Vivian Zhang

Vivian Zhang from Diamond Equity Research inquired about the source and nature of the $9 million in other income, the underlying reasons for the decline in product sales, the primary drivers behind the significant increase in revenue from Mainland China, and the anticipated impact of easing trade tensions on the market and the company's sales recovery.

Answer

CFO Yimeng Shi clarified that the $9 million in other income was an $80 million gain from the fair value of other investments, representing a change in fair values. Regarding product sales, Mr. Shi explained a $4 million decrease, primarily from $2.6 million in low-margin product-related data sales and $1.1 million from delayed Japanese mobile broadband orders. He noted that while new business lines like GlocalMe Life, IoT, and SYNC saw dramatic volume increases, their lower per-unit revenue impacted the total, though overall MAUs increased by over 10%. CEO Chaohui Chen added that macroeconomic and trade headwinds caused customer hesitation and longer decision cycles for high-value hardware. For Mainland China's revenue growth, Mr. Shi attributed it to the recovery of Chinese outbound travel and the increasing use of the Roaming Man service. Mr. Chen further detailed that 5G adoption and uCloudlink's leadership in 5G coverage, the introduction of new products like eSIM and eSIM Trio expanding into previously untouched market segments, and potential market share gains post-economic stabilization were key drivers. On trade tensions, Mr. Shi believes the impact is limited, especially for new business, citing new product launches in the US with major retailers like Chewy and Walmart. Mr. Chen confirmed that traditional mobile broadband is stabilizing with Q4 orders, and new products (PetPhone, SYNC, IoT) launched in Q3 are showing strong positive feedback, significant orders, and high user engagement, leading to expectations of better revenue in coming quarters due to increased R&D and marketing investments.

Vivian Zhang from Diamond Equity Research inquired about the source and nature of the $9 million in other income, the reasons behind the decline in product sales, the main drivers for Mainland China becoming the largest revenue market, and the anticipated impact of eased trade tensions on sales recovery.

Answer

CFO Yimeng Shi clarified that the $9 million was an $80 million gain from the fair value of other investments. He explained the product sales decline was due to a $2.6 million decrease in low-margin product-related data and a $1.1 million delay in Japanese mobile broadband orders, while new product volumes increased. CEO Chaohui Chen added that macroeconomic headwinds caused customer hesitation for high-value hardware. For China's growth, CFO Shi cited recovery in Chinese outbound travel, while CEO Chen highlighted increased 5G adoption, new product lines (SIM, eSIM Trio), and potential market share gains. Regarding trade tensions, CFO Shi noted limited impact on new business, with U.S. market expansion for PetPhone. CEO Chen observed stabilization in traditional mobile broadband and strong performance from new product lines (PetPhone, SIM, IoT), driven by increased R&D and marketing.

Inquired about the new partnership with a U.S. airport retail channel and the reasons behind the significant increase in platform-as-a-service (PaaS) revenues.

Answer

The company signed a contract with a major U.S. airport retailer at the end of Q3, with products hitting shelves in 38 airports in mid-November. Another major U.S. airport channel was signed in Q4. The PaaS revenue increased because some business partners chose to pay higher platform fees for future operational efficiencies, which is an option in their service packages.