Q2 2023 uCloudlink Group Inc Earnings Call
Speaker 1: Good day and welcome to the UCloudLink Group Inc. Second Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker 1: After today's presentation there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star then 1 on your touch tone phone. To withdraw your question, press star then 2.
Speaker 1: Please note this event is being recorded. I would now like to turn the conference over to Jillian Zhang, Investor Relations. Please go ahead.
Speaker 1: Thanks everyone for joining us on our second quarter of the 2020 Great Earning Call today. The earnings release is now available on our IR website at IR.UCLoLINK.com and via new web services. I will give a brief introduction to our UCLoLINK management team.
Speaker 1: Mr. Ji Ping Pong is our co-founder and Chairman of the Board of Directors. Mr. Chao Hui Chen is our co-founder, director and chief executive officer. Mr. Yi Meng Shi is our chief financial officer.
Speaker 1: Mr. Chao Huichun, our co-founder and CEO , will begin with an overview of the company's recent business highlights, which will cover the earnings presentation posted on our I have app stand. Mr. Yimeng Shi, our CSO, will then discuss company's operational highlights and financial results. Before we proceed, please note that this Kwamekin tie forward looking statements made pursues to the state's cover provisions of the private security litigation reform act of 1995. This forward looking statements are based on maintenance, current expectations, and observations that involve knowing and unknown ways, uncertainties and other factors that under the company's control, which makes house active results performance or achievement of the company to be materially different from the results performance or expectations implied by this forward looking statement.
Speaker 1: Also, we're looking statements I expressly qualify in their entry by the concerning statements with the factors and details of the company's findings with the SEC. The company does not assume any application or revised or updates any forward looking statements as a result of new information, filter events, chance in market conditions or otherwise except as required by law.
Speaker 1: Please also note that U.C.L.L.E.K.E.S. earning press release and this conference call include distortions of the non-nodiate GAAP financial information and non-nodiate non- GAAP financial measures. U.C.L.E.K.E.S press release contains a reconciliation of the non-nodiate non- GAAP measures .
Speaker 1: to the non-dietate most directly comparable GAAP measures . I will now turn the color of our co-founder and CEO , Mr. Cha Hui-chuan, please go ahead.
Speaker 2: Thank you, Julian, and good morning, everyone. Thank you for joining us on our second quarter, yesterday's 2020 screen and next corporate day. We appreciate everyone's time.
Speaker 2: We were pleased to have achieved positive cash draw from operations.
Speaker 2: for a fifth consecutive quarter.
Speaker 2: During the quarter, we reported strong top nine growth with total revenues of US dollar 22 million. At 21.9 percent increase from the prior year period and the average daily activity.
Speaker 2: an active terminal is continued to increase. And once again, which records higher over 310,000. Building the second quarter of year 2023.
Speaker 2: Reveals from new clouding 1.0 International Data Connectivity Services business. We call you clouding 1.0 business increase by 32.5% year-over-year to US $2.9. And the average daily active terminals from you clouding 1.0 business.
Speaker 2: increased by 57.7% a year over years.
Speaker 2: Primary as the result of the recovery in international travel.
Speaker 2: While our bankshabber from China remain somewhat limited in the first half of year 2023.
Speaker 2: Chinese tourists utilizing Lung E-man brand services.
Speaker 2: contribute and increasingly considerable amount to our international data connectivity services.
Speaker 2: Our unique 5G portable Wi-Fi terminals and the various data traffic packages from 4G to 5G are widely recognized by the market for the ability to elevate user experience across a broader audience.
Speaker 2: which we are enabled us to maintain our leading positions in the global long-term market.
Speaker 2: I'm pleased to share a few recent developments in our 100-hour business.
Speaker 2: In July year 2023, we launched the Glowcomi theme car.
Speaker 2: This is this SIM card is backed by our patent cloud SIM technology, which allows our customers to freely purchase and use multiple global data plans as needs.
Speaker 2: As of lunch, this global meeting power can measure destination countries.
Speaker 2: including Japan, the United States, Australia, and we expect to gradually expand its availability to...
Speaker 2: Additional country is a region.
Speaker 3: occasion.
Speaker 2: We are launching a pilot sales of a GPS tracking in Navel Longming, Podible Wi-Fi Terminals. Let's believe we have been the smallest one in the world.
Speaker 2: check Idiot
Speaker 2: Range power. gain back.
Speaker 2: GPR tracking enable long-term signals and the global mid-SIM card as our ever-expanding you calling 1.0 business portfolio of operating through which we have a global user.
