uCloudlink (UCL) 24 Mar 222021 Q4 Earnings call transcript

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to uCloudlink Group Incorporated Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After prepared remarks by the management team, there will be a question-and-answer session. Today's conference call is being recorded. to Ms. conference like your over now today, host would turn call the to I Investor of Zeng, Jillian Relations the Company. Please go ahead.

Chief Thanks, fourth to quarter services. I today. us our ir.ucloudlink.com as on uCloudlink of Executive is XXXX website Vice our and give Yimeng via Tan Co-Founder, Co-Founder the our joining Board Directors; is call newswire Peng as of on release This our Zhu everyone, earnings earnings Chaohui a Zhiping Sales. at our team. Director available President is IR Chairman and Officer; will well Shi and for full-year Officer; now Marketing our Chief is brief introduction Chen and of Financial the our is

our cover on which business Our CEO Company website. will and Section presentation posted of begin will the our earnings IR of highlights, with X overview an

then Shi presented operation Our in will X and as and Sections CFO, discuss X. financial results our Yimeng highlights

statements. required forward-looking filings the actual that entirety Litigation of details forward-looking Before pursuant risks, Reform under from we their to forward-looking risk achievements Securities be expectations implied unknown statements press information, Company's the and statements obligation include note XXXX. safe the of law. please does or expectations in results, Act Please note Private materially are release will statements, measures. qualified Company revise statements release our by CEO, results, may Company's All other measures. involve to ahead. any contains discussions as and uCloudlink's events, measures control, except conditions call well are unaudited of in GAAP that not this factors which also to The SEC. these the the the market new proceed, unaudited may cause Mr. by different changes or non-GAAP turn expressly performance conference as as update the facts non-GAAP Company of this cautionary press that management's the of known otherwise, performance a information to These financial the or a the earnings statements to and assume Chen. by forward-looking provisions or the I not GAAP and current any of now result unaudited and on future the with call Chaohui uncertainties and comparable forward-looking unaudited Please made harbor go reconciliation uCloudlink's Co-Founder financial of based over contain as directly observations call most

presentation the you. year Yes, development. thank earnings of content of on technology third our XXXX. the I quarter will There as focus recent are similar and

Let's which move XX. track potential. services international margins X.X and business, record to high has connectivity had ongoing uCloudlink the data of gross our is profitability with a strong growth Page

operators such our unit as end differentiate further to acquire to and from retail repackaging operators, connectivity as model virtual data ensure rental that technologies, wholesale and and in multi-network package We data partners. management, management, selling improve minimize and selling cost ourselves or rental large traffic, and C, partners; could billing and combination devices or operators experience. PaaS intelligent of monetization includes SaaS X.X our B, solution differently. CRM, local prices have reselection to et our which priced data an with cetera. and is card business pool wholesale our at uCloudlink wholesale-to-retail SIM high-quality attributable mobile user single mobile We the This are to network operator ability to packages established business data user; to of services, across

year and terminals called the business We PaaS charge through services strive XXXX and quarter business year-over-year. the American to recovery our of during traffic revenue daily X.X SaaS In reseller and to and X.X the international a year-over-year. to reflected first pools the XXXX business, increased in XXXX, DAT X.X growth, was X.X in our trends our year business of third we of our wholesale positive in travelers allowed active business which our B, The to of fee. Europe data North or of accelerate For we market in increased in as business number the can partners platform revenues commission partners. as share our various a year markets of increased act quarter our the commission provide

has virus. the the revenues COVID-XX same Although line year-over-year of total decrease of the business, due on data business the opportunities our vaccination COVID from in demand and a related to impact the impact including passports, growth, digital pandemic tracking, experienced period potential for X.X the travel, report. to mobile the Despite created the had same it records, also the test has for

international travel negatively that see to their but will reiterate vaccination We that and We impacted year XXXX to XXXX. pandemic market, our for COVID-XX post-pandemic not the in the connectivity vision to in countries With prospects we you and international more tourists would borders also worldwide the competitors in remain anticipate and opening be data progress X.X like for with X.X business we year beyond. business. the will continuing more that, I by confident fewer assure in now could

innovative existing share to of the high-quality to big size X.X plan services. and with Our market providing not offering, only is products more development continue but

a Let's X.X year uCloudlink revenue has services new model local and move is base. of the is a local similar massive to driver connectivity This business the that business potential X.X since become XX. the monetization to growth XXXX. Page user uCloudlink data with our of

