Q3 2023 uCloudlink Group Inc Earnings Call
Hello, and welcome to the you cloud linked third 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 Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a quest.
You May press Star then one on your Touchtone phone. Please note. This event is being recorded I would like now to turn the conference over to Chileans Young. Please go ahead.
Hello, everyone and thank you for joining us all your clothing third quarter 2023 earnings call.
This release and our earnings presentation are now available Oh, well I have upsides.
I got all your clothing dot com.
Joining me on today's call Mr. Jim Keane Palmer, our co founder and chairman of Board of Directors.
They're totally Chen our co founder director and the Chief executed officer, and amidst the email Shea our chief Financial Officer.
Mr. Chen will begin with an overview of our recent business highlights. Mr. Hu will then discuss our financial and operational highlights for the third quarter of 'twenty and each week.
They will all be available to take your questions in the Q&A session that follows.
Christie. Please note that this call may contain forward looking statement made to pursue choose the safe Harbor provisions of the private Securities Litigation Reform Act of 1995. This forward looking statements are based on management's Collins expectations and observations.
That's involved known and unknown risks.
Certain tastes and other factors not under the company's control.
You may cause actual results because almost all the achievements of the company to be materially different from the results, but the most expectations implied by these forward looking statements all forward looking statements expressly qualified.
Entertain buys a cultural re statements risk factors and details of the company's filings with the as you say the company does not assume any obligation to revise or update any forward looking statements as a result of new information future events change in market condition.
<unk> or otherwise except as required by law. Please also note that you called Inc's earnings Press press release and today's conference call include discussion of non nowadays take GAAP financial information and then amounted to non-GAAP financial measures, you're calling some press release.
Oh, great consolation off none of them that did take some got Mad hits.
The most directly comparable now did take off measures I don't know tens of whole birds. Mr. Chen base go ahead.
Thank you Julian and good morning, everyone. Thank you for joining us today.
I appreciate everyone taking time.
Which delivered another strong set of results in the quarters.
Highlights by.
So two 1% year on year increase in total revenues to U S. Dollar 10, pinpointed 9 million U S dollar and a six six.
Sixth consecutive quarter of positive cash flow from operations.
Average daily U S tornadoes.
He operation not magic increased once again to a new all time high.
320000.
These awards were wrong.
Across our entire business.
During the quarter, we continue to consolidate and.
Oh, well, you're calling 1.0 intonation that David Hudson attainment against that with Gs.
And.
Uh huh.
In a second one.
Total revenue was wrong Youll, probably one point inhalation of basics.
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42 upon the 7% year on year to U S dollar.
One for me.
No recovery.
And our nation of travel.
Okay I see.
If they can.
Headwinds for these spaces with growth on Japan Amendment, China.
[laughter] synchrony second growth driver during the quarter.
Chinese outbound travel remains top Chinese nation on travelers.
We're in the peak summer holiday season increasingly chose to use our low me men Grand services.
Accounting for a growing share in a nation of data are coming up here with you. So we face.
Because of all of that revenue was from mainland China increased to seven 2% of our total revenue during the quarter.
Compared to two 4% during the same area last year.
This strong performance was enabled by love continuous development of all our technology product and services offerings.
Why do you ask somebody sees.
During the quarter, we consolidated.
Our leading position as a five XI long means solution provider.
Across the board.
Continue to cover.
However, our five cheap portable Wi Fi temenos poverty come you know how to use and Palo not use a fear that this now.
Like why.
Our most popular mobile why fight the white space.
I'll be quick.
Waste and occupation in Huntington services assistant.
Sure they provide for Chinese cross border tell us.
I mean, that's all I'll hold off on those jobs data traffic and that he would keep temenos.
Oh, so intelligent Trevor.
We launched <unk> com.
<unk> currently offers courage across 10 high demand travel destination.
G P S naval portable Wi Fi communal less liquidity, it's calling for a small leases all of its kind in the war in addition.
With pilots and easy solution.
In October 2010 phase III.
