uCloudlink Group - Earnings Call - Q2 2025

Transcript

Speaker 5

Today, and welcome to the uCloudlink Group Inc. Second Quarter 2025 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. 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 Mr. Daniel Gao. Please go ahead, sir.

Speaker 0

Hello, everyone, and thank you for joining us on uCloudlink's Second Quarter 2025 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir.ucloudlink.com. Joining me on today's call are Mr. Zhiping Peng, Co-founder and Chairman of the Board of Directors, Mr. Chaohui Chen, Co-founder, Director, and Chief Executive Officer, and Mr. Yimeng Shi, Chief Financial Officer. Mr. Chen will begin with an overview of our recent business highlights. Mr. Shi will then discuss our financial and operational highlights for the quarter. They will all be available to take your questions in the Q&A section that follows. Before we proceed, please note that this call may contain forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements 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, which may cause actual 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 entirety by the cautionary statements related to factors and the details of the company's dealings with the SEC. 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 conditions, or otherwise, except as required by law. Please also note that uCloudlink's earnings press release and this conference call include discussions of unaudited GAAP financial information and unaudited non-GAAP financial matters.

uCloudlink's press release contains a reconciliation of their unaudited non-GAAP matters to their most directly comparable unaudited GAAP matters. I will now turn the call over to Mr. Chen. Please go ahead.

Speaker 1

Thank you, Mr. Daniel, and good morning or evening, everyone. We are accelerating three transformative growth lines: GlocalMe Life, led by a platform; GlocalMe SIM, powered by eSIM TRIO; and GlocalMe IoT, through focused investment in R&D, go-to-market capabilities, and brand building to drive sustainable market expansion, while simultaneously strengthening our legacy GlocalMe mobile broadband business line by proactively offsetting tariff impacts through strategic supply chain adjustments. Throughout this expansion, we maintain financial health as our foundation, ensuring disciplined investments drive sustainable profitability and laying a solid foundation for sustainable long-term value creation. Our GlocalMe ecosystem continues to gain traction and growth momentum. Our business remains profitable and continues to generate a stable margin, with total revenue of $19.4 million and net income of $0.7 million during the quarter.

Our 1.0 international data connectivity services business continues to grow with full-speed 5G network coverage across 86 countries and regions as we continue to consolidate market share, especially in mainland China and strengthen our leadership position in the global roaming sector. Our substantial strategy investment focuses on R&D and marketing for our next-generation products to ensure they drive growth and improve our performance once launched. The development, refinement, and testing of these products progress smoothly with several major distribution partners as we build a robust pipeline and enter a final stage of commercialization. Feedback has been overwhelmingly positive, reflecting how our solution directly addresses the market demand and has validated our investment strategy. This has set the stage for the launch of several groundbreaking products in the near future. In this quarter's earnings release, we have introduced a new metric: average monthly active terminals, MAT.

Our three new product lines, GlocalMe Life, GlocalMe SIM, and GlocalMe IoT, demonstrated remarkable MAT growth of 105.2%, 120.1%, and 789.0% year-over-year, respectively. I will now review highlights for each of our key business lines. I will start with GlocalMe Life business line, the upcoming commercial launch of the platform, where we already have over 20 potential strategy partners lined up, and we launched a brand in several countries in the third quarter of the year 2005. In Hong Kong, we are collaborating with a premier telecommunications service operator to launch the platform, making a significant expansion in our global market research and the rollout of a powerful win-win cooperation model. This allows operators to monetize premium subscriptions, acquire high-value pet-owning customers, and diversify their revenue streams through our value-add services. Our technology amplifies their market research, and their infrastructure accelerates our scale.

We also make substantial progress with a leading global online pet retailer to further enhance PetPhone's accessibility and the market penetration within a short time. Alongside PetPhone, our industry-first Unicore+ and Unicore+ series, which are highly competitive, innovative, and pioneering products, integrating seamless connectivity across multiple networks, six-stack global positioning, and fast charging capabilities, we have further strengthened our competitive edge in the travel, automotive, and secure networking markets. Commercial application of our GlocalMe IoT solutions also continues to gain strong momentum, with user adoption growing over 10 times year-over-year after nearly three years of commercialization efforts. As revenue contribution increases, entering a new phase of accelerated growth. Beyond core connectivity revenue, we are also diversifying monetization through value-add services.