and our U.S. China, Japan. contributed partners X.X greater connectivity is HyperConn have data our HyperConn growth the uCloudlink various development partners and as our and we operators Currently, expanded mobile local with industries widely of network further and growth innovative scope potential, business by local the of the business Our business, in services. accepted with technology to such technology new in

during growth business high-quality provide services Our problems connection proven and PaaS We data data resilience their solve shows the of the improve with help data operators deal greater in connection X.X and connectivity SaaS demand We which better our product a get response platform. remote pandemic. high through potential as to and our used connectivity reliable services solutions normal, learning, for applications increased to work demand people provide the well. for for services. and better the Furthermore, new require XG and performing as

in For and new industries been HyperConn put as equipped example, to has our with SIM tablets new Cloud education. such technology use

HyperConn and solution have We as under application progress business broadband. through scenarios home mobile fixed broadband various with such made

to launched our with For example, our provinces. cooperation business major operator has and in more broadband distributed and of mobile China one network been fixed successfully

invest We hardware Inside, with call, GlocalMe manufacturers. we in GMI device by plan more to cooperating also smart more intelligent

limited exploring In have application e-commerce and Autopilot, prospects broader to serve actively et addition, footprint scenario, are but IoT industry Camera; Internet including to more of modules; routers; a IoT Things, and Power price; live IP our cetera, extended not new Wi-Fi a applications. we emergency broadcasting into of services; business spectrum

X.X with market our support our to we Cloud our and with technology innovative partners. expect our grow to HyperConn and as SIM the cooperation strengthen of the continue products local the and We business introduce solutions, services to

of we on Let's technology devices. SIM products the continue and third-party portfolio and offerings innovative HyperConn such our broaden with Based move our our Page Cloud to new self-developed services, solution, as to develop and XX. terminals and

Turbo, June and we For our launched and products new Numen, half solution we to second XXXX, these of the year world’s Genie, Mini XXXX, of the the the in HyperConn Wi-Fi portable the XG technology a products the markets of such with year of equipped year XXXX third unveiled XXXX. and example, first mobile year as quarter after in the HyperConn in quarter Wi-Fi HyperConn and in tablet device Hotspot fourth

commercially Camera, testing completed has expected Our to IP IPC launch and soon.

related are user been base gaining recognition technology received a well solution Our across spectrum growing proven of products industries. and HyperConn has wide by

SIM our uCloudlink types Going with to technology forward, technologies launch like in In notably both technology are of positions provider these more made HyperConn products development, we innovative advantages. itself scenarios, of data a solution application to most the which that market. of pioneer in year XXXX, services. priority as plan a we research connectivity in and reinforce greatly invest Cloud and various compatible and

and SaaS the recognized newer of partners. mature X.X will business development promote and business long-term business which various by been the Our has PaaS ecosystem, X.X together

full-year believe that driving million expects to expansion support US$XX our anticipate information the we total connections, advanced release, earnings to million in the commercialized between by of the of growing financial existing our the of the total The with our as million XXXX efficient year uCloudlink company to quarter the for XXXX year covenants related era. connected product, XX% improvement range versus scenario of stated in of a of revenue as US$XXX HyperConn of and revenue ongoing in As to to significant XG business expense. improve the a well XXXX. XX% technology application reduce force US$XX.X of to operating increasingly We IoT the diverse transformation is year continuous strategy since implemented the four better from year portfolio

over to the turn more in CFO, and future serving customers I our and Shi, financial positive for a to connected through it Yimeng committed are we build and now business more will a to make We users, community. strive will global impact who go user highlights.

Hello, Mr. you, Chen. Thank everyone.

XXXX. fourth Terminals, Let by by to Average left-hand owned Daily December an business of quarter were XXX,XXX active X,XXX of the the the XX.X% XXX,XXX of XXX,XXX owned of quarter Page fourth in representing business our from slide the DAT, The XXXX. our highlights. side Active for XX us XX, shows in partners, and terminals increase daily turn as company including

the gigabytes fourth of per for service daily of around X.XX XXXX. December XXXX. in Our Average terminal total uCloudlink the data accounted X.X DAT XX% usage during quarter was

We global XX to from the outside diversification us our of Let business. which Mainland XX% China. turn Page of revenue total shows had

contributed fourth the to of quarter the XXXX, During total Japan XX% revenue.