Which will enable us to satisfy a wide range of data connectivity needs.
Our costs on the side.
Taken together, we believe our high margin, you'll calling one hotel business will remain a key driver of all basically as a long term recovery.
Nation know Trevor continues.
We are confident that our.
And the operating portfolio, a quota and so what we have.
And all of our business partner, a chip for their market share scan and enhance our leadership.
In the information that they would have normally in business.
We are working on is pending data clinician tomorrow daily life applications scenario, but enriching our portfolio all of these.
Our internet of things Iot solution, a key part of the strategy and during the quarter. So hockey by utilizing new counties cloud Siem technology powered by Iot solution, One Cola marketing, Japan beside embedded Oh.
Iot module in the surpassed 50 white space we own.
So it's back to cooperate with major Iot module manufacturers.
Great he called the same technology.
We're also continuing to conduct commercial testing all are high from those five key customer pardon me if you can get them.
C P, which we expect to launch in the near future.
The upgrade D C P provide home office.
[noise] connection.
[noise], Tennessee sitting days between the fixed and mobile networks.
Mackie.
A reliable substitute for traditional fixed broadband offerings. We believe this new offering we are bolster your cloudy.
Petitions in the fast growing market for home office Internet connectivity.
Happy to.
It depends on our user base and gained additional market share in the fixed broadband market.
In addition, we launched really pass the house.
Our GPS enabled possible Wi Fi in Hong Kong during in the quarter, which marks the beginning of.
And he will help us to provide more daily life services.
We believe these GPS enabled devices.
And indeed.
In dispensable.
And in consumer stay lives offering and easy ways to keep the track personal belongings.
Monitor the location.
Members.
Including Heathery relative pace and path.
As I mentioned before our offering including the increase in cloud.
So call me CCAR and eastern solution, and we plan to launch various high port count at Haverhill solution compatible with all the same sort of thing and easy technology in the future.
To sum up we believe our new offerings.
The new range of applications scenario for our solutions and holds significant long term growth potential.
All police solution designed to generate no revenue from South, Florida and that they took on it here with the established safety, but also Uh huh.
<unk> revenue.
That's correct.
One three or three and annual basis.
Oh, Hey, it's a walk in the region.
To expand our offering to serve a broader customer base.
But wherever.
I'll use the U K.
I also believe that we are well positioned to create a more biotechs are choppy sharing much price that would.
With the fine and the mobile data he was he experiences of all our assets.
Q2 was with enforcing the complexity at the one page is that's where the city pipe the development of this marketplace.
Our growing user base.
Healthy relationship with global mobile network operators and our innovative technologies.
We will continue building out our offerings and walk into what I'll call Jackie enabling.
Everyone to enjoy a more intelligent on how many.
Lots of snow reliable and high quality data pernicious.
For the fourth quarter of year 2003, you'll probably expect total revenue to be between U S dollar penalties to media and.
U S dollar 26th to media.
Representing an increase of 12, 2% to 33, 7%.
The increase compared to the S&P area of year 2022, I will now turn the call over to Lee.
Mr Shaw.
Thank you Mr. Chen.
Hello, everyone.
Now walk you through our operational and financial highlights, but at some quarter I'm trying to move freight however.
However, it is very active terminal b, a T mission customer usage trends and it reflects the overall performance of all goodness.
Quarter trying to any strength.
Steady actually determined there were 325078 up by nine 3% from the same tier is unlocking yet on it.
Costar approximate to late 2000 owned by the company and a 313000 owned by alternate upon us now.
One O you currently two point, though fitness accounted for a wrong.
54% and 49, 6% of total C. A T respectively.
Third quarter upfront in history.
Steady state.
Mystic cause terminal was 150.
56 gigabytes.
Tenda 2023.
Total revenue for the third quarter of 223 were $23 9 million startup representing an increase of.
So do you what percent from $18 2 million in the same period 2022.
Revenues for service were $16 6 million, an increase of 31, 9% from <unk> 6 million in same period of time to revenue from service.
