Q3 2022 Ucloudlink Group Inc Earnings Call
Hello, and welcome to the you Cloud Link Group, Inc. Third quarter 2022 earnings Conference call.
All participants will be in listen only mode.
You need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Julian Jang Investor Relations of the company. Please go ahead.
Thanks to everyone for joining us on our third quarter 2022 earnings call today.
It's really it's not about about Oh, well I, all that stuff and I ask all your blogging they'll come as well as why news, whereas survey.
We'll give a brief introduction, our new clothing Mad men T.
Hum our co founder and chairman of the board directed totally Chen our co founder director and Chief executed Apis that email she is our chief financial Officer Jude.
Oh, well that is the president of marketing and sales.
I was saying Oh, well begin with an overview of our company and the basic needs of her life, which well how about section one of the earnings presentation posted to our I have that stuff I would say Oh emo shoe well then discuss our operational highlights and financial results afterwards.
Dentists in NASDAQ since two and Sweden.
Before we proceed. Please note that this call may can tally forward looking statement made up a steer to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Forward looking statements are based on imagine many current expectations and observations that involve known and unknown right.
Taste and other factors not all of the Companys control.
Which may cause actual results put them up all our achievements of the company to be materially different from the way, though because almost all expectations implied by these forward looking statements.
All forward looking statements are expressly qualified in their entergy by the couch, Norway statements risk factors and details of the company's filings with the ask these days.
<unk> does not assume any obligation to be why I'll update any forward looking statement as a result of new information future events change in market conditions or otherwise except.
As required by law.
Please also note that you called links Army crab and crab release and this conference call include discussions of the no nothing changed GAAP financial information as well as some nowadays changed non-GAAP financial measures.
Your clothing.
Press release contains a reconciliation of the non audited non-GAAP measures to the most directly comparable GAAP measures I will now turn the call over to our co founder and CEO . Mr. Chopra Chan. Please go ahead. Thank.
Thank you Shannon.
Ah patient pool to take quick uptake.
And our content.
I mean, taking patients off the second quarter of year 2021.
<unk> been.
How did you you didn't leave you in the third quarter 2022.
Presentation.
Loyalty.
That's a relationship website with some bases to update.
I will focus on them.
Most of the recent developments.
Clifford.
Yes, most of it on page 17.
You'll find me one if all our international Kate Hudson is Hey, Whats the assembly business, which has.
Our strong track record of high gross margin.
On the topic of finicky with ongoing growth potential.
In the third quarter of the year 2022.
Hum COO business revenues increased five point of what I was saying compared to last 10 years.
What.
Now revenue Oh, Wow, one on the L. B.
In Japan, and Southeast Asia market increase.
Inefficiently.
In mainland China market recovery slightly during the quarter, yet we saw some in Q2, yeah, Oh, what a year.
And our nation as Trevor.
Friction around the work continues.
Oh.
Across all our major international market with North America openly Hello.
And data sources into Asia.
One of our key markets, Japan has also recently announced the lifting of restrictions.
Falling covered us.
This October .
Consequently, the number anyway, you could say, okay tell me now for the one on the old business.
Increased during the third quarter 2022 comp.
Tom.
Oh, yes.
One.
Average daily activities Tullow for one business increased by 25%.
Sure Casey.
No.
It's Halloween ultra demand after a new coffee is a high quality in our nation.
So I wouldn't see it.
Commentary, we are providing reliable and high quality, taking a nathan nothing's off the table.
In the morning.
All key countries powered by our pasta and sauce headphone.
Enabling single operator and.
She points to assess more than 300, a global mobile network operators are well up on the other one.
For water.
We men pauses heat.
Oh, and one point of all basically we have continued to be a key growth driver.
Revenue as well as auto non res up.
Let's move on page 14.
You're calling to pause, though is our local data, let's see what he said was excuse me.
And that has become a new driver of revenue growth She's here 2020.
It's close.
Oh Wow.
He is falling market opportunities such as the post pandemic, new normal lifestyle that people are getting more and more use T lucky, but among all five key applications in the Iot area, our ability to improve network convergence and data connections.
