UCloudLink Group Inc. (NASDAQ: UCL), a provider of mobile data traffic solutions, has reported a 5.6% increase in revenue for the third quarter of 2024, with figures reaching US$25.2 million. The company also posted a net income of US$3.4 million and saw its cash and cash equivalents rise to US$27.7 million. The growth is attributed to the expansion of its Glocomi ecosystem and increased 5G network coverage. The company is also preparing to launch a new AllSim solution and has signed a significant retail partnership in the United States.
Key Takeaways
- UCloudLink's Q3 2024 revenue climbed to US$25.2 million, a 5.6% year-over-year increase.
- The company's net income reached US$3.4 million, with a positive cash flow of US$2 million from operations.
- Cash and cash equivalents have increased to US$27.7 million.
- Expansion of the Glocomi ecosystem includes new products and increased 5G coverage.
- A strategic partnership with a major U.S. airport retail channel has been established.
- An innovative AllSim solution is in development, with a launch anticipated in Q4 2024.
Company Outlook
- UCloudLink aims to transition to an integrated marketplace, moving beyond mobile data traffic solutions.
- The company forecasts a potential user base growth to over 100 million.
- Revenue guidance for Q4 2024 is set between US$25-30 million, indicating a significant year-over-year growth.
- Plans include continued investment in marketing and expansion into U.S., Japanese, and European markets.
Bearish Highlights
- The company did not highlight any specific challenges or setbacks in the earnings call.
Bullish Highlights
- The expansion of the Glocomi ecosystem and increased 5G network coverage are expected to contribute positively to future growth.
- The anticipated launch of the AllSim solution could disrupt the market and create a new industry benchmark.
Misses
- There were no specific financial misses reported in the earnings call.
Q&A Highlights
- CEO Cao Wei Chen emphasized the belief that "better connection empower better life," indicating the company's commitment to enhancing connectivity.
- The AllSim solution was highlighted as a product that could break cross-carrier restrictions and empower smartphones, suggesting a strong market position.
- CFO Yimeng Shi stressed the importance of investing in marketing to increase product and brand awareness.
UCloudLink's financial performance in Q3 2024 demonstrates the company's steady growth and solid market positioning. The expansion of its Glocomi ecosystem and strategic developments, such as the partnership with a U.S. airport retail channel and the upcoming launch of the AllSim solution, are poised to strengthen the company's presence in the global market. With a clear focus on increasing its user base and extending its reach into new markets, UCloudLink appears well-positioned for continued growth in the upcoming quarters.
Full transcript - Ucloudlink Group Inc (UCL) Q3 2024:
Conference Operator: Hello, and welcome to the UCloudLink Group, Inc. 3rd Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Daniel Gao, Investor Relations of Yuke Cloud Link.
Please go ahead.
Daniel Gao, Investor Relations, UCloudLink Group, Inc.: Hello, everyone, and thank you for joining us on Yuclind's Q3 2024 Earnings Call. The earnings release and our earnings presentation are now available on our IR website at ir.yukling.com. Joining me on today's call are Mr. Qiu Ping Peng, Co Founder and Chairman of Board of Directors Mr. Cao Wei 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 both be available to take your questions in the Q and 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 previous 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 company's control, which may cause actual results, performance and 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 their conditionary statements, risk factors and detail of the company's filings with the SEC. The company does not assume any obligation to reverse or update any forward looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law.
Please also note that Nuclein's earnings press release and this conference call include discussions of Annalate's GAP Financial Information and annotate non GAP Financial Measures. Yucline's press release contents a recommendation of the annotate non GAP measures to their most directly comparable annotate GAP measures. I will now turn the call over to Mr. Chen. Please go ahead.
Cao Wei Chen, Co-Founder, Director and Chief Executive Officer, UCloudLink Group, Inc.: Thank you, Daniel, and good morning or evening, everyone. We continued to gain growth momentum during the quarter with revenue increasing 5.6% year over year to US25.2 million dollars in line with our expectations. Our financial position remains solid with a net income reaching US3.4 million dollars and a positive net cash inflow from operations of $2,000,000 During the quarter, we actively enhanced our market presence. Our Glocomi ecosystem continues to thrive, offering comprehensive data connection solutions and diverse business lines, including Glocomi Life, Glocomi SIM and Glocomi IoT that are driving our expansion beyond the travel sector into various aspects of daily life, supported by the further consolidation of our leading position in the roaming market through glokomi mobile, Vix4band. This expanding ecosystem is broadening our portfolio of solutions and allowing us to cater to a wider variety of user needs.