Speaker 2: achieve a leading zero-loaning experience in various application scenarios to satisfy their cross-border data demands.
Speaker 2: Driving competitive competitive advantage is less intense our business performance.
Speaker 2: will remain optimistic about the prospect of you clouding one point of business and believe that this higher margin business will continue to serve as a key growth try into the future.
Speaker 2: You are in 2.0 local connectivity services business and call you are in 2.0 business. Maintain continuous development, which report you as 2.2 million inhabitants.
Speaker 2: A by 23.1 percent long US 1.8 million in the second quarter of the year 2002. During this quarter, our upholic customer premium equipment CTE.
Speaker 2: was heavy commercially. This product in may fall a similar transition between thick and mobile network. Seven serving as a substitute.
Speaker 2: For traditional fixed-line broadband, that's suitable for home and the Office Internet Commission use.
Speaker 2: We are confident that the U.S. Placid CPE will allow us to further gain the market share in the 4-band record at a 3-B market.
Speaker 2: What I discussed just now, outlines our data connectivity services, isn't it?
Speaker 2: I would like to highlight your cloud links, past and past solutions, which is a none of business where we see great potential.
Speaker 2: Only IoT side, Euclid's IoT module will begin to become a series in-depth into the devices of a major mobile network operator in Japan within years 2023, making a significant expectation into IoT specification scenarios. As into the in-depth IoT module, the GPS checking enable
Speaker 2: and start services revenues, apart from data kind of table-to-service services revenue, and set up products. We look forward to applying our path and start solution to provide additional services, including customer management services, emergent and security communication services,
Speaker 2: and the GPS tracking services. And many others, depending on our user days and application scenarios, and the country building to the growth of our revenue.
Speaker 2: to assess our full portfolio of service. We believe that we are approaching the launch of one step marketplace ATP, which we enable us to check more users and customers beyond the users of possible Wi-Fi step by step. We remain confident in our teams capabilities to launch the ATP in the near-term. In conclusion, we will please with the progress we have made in our close initial years, as well as the...
Speaker 2: improved financial results we have achieved in the first half of the year. We are pleased to be at the forefront of the innovation and expect to continue expanding our portfolio of offerings based on our innovative cloud thin technology.
Speaker 2: and the high-pound solutions, which demonstrates our strong research and development capability laying a solid foundation for future growth. For the third quarter of year 2023, you're clearing its back.
Speaker 2: Total revenues to be between US$23.5 to US$24.5
Speaker 2: representing an increase of 29.1% to 34.6% compared to the same period of year 2022. We will continue playing a significant part in...
Speaker 2: And we believe that our solutions truly enable our customers and users to lead a more convenient and intelligent life from kinetic to be better connection. I will now turn the call over to our CFO , Mr. Yiming Zhi. Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the second quarter of 2023. The daily active terminal DAT measures the trend of customer usage over the period.
Speaker 2: reflecting our ongoing business performance. In the second quarter of 2023, average daily active terminal was 318,000.
Speaker 2: and the 778 of a watch, 7,386 owned by the company and 311,000 and 392 owned by our business partners, up by 9% from
Speaker 2: 292,432 in the second quarter of 2022.
Speaker 2: The average DAT for our UKIing 1.0 and the UKIing 2.0 business account for around 46.4% and the 33.6% of TOSO DAT respectively, giving a seeking quarter of 20.3.
Speaker 2: Average daily data usage per terminal was 1.59 gigabytes in June 2023. So the revenue for the second quarter of 2023 were 22 million US dollar, representing an increase of 21.9% from 18 million US dollar in the same period of 2022.
Speaker 2: Revenue from service were 14.1 million years dollar increase of 25.2% from 11.2 million years dollar in the same period of 2022. Revenue from service as percentage of a total revenue was 64.1% up from
Speaker 2: 6.5% during the period of 2022. During the second quarter of 2023, as a percentage of our total revenue, Japan contributed 43%, North America contributed 29.5%, mainland China contributed 11.6%.
Speaker 2: 1.4% and 21.3% in the same period of 2022 respectively. The revenue from mainland China increased significantly, primarily due to the recovery of international travel from the Chinese tourists utilizing Romy Man brand service. Overall gross margins were 44.9% in the second quarter of 2023 as compared to 44.1% in the same period of 2022. Gross margins on service was 58% in the second quarter of 2023.
Speaker 2: as compared to 36.2% in the same period of 2022. Excluding share basis conversations, total operating expenses were $13.3 million or 33% of total revenue. In the second quarter of 2023, as compared to...
Speaker 2: 7.6 million or 41% of the total revenue in the same tier as of 2022.