Total revenue was 69, 7% up from 69, 2% during the same periods I would tend to need to do.
The quarter was 203 as a percentage of our total revenue Japan contributed 44, 2% North America contributed 26, 3% mainland China contributed 17, 2% in the other country in the region contributed there.
Danny tariff one 3% of <unk>.
<unk> to 35 point to 1% 41, 5% to 4% and 21% respectively from the same period, a 10 to 32.
Revenue from mainland China increased significantly primarily driven by Chinese travelers using bromine man Brown surveys are the key increasingly resume outbound and international travel.
Overall gross margin was 51, 2% in the third quarter I was trying to in history as compared to 47, 7% in some key areas.
Turning to gross margins on service was 75, 9% in the third.
Quarter of Trenton history.
As compared to 47.9% and same periods turning to.
Excluding share based compensation total operating expenses were $8 7 million in start up.
36% of total revenue in the third quarter of printing industry.
Compared to the same point is 3 million startup or 40% of total revenue in the same period of 10 22.
We recorded net income of 345.
Many of you saw that in quarter, three as compared to a net loss of $4 6 million startup.
Quarter I was trying to get to adjusted EBITA non-GAAP improved to $4 1 million during the quarter strengthening history as compared to <unk> 9 million you saw that in the same period, a 10 22.
She presented cash operating cash flow of two.
$2 8 million during the quarter continued strength as compared to $1 2 million during the same period of the country too.
We successfully achieved because they need the cash flow from operation for six consecutive quarters.
Accumulating operating cash inflow.
$16 7 million you saw that through the previous six quarters in.
Sean.
Financial performance continued to improve during the third quarters, and we believe that we are well positioned to ease the cute.
Strategies gross initiatives with that operator, let's open.
Oh, so cute.
We will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys 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 from Diamond Equity Research. Please go ahead.
Hello. This is John with Diamond equity research Congrats on the strong quarter here My classroom first could you elaborate on what drove the margin expansion as the colder, particularly margin protect snout what does he take price increase or product mix.
And is it easy is this Kansas dependable. Thanks.
Oh, thanks, so maybe.
I'm sorry, your first question regarding.
The improvements on gross margins.
How do you see the overall assessment.
Margin improved a lot compared to the same periods.
And last yes.
The majors are contributions came.
And from there.
The sale of the sale of a paradox.
It makes sense they are productive so that's improving on a SaaS product. So can you give us a role for all of this quarters gross margins.
For service gross margins they used to.
It's a similar labor a little bit.
Fluctuations compared with the same period last yes, so looking forward as are we.
Hum.
That said, we are we can expect the recovery recovering international travelers resumes.
In the following years.
Yes, so we are in there.
And there's a connective service gross margin you saw one of our highest gross margin in our categories. So we expect that service.
Service gross margins were keep this ER to.
A similar high level in.
In the fourth quarter of just yes.
And for sales purposes.
Parents on the mix of product selling to the casting about that.
That's Uh huh.
That's within that.
Gross margin as well, so well wont be oh.
Terry owns it depends to the mix.
Thank you.
Okay got it. Thank you my second question will be about the newly launched product can you share with us more information about the portable Wifi terms now and how your east, Texas, New products to drive the Companys growth.
Yeah.
Yeah. So you know first I think it's a lunch the five T. E. D. C is a fact she pulled out this year.
In the in the.
Last quarter. So you know in Q2, so a class that says for a lazy snow was leading a close to Oh watch our five key Oh cobalt owning our freedom.
Hyperthermia is a plus at least a half as a cheap.
Good I'm not sure because the cut until you're.
Almost the only one only one possible Wifi.
Available in decent market for callable only.
That's the first time second.
We launched a small base to Ah Ah Ah.
Business Contactor business class size, a portable last night.
These positive Wi Fi kind of enhance all our marquee petition.
And Uh huh.
Our nation of business, because we can combine all our people Wifi and small of all that together provide a bit.
More flexibility.