First, let me start with the progress we have made in our GoCommi mobile fixed broadband business line. Our 1.0 international data connectivity services business growth, with full speed 5 gs network coverage increasing from 75 countries and regions from 60 in the Q2 of year 2024, fueled by the recovery of international travel and increasing demand across the key markets. We further consolidated our leading position in the long term market and expanding our market share in Mainland China and Japan. This growth highlights the strong performance of Chinese travelers from our service during the peak summer travel season, reflecting an expanding segment of our international data connectivity services. Our next generation portable MiFi product integrated with hypercar solutions will be launched in the near future.
According to the Mobile Economic 20 24 report from the Global System for Mobile Communications Association, or the GSMA. The global number of 5 gs connections is expected to rise to RMB 5,500,000,000 by year 2030 from RMB 1,600,000,000 at the end of the year 2023. 2nd, the first three global line solutions, which include KeyTracker, Unicorp and LoanPark, make significant progress during the quarter. We lower our extensive market content and actively develop new distribution channel to support their launch, building what we believe will be a promising new revenue stream going forward. Following the introduction of our Blokomen Live product series at VIVA Technology in Maine, the series commercial launch in July year 2024, we further enhanced our market exposure by attending other leading global expos such as Travel Mid Asia, Pet and Vet Esports and IFA Berlin 2024, etcetera.
Additionally, we make breakthroughs in developing repair channels, signing with 1 of American largest airport repair channels to make Unicor, Loan Plugs and KeyTrak, among other products, available at airports across the U. S. We will develop strategy partnerships with other key channel partners across the U. S. And Europe in the coming quarters.
With the other solution already in development, we're looking forward to launching more new products in the coming quarters. The third, within our global mixing business, we continue to expand the market presence of the over the air thing as more users resubscribe to our data plan service, which is having the way for our innovative AllSim solution. This solution, which consolidates OTA SIM, eSIM and our pioneer cloud SIM technology, is under commercial testing and expected to commercially launch in the near future. Our AllSIM solution is uniquely positioned to break cross carrier restriction, empower various smartphones and set a new Pioneer industry benchmark for mobile connectivity and convenience. Lastly, our glottome IoT business line continued to advance with several products embedded our technology already in a smaller scale commercial application, demonstrating the strength and capabilities of our solutions to a broader audience in the IoT of Things Industry.
Leveraging our software cloud SIEM technology compatible with various IoT device chipset platform, we are exploring additional application scenarios as we engage with several reading manufacturers in the security IP camera, dashboard camera and related sectors. We believe that better condition empower better life. We will continue to leverage Glocomin Life, Glocomin SIM, Glocomin IoT and their integrated innovative core headcount and cloud SIEM solutions to expand our global presence through the business partner and channel globally. Over the past 10 years, the Glocomi mobile broadband business has accumulated millions of user bases, with leverage daily active terminal DAT in the Q3 over 3,200,000. We expect the Glocomid Live business will accumulate a broader user base to over 10,000,000.
Furthermore, both of the growth of the Glocomixim and Glocomixim IoT business have the potential to bring us a user base over 100,000,000 in the future, which will allow us to transition from a provider of mobile data traffic solutions to an integrated and comprehensive marketplace. With each of these business lines fading into this full marketplace, we expect our user base to diversify beyond the travel sector and grow substantially going forward. We are confident that we have the right strategy in place to generate sustainable growth in the coming quarters. For the Q4 of year 2024, we expect total revenue to be between US25 $1,000,000 and US30 $1,000,000 representing an increasing of 15.2 percent to 38.2% compared to the same period of year 2023. I will now turn the
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: call over to Mr. Thank you, Mr. Chen, and hello, everyone. I will go over our operational and financial highlights for the Q3 of 2024. Average daily active terminal is an important operating metric for us as it measures customer usage trends over its periods, which is reflective of our business performance.
Average daily active terminal, or DAP, in the 3rd quarter was 320,452, of which 55.4% were from Eucralink 1.0 International Data Connectivity Service and 44.6% were from EuclearLink 2.0 Local Data Connectivity Service. Average daily data usage per terminal were 1.52 gigabyte in September 2024. As of September 30, 2024, the company had served 2,759 business partners in 61 countries and regions. The company had 183 patents with 158 approved and 25 pending approval, while the PUA SIM cards were from 389 MNOs globally as of September 30, 2024. Total (EPA:TTEF) revenue was US25.2 million dollars representing an increase of 5.6 percent from US23.9 million dollars in Q3 of 2023.