Speaker 2: We now rate late loss significantly to 0.9 million USD in the second quarter of 2023 compared to a late loss of 6.3 million USD in the second quarter of 2022. We now rate late loss significantly to 0.9 million USD in the second quarter of 2022.
Speaker 2: We achieve positive operating cash flow 3.4 million a dollar during a sticking quarter of 2023. As compared to 2.5 million a dollar during the same period of 2022. We successfully achieve positive cash flow from operation for a free computing quarter accumulating operating cash flow of 13.9 million a dollar through the five periods. In a sticking quarter of 2023, we continue to improve our financial performance and we believe that we will position the executive from our growth initiative.
Speaker 2: Without a preterm, this often happens for Q&A. Thank you. We will now begin the question in the empty fashion.
Speaker 4: To ask the question, you may press star then one on your touchtone phone.
Speaker 4: If you're using a speaker phone, please pick up your handset before pressing the keys.
Speaker 4: Sooth jar your question, please press star then two.
Speaker 4: At this time, we will pause momentarily to assemble our roster. Our first question comes from Pio O'Neill with Lichfield Hill Research. Please go ahead.
Speaker 5: Thank you very much. My first question is about product sales in the quarter. They were up sequentially from the first quarter. Quite a bit. Is there a particular reason for that? Strength in Q2 versus Q1.
Speaker 2: So you're questioning regarding the taking quarter revenues. Compare with the first quarter of this 2023. That's your...
Speaker 5: Yes, but only for products, not services. Just the product strength growth was strong in Q2 versus Q1. I was just wondering if there was something going on in Q2 for products that was different from Q1.
Speaker 2: Yeah, so I think two reasons that this happened. One is because of the, because COVID-19 is all over the world, including China, Japan, Southeast Asia. So the first quarter just, for China, the first quarter just opening. So everything is still, it's not a fast growth. And that is why, that's first reason because COVID-19 is over. And the second is the worldwide of our customer prepare for summer season.
Speaker 5: So these two reasons met the equipment close. Okay. My next question is about the GPS tracker enabled portable terminal. Having a GPS tracker inside the terminal, is that to prevent theft or does it...
Speaker 5: Does the GPS info feed into the SIM card selection? Or... Sorry, can you repeat your question? Yes. The GPS tracker enabled...
Speaker 5: into the SIM card selection. Sorry, can you repeat your question? The GPS tracker enabled portable terminals.
Speaker 5: Is the GPS tracker in there, is that to prevent the terminal from being stolen or does the information from the GPS feed into the SIM card selection?
Speaker 2: Yes, let me answer. We just newly launched a new product in the second quarter. So I think it's a smaller volume lunch and it's very small, very tiny, about 40 grams.
Speaker 2: the weight is down fully, like smaller than a business card, smaller than a business card. So it's convenient. It's more or less portable Wi-Fi and multi-function with the GPS tracking SOS function.
Speaker 2: Why we launched this kind of product, that's because we try to let people understand not only for connection, because our multi-network cloud-themed technology and the HyperCon will enable people get the best coverage. So this technology, not only we can apply...
Speaker 2: into the connection for better connection, but also because of better connection, we can enable people to find a lost goods much easier because we get a better coverage. All the GPS information is easily to be wired via 4G.
Speaker 2: send back to the server and let the people can find the loose material or the people who lost an easy to SOS for get a set, get a ask help. So that's the reason we are now.
Speaker 2: expansion our business from a connection to be that the people who need better courage and need this checking and help requirement.
Speaker 5: Oh, thank you very much.
Speaker 5: Oh, thank you very much. That completes my questions. Thank you.
Speaker 4: Again, if you'd like to ask a question, please press star, then 1.
Speaker 4: Our next question comes from Vivian Zen with Diamond Equity Research. Please go ahead. Susan, the intro.
Speaker 1: This is Vivian with Diamond Aqua Research. Congratulations on the nice quarter. I have two questions for you. First one is about operating expenses because in the quarter the research and development expenses decreased by over 36% while sales and marketing expenses increased over 40%. So like we said, painting use changes are more quickly sn Toast if you want to. science of finding save money feared for the risk of providing this is just looping through
Speaker 2: Can you explain why this happened? Does this mean that the company spending will be focused more on the marketing side? Yes, you have the figures tell us how we manage our telecom.
Speaker 2: relevant cost and also the other, the business driven is expensive as well. For INDs we are managing tightly on the increased credit count. Even this year we expect the business activities increasing and the revenue will grow.
Speaker 2: we're managing this program under the tight cost of control measures. So R&D is not increasing as we review the growth expectations.