No cooperation with the intelligent hardware manufacturers.
Incremental local me inside et cetera.
In the past quarter, we have continued to strengthen our Princeton in power is a 15 monkeys.
Including Japan, North America, South Asia.
We have operators and basically its partners in doing that things have kind of turnkey services and it's all states have punish him cobras Sue a pop in soft pretzels.
Peyton technologies, including the call the theme and the hyper call technology solution.
That's what we shared in our latest quarter.
Last quarter, we packed priced into our ability to adapt all.
Our sales to the evolving market by introducing an upgrading in the weight you put up a.
Various two pond Oh business applications.
It's analogous.
Our coupon the obesity revenue.
Report.
So can I call. It a 7% increase during the third quarter 2022 compares would offend Peoria in play out yes.
Our customers are able to realize the refuse operating cost and improve data connectivity theaters.
So what are these.
H Iot solutions, and we continue to focus on exploring new business post person to serve a broader spectrum of partners without the need for example, you'll calling is cooperating with a global leading cloud platform.
Per watt.
Hey, what tastes overseas.
So not when.
Okay.
During the third quarter.
We have the assets.
Into upgrading our column portfolio offering to provide.
How can I take that.
He is feeling for the Iot customers and Paypal is protest and solutions for more diverse applications in August .
We expect our coupons all business to close the waste I suppose all of it.
No wait heap cloud and hyper come technology, that's what we continue.
To introduce our solutions. So we see some puts us towards the market in Australia, and our collaborations with the local partners.
The move to the page 15.
You'll cloudy petitions.
So at our Piney technology solution provider in the states have kind of stayed with the market.
The one I'm not sure one part of our business and new work pool pump business, we promote a long term development of our partner ecosystem.
Happy.
Nice by various species partner would remain confident in our business development teams and empower the building of our Pasadena South ecosystem.
A lot of research and development team too.
I want to find niche to our customer Pos.
We are modeling piece now, let we maintained a positive operating cash flow for the second consecutive quarter. During the third quarter of 2022, and we successfully achieved a positive.
Net income non-GAAP for the first time since the global health threat of the COVID-19 pandemic in the second quarter, Oh, yes, with all of a sudden punty. Our total revenue rich U S. Dollar I think part of the 2 million U S dollar during the third quarter.
Also in the year 2022 and for the first quarter, yes, It was awesome.
'twenty two we expect we would further improve our total revenue to be between U S. Dollar 90 million and a U S. Dollar 102 million, we've presented representing an.
An increase of 8% to 5% compares to offend Peoria Oh, Yeah 2021.
We expect these improvements will allow us to build a more solid financially.
Operation our petition to few bad test results in the future we believe less.
Connecticut.
To better condition.
It's a significant so I wouldnt force in the transformation of increasingly otherwise informational Ella.
We are committed to build a mall polanski future for customers or more customers and users and we strive to make a positive impact in serving our global user community.
I wouldn't know.
Our staff Oh he much.
Who we haven't close new business and financial highlights.
Thank you Mr. Chen Hello, everyone I will quickly go over our business highlights for the quarter ended September 32022.
Let's turn to page 17.
Average daily active terminals.
No quarter, where.
200 9700.
297501 of which was on the 522 owned by the company and 295009, you said benign on popped in this panel.
Presenting an increase of 610, 2% from 250.
56124, so quarter, a return to a new one.
Calling a 2.0 service accounted for around 65% of the total with D. A T. During the third quarter I was 10 22.
You stated that you are searching for terminal was 170.
71, Gigabyte September 2022.
It's our turn to page 18, which shows global diversification of our business, we had around 98% of total revenue from outside and then in China. During the quarter at 10 22, Japan contributed to around 35, 1% total revenue for all of the.
Congress revenue the last American market had the largest contribution to all goodness, reflecting the further developments our North America business.
We'll continue to expand our the market such as Europe , and southeast Asia et cetera.
The quarter attempting to one we have three 7% of total revenue coming from mainland China 46, 6% of total revenue technical in Japan, and a 49, 7% of total revenue excuse me for all the countries and regions.