Revenue from service was US17.3 million dollars representing an increase of 3.9 percent from US16.6 million dollars in the same period of 2023. Revenue from service as a percentage of total revenue was 68.6% during the Q3 of 2024, remained relatively stable when compared to 69.7% during the same period of last year. Geographically speaking, during the Q3 of 2024, Japan contributed 46.6%, Mainland China contributed 27.8 percent North America contributed 12.8% and other country regions contributed to the remaining 12.8% compared to 44.2%, 17.2%, 26.3% and 12.3%, respectively, in the same period, 2023. Overall gross profit was US12.19 million dollars compared to US12.21 million dollars in the same period of 2023. Overall gross margins was 48.4% in Q3 of 2024 compared to 51.2% in the same period of 2023.
Gross margins on service increased to 60 percent in the Q3 of 2024 from 55.9 percent in the same period of 2023. Gross margins on products decreased to 23.1% in the Q3 of 2024 from 40.1% in the same period of 2023. Excluding share based compensation, total operating expenses were US9.7 million dollars or 39 percent of total revenue in the Q3 2024 compared to US8.7 million dollars or US36 million dollars of total revenue in the same period in 2023. Net income was US3.4 million dollars compared to US3.5 million dollars in the same period of 2023. Adjusted EBITDA was US4.4 million dollars in the Q3 of 2024 compared to US4.1 million dollars for the same period of 2023.
For the Q3 of 2024, we generated operating cash inflow of US2 $1,000,000 compared to US2.8 million dollars in same period of 2023. For the Q3 of 2024, capital expenditures were US1.1 million dollars compared to US0.8 million dollars in the same period 2023. We maintained a solid balance sheet with cash and cash equivalents increasing to US27.7 million dollars as of September 30, 2024, up from US26.8 million dollars as of June 30, 2024. With that, operator, let's open it up for Q and A.
Conference Operator: We will now begin the question and answer session. The first question comes from Theodore O'Neill with Litchfield Hills Research. Please go ahead.
Theodore O'Neill, Analyst, Litchfield Hills Research: Thank you and congratulations on the results in the quarter. I just have a couple of questions. My first question is about the AllSim solution and your expectation that it will launch commercially launch in the near future. Can you give us an idea of what sort of milestones you have to meet in order to get to the commercial launch stage?
Cao Wei Chen, Co-Founder, Director and Chief Executive Officer, UCloudLink Group, Inc.: Yes. So I'm Chao Wei Chen, CEO of UCLAR Link. So about all SIMs, first, at the beginning of this year, we already get experience from the SIM card business. We already set around nearly 300,000 OTA SIM card. So we now understand how to play in this industry.
So our all sims solution also another name is e sim Trio, its official name, and we have to launch at the end of the Q4. So that's a first milestone. So we will launch the product. And this product, I think, is we call is currently is best your second SIM card car for people who has original SIM car, and we are the best SIM car for choice because we overcome the 1st SIM car limitation for roaming, also for domestic data connectivity for congestion and the coverage issue. Also, we overcome the primary SIMCAR for the flexibility of the data package.
So also we are fully solved the eSIM challenge about handset. So eSIM has a bigger challenge for adapt to the old handset or some handset. So we can our all SIM adapt to all handsets. Also, so we can support eSIM in all handsets, not only just a new style handset, which can support eSIM handset that need a new handset can support it. I think that's our advantage.
So we call our All SIM is compatible with the OTA SIM, physical SIM, cloud SIM and e SIM. So that's our solution, quite unique in this industry. So I think quite in a leading position in this industry. So we hope next year, we will get more promotion and more let the market understand. We can working with the partner in the worldwide local and the carrier with a 2nd tier or 3rd tier carrier and the mobile watch operator.
So we will, I think, attend the NWC to announce this news about this new solution. Okay. That's around the progress we will have in the future.
Theodore O'Neill, Analyst, Litchfield Hills Research: Okay. And in regards to your guidance into Q4, your sequential revenue from Q3 to Q4 historically, some of the quarters some of the Q4 quarters have been lower than Q3. And your guidance here at the high end of the range is that the Q4 will come in much better than sequentially have that growth higher growth than you've had in the past. What gives you confidence that you could come in at the near the higher end of the range for Q4?
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: Yes. Your attention is our guidance for the Q4 this year, which is a range between US25 $1,000,000 to US30 $1,000,000 Yes, in the past years, you said the 4th quarter revenue is normally lower than the 3rd quarter revenue. That's the past patterns of revenues in
Cao Wei Chen, Co-Founder, Director and Chief Executive Officer, UCloudLink Group, Inc.: legacy's
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: revenue stream from portable WiFi, but this year, the Q4, the guidance is a little bit higher than the 3rd quarter's revenue. We think our new product like Gourmet Life series product has been launched to the market and gain some revenues in Q4 as well. And also that's a trend we grow with more than just portable WiFi terminal. I think this trend will this trend as Varex revenue streams more than portable WiFi will be significant in the next years. So that shows our strategy to grow from 1 business line to 4 business line and that will be come to our account from this Q4 and following the quarters next year.
