Q4 2022 Ucloudlink Group Inc Earnings Call
Speaker 2: Good morning and welcome to the YouCloud Link Group Inc. 4th Quarter and full year 2022 earnings conference call.
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Speaker 2: Please note this event is being recorded. I would now like to turn the call from over to Jillian.
Speaker 2: Julian Zhang of Investor Relations. Please go ahead.
Speaker 2: Thanks everyone for joining us on our fourth quarter and fourth year 2022 earnings call today. The earnings release is now available on our IHAR website at IHAR.UCLoWLink.com as well as our news via survey.
Speaker 2: I will give a brief introduction to our EucloLink Management team. Ji Hing-peng is our Co-founder and Chairman of Board of Directors. Chia Hui-chen is our Co-founder, Director and Chief Executive Officer. Yi Meng-shu is our Chief Financial Officer.
Speaker 2: Zhu Tan is our Vice President of Marketing and Sales. Our CEO , Chao-Hui Chen will begin with an overview of the company's recent business highlights and Ucolink's 2023 Business Outlook, which will cover the earnings presentation posted on our IR website.
Speaker 2: Our CFO Yi Mengxi will then discuss company's operation highlights and financial results. Before we proceed, please note that this call may contain forward-looking statements made to pursue to the safe harbor provisions of the private sector.
Speaker 2: private security litigation reform act of 1995. This forward-looking statement are based on management's current expectations and observations that involve known and unknown risks, uncertainties and other factors not under the company's control.
Speaker 2: which may cause F2 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 entity by the contrary statement.
Speaker 2: in rupture conditions or otherwise except as required by law. Please also know that you call links only press release and this conference call includes discussions of the non-ordinated GAAP financial information as well as non-ordinated non-GAAP images.
Speaker 2: You can link press release, containing a constellation of non-audited non-GAAP measures to the non-audited most directly comparable GAAP measures. I will now turn the call over to our co-founder and CEO , Mr. Chia-Hui Chen. Please go ahead.
Speaker 3: Thank you, Gillian, and good morning, everyone. Thank you for joining us on our year-end 2022 earnings call today. We appreciate everyone's time.
Speaker 3: Year 2022 was truly a pay-with-all year for UCloudLink characterized by achieving great success and overcoming tremendous challenges.
Speaker 3: We are pleased to have achieved positive operating cash flow of US$4.4 million for the year end December 31, 2022. A significant milestone for our company.
Speaker 3: As this is the first time we have done since the COVID-19 pandemic.
Speaker 3: Having overcome the difficulties we faced during the COVID-19 pandemic and working to strengthen the diversity of our business, as well as increasing its resilience with new growth opportunities, we are excited about the company's long-term growth.
Speaker 3: prospects and belief we are well positioned to be an industry leader.
Speaker 3: UClouding 1.0 is our international data connectivity services business.
Speaker 3: which tends to be a higher margin lines of business and one which we believe will continue to be a key growth driver for the company.
Speaker 3: During the fourth quarter of year 2022, UClouding 1.0 business revenues increased 48.2% year-over-year to US dollar, 7.7 million.
Speaker 3: For 2022 year, clouding one point of business revenues, increased 30% year over year to unite two U's dollar Twenty eight point, the one meaning.
Speaker 3: This improvement is a reduction of international travelers recovering across our major markets over the course of the year.
Speaker 3: This was accompanied by an increase in average daily active terminals for UClouding 1.0 business during the fourth quarter and full year 2022.
Speaker 3: Average daily active terminal increased 20.5% year-over-year in 2022.
Speaker 3: In 2022, we have become a leading 5G no-means solution provider in the wireless network industry.
Speaker 3: and have continued to provide reliable and high quality international data connectivity services in more than 140 countries, enabling single operator entry points to assess more than 300 global mobile network operators available networks.
Speaker 3: UClouding 2.0 is our local data connectivity services business, which has been a significant driver of revenue growth since 2020.
Speaker 3: Over the past two years, we have continued to strengthen our presence in markets like Japan, North America, Southeast Asia, where we have helped operators and business partners improve their data connectivity services.
Speaker 3: and resolve data connection problems through our past and past platforms based on our patent technology, including cloud-thing and hyper-con technology solutions.