We enable China's top manufacturers to accelerate their global expansion through customized IoT connectivity solutions, strategically partnering with more industry leaders in the battery monitoring, dash cams, vehicle infotainment, and the smart security camera sectors, accelerating our expansion into high-growth verticals, further consolidating IoT as a key pillar for our business. Turning to our GlocalMe SIM business line, our success isn't an accident. It is the result of a successful business evolution. We have already sold over 300,000 OTA SIM and eSIM units since the year 2024. Outperforming competitors in these baseline segments, we achieved top-ranking market share in our outbounding travelers of mainland China, traveling to Hong Kong, Macau, Japan, and Korea. These operational maturity positions are distinctly from market entrants. Building on this foundation, eSIM TRIO represents our second more advantageous real life.

While competitors remain focused on the legacy SIM or eSIM technologies, we have advanced to redefine industry standards through this innovation. eSIM TRIO has been recognized as a transformative solution, receiving the top NWC Innovation Award from the SAS Guild. Its groundbreaking capabilities generate significant industry attention at both Mobile World Congress year 2025 in Barcelona and Mobile World Congress year 2005 in Vienna. Our comprehensive marketing campaign for eSIM TRIO, executed in a partnership with top media outlets, substantially increased its market visibility and exposure. We are synergistically addressing two critical pain points for the industry with this product. First, as the ultimate permanent secondary SIM for consumers, it ensures seamless global coverage by dynamically connecting to multiple networks, eliminating the need for costly international roaming and providing users with reliable, high-speed connectivity across devices.

Secondarily, through our carrier core insurance program, we solved a critical pain point for operators, especially Tier 2, Tier 3 mobile network operators and mobile virtual operators, by upgrading their network performance and global roaming capabilities without the need for infrastructure investment and budgeting power. With nearly 1,000 trial units distributed, strong user feedback, peaked thresholds in carrier partnership programs and sample car production, and testing with multiple operators scheduled for the next quarter, we are poised to begin large-scale commercial deployment during the third quarter with strong market confidence. Lastly, in our GlocalMe mobile fixed broadband business line, we pilot-launched the upgraded MeowGo G40 Pro late in the second quarter, with the support speed three times faster than traditional 4G devices. It's the world's first enabled infrared Wi-Fi and connects to Wi-Fi networks across several application scenarios such as home, airport, office, and cafes.

With MeowGo G40 Pro, we are transforming portable connectivity from an international travel-only solution to a true market scenario companion with our patented AI HyperConn technology, SIMless serving users through a single intelligent device and one account regardless of where they are. Furthermore, in the third quarter, we will launch the MeowGo G50 Max with the sky-to-ground 5G satellite integration and AI-driven network switching, further solidifying our innovative leadership in the mobile fixed broadband industry. This device enhances network quality through AI-powered real-time condition detection and network reselecting. In summary, we are ideally positioned to capitalize on our strategy and operational momentum. Despite trade and macroeconomic headwinds, we remain committed to executing our strategic R&D and marketing investment for new products while sustaining a healthy finance performance.

These three products from our core business line, GlocalMe SIM, led by eSIM TRIO, GlocalMe Life, enabled by PetPhone, and GlocalMe IoT solutions, have all achieved successful transformation in the second quarter, laying a solid foundation for future growth with the potential to reach real multimillion of users in the future. Our diversifying product portfolio provides multiple pathways for us to drive growth throughout the remainder of the years as we scale up our user base and build a comprehensive global market data traffic and sharing marketplace. We are confident that we have the right strategy in place to generate sustainable growth in the coming quarters. For the third quarter of year 2025, we expect total revenue to be between $22.0 million to $26.0 million, representing a decrease of 12.7% and an increase of 3.2% compared to the same period of the year 2024.

The company currently expects its revenue from the full year of 2025 to be in the range of $85.0 million to $95.0 million, as compared with a range between $95.0 million to $130.0 million, as previously announced. The company is revising its guidance in light of the present macroeconomic challenges and the global trade headwinds, which have had and may continue to have a broader impact across the industries. Now, I will turn the call over to Mr. Shi. Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the second quarter of 2025. Average daily active terminal, DT, and average monthly active terminal, MAT, are important operating metrics for us. The measure customer usage trend over the periods is reflective of our business performance.