This all turn to page 20.
It goes through our financial highlights of the quarter our company too.
Services related revenue as a percentage of total revenue was 69% 22%.
During this so called <unk> 22, compared with 34, 2% during the third quarter of 2021.
Revenue from international connectivity service and local data connectivity service increased by 31% and eight 7% year over year, respectively. This increase in revenue from data connectivity service for many attributes though to the graduate to recovery.
International travel and a continuous development, our local data connectivity service business.
Let's move to page 21, which shows the revenue breakdown of our two business segments eliminated revenue from service sales put us.
Total revenue decreased by five 7% from $19 3 million to start up in the third quarter up from 21 to $18 2 million COO.
Our country two primarily due to the decrease in sales of certain terminal and data related products. However revenue from service was $12 6 million.
Representing an increase of 25% from 10 point, if I'm willing to start up from the same period of time for new work. This increase was primarily attributable to the increase in revenue.
Note that our connectivity service and the local that are going to focus.
Please turn to page 22 for gross margin, that's all goodness our service gross margins increased to 57, 9% in the third quarter up 22, compared to 43.5% and send peer tend to anyone.
Our overall gross margin was 47, 7% and so quarter tend to need to increase from 28, 3% excuse me same theory I think when you walk in.
Increase our service gross margin is still being so quarter, two was primarily attributable to higher margin profile from them, they're not going to start to connectivity service with.
Let us move to page 23, we just shows it break it down our operating expenses.
Excluding share based compensation and others, excluding share based compensation operating expenses as a percentage of total revenue was 40% in the third quarter 'twenty 'twenty compared with 61% during the same period attempting to what we had to further streamline our business operations, including opt in.
More than labor costs, and now to the operating expenses, excluding share based compensation decreased to 3.3 million for the quarter accompany two compared to $11 8 million in the same period of time can you walk.
Please turn to page 24, operating cash flow maintained COVID-19, even when they're thinking consecutive quarter, so quarter, two and there was $1 2 million.
You start to compare to elect at $5 7 million guests dollar during same period of time can you won this primarily a result of our ongoing efforts to improve our margin profile and controlled operating expenses, our cash cash equivalents and short term deposit what chokepoint in five minute installers.
As of September 30, 10 temperature.
Capex was pointing to $1 million compared to 23 million guests that are in the same period company what they.
Move to page 24, 25 net loss during the quarter after nearly two full.
$4 6 million compared to 7.7 0.0 million start up during the quarter company wide adjusted EBITDA non-GAAP was positive four 9 million.
Unit the quarter upfront 22 compared to <unk> five.
But for many of you saw that during the quarter our companywide.
Our successfully achieved a positive adjusted net income non-GAAP and adjusted EBITDA non-GAAP for the first time.
Global outbreak of COVID-19 pandemic in the second quarter 'twenty.
As I mentioned about the company's walk into walls, improving it is bottom line results and our financial position in October along with early redemption of the convertible debenture due to our increasing confidence in the improved conditions. We are confident in the company's capabilities.
Q the strategies to further enhance our financial and operational position with that let me conclude today's presentation. Thank you kind of 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.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Vivian Zhang with Diamond equity research.
Please go ahead.
Good morning, Congrats on nice quarter.
My so my first of classrooms and walk through the reason why the company can continue to generate positive operating cash flow for the second consecutive quarter, how would that affect the company.
Yeah in my shoes, I'm answering the questions yes.
The second quarter, we maintained our debt that's because it is our operating cash flow following the second quarter that kind of come true.
The man.
The main reason.
Q4 came from the two first of all was the margins profile has been improving.
Quarter over quarter.
As we illustrate on orientations Ah was our service gross margins and overall growth.
Overall gross margins.
<unk> reached the highest level.
So that contributes that that's contributes to our gross profit.
Increased significantly.
And then the stick in the second point is our we have a maintain control our operation operations.
Chris as we streamline our streamline our operation.
Operations and.
As we.
The most choice our operating expenses has been a has been a decrease a cyclical.