Theodore O'Neill, Analyst, Litchfield Hills Research: Okay, that makes sense. Understood. My last question is about the sales and marketing expenses in
Daniel Gao, Investor Relations, UCloudLink Group, Inc.: the
Theodore O'Neill, Analyst, Litchfield Hills Research: quarter. I understand there were some expenses for trade shows and product launch. Can you talk about whether or not you expect the expense is in the Q3 sales and marketing expense will continue at that level or will that come down somewhat going forward?
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: Yes, we will spend more. We will spend invest more on marketing and as different countries like the U. S. Market, Japan markets and European markets. And as we disclose, we have a corporate with one biggest airport retail channel.
We also have a corporate with more, there's a top channel in U. S. And European. So also we will have enhanced our marketing's exposure for our new product like Gloomi Life and when Glomi is seen, all same solutions will be launched to the market. That solution is innovative to the market.
So we need to invest more on the market and to get awareness of our product, our values to the market. So we will invest more on market expenditures and that's absolutely we will need to do that. But at the same time, we'll balance the financial positions when we support and invest on growth. So maybe the marketing expenditures will be increased with the balance. We have still maintained growth with the profit and positive operating cash flow.
Thank you.
Theodore O'Neill, Analyst, Litchfield Hills Research: Okay. Thank you. Thank you very much. That concludes my questions. Thank you.
Conference Operator: The next question comes from Vivien Jiang with Diamond Equity Research. Please go ahead.
Vivien Jiang, Analyst, Diamond Equity Research: Hello. Good morning and evening. This is Vivian Zhang with Diamond Equity Research and congratulations on another strong quarter. So my first question will be about the partnership you just mentioned with the U. S.
Airport retail channel. So can you provide us some more color on this corporation and how it will impact the future product sales?
Cao Wei Chen, Co-Founder, Director and Chief Executive Officer, UCloudLink Group, Inc.: Yes. We the progress in the Q2, we in May, we just in the VIVA exhibition, we announced we will launch the Glocomid Live product. And the launch we launched 3 new products in July. So and after a quarter ever, so end of the Q3, we signed a contract with 1 of the largest U. S.
Airport channel partner. So I think you already can see in the 38 U. S. Airport in the shop. So in airport shop, you can find our 3 products for Unicor, for long plaque and our advanced tracker, so T Tracker.
So you can see these 3 products. So I think they just they launched this product in November middle of November. So you can see the product. We signed the contract end of Q3 and the product leased in the shop in the middle of November. So I can also give some guidance.
And in the Q4, we already signed another American big channel. So that's the total 2 big channels in the U. S. Airport we all encourage. And the second one will be we already finished a winning contract in the Q4, and we'll release the product in the next Q1.
That's the progress for our progress in the U. S. Airport channel, 2 biggest. I think in the following quarter, we will continue put our effort in the other U. S.
Big top 3 channel. We continue effort to be assessed by this channel buyer. Also, so we have some breakthrough in Q4. So in Europe, some big channel. So we already successfully to sign a contract, and that's the progress.
Just in 3 or 6 months, I think we can break through some top tier channel in airport. So I hope next year, we can break through more top tier channel with the consumer or pet channel in the next years.
Vivien Jiang, Analyst, Diamond Equity Research: Okay, got it. Got it. So my next question is that, can you elaborate on why like why pass on SaaS services revenues increased significantly like over 29% in the Q3? And is this growth sustainable? Thank you.
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: Yes. We cooperate with our global business partners in various way. Our pass out revenues, the business model pass out revenues have a way
Vivien Jiang, Analyst, Diamond Equity Research: Can you hear
Cao Wei Chen, Co-Founder, Director and Chief Executive Officer, UCloudLink Group, Inc.: me?
Vivien Jiang, Analyst, Diamond Equity Research: Yes.
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: Okay. Yes. That's the Q3's pass out revenues increased significantly because some business partners are willing to pay more platform fee for the future operations efficiencies improvement. So that's our business partners' choice. You can buy different package for our platform service.
Vivien Jiang, Analyst, Diamond Equity Research: Okay, got it. Okay, that makes sense. That's all my questions. Thank you.
Yimeng Shi, Chief Financial Officer, UCloudLink Group, Inc.: Thank you.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Daniel Gao for any closing remarks.
Daniel Gao, Investor Relations, UCloudLink Group, Inc.: Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact Yuclen's Investor Relations through the contact information provided on our website or speak to our Investor Relations firm, Christensen Adversary. We look forward to speaking to you all again on our next quarterly call. Thank you.
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