilience.
And basically what what we're at parity in the second quarter of year 2021.
Generating revenue of U S dollar 19.2 million.
Above the top end of our guidance ranges.
With a revenue Manny.
Coming from the Japan U S and men in mainland China market.
In the Japanese market, we successfully launch and start to ship a new tablet packet.
Patient industry.
The new tablet comms equipment equipment with the same technology.
Enabling a seamless.
Connect to better available mobile <unk>.
Six profit.
And the all time.
In the U S market, we continue to expand and deepen cooperation with online and offline distributors and recall.
A new 12 month high for sales, while Amazon in a quarter.
We also saw.
Stinker inflation year over year increase in order to in order demand.
International data connectivity service in the U S market.
Compared with the second quarter of years.
2020.
Chinese market, we steadily increased our number of mobile broadband fixed broadband related product installations.
Through cooperation with major mobile network operators in this.
These installations served to elevate.
User experience and scale our potential user base.
In areas, such as home broadband service services.
David.
Good reference case for further business development with the mobile network operators across other cities in China.
Yes.
Sure.
Thank you everyone.
Let's turn to page four.
And in presentation, which shows our recent and vision.
We have redefined our mobile data connectivity experiences.
Allowing users who can assess.
Mobile data traffic allowance share by network operators.
Our marketplace.
Our technology for a steady pace carriers and use this.
I think operator entry point.
Its all available local and global network.
And would enable.
<unk> people to use more data traffic pretty.
Anytime anywhere.
Briefing.
We expect to eventually cover available networks from operators cooperate with the recovery of COVID-19 pandemic.
And development of two of our business and eventually a full global marketplace of mobile data traffic.
We believe less for connecting to better kinetic.
Is that 10 of the information and we would enable all phases.
And as our users.
Our backup data connectivity.
Our innovative technology facilitate us to interpret our leading technology position of our Paas and SaaS platform in the early stage of five key and wheat that he paid to promoting.
In better condition to everyone.
I will now.
Over to our CFO.
MS <unk>, who will go through the base.
And financial highlight section.
Thank you Mr. Chen Hello.
Everyone, Amit <unk> from 10 to 2016.
Finish timeline.
That's it for the second quarter of 2021 shows that.
Impact from COVID-19 is the Chinese paper.
The left hand side of the slide shows there is actually determined.
June 32021.
Equally to point, our surveys are telling.
The full amount around 8% of total <unk> during the second quarter of champion Europe, our reach steady data usage of terminal one nine gigabytes in June 'twenty one.
Please turn to page 17, which shows global diversification.
Vacation of our business.
Mainland China revenue as a percentage of total revenue increased 8% during second quarter attempt any one compared to 6% here in the first quarter of <unk> and we had 92% of total revenue from outside of mainland China.
Unit sticking quarter pardon me, one Japan contributed to 53% of total revenue.
<unk> to be the single largest market for authentic.
So all of our countries revenue the U S market has the largest contribution to our fitness, giving us thinking quarter pinpointing.
We had 80% of total revenue coming from mainland China, 36% of total revenue came from Japan, and the phase six to the revenue coming from all the countries in the region.
Please turn to page 19.
Where it goes through our financial highlights of the second quarter I tend to Newark.
Subsea related revenue as a percentage of total revenue increased from 46, 9% in the second quarter of 2020 to 48, 5% during the second quarter of <unk>.
Revenue from Pos on a soft service increased 589, 5%.
Loss from half a million dollar in the second quarter of 2020 to $3.2 million in the second quarter, depending on what the increase was primarily due to that increase but as a partner now use our Pos our service to provide local center connectivity service.
Revenue from <unk> as a percentage of total revenue also increased to 15, 4% during the second quarter of 2021 compared with.
Two 9% during this first quarter of <unk>.
Let us move to page 20, which shows that.
The breakdown of our two business segments eliminate revenue from services and the sales production during the second quarter 'twenty, one revenue from service and a fair products accounted for 49, 5% and 51, 5% of total revenue respectively.
Revenue, our total revenue decreased by eight 5% from $21 million in the second quarter 2020 to $19.2 million a stellar second quarter companywide.