In the second quarter of 2025, average DTs were 317,957, of which 18,863 owned by the company and 299,094 not owned by the company, representing an increase of 3.8% from 306,289 in the second quarter of 2024. During the second quarter of 2025, 55.7% of DT were from uCloudlink 1.0 International Data Connectivity Service and 44.3% were from uCloudlink 2.0 Local Data Connectivity Service. In June 2025, the average daily data usage per terminal was 1.59 gigabytes. Average monthly active terminal, MAT, in the second quarter were 663,197, representing an increase of 5.6% from 628,125 in the second quarter of 2024. First, average MAT in the second quarter of GlocalMe IoT solutions business was 42,095, representing an increase of 791% from 4,725 in the second quarter of 2024.

Average MAT in the second quarter from GlocalMe SIM business was 42,271, representing an increase of 120.1% from 19,208 in the second quarter of 2024. Third, average MAT in the second quarter from GlocalMe Life business was 2,633, representing an increase of 105.2% from 1,283 in the second quarter of 2024. Fourth, average MAT in the second quarter from GlocalMe mobile fixed broadband business was 576,198, representing a decrease of 4.4% from 602,909 in the second quarter of 2024. As of June 30, 2025, the company had 183 patents with 167 approved and 16 pending approval. The approval of SIM cards was from 391 mobile network operators globally as of June 30, 2025. Total revenue for the second quarter of 2025 was $19.4 million, representing a decrease of 13.3% from $22.4 million in the same period of 2024.

Revenue from service was $14.6 million in the second quarter of 2025, representing an increase of 3.3% from $14.2 million in the same period of 2024. Revenue from service contributed 75.5% of the total revenue during the second quarter of 2025, compared to 63.4% in the same period of last year. Geographically speaking, during the second quarter of 2025, Japan contributed 33.6%, mainland China contributed 33.2%, North America contributed 15.3%, and other countries and regions contributed the remaining 17.9%, compared to 46.2%, 23.5%, 14.6%, and 15.7% respectively in the same period of 2024. Our gross profit was $10.2 million in the second quarter of 2025, compared to $11.0 million in the same period of 2024. Overall gross margins in the second quarter of 2025 further rose to 52.8% from 49.2% in the same period of 2024.

The gross margins on service were 56.6% in the second quarter of 2025, compared to 60.3% in the same period of 2024. Excluding share-based compensations, total operating expenses were $10.1 million, or 51.9% of the total revenue in the second quarter of 2025, compared to $8.7 million, or 39.1% of total revenue in the same period in 2024. Net income in the second quarter of 2025 was $0.7 million, compared to $2.2 million in the same period of 2024. Adjusted EBITDA was $1.4 million in the second quarter of 2025, compared to $3.3 million in the same period of 2024. For the second quarter of 2025, we recorded operating cash outflow of $0.9 million, compared to an operating cash inflow of $4.7 million in the same period of 2024.

For the second quarter of 2025, our capital expenditure was $0.2 million, compared to $1.6 million in the same period of 2024. We maintained a solid balance sheet with cash and cash equivalents of $30.2 million as of June 30, 2025, compared to $31.1 million as of March 31, 2025. With operators, let's open up for Q&A.

Speaker 5

Thank you. 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 are using a speakerphone, please pick up your handset before pressing the keys. 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. Question is from Theodore O'Neill, Litchfield Hills Research.

Speaker 2

Thank you. My first question is about the GlocalMe ecosystem. You're seeing strong growth in the quarter, and I was wondering how much you expect that to continue in terms of growth.

Speaker 1

I'll put some colors first, and then I see the CEO has more comments on that. In this second quarter, we just had statements in this IR call. There were some three new businesses: three new businesses such as GlocalMe IoT solutions, and the GlocalMe SIM business, and also GlocalMe Life business. These three businesses have shown strong and rapid growth in terms of average monthly active terminal. Even as the figure tells us, the IoT business and the MAT increased nearly eight times on a year-over-year basis. The SIMs MAT growth more than 100% compared with the same period last year. The live business in terms of MAT growth 105% on a year-over-year basis. Even the revenue generated from these three new businesses is small proportionately, but the growth trend is massive.

We expect the new business, IoT, SIM, and live, will scale our user bases to a multimillion basis. That gives us the future's strong growth potential to 10 million user bases in the next couple of years. Yeah.

Speaker 4

I'm Jeff. I have some more comments about this. Because we put a lot of R&D resources in the branding and marketing, investment in these three new products we already have nearly more than one year. For IoT, we already invested here for three years. We can see the IoT part is now going to a new stage because we already finished the testing period with the major leaders in the industry for IoT. Now it's starting to launch the product. We can see the faster growth from the revenue side and the MAT side. For example, like the major matters, maybe every month just active ones. MAT can more really threaten the IoT growth. We can see now it's on the right track. We believe the trend of every month we can see the data is fast growing.