He couldn't delay compared to the same periods last yes. So that's the two men are contributing contribution to the I'll walk a suitcase suitcases that cortez cause it to cash flow and we expect this trend the predicative catch.
Operating cash flow will be will be achieved in the first quarter of this yes. So we we believe our financial position has been improving and to support our growth in the in the future.
Yes.
Our international business recovery.
So do you think the high margin pieces or yourselves to.
To Uh huh.
Two to get them all.
A high margin business.
Okay got it so can you share with us what matters have you taken to control costs and achieved positive adjusted net income and EBITDA.
Yes. The segment are they suddenly there's a reason it's oh I.
I saw a positive operating cash flow.
On the gross margin overall gross margin improved a lot and I'll watch the operating lease operating expenses.
<unk> has been decreased.
Same time us warehouse, so we combine correlations that together, we'll achieve a positive.
Adjusted net income and positive adjusted EBITDA loss. So we are we expect this there's a improvement a wealthy where we carry all of them are in the in the fourth quarter.
And the next yes warehouse so that the companies are for acquisition that will be improving on.
On this basis.
Okay can you elaborate on that like what is that you're.
He had taken like crazy.
Great operating expenses, because we saw that operating expenses would be quite a lot, but that wasn't I guess have you taken.
Yeah, there's a as we are in the ER.
Ah Ah release, we are there.
Men.
The decrease in amounts came from the head count head count related cost now that that's out there.
The diamondback.
Allah head count has been reduced compared with the same period last yes. So we would report that's a.
Constant numbers in our presentations.
It is.
300, <unk>, they're hanging around so the compare with last year as the number of head count has to be that the capacity power.
Our efficiency.
Ceased operations has to improve and this is not about penny counts.
To support our suite, the cheese and other Luke and cause and it also could achieve our gross.
And the next year as well.
Okay got it so my love for Clos or any of that comparator with the Japanese and Chinese markets. The partial rovner from North America has been placed in logic here. So can you share with us.
The North American market and how what are the drivers there.
Yeah.
Yeah, So in Q2.
North American East you can see in our data all our north American market increased quite a lot of flown last year about a similar opinion to D. C. Here, we focus them on in a $10 million and that's a big increase.
Yeah. The the met several reasons why you saw U S. A recovery from the COVID-19 solar requirement for the international traveller become more and more popular that's one reason and the second reason is the U S market.
Courage Manitowoc.
It's not as good in China, and Asia, So people need to have a better car, where you keep them. That's the topic Jim scheme in local a NASA work. So that's that's increased especially for five cheese. The coverages pool. So we launched the war plus the five key.
You know our solution got me five solution.
The United States, that's got a popular in this market.
No.
The local market, including Iot and AR, including the local requirements for the better but our coverage. So it's a it's getting more and more.
I think it's more and more industry and people need to upgrade our courage to provide power, providing a better service.
So at least three key reason.
And because of our product can provide the best probably to comp out other products. So we win more and more market share in this market.
Okay.
Okay got it.
So Pete can you share with us like what what was the main competitors.
Or are you is that north American market.
Yeah Yeah.
In different area, we have deeper.
Compotator Das.
Yeah.
Yes, I'm a competitor like Scott along that similar technology, but you know we can't provide much bladder proton, none and much better quality because of where it came from the telecom industry.
Understanding the quality is how important will the market. So are we invest a lot.
That's why we are currently the only one window, who can pull while our CRO for fast and cheap.
Mr. Luis shouldn't know either hold that can provide that's a case the other case. It's a we all put out you know a you know a is the bestseller in the court upheld the same technology in our in the in the out months old market you can see them all.
Our next year, there and Oh, so it was all customer understand our quality product Peyton its market leading position in this market. These happen.
ER quickly you know sports protein in the U S market and the market share increase where he quickly.
Yeah.
Okay I see thank you that's all my questions.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to Julian Jenkins for any closing remarks.
Okay.
Only one floor joining us because you'll have any questions. Please contact you're calling for investor relations during the contact information CRO watching all of that is that all come contact our investor relations fun. The aperture grip. Thank you everyone.
Yes.
Yes.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you.
Yeah.
[music].