Revenue from services was $9.3 million, representing a decrease of five.
5% from $9.9 million dollar with same periods of 2020. This decrease was primarily due to the lower revenue from international and the local data connective service, partially offset by an increase in revenue from path in a soft service.
Our total revenue increase.
<unk> eight point of 7% compared to.
$17.7 million U S dollar in the first quarter of 'twenty.
Let's turn to page 21 for gross margin about vendors.
Our service gross margin increased to 45, 4% and now.
Overall gross margin increased to 28, 1% in the second quarter with Tucson, 'twenty, one compared to 35 point at 12% and 36, 2% during second quarter of 2020, respectively. The.
The increase our service gross margin during this call.
They are tending to want and is primarily due.
Although the increase of our <unk> revenue, which is a higher gross margin over the other fitness revenue.
Let us move to page 22.
Which shows the breakdown of our operating expenses, excluding share based compensation and others excluding share basis.
Due to the compensation operating expenses.
<unk> total revenue decreased from 71% during the first quarter of 2022, 61% during the second quarter of 2021 and will continue to improve operational efficiency.
Sure Dennis.
Yes.
Turning to page 23.
Operating cash flow was elected.
The 1% of millions during the second quarter attending one.
Compared to negative $2.8 million during the second quarter of 2020.
Cash flow was Loma was sufficient cash cap equipment at June 30.
Let's talk in Europe.
Capex was 23 million U S dollar during the second quarter attendance, one compared to $22 million, giving.
During the second quarter of <unk> Capex.
Capex as a percentage of total revenue increased one 1% during the second quarter 2022 to one 3%.
Then second quarter event in the world.
Let us move to page 24.
Net income during the second quarter of <unk> was elected $8.2 million U S dollar compared to negative $41.6 million U S. Dollar during the second quarter of 2020, adjusted EBITA was selected five.
5 million dollar during second quarter, 'twenty, 'twenty, one compared to negative $3.1 million color.
The second quarter of 2010.
With that let me conclude today's presentations. Thank you and then 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 were 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 you wish to ask your question to management in Chinese please.
Please immediately repeat your question in English.
Again it is.
Star then one to ask a question.
At this time, we will pause momentarily to assemble our roster.
Okay.
Yeah.
The first question comes from Vivien <unk> with Diamond equity.
Please go ahead.
Good evening. This is vivian sometime in that cause you any search thanks for taking my question. So.
So we see the company just the launch of new Hopper call in April.
In Japan.
So can you update more information about this product and its market inflation are there any comparator of buprenorphine.
For this product in the market.
And my second question is regarding your overseas expansion can you provide more colors on the reasons partnerships you got in the.
Second quarter. Thank you.
Okay.
Okay.
Yeah.
This is tangible.
Right down here.
We have launched our products.
With.
The hyper calling feature.
Yeah.
And in Japan, and there was some article.
And we have two products, one or does it mean.
Speaking from Greenville.
Right.
And another one is we call Newman Newman.
Jean.
Mobile Wi Fi.
And would we be without the hour.
Currencies are first providing an award.
It's going to have this feature.
And we do not have income.
Yeah.
And they still men.
Because of our hyper com.
Mm connect us to any kind of their network because of the war.
Like go Wi Fi or Amy and mobile networks.
Jimmy Choo nationally you may have.
At multiple connections.
For example, why one Wi Fi connection with them internationally with Gabon.
Our mobile network and the weakest suites from one went over to another one.
A J this is between the Wi Fi and mobile metal or from one of my mobile networks.
The auto network.
We believe this is quite unique.
Okay feature.
Let's see.
Hum.
Yeah.
Which related to our end users. These two gave.
More.
Reliable connection.
To our consumers. So for example, if at all.
The consumer use the mobile Wifi for remote learning.
Or just like us to have available.
Today's call will review conference call, we will have them much better.
More actions.
Ottawa.
Hey, you in and.
One base station Xiaodong.
Hum.
Oh, because that's critical for example.
And we can go with this switch.
So each medium to states that either.
Better clinical results.
Interruption.
The conference.
Okay.
And clear.