But to me that where we don't need to open the family package twice I'm Hope no family I said, we're spending a member they can use one package your four biggest device.
Okay independent play.
Symbolically wise, so that means I've got some more attrition and he is a he was a small press ability that's a second point that we launch.
Another point that I always I'm going to wait for a while.
Hi, Archie Fisher encourage them into our Wi Fi that means you're not what Chinese travel. They are half we use that can I could try the GPT.
Doug I tried to chase GPT in China, its difficult because you need a phone number to reduce the central at least if barrier isn't there a weekly with our solution. We are working with the so its provider providing a artificial AI into all of our.
My father, and then our user travel from China to all silo a ton of work they can use the China.
China GPT, so freely so I think that's.
<unk> Ala so is our ability by the way. So we also provide a more.
Sydney pop basis.
No no no.
Many people now know we even the portable Wifi can provide the best connection.
Some of US are still want to use a simple solution no no willing to carry our external device for this scenario, we've pro while a Sim card business.
And our Sim card business in Canada.
And downloading a different countries you know in our portfolio and also its combined with alcoholic called the scene.
Enable at least at least at least the why you only with the Sim card. They can free looming in Marlin 10 country I believe in a in the fourth quarter, we are providing more countries and diesel we admit that.
Our cost of a need for more convenient for people who are no waiting to bring he's taught device. So I think all by the way also as our solution now can integrate and most of them in the future.
Like in all our key 40 integrate more occupied.
Occupation like how calling and these kind of services can help no Chinese and falling.
Easily.
When he is doing that Trevor.
So all this is a pull down for Allah Oh one.
And also as we launch.
45 G. P. P fortunate already along when the war the first to a high reliable even though.
C. P leased can Hep C. NASA work become more reliable no matter the fixed network Hollywood I, though that there are some periods in the year.
Is here now.
Some broken the sudden that's all you can use the lucky.
Mobile network to enhance our to guarantee provided the most a strong back half all disaster recovery for place and you have to look at.
That's all are quite unique of a sudden we shouldn't fall fixed and mobile broadband.
Also help us to consolidate all the ways the bad condition, our brand and our services.
And the final one we also launched our cloud offering.
Into La you know Iot AR. So it was not getting Japan announced and also with more and more module.
And and.
Understand all way to Paula Costa.
Korea and also its not Propylamine C and this can provide all of these smart city wise in our nation and locally.
Best reliable condition, that's basically needs across a lot of intelligent devices. These market share also solutions get more and more attrition Claudia and uses so I had all these fly a new protests and solutions I believe I know the only Ken <unk>.
In March our market share in 1.0 business you can see we already win the market share compare with the before before COVID-19, I'm not sure for me five rental business in China is higher.
The in year 2019, so even though China in China.
Recovery of the intonation that business is soft it's no. So.
You know its so that's Quaker as we expect.
Almost 30% of recovery, so far but we still kept that achieved a peak of March here and what's the result.
Okay.
Okay.
I think that's my answer.
Okay. Okay that makes sense. Thank you so much for the detailed information that's what my question that's all.
Okay.
Okay.
Yeah.
The next question will come from Theodore O'neill of which field Hills research.
Please go ahead, thank you dror.
Thank you very much and congratulations on the strong quarter. My My first question is about the the growth rate of terminals versus data. So the terminal growth rate was strong at nine 3% in the quarter.
But the total data consumed was less than 1% should those two things be related does it does it have any meaning that once much larger than the other.
[noise] Uh huh.
Hi, Thanks, a question for them.
Let me first.
Thanks Grant.
The two metrics.
Yeah.
You had mentioned that the matrix is a very active terminal right.
Now we are at chiefs are a new hires of Oh, the 220 subjects.
Compared with last year is that.
This figure is the increase that by about nine 3%.
It's not a very significant growth.
But our the revenue generation is quiet school that compare with the gross rates are in terms of active terminals that means yeah.
Activity that is a very important operating metrics.