Speaker 2: But on the other side, as you saw, our sales are the max sectors, expensive, compared with the last year period, increasing. This came from two drivers, one is the sales guy, the helicopter sales guy, increasing.
Speaker 2: increases compared to last year. As we explained in the ER, Romingman Brown service can use a lot of revenue for Chinese out-of-bound tourists. So our headlines for the China maintenance...
Speaker 2: there's a bonus increase, but all the physical increase is in our budget. So that's reflecting our growth and we control our budget in line with our growth activities.
Let me add two more comments. I think our cue to the major revenue still comes from our traditional product, but especially for our 5G product. That's quite popular because we are the only one currently.
launched 5G worldwide connection. It's quite popular and generally good revenue. But more than the traditional product, in the second quarter we launched three new products. That means our R&D capabilities.
it's very strong. So we can in one quarter launch three new products and this new product just end of the second quarter. And I think in the next two quarters and the next year, will help us win more revenue and users.
These three products I think you can see are about our global mixing. First and second is our high-reliable upgrade CPE and that then can enable some enterprise office and home.
to get a high level network to secure their fixed network, no job for disaster recovery. So the last one we just launched, smallest card size tracking and and and
and the Wi-Fi product and this product can go to the daily life of people. So all these three new products, I can demonstrate our R&D has a very strong capability, even during the last painful years, we still can launch our new product in the second quarter.
So I believe this new product I just mentioned can in the following quarter and the next year we are generating more revenue and users for us. Thank you.
Okay, okay, I understand. So next question is that could you elaborate on what drove the company's revenue growth in China? And your products and growth strategy there cause I see the proportion of our revenue from China.
increase a lot this quarter. Can we expect this growth momentum to continue? Thank you. Yes, we disclosed the third quarter's guidance. The growth rate will be...
go to 30% around compared to the same period of 2022. We expect this peak season for summer holiday and the same for Chinese outbound tourists.
So this is some of the, some of it is peak time for our years, for this year. So we expect the growth momentum came from the international travel. This is the peak up time.
stronger financial position in terms of operating cash flow and this adjusted late income. Yeah, so I still have more to comment. We can see the report from the government. The first half years of China outbound tourist only recover 30%. So you can see the smaller compared years without before COVID-19 only 30% recovery.
So, the government forecast during the next holiday, like National Day, will be go to the 50% around this year, almost another big growth. Another reason we understand, because of the visa issue and the passport issue during the next holiday, is that the government forecast during the next holiday will be go to the 50% around this year. Another reason we understand, because of the visa issue and the passport issue during the next holiday, is that the government forecast during the next holiday
We believe that once the visa program and the passport program and the opening of the boundary become more, become more, I think at least this barrier was overcome. I believe that in the third quarter and fourth quarter.
we will get a much better revenue from the China market for the only main brand. Okay, that helps. Thank you. That's all my questions. Our next question comes from Zemili with Great Wall Securities. Please go ahead.
Hi, this is Saphan from Great World Security. I have a question about the part-and-start service because we see the revenue of this part doesn't have a
obviously increased compared to the first quarter. So I want to know the maybe the process of the Part-time Service Development at this time. Yeah. Yeah.
segment increases significantly with a mix of three main types of revenue.
International roaming connectivity service, local connectivity service, and a part-size service. Among the three categories, roaming service is increased number one in terms of growth rate.
So that's our foundation to reflect our growth foundation activity is growing. Why is this part of revenue growth rate in third place? It depends on monetized business models. We have three main business models. One is B2C retail business model, and the second is B2B2C wholesale business model, and third is part stock platform. So it depends on the business partner to choose which business model is the best.
is suitable for them. So you would be able to choose B2B2C, wholesale model in roaming sectors. So we will have more roaming.
generated from this commercial term. We don't, we sometimes we don't double charge wholesale packets to the partner and a platform. So that's, but overall our activity is growing in mind of the gross total. And as we disclose as well, we launch three products in this quarter. And Glomly SIM card and this smallest Wi-Fi, portable Wi-Fi with the GBC track function and IoT modules delivered to a main, main,
GBS tracker will also generate platform service, part-size service to account as well in the future. So the momentous for part-size revenue growth is still strong. So, but we manage our performance in terms overall of three main categories of service sector. Thank you.
Oh, yes. Yeah. I got it. Okay. Thank you very much. This concludes our question and answer session. I would like to turn the conference back over to Gillian Zeng for closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to contact the use law links in vessel relations through the contact information provided on our website or contact our IR info at the group.
We look forward to speaking to you again on our next quarter. Thank you. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.