Ah yes.
My second question is regarding your overseas expansion.
Can you provide more colors on the rates and partnership there.
Okay.
Sure.
Oh.
And we have.
Actually you may notice that.
Yeah.
Oh Rum Mark sure.
Our business in United States Europe.
And you can see.
The increase.
I think.
This is <unk>.
Is one market.
We are right now our market.
The largest market devices in Japan.
We believe that Mexico wireless should be United States.
Then.
For the Asia Pacific and also rural.
We also.
Put more human resource sales in that region.
We think that we will get some more market share.
Yeah.
In this regard.
Okay. Okay, great. Thank you for the additional detail.
Alright.
Yes.
Yes.
Our bogs Shang I think Uh huh.
Adding Paul.
For your first question regarding the hydro car solution. So as you know that we already unveiled our hydro.
Solutia and <unk> related products and services.
Apart from a Japanese market, that's shree off of other markets, where we also.
Rate of progress.
Sure our hyper connectivity solution with our mobile and fixed broadband business, which we call a N D. P. F. P P and those areas are application scenarios.
Such as in the.
Chinese market for Uh Huh.
Home broadband and we received a very.
Very positive feedback of our fired chi and that foggy a millisecond.
Multi network with risk selection technology et cetera.
For your second question Yeah.
As you know that are we.
Probably should have our press release their guidance.
Our partnership either in the South East Asia, and Europe, and also in the U S market and as.
As you know that's a U S a and.
Europe, we are continuing to develop and also made in China is that all of my major box as well.
And Florida partnership.
We actually in our way to the cooperate to is Oh, and then OS.
Trust mobile phone handsets manufacturer.
<unk>, which is a very innovative.
Business model for Us and we believe that such kind of.
Corporation, who will give us more business.
To prevent potential and also it will help us to scale up our user base.
Through our path and a SaaS platform I know we are continually Ah.
Spending our path and assess our ecosystem globally. Okay. Thank you.
Hum.
Yes, sorry, I'm, just I'm, a long time and so forth.
Because when you finished the first.
Delivery off now you know hypocone product such as temporary.
Lumen.
That's the only use of it is supposedly.
It is the first and the second one for you all for your second question is I have some more come.
Because you know you said it was.
Jim.
Japan, Japan market.
In China become another two faster growth market and also as a partner.
This is Paul.
It's been a small country now even.
Uh huh.
COVID-19.
The impact so another.
Our progress is poor Pos not all revenue is increasing.
Increased much faster than before so that's the kind of information.
Great Great. Thank you for the information congratulations on the quarter.
Okay.
The next question comes from.
Thompson with Zacks investment research.
Please go ahead.
Hi, good evening.
So.
Yeah.
I had a few questions about your future revenue comps.
Guidance.
I.
Believe that you talked about having some large education contracts for the tablet in Japan.
It doesn't look like that's going to happen next quarter could you tell us what what happened to that business has it have they cancel the orders are they going to do it next year or is it just going to be delayed.
And talk a little bit about what's going on there.
Yeah.
Hello.
Yes, I am.
I'm certain.
Certain because they will respond commentary okay sorry.
No no no that's.
Okay. So yes.
We can see the tabular impact.
Phosphates, COVID-19, and I'll slow down slow down everything like a slowdown that <unk> ever seen like in Japan, So would that be if we have progress.
Everything slowdown so we believe the requirement is land, but neither more time this firsthand.
In a second.
Cost offering and a shortage of law chipset.
And.
<unk> chipset.
<unk> tightened and price going up less than a certain impact.
The third is.
Uh huh.
A little bit.
Delivery of I'll put a little bit later about one month later, so let's leave all of you know these futures impact our Q3 four type rig, but we believe the market is there and we are.
I get that you know.
The order in the in the in the in the first quarter.
So you said first quarter 'twenty 'twenty two yeah, just to let you know.
No.
The decrease in the all 50 of the auto market.
We believe the market is still there.
We are in line with the market.
So it's definitely that Tam and also speak to over time, that's the primary issue.
Okay. That's it doesn't matter that it's the middle of the school year, you didn't miss the whole year.