as we cetera. largest continue business countries’ our the et the other expand South such U.S. contribution business market and Europe further had For to other our East and revenue, of Japan, will to China, Asia, markets development U.S. with

of total X% XX% XX% revenue coming XXXX, of other from Mainland and revenue and During China, total revenue from coming countries regions. the of had total we from Japan coming the fourth quarter of

a with in will fourth quarter to was Let Page XX.X% increased revenue XX.X% the from through PaaS XX. I compared connectivity the revenue of percentage XXXX partners our total fourth quarter use million us expansion our of of as due XX.X% total XXXX. the fourth compared the the of of revenue to fourth a during quarter fourth financial of from SaaS quarter that Revenues Service-related XXXX. go primarily business during XXXX. number million Revenues the provide increase US$X.X of from during services XXXX and local PaaS SaaS data during of turn our in US$X.X fourth XX.X% to quarter was also services percentage to of XX.X% the XXXX the of XXXX. This services. in quarter to and fourth SaaS as PaaS with and quarter highlights the increased

XX Page revenue to move two which shows us from of breakdown the namely Let sales services and segments, of revenue products. business our

XXXX SaaS connectivity the increase the and US$X an million revenue from in service representing increased increase from million X.X% of primarily of fourth quarter the for in US$X.X increase was Revenue were US$XX by quarter same This XXXX. total attributable PaaS XXXX. Our period from million, million fourth US$XX.X and to from data in of local services revenues service. of to X.X%

turn the business. our gross to us XX Page margins for of Let

period of XX.X% XX.X% quarter margin compared during in of the margin to SaaS service of margin XXXX of and compared XX.X% gross our other in XXXX. XXXX of our increase XXXX, in quarter fourth service gross overall primarily same the XX% business increased gross quarter fourth Our during and revenue. margins fourth to our the revenue, of gross to fourth the was quarter was The due XXXX which highest increase has to PaaS the the over

Page move operating excluding breakdown which compensation our and of XX, the share-based Let others. shows to us expenses

percentage for research with development Excluding revenue been of expenses the share-based XX% a and during of and a in compared XX% operation quarter total cycle the improve time few The our research and operating of fourth will optimize quarter efficiency and have past to was we development, as XXXX compensation, of years XXXX. continue fourth peak our the business.

Operating fourth during US$X.X cash of US$X.X XX. Let's the during turn the negative quarter Page to of XXXX to negative million fourth was quarter XXXX. million compared flow all

US$X.X Our December XXXX. cash were XX, deposits million short-term and as equivalents cash at and

fourth US$X.X X.X% to CapEx fourth quarter US$X.X Our quarter during as million to compared million fourth quarter was fourth XXXX the of quarter percentage the XXXX. CapEx XXXX. the during revenue to the during during of of XXXX decreased the X.X% of from

to Net XX. quarter EBITDA during the Page conclude first fourth Thank XXXX. the million Q&A million of was negative during was million loss of Let's US$XX.X XXXX move quarter quarter million we compared XXXX. the the during compared of today's start XXXX me fourth US$XX.X that, our US$X.X US$X.X Adjusted presentations. all to quarter and negative will let session. during With fourth of to you,

and Investment question-and-answer And Ladies with question. the Research. begin session. gentlemen, ahead Zacks this [Operator at from your question time, today our we'll first from Lisa go Thompson comes Please Instructions]

evening. good for Hi, you presentation. Thank that

have So number the a I questions quarter. of about

First, could what's now you have count you fully convert? share tell just current the us diluted that a

repeat question? Hi, the Lisa, you can

the count a now that share convert? What's current fully issued Yes. diluted you've

account debenture – shares taking we convert in this diluted Yes, will into disclose that this that convertible January. issues

in disclosed only first quarter year. the be will released this figure that So

Okay.

million where or that? cash as $X So number. this a are Is is you month the far now? than as it less right, All burn,

XXXX, bond for of US$X.X million quarter cash fourth operational the we In flow.

company XX, short-term US$X.X million. cash US$XX.X short-term and deposits, As and equivalent cash million the investment of December and had at XXXX,

completed XXXX, short-term the through of balance equivalents, of flow and convertible cash, company's deposits So private projection in investment. January cash the insurance an a with company cash the based million existing on of debenture US$X.X and short-term proceeds placement

companies think execute flow – obtaining well. a revenue fund successfully plan, positive generate the sources controlling company's have sufficient take to external as cash And while has company increasing to operating measures business operations. includes which sustainable from for – I expenses operating its the and this

be materially. So burn we improving expect year the rate cash this will

cash others, flows And so position healthy we the managing our into guidance this and in for we were year. expect