We believe IoT will be the first one to make a positive profit. After three years' investment, that's the first. Second, from the SIM card, we already sold a SIM card for 300 pieces. We get the experience. We know how to play the game in this industry. In some travel lines, for example, like China trip to Hong Kong, trip to Macau, trip to Japan, we already go to the tier one sector in this SIM card service in China. Now we are more confident because we have new products for eSIM TRIO. This innovative SIM card came out, and we just launched at the end of June. Through the, I think we do the promotion with the Fan Zhong, for the lead advertisement. It gets a very fast growth as well. Finally, you can see our GlocalMe Life product.

Currently, the smaller revenue is we started to launch our GlocalMe Life product at the end of last year. It's for cable. It's our Unicor is our fourth product and a long plug. In the end of second quarter, we had new, the second generation of the Life product come out, like Unicor Plus, like this new Unicor Pro. This new product comes out. It's more stronger capability, more high performance. It will be winning more market share. More important, I just emphasize here is our PetPhone product. I think we already finished many trials. We try to improve our product better and better. We keep in our R&D, and we just let our product reach our requirements. That's why we delayed the launch of the commercial launch. Our preview is a launch we're supposed to launch in the second quarter, but now we're postponed to August.

As middle of this August, we will launch the global wide link of our PetPhone. I think currently the feedback and the trial is very positive for our new version. We believe this will lead to fast growth after our heavy investing in the branding and the marketing. Let me just give a brief about our three new product line growth. Although we had some impact on the tariff, as I mentioned, for tariff impact for our traditional product, I think we can see the fast growth for new products.

Speaker 2

Thank you very much. My next and my last question is about sales of products were below expectations. I was wondering if you could give us some more detail on that. Was that tariff related? Is it particular geographies?

Speaker 1

Yeah. Because there's earnings for the second quarter, our quarterly revenues achieved below the guidance, and that's $23 million. The main reason for this lowest revenues achievement is the legacy mobile broadband business. The order from Japan was delayed. That was a couple of millions of U.S. dollars. This order will be placed in this quarter, third quarter. This is the main reason for the second quarter's revenues achieved below the guidance. The second reason is microeconomics and trade headwinds. That's our sales on the U.S. market have not reached the expectations. The major geographical reason is the Japanese market's delayed orders. The second is the trade headwinds. That's a little bit impacted our sales in the U.S. market.

Speaker 2

Thank you very much.

Speaker 5

Next question is from Vivian Zhang, Diamond Equity Research.

Speaker 3

Hello. Good morning and evening, everyone. Thank you for taking my questions. My question is regarding the company's upcoming product, such as the PetPhone. Do you think this upcoming product will be affected by the industry headwinds and result in lower than expected sales?

Speaker 1

Because this new product, I think it's a new concept, a new innovation in the industry. We already have hundreds of pieces already in commercial trial. All the feedback is very positive. Also, we improve, we adopt some consumers' opinion that this product is more better and more, I think, competitive in the industry. Because it's a new product, new concept, from currently, we can see the feedback from the users, feedback from investment, feedback from our channel, feedback from the mobile operator, all is very positive. I believe this product will be very successful. That's why we are now having we are very confident. We already have invested in R&D design. Also, we were more invested in the branding.

You can see that from this month, we start to launch products in Hong Kong, U.S., and with some big channels, and we have 10 countries in our plan, country by country. We will land with our local big channel partner. We start to launch this product. We haven't placed a big forecast in our annual product revenue because I believe this is from the concept to the big volume needs two or three quarters. That's our current believing. The product, we haven't placed a big order here. We believe in the future, this will bring us a very successful product. We believe so, and our partner also believes so.

Speaker 3

Okay. I see. Thank you for answering my questions. That's all my questions. Thank you.

Speaker 5

This concludes our Q&A session. I would like to turn the conference back to Mr. Gao for any closing remarks.

Speaker 0

Okay. Thank you, once again, for joining us today. If you have further questions, please feel free to contact uCloudlink's investor relations through the contact information provided on our website or speak to our investor relations firm, Christensen Advisory. We look forward to speaking to you all again on our next quarterly call. Thank you.

Speaker 5

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.