Yeah.
Hello.
No we are not in the Miss the whole year's Oh, Yeah, just a we are the delay.
Delayed it's a deliberate that's a that's a product and teaches them.
The chance.
Fiction somehow.
So that the demand.
The demand is good there and the demands are.
Is that is increasing.
So.
Will it come back.
Or will it come back.
In the future.
Okay. So.
Do you feel then that.
Q4, this year, it's going to be similar to Q3.
Okay.
Oh boy, what what is kind of a surge in Q4, our guidance are the lakes are yeah.
Yeah coal and so we yeah, we are well well well well it gave a call at that time.
Now we are we have we gave the guidance for the third quarter and we will deliver.
That caught us a guidance.
And as I said, we are.
So we are as always are at its close.
That's a lot of pockets, where we are focused on.
Alright. It can you just give a current update on the.
Status of the distribution of your five G products like where are they being sold now and when do you think there'll be sold into other geographies.
So we are you know what.
It just launched a fatty product lumen.
In August so about one month delay.
Our operating plan.
The feedback from the user and the partner and also channel partner.
Mobile network operator partner.
Possibly but because you know this is high end product.
It is very strong product and with the hype.
<unk> is a best of five <unk> and Wi Fi.
The hotspot and code can provide a better connection for the <unk>. So the feedback is very good.
Because he is a high end product and the pricing is very high and I think it's mainly for enterprise and education.
Uh huh.
Uh huh.
Industrial Internet.
And that's the application that's the pull down in no position.
And therefore, the coming fall are coming.
Ah the quarter in the fourth quarter, we will launch even though.
And then finally, you've called out we called a second type of you know.
Uh Huh, she pulled out we call five you'll find the zero and wearable end up in a year, so more and more.
To put that we have available and also will come down to price and we have a more complete it here and I kept full cheap so we believe our five cheap.
Eventually we are you know get a peek amongst here and get a better quality. So that's the for all our five key potash strategy. So for you before for lumen.
We all understand it is quite high and marquee enterprise application for the industry.
Well he vitamin application.
That's the tanker market.
So if I wanted to buy a new man, where can I buy one what countries.
So you can buy.
In the Amazon you know like Uh Huh.
In Japan in Europe in China.
Almost all of that offline.
Yes.
And you're not you're not interested because it tastes a United States region.
Stephen So we couldn't go by in the in the Amazon United States.
Yes.
We have provided later, but what is the you know our radio frequency ready and with the launch in the United States.
Okay great.
Thank you.
One last one last question I noticed that the gross margin went down considerably.
For product.
What happened what's happening there is that just because of the startup costs of the five G.
Yeah.
And they're sticking Cortez.
Uh huh.
Yeah, so the gross margin products.
Our products as well.
Went down a bit.
Yeah.
The main reasons.
That's a product mix.
It's.
For our mix of we are we saw some.
No of course module for that.
Second quarters.
<unk>.
For instance.
It's a low gross margins.
Wifi Tango.
Jim.
One Japanese customer.
And there's a every every product so.
It provides opportunities.
Device connected to a powerhouse.
So you you would find that we have onsite we have offsets by increasing.
Pasta sauce.
Service.
Which gave us give us a higher gross margins in Europe.
Service gross margins in the.
Second quarters so.
On the products I mean is it getting is it gave us a.
We have.
More opportunity to connect the consumer to our postpaid phone.
So we are we.
We haven't been tanks.
Sales.
Is that should the best gross margins portfolios, yes.
But there's a there's a train is not cannot be predictable.
It depends.
That's that product mix, how we savings in.
Followings.
Following periods.
Another impacts come from them.
Chipset price going up a little bit.
Yeah.
Okay, great. Thank you that makes sense, that's all my questions.
Okay.
If you have any question please.
Please press Star then one.
Yeah.
[noise] as there are no further questions now I'd like to turn the call back over to management for closing.
Again March.
Thank you once again for joining US today. If you have further questions. Please feel free to contact you crowding investor relations through the contact information.
I did a hollow website.
TPG Investor Relations.
This concludes the earnings conference call you May now disconnect. Your line. Thank you.