uCloudlink Group Inc. (UCL) Q3 FY2025 Earnings Call Transcript & Summary

Hello, and welcome to the uCloudlink Group, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Daniel Gao, Investor Relations of uCloudlink. Thank you, and over to you.

Hello, everyone, and thank you for joining us on uCloudlink's Third Quarter 2024 -- sorry, 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 company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations projected or implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entirety by the cautionary statements, risk factors, and details 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, 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 measures. uCloudlink's press release contains our reconciliation of the unaudited and non-GAAP measures to the most directly comparable unaudited GAAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel, and good morning or evening, everyone. Amid a complex macroeconomic and the trade environment, we remain disciplined in our execution while maintaining operational profitability. This balanced approach allow us to successfully navigate these external challenges and reinforce the resilience of our business while also laying the foundation for long-term value creation. We remain profitable and continue to generate stable margins with total revenue of USD 21.1 million and net income of USD 9.3 million during the quarter. Our GlocalMe ecosystem is gaining momentum as it grows in scale and global user adoption. Likewise, our 1.0 international data connectivity services business continues to grow with full speed 5G network coverage across 91 countries and regions, as we continue to gain market shares and reinforce our leadership position in the global roaming sector. We remain focused on overcoming the world's first 3 fundamental digital dividers through the transformative connectivity solutions. Firstly, we are eliminating the global connectivity divide by breaking down international roaming barriers and providing seamless network access worldwide. Secondly, through our patent cloud SIM and HyperConn technologies, we tackle the single multi-network divide by enabling intelligent and optimized connectivity across multiple networks. Lastly, the most innovatively, we are bridging the emotional digital divide with our AI-powered technology, creating entirely new and meaningful connections between humans and their pets. Building on this mission, our strategic investment in R&D and marketing to accelerate innovation, enhance user experience, and speed up commercial stabilization of our 3 new growth engines are yielding strong results. Our 3 new product lines, GlocalMe Life, GlocalMe SIM, GlocalMe IoT, saw remarkable year-over-year MAU growth during the quarter, increasing 382.3%, 188.2% and 593.3%, respectively. Feedback has been overwhelmingly positive, reflecting how our solution directly addresses the market demand and validating our investment strategy. I will now review the highlights for each of our key business lines. I will start with our GlocalMe Life business. In the third quarter of year 2025, the average monthly active terminal reached 3,903, representing an increase of 408.2% year-over-year. Within our broader GlocalMe Life portfolio, which includes our industry-first Unicore+, Unicore Pro, and LP, MAT grew by 369.3%, excluding PetPhone year-over-year, reflecting strong user adoption across the innovative product lines. Building on this solid foundation of product excellence, I will now highlight the significant progress we made with our PetPhone product platform, designed to bridge the digital divide between humans and their pets. PetPhone is already gaining the momentum after its initial commercial launch in September 2025 in Hong Kong and across the Middle East, where it has already generated orders for approximately 40,000 units as we continue to expand our distribution channels and partners. At IFA Year 2025 in Berlin, PetPhone was recognized as an honoree in the communications and connectivity catalog of the inaugural IFA Innovation Awards. It also received the best of IFA Year 2025 distinctions from Yanko Design, Home Crux, and Mark Ellis Reviews. Following the showcase of our solutions at IFA Berlin 2025, we are now in advanced discussions with several major retail channels, including one key partner. Furthermore, we successfully entered into a partnership with a leading online pet retail platform in North America, where initial product shipments have already begun. With the strategy foothold being established across Hong Kong, the Middle East, North America, and Europe, we plan to establish a new operational structure and raise additional capital to accelerate the global expansion of our Pet tech business. We also plan to develop PetTech as a stand-alone application that extends beyond smart hardware and build a comprehensive systematic platform, integrating social entertainment, living stream, and a comprehensive pet ecosystem. The initial version of this new app is expected to launch in the first quarter of year 2025. Our GlocalMe IoT business maintained its strong growth trajectory with user adoption and revenue contribution showing substantial year-over-year improvements. In the third quarter, average monthly active terminal for GlocalMe IoT recorded a year-over-year increase of 583.0%. We secured orders for in-car infotainment system, while our initiatives in the secretary camera sectors are now fully deployed and enter a phase of expansion, supported by broadened partnerships across several high-growth verticals. Having established an initial presence in this key sector, we plan to expand our solution into additional industries in the future. Turning to our GlocalMe SIM business line. Over the past 9 months, GlocalMe SIM has surpassed 400,000 cumulative cars sold, including OTA SIM, and eSIM, and eSIM TRIO, a game-changing solution demonstrating clear technology leadership in the industry. The eSIM TRIO was named as a best of IFA Year 2025 by market reviews, further highlighting its innovation and market recognition. This momentum has fueled our growth, driving at 269.5% year-over-year increase in average monthly active terminal during the third quarter. The eSIM TRIO solution has continued to gain strong traction following the widespread distribution of 10,000 trial units under a pilot program. It generates a positive user feedback and at more than 75% in user registration and more than 30% in active engagement, validating both our carrier partnership model and product market fit. Our carrier insurance program has also made significant progress. We have complete pilot negotiations with multiple operators and expect to commence joint testing and pilot initiatives in the coming quarters, laying the groundwork for future large-scale carrier partnerships. Lastly, our GlocalMe mobile fixed broadband business remains stable with growing order momentum expected to provide a stable foundation of our future growth. The launch of our MeowGo G40 Pro and the cutting-edge MeowGo G50 Max are expected to serve as a growth engine for the coming quarters. The MeowGo G40 Pro is a revolutionary upgrade and a milestone product, enabling users to stay connected through one single device and one account. The product began deliveries by the end of the quarter and is the world's first device to support in-flight WiFi and connect seamlessly across several usage scenarios, such as home, airports, office, and cafes. With the MeowGo G40 Pro, we are transforming portable connectivity from an international travel-only solution into a true multi-scenario companion. Powered by our patent, AI HyperConn technology, it seamlessly serves users through one single intelligent device and one account, regardless of where they are. HyperConn, our industry-leading solution, also lay the foundation for large-scale product iteration and future upgrades. Furthermore, we will launch the MeowGo G50 Max with Sky to ground 5G satellite integration and AI-driven network switching, further solidifying our innovative leadership in the mobile fixed broadband industry. This device also enhanced network quality through AI-powered real-time congestion detection, delivering a faster and more reliable user experience. Looking ahead, we are entering the next phase of expansion, where we will scale our global user base, further diversify revenue streams, drive innovation across our ecosystem, and sustain a healthy financial performance. The launch of MeowGo G40 Pro and cutting-edge MeowGo G50 Max, combining with the launch of the PetPhone, the strong validation of the eSIM TRIO pilot, the robust expansion of our IoT solutions, provides us with several robust growth engines going forward, laying a solid foundation for future growth. Having successfully navigated external challenges, we are confident in our ability to scale our user base, expand our global partnership, and deliver growth in the coming years as we continue to innovate and bridge digital devices for users worldwide. We are confident that we have the right strategy in place to generate sustainable growth in the coming quarters. For the first quarter of year 2025, we expect total revenues to be between USD 22 million to USD 26.5 million, representing a decrease of 15.4% to an increase of 1.9% compared to the same period of year 2024. For the full year of year '25, we currently expect revenue to be in the range of USD 81.3 million to USD 85.8 million. The company is revising its guidance in light of the persistent macroeconomic challenges and global trade headwinds, which have had and may continue to have a broader impact across the industry. I will now turn the call over to Mr. Shi.