Oh, Haynes, how where that I'll use a partner how how much of that that they they told me not to generate revenue. So that's a the revenue generation side.
It's quite rely on their usage of our terminus two provides a better.
Connections so.
That's our strongest AR that's goes.
The indications are indications of how revenues generation grows in the future so that hit.
In the future.
In this Atlanta surrounding 20 thousands.
Daily epic term not support or generate a revenue are in a very fast growth of past. So we are not.
And that's why we we.
Hello.
More new product to satisfy customer requirements, so I'm a lot more product.
Rodney is by our CEO Mr. Chan. So that's the that's the deal forgot where it belongs to the market and the West supports are all off a more active.
Okay.
<unk> are in the market. So our gross will be where we grow our revenue with service revenue growth as a way of when we did that actually turned out as a gross.
Okay.
Okay.
I understand does that expression is about the I O T. Okay. So in your prepared remarks, you talk you're talking about the expanding number of third party devices powered by O T solutions in Japan. During the quarter is there any particular end use application for this Iot or is it is it broad based.
Yeah, well, all I O T asking for Japan case is achieved by our partner.
They apply these solution for that end user in the end user so called Altair tried to enhance the you know the road Apple offline network connectivity.
Yeah.
Potentially so.
That's that's that's on.
Horse-faced lunch and we believe that we are now much more pick up in the future.
And then for the Iot in Japan case, Oh, sorry, I'll just mention we embed our solutions into the molecule manufacturer. Let me just Oh, you know a hell of a thing technology in.
And put them all in a module manufacturer a cheap progress.
I think as more and more into a provider embedded all up.
Comedians sign so I believe.
This small molecule known that he saw same cockpit or you sign and then we provide them better condition more connection and our worldwide connection for at least 90 life and death.
Is become more and more a song neat I understand Paul our Elisa Smart device for example, like a that's smart.
<unk>, a smart car like a nice us another charger power batteries or battery now worldwide.
Total worldwide, but they need to be monitored yeah at least factor.
They are tough on that.
Oh goodness. So I think we provide these are best connection and all sorts out quite a competency of connection and that's why I believe in this path and.
In the next year and then the following years, we have achieved with the.
A you know a number of conditions.
And my last question is about the cash balance you if you're building a good size cash balance here I Wonder if you have plans for acquisitions or dividend or.
Similar.
[laughter].
Yeah, you'll see a as we as we LASA, we achieve a positive cash flow from operation for a sixth consecutive quarter and so our communities operating cash inflow of $16 7 million.
I feel really good pervasive quarter, so our cash balance and now it's over 20 million U S. Dollar. So that's oh, yeah. We're cheaper in terms of the gross rates are quite good.
We expect we'll keep this there's a.
That's us.
Trend to generate more cash flow from operations took them to further improve franking positions met that's our O us.
We want to have enough cash balance to support the company to growth and expansion in the future.
Now, we so far we don't have a target.
Pocket to allow us to do some acquisitions, there's a kind of a thing. So we will focus our efforts to generate more cash flows. So we can enhance our position.
That's my answer your question.
Thank you very much.
I've seen yet, but I think it was I believe so.
I think the news one bundle them put in Oh, and also sort of forming new proton launch I believe where we are generating more revenue.
Oh gosh, that's a good business. So yeah first I just tried to he met the country more stronger and more healthy such that in a second also we consider any potential opportunity in the future. So which has been a concentration by I think the first step is meant a company more stronger and more healthy that's L. A.
Pretty cool thinking.
Okay. Thank you very much that completes my questions.
Yeah.
Okay.
As a reminder, if you have a question. Please press star then one to enter the queue.
Okay.
Yeah.
Yeah.
This concludes our question and answer session.
I'd like to turn the conference back over to Julien Zhang for any closing remarks.
Well. Thank you once again for joining us today, if you have further questions.
They are free to contact you calling back in relation to what was the contact information provided all of that stuff all contact our investor relations.
So I think that that's something we look forward to speaking to you all again on our next quarterly call. Thank you.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yeah.
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