So you'll cash of the the to year? do by end you get breakeven think flow

That's efforts achieve will we will and – we to what be expecting, are – management that take achieve target.

right. All

income you million that? the expense? was statement, that As what $X.X could other What as say far in caused

operating of mean You breakdown expenses? the the

Right.

you Lisa. repeat? Hi, Can

the What's number, number? in there? $X.X million? in What's Yes. in What's that the

million $X.X cash balance, right?

and income income other statement? on million Under the right, expense? $X.X $X.X No, in general there's administrative, million

after we that this for [indiscernible] figures okay? these have can Lisa, call. Is

Okay. It's answer. an not easy

tablets you update an also have So canceled? when the could Japan, has might – still start? or in for that order give you do on that been And education

pass Chen Can question? Mr. question answer or to the to I Yeo, Chaohui the

Okay.

Japan, contract about the asked right? in You pad

pad So in can you repeat question? your about right? Yes, Japan, it's

Yes.

pad again. in Japan The education, Yes. order school going it's still on. But because face-to-face in restart Japan, is the a

on. than speed but the still is our a slowly little So expectation, bit going

why in Okay. And revenues is there an explanation for declining? Japan are

clear local in requirement COVID-XX it's the of because course, getting and of when before QX because because think because But meeting, because the XXXX, huge. I But happened, – Yes, become out. new the recovery, [indiscernible] of is come pandemic virus, and face-to-face QX worse because year COVID-XX the of again. because the still because vaccination, medicine the that QX,

meeting face-to-face and and So working. education remote face-to-face

X.X domestic So decreasing. decrease little in Japan bit that that, a

final launch my is, any to more And Okay. question there products you are plan soon?

HyperConn have that Yes. between solution, the XG, network. with the can product, Numen, Wi-Fi, XG order XG we – – that we all have is Yes, the you see XG the fourth workforce which switch [indiscernible], can

third in we And with global Europe part U HyperConn only don't IoT the quarter. band] X.X we And and launch. the call product, launch and second That's band the more we and launched radio CPE the moment. have radio And because the inside. new the one like a band, competitive module this our with global recently, XG more, part. [radio band radio a have So with Asia product key we to price at accelerate

as as fourth So products industry more are router. we testing quarter, we IoT mentioned in – launching I finished for the such

in product That’s launched year a And the into roaming the XXXX. module So including fourth more year quarter IP also, have come we the – module, fourth product year of camera we up, of And product new quarter XXXX. products. have the also, in the IoT in competitive year launched including more fourth quarter we our XXXX HyperConn as well. Wi-Fi of And we XG, launched XXXX. more international more

That's forward Thank Great. right. you. all All questions. to. my to That's something look

next Diamond Zhang And question Vivian from from comes Equity. our

Thanks Hello, my taking for everyone. questions.

[indiscernible] company the So partners the business during with last growing. maintained year, topline second see half of with SaaS partnership, we the and business PaaS and growth

instead to decrease year-over-year the reason outlook? we'd What's company know the decrease revenue. main to quarter in for So X% XXXX of like why first XX% the in

for year, the million. supply quarter, the in and the $XX an chain, some that's $XX the And some on guidance difficulty as COVID-XX to million orders this impact of of that of on XXXX, manufacture there's That's some range quarter us we're hand. quarter reason first the delivery decrease The kind it, recently. Dongguan, quarter's, between areas. occurred this in in that Shenzhen we with compared the aware – year's for said have Yes, is at some And these a first last not first gives and that with lockdown XXXX. China,

– guidance So little a with have bit expect we – years. Yes, we decreasing? on do quarter first you have quarter color some guidance this Mr. the dropping the Chen, last that's. first compared first quarter

Yes.

mainly One because the of our the of Omicron, China, in virus. And because second heavily So Shenzhen impacted of is that's base. manufacturer in That's because our lockdown is two is reasons. in revenue. and COVID-XX Dongguan,

the decreasing. quarter, second variant will So and believe by impact country of COVID-XX fourth variant quarter – be the more open because we but in

Okay. understand. I

provide So the China? is in company's local well? regarding my second revenue in as additional your you affect color restructuring. revenue China why some future question ongoing will Thanks. business the structure and company the And the on Can this adjusted

Yes.

to and this have in disclosed As to yes. China, decided our model year our plan, business we business evaluate we out, we adjust continue

were uCloudlink Shenzhen March Technology transferred AE equities XX, the An XXXX, the Limited. on the agreement original So was terminated. to of

affect connectivity in service data believe will international not this X.X our we China. restructuring So uCloudlink

and business connectivity we local SaaS the Lianxin China the will required in such provide which service to with Technology, transfer cooperation we partner Huaxiang the PaaS and data platform license in invested Beijing China. So carry service out local as have

model we as – the China Japan. we, adjusted in in that's So similar as

can regions to So partner see with our you in of world. local apply Japan, China, either service other ecosystem as and corporate, a PaaS/SaaS PaaS/SaaS our in the

So a that's adjusted as PaaS/SaaS we with strategies – execute and well. to this business model platform-centric model

reason. is the in – varying I this We key that's a China. models think So adjust

market. the gives to in well. this give it position incorporated local us operation in business more local think And as a do secure compliance us position I with and partner

Okay. That's all my questions. Thanks.

ladies And floor like I'm to back for the additional showing turn this at closing over and management gentlemen, no I'd to questions. time any remarks.

again us you once Thank today. for joining

further have Investor questions, Group you contact information through provided If Investor Relations. or webcast free please Relations contact uCloudlink feel to Equity on our our

This Global. And the apologize. go question Jakob, Greenridge with have Jakob is ahead question. operator. ladies We do Kurtz gentlemen, I your late from conference joining and a from please

Hi.

terminals to in the daily third increase but total slipped of quarter, over continued consumed expect compared see Should XXXX? numbers the So active current quarter. to both we course the rise to data

in daily consumers be This will policy of the target data per mix that this choose. terminal different the and package active a selling customers terms change

change So that's in a figure. statistic its

active this consumption, daily give terminal. this – on kind accurately color forecast, – the this will this consumers of this be We average – this cannot daily we data terminal don't expect with cannot So per know we somehow. increasing clear

you assuming stay the roughly X.X percent and do total Okay. travel revenue next remainder in XXXX, of And of then expect what from for what similar to my X.X? are they now restrictions China question,

you Specifically China, from China? mentioned Mainland revenues these

that? was Sorry, what

clarify you your Can question? right. All

account think the similar they X.X do what the the you stay are remainder will revenue restrictions what travel currently China the of year, total of in for to year? end Assuming and by percent X.X of for

city Yes, across something. still this and COVID is in China, restrictions implemented

countries been the don't and opened Asian will Chinese open we the border when the Japan, like up – U.S., Chinese has some expect the this to the the do So We know to outside as there's well. outside. But open not some Singapore, year. in border – has other lift European Asian and countries been

business than more business aware, our we the for across a countries run have regions. as So and worldwide, as you're XX we diversification

China the opening been up China's there's recovered yes, So The due is at outside this travel has this moment. – smaller to the risk Mainland when contributions is international borders.

us the So for have expect our outside as improving growth that service that this and well connected we we year. improve will year. will Yes, international China be a of give this profitability

comment the more Yes. I have some [indiscernible]. from

We for next year. we maybe So we think of business the will we so that border year the for end whole our the China. expect – the started in happen or open of – because That's forecast – case. think market, don't China don't in this China year, in X.X opened recovery worst

one. that's So

So business in focused IoT X.X mainly and on business. are we China, –

So that's in China.

so for So know – very only we data. international opportune business, not

case, border But the quickly. QX, For the impact example, be we or – so we COVID-XX think the think QX open our will the we'll opened the open to what don't really majorly starting start don't countries China in of think to of That's outside on some assumption. under We countries country. country. QX the

the regions Okay. there outside to showing do of to or growth my these expect countries faster question, continue Japan you any and then China have And markets recently. in strong this? growth And driving next regions? see be been Are

Yes.

regain So once recovery also China. believe and about we sought challenges, will for the in the we X.X regulation the in And pronged one also IoT. fast challenge China, two in growth we the of is the

others, and – markets Japan's be will and business U.S. market the growth potential to year. the For expect the in fast market European that main this for we the is growth,

the Okay, with awesome. CMO And settlement last completed? Holdings then Was question.

repeat? you can Sorry,

completed? CMO Holdings with settlement the Was

was – That was yes, year. that last

So we last year. the agreement launched

And so more [indiscernible]. mediations between no it's peaceful,

all. you. That's Okay. Thank I appreciate it.

you. Thank

And gentlemen, We and question-and-answer we will conclude for that, call. you conference thank do attending presentation. today's ladies today's with and session

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