Thank you, Mr. Chen, and hello, everyone. I will go over our operational and financial highlights for the third quarter of 2025. Average daily active terminal and average monthly active terminal MAT are important operating metrics for us as they measure customer usage trends over the period and are reflective of our business performance. In the third quarter of 2025, average DAT was 332,674, of which 21,484 owned by the company and 311,190 owned by the company, representing an increase of 3.8% from the third quarter of 2024. During the third quarter of 2025, 57.3% of DAT were from uCloudlink 1.0 international data connectivity service, and 42.7% were from uCloudlink 2.0 local data connectivity service. In September 2025, the average daily data usage per terminal was 1.7 gigabytes. Starting from this quarter, we are disclosing our average daily active users, DAU, and monthly active users, MAU, which represent the average number of unique users engaging with our GlocalMe service on a daily and monthly basis, respectively. We believe these metrics will better reflect the progress we are making in driving user engagement across our different business lines and how we are managing and monetizing our user bases as we scale up. Growth in average DAUs and MAUs follow a similar patterns with a strong momentum. Average MAUs in the third quarter were 761,586, representing an increase of 11.9% from 680, and 609 in the third quarter of 2024. Average MAUs from GlocalMe IoT, GlocalMe SIM, and GlocalMe Life business saw increase of 593.3%, 188.2% and 382.3%, respectively, from the same period of last year. Average MAUs from GlocalMe mobile and fixed broadband business decreased slightly by 0.8% year-over-year. By September 30, 2025, the company had 201 patents, with 168 approved and 33 pending approved. The pool of SMCR was from 392 MNOs globally as of September 30, 2025. Total revenue for the third quarter 2025 was USD 21.1 million, representing a decrease of 16% from USD 25.2 million in the same period of 2024. Revenue from service was USD 17 million in the third quarter of 2025, representing a decrease of 1.4% from USD 17.3 million in the same period 2024. Revenue from service contributed 80.6% of the total revenue during third quarter 2025, compared to 68.6% in the same period last year. Geographically speaking, during third quarter 2025, Japan contributed to 33.2%, Mainland China contributed 35.1%, North America contributed 15.4%, and other countries and regions contributed the remaining 16.3% compared to 46.6%, 27.8%, 12.8% and 12.8%, respectively, in the same period 2024. Our gross profit was USD 11.3 million in the third quarter of 2025 compared to USD 12.2 million in the same period 2024. Overall gross margins in the third quarter of 2025 further rose to 53.6% from 48.4% in the same period of 2024. The gross margin on service was 56.6% in the third quarter of 2025 compared to 60% in the same period of 2024. Excluding share-based compensation, total operating expenses was USD 11. million or 52% of total revenue in the third quarter of 2025, compared to USD 9.7 million or 39% of total revenue in the same period in 2024. Net income in the third quarter of 2025 was USD 9.3 million compared to USD 3.4 million in the same period of 2024. Adjusted EBITDA was $1.4 million in the third quarter of 2025 compared to USD 4.4 million in the same period of 2024. For the third quarter 2025, we record an operating cash outflow of USD 0.9 million compared to an operating cash inflow of USD 2 million in the same period of 2024. For the third quarter 2025, our capital expenditures were USD 0.5 million compared to USD 1.1 million in the same period 2024. We maintained a solid balance sheet with a cash and cash equivalents of USD 28.5 million as of September 30, 2025, compared to USD 30.1 million as of December 31, 2024. With that, operator, let's open it up for Q&A.

[Operator Instructions] We have the first question from