Speaker 3: Our UClouding 2.0 Business Report USD 7.4 million in revenues, up 55.5% in year 2022 and beyond USD 4.7 million in 2021
Speaker 3: On the internet of things IoT side, our customers were able to realize reduced operating causes and improve data connectivity experience through these cutting edge IoT solutions. Time will continue to explore opportunities.
Speaker 3: where we can broaden the applications of our technologies for partners with IoT needs.
Speaker 3: covering application scenario like a Wi-Fi loader, IP camera and electric vehicles. We continue working to close our U-cloud in 1.0 business.
Speaker 3: strengthening our leading global position in the international data long means to do since marking.
Speaker 3: since the beginning of the year 2023. We have observed an accelerated recovery in international travel. The United Nations World Travel Organization expects...
Speaker 3: 2023, international tourist arrival number will recover about 80 to 95% of pre-pandemic arrivals, which presents a significant opportunity for us.
Speaker 3: Following China moving away from the zero COVID-19 policy and subsequent opening of the national borders, we act quickly to establish provided data solution coverage at many of our partner organizations.
Speaker 3: airport, airline and travel agents.
Speaker 3: allowing us to meet the recurring demand for U-Clouding 1.0 long-meaning business in China, Malaysia and Singapore. We believe that improving market development represents a greater upside for U-Clouding 1.0 business in year 2020.
Speaker 3: to satisfy the various needs of our customers and users in multi industries.
Speaker 3: For the UCLoglin 2.0 business, we have gained more industry recognition and have continued to expand our past and past platform ecosystem.
Speaker 3: While continuing to establish a natural customer relationship for the new clouding two-point of business in existing key markets like Japan and North America, we have gotten more industry recognition in China.
Speaker 3: which is expected to accelerate new clouding two-point of business growth.
Speaker 3: In January 2023, our wireless marketing network Intelligent Connection Engineering Technology Research Center was approved as one of the Guangdong Province Engineering Technology Research Center by the Department of Science and Technology of Guangdong Province.
Speaker 3: We believe this recognition serves as a testament to our continued technology advancement in mobile and data connectivity technologies.
Speaker 3: and brings in new momentum for you, Clouding, to expand our presence in a man-made China market and beyond.
Speaker 3: In the IoT side, the company continues to serve existing partners with our superior, more reliable mobile network solutions.
Speaker 3: while proactively exploring opportunities in new industries and new application scenarios, including augmented reality AR and virtual reality VR, electric.
Speaker 3: vehicles, etc. We expect to make a breakthrough in Japan market, where we have a strong presence.
Speaker 3: helping business partners to further improve their data connectivity experience in the IoT field.
Speaker 3: we remain on track in the long-term development of our path and SaaS platform ecosystem, which we believe
Speaker 3: is key to the success of our mobile data sharing marketplace.
Speaker 3: With that, I would like to touch on new Cloudin near-term initiative, new Cloudin 3.0.
Speaker 3: to initiate a mobile data traffic sharing marketplace application based on our efforts in building a scalable user base through our new Cloudy 1.0 and 2.0 models.
Speaker 3: This marketplace enables a user's device to connect to any available network anytime and anywhere, utilizing the Global Meet app. The Global Meet app is designed to support various application scenarios.
Speaker 3: without the limitation of the device, including Top-Up and Go global terminals, active on go, you see.
Speaker 3: GloCoMi data application only solution. GloCoMi theme, GloCoMi inside the third-party device, mobile Wi-Fi window, etc.
Speaker 3: Backed by our cloud scene, Hypercom and Web 2.0 technologies, we aim to build a data traffic marketplace for operators, customers and users.
Speaker 3: Data traffic can be shared simply and efficiently via day-to-day market behavior.
Speaker 3: Once this marketplace application launches in the near future, we expect to continue to make investments into optimizing the system on ongoing basis.
Speaker 3: in cooperating more state-of-the-art technologies, such as blockchain technologies.
Speaker 3: We are committed to continuous development of...
Speaker 3: innovative solutions and plan to expand our cloud-themed and high-pitched technology solutions to various application scenarios, including media, video confluence, outdoor live broadcasting, etc. Based on these, we have developed a new technology solution that will help us to improve our and we plan to expand our cloud-themed and high-pitched technology solutions to various application scenarios, including media, video confluence, outdoor live broadcasting, etc. Based on these, we have developed a new technology solution that will help us to improve our cloud-themed and high-pitched technology solutions to various application scenarios, including media, video confluence, outdoor live broadcasting, etc.
Speaker 3: innovative clouding and hyper-pond technology solutions, we expect to launch more innovative products tackling the need of diverse sets of enterprise and individual customers in year 2023. One part of which is...
Speaker 3: The One-Step Data Connectivity Solutions application I mentioned earlier, the local meetup
Speaker 3: on various smart hardware supporting various types of things.
Speaker 3: Finally, I will briefly discuss guidance for year 2023 for
Speaker 3: 2023, we expected total revenues between US dollar 85 million and US 100 million US dollar.
Speaker 3: representing an increase of 90% to 40.1% compared to year 2022. We expect to build a more solid system.
Speaker 3: financial and operational positions to feel better results in the future.
Speaker 3: We are pleased with our achievements in 2022, and I would like to extend a heartfelt thank you to all the UClouding team members for their efforts and dedication.
Speaker 3: to strengthening our company. We feel confident in the opportunities and challenges ahead of us in 2023, leveraging our portfolio of advanced technology offerings.
Speaker 3: and more mature commercial experiences and look forward to continuing to serve our customers and partners throughout our global market. Pure Clouding remains focused on scaling our user base and constantly improving the technology.
Speaker 3: and business operation model to build a mobile data traffic sharing marketplace, which will fill the company's long-term growth.
Speaker 3: I will now turn the call over to our CFO Yimeng Shi.
Speaker 3: Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the fourth quarter and the full year of 2022.
Speaker 3: Average daily active terminal, DAT, is an important operating matrix for Eucalypt-link as animation trained as customer usage trained over each period, which is reflective of our ongoing business environments. In the fourth quarter of 2022, the Eucalypt-link is a
Speaker 3: Average daily active termina were 297,884. Of which..
Speaker 3: 2,299 owned by the company and 295,585 owned by our business partner. After 0.2 from 265 thousand...
Speaker 3: 595 in the fourth quarter of 2021. Our e-cloning 2.0 service accounts for around 62.1% of the total DAP during the fourth quarter of 2022. Our expected data usage of the terminal was 1.6.
Speaker 3: 68 gigabytes in December 2022. Total revenue for the fourth quarter of 2022 were $2.5 million.
Speaker 3: 19.6 million US dollar representing an increase of 11.6% from 17.6 million US dollar in the same period of 2021. Revenue from service in the fourth quarter of 2022 were 12.5 million US dollar.
Speaker 3: an increase of 30.3% from 9.6 million US dollars in the same period 2021. Revenue from service as percentage total revenue was 63.9% during the first quarter of 2022.
Speaker 3: up from 54.8% during the same period of 2021. During the fourth quarter of 2022, Japan contributed approximately 43.7%. The men in China contributed 3%.
Speaker 3: and other countries and regions contributed 53.3% of total revenue compared to 37.4%, 3.1% and 59.5% respectively in the same period of 2021.
Speaker 3: Overall, gross margin improved to 51.3% in the first quarter of 2022.
Speaker 3: compared to 31.0% in the same period of 2021. And our gross margin on service increased to 59.4% in the first quarter of 2022 compared to 46.1% in the same period of 2021.
Speaker 3: Excluding share-based conversations, our total operating expenses decreased to $10.4 million dollar or 33% of total revenue in the fourth quarter of 2022 compared to 2020.
Speaker 3: 10.9 million US dollar or 62% of total revenue in the same period 2021. As a result of a more favorable business mix and a significantly decreased operating expenses, we report narrow net loss of 1.1 million US dollar in the fourth quarter of 2022.
Speaker 3: compared to a net loss of 15.5 million US dollars in the same period 2021.
Speaker 3: Similarly, adjusted EBITDA improved to 1.6 million US dollar during the fourth quarter of 2022, which compared to elective 5.1 million dollar in the same period as 2021.
Speaker 3: We were proud to have achieved positive operating cash flow of 5.2 million US dollars during the fourth quarter of 2022, which compared to elective 3.2 million US dollars during the same period of 2021.
Speaker 3: going to 2022 financial results. Total revenue for 2022 was 71.4 million US dollars compared to 73.8 million US dollars in 2021. The decrease was primarily due to
Speaker 3: decreases sales of certain terminal and data ready products. Partially offset by an increase in international and local data connectivity service. Revenue from service for 2022 were 46.2 million US dollars.
Speaker 3: and increase of 22.3% from $37.8 million for 2021. Revenue from service as a percentage of total revenue was 64.7% during 2022 up from 31.2% during 2021.
Speaker 3: In 2022 revenue from the National Data Connectivity Service, or 28.1%
Speaker 3: and the local data connectivity service will...
Speaker 3: 7.4 million dollars, increasing by 29.6% and 35.5% respectively year over year. This increase in revenue for data connectivity service was mainly attributable to the gradual recovery of the data.
Speaker 3: of international travel and the continuous development of our local data connectivity service center. COVID in West Virginia.
Speaker 3: Overall, growth margins improved to 45.5% in 2022.
Speaker 3: compared to 29.6% in 2021. And our service gross margin increased to 56% in 2022 compared to 43% in 2021. The increase of service gross margin during 2022 was primarily attributable to a more favorable dinner mix.
Speaker 3: to significantly reduce operating expenses. Including share basis compensation, total operating expenses decreased to...
Speaker 3: $34.4 million or 48% of total revenue in 2022 compared to $47.1 million or 64% of total revenue in 2021. In 2022, we significantly lowered the loss.
Speaker 3: which was 19.9 million US dollar compared to 46 million US dollar in 2021. Adjust EBITDA LIRAP to LACTIF 2.3 million US dollar here in 2022 compared to LACTIF.
Speaker 3: $22.6 million in 2021. Here in 2022, our K-PACs was $0.4 million in $21.9 million in 2021.
Speaker 3: For the full year 2022, we achieved positive operating cash flow of 4.4 million in solar compared to last year.
Speaker 3: 21.7 million US dollars during 2021. Move on to balance sheet items. Our cash and cash equivalents and short term deposit increase to 15.1 million US dollars on December 31, 2022 compared to 8.1 million US dollars on December 31, 2021.
Speaker 3: We're pleased to have facing the company financial position over the course of 2022 and are well positioned to continue growing our business in near term. With that operator, let's open it up for Q&A.
Speaker 2: We will now begin the question and answer session. If you ask a question, you may press star then 1 on your telephone keypad.
Speaker 4: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker 4: To withdraw your question, press star then 2. Once again, that was star then 1 to ask a question, and at this time we will pause momentarily to assemble the roster.
Speaker 4: And our first question will come from Theodore O'Neill of Litchfield Hills Research. Please go ahead.
Speaker 5: Thank you very much. My first question is about the gross profit. You're showing improvement year-over-year and sequentially in gross profit margin and I was wondering if you give us some insight into why that's improving so nicely here.
Speaker 3: Yeah, thank you Phil. Yes, this image, it gives more color on improvements across profit, across margins. Generally, the improvements came from a service mixture as we...
Speaker 3: disclosure in this statement. And we have more international connectivity service in our total service portion. And the international connectivity service have higher cost margins.
Speaker 3: than local connecting service. And also in our service mix, we have significant portions of past sales revenue. So this is the highest cost margin as well.
Speaker 3: So this, and also we have in the past years, and we have put all first on research and developments to control this data consumption usage. And also we have put controls on the data consumption usage.
Speaker 3: commercial sites and keep this is the commercials pricing on some staples and neighbors So that's that's the whole year that give us improving cost margins compared with the 2021 and the Soviet cost margins is coming back to the
Speaker 3: the history of coal years' labors, 2019, and the Soviet Core Margins.
Speaker 3: It's picked up to 59% overall in the whole year. We expect this trend for this higher gross margins for service. We will keep this trend in this year, 2023, as we expect the revenue portions.
Speaker 3: from international connectivity service will increase
Speaker 3: And we have this same trend compared with the last year as well.
Speaker 5: Thank you. My next question is about the balance sheet.
you're showing a year-over-year large decline in accounts receivable. Can you explain what's going on there?
Yeah, that's correct.
In 2022, we put significant efforts on cash collections from the account receivables from the current year 2022 selling and also we put efforts on the agents account receivables.
backward from the year 2021 to sailing.
So there's this account receivables the balance account receivables decreasing significance because we we put Quite a lot of efforts on cash collections from the customer side. So this year and we will also keep the This same APIS
on selling and to collect cash quickly from the customers side as well. And I think we have a good customers course from the Japanese market, from the US market as well.
So, the cash collection cycle is very important for us to have a quick cash inflow to support our operations and the business growth.
Cash collection cycles is very important for us to have a quick cash inflow to support our operations and the business growth. Thank you.
Thank you very muchthe next question comes from viian's end of Diamond research. Please go aheadgood morning. May is a bigbegin generent from Diamond now. Great thanks for taking my questions and congrress on achievement you may luy.
So how do you think this will affect your company's business and revenue in 2023 and beyond? Yes, I'm Chuanwei Chen, CEO of UCloudLink. So we can see the whole world.
including China, you know, to open the border so we can see a smaller rebound from the spring festival in China in the Chinese New Year.
But I think the fourth wave of the refund from COVID-19, I think, will be the labor day in May 1st. These methods will have the fourth wave of the refund from COVID-19.
So the whole years we think in China, because you know, everything recovery needs some peer, some peer, so including the passport, visa, everything they did already. We believe that this year maybe in China only,
40% recovery and the next year, year 2014, I think full recovery that the China will happen. So this year around 40%, so that is our forecast based on this and our year 2023 forecast is based on this assumption.
We believe that maybe the things will go more better. So if the things go more better, we will get a better result. So that's from China and Southeast Asia, like Japan and Korea. Like and subscribe, too.
not open as early as like in Europe , in the United States. I think this year major from East Asia and China, we have got at least 40 to 50% recovery and this year we are fully to come with our expectation.
Okay, thank you, Mr. Chen. My next question will be about the products. Are there any products the company plans to launch or update in 2023? If so, can you briefly introduce them? Yes. Sorry, my bad.
So we have even last year we faced a challenging use for our R&D highway investment in R&D sites. So you can see these years we will not only launch the 5G product, but also the leading industry. Currently, almost it's the only one product can launch.
all 5G network in the world. This will be our leading position for commercial business traveler. So we believe that's the best connection experience for international market. That's one side. Another side we will near turn.
In next month, we will launch a more smallest product, just smallest creative product, so we call TechFly. So this will be around in the year term. So that's another creative product. It's smaller than just a critical.
So it's very, it's smallest in the world. So that's another, you know, creative product. Easy for caring for the international and the local, you know, improvement for the network and roaming. Also, we have some other new product for mobile.
launch one app, you know, marketplace, or 1.0 solution, marketplace our app for 1.0 app and this app will launch in near term also
Then we can meet the different requirements of the user for not only just for cloud theme, E-theme, so we can meet almost various all kinds of the customer need for travel.
So then we can attract more customers and provide more, you know, attach more customers catalog and a segment. So this will increase our customer appointment and also our influence for the long-term solutions. So that's another, you know, new product we will launch.
That's for software and hardware as well. So basically, also we have some other new product we'll launch at the end of the year. So that's a near term I can show to you for the product we'll launch in the year 2023.
By the way, IoT, we have a lot of new products launching like IP cameras, like an industrial rotor. There is also more product impact into power supply.
solar power systems, etc. Then more and more IoT things products will embed our cloud theme solution which can provide better coverage and reliable network connection.
and we save the cost and save the main cost and also the launch cost and also the maintenance cost. That's our advantage. And also can enhance the reliability of the IoT network. So that's some, it is quite a lot of the new solution, especially our marketplace and we can, you know.
some sort of launch in these years. Okay, got it. Thank you. Thank you for detailed information. Just make sure this project and hardware updates will be launched to global markets, right? Not just some certain markets like Japan or the U.S.
user and partner recognition our technology for IoT for this new product, we believe we can get more wider under growth of year 2023.
Yes, you have the question as to whether the new product will launch to the global market. Yes, it will launch to global markets. That will deliver to the Japanese market as well. So that's a target for the global market.
Okay, okay, thank you. That's all my questions. That's all. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Jilly and Zhang for any closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to contact you call links in the investor relations.
through the contact information provided on our website or contact us at the investor relations firm, the EFT group. We look forward to speaking to you again on our next quarterly call. Thank you.
contact information provided on our website or contact our investor relations firm to after growth. We look forward to speaking to you again on our next quarterly call. Thank you. Thank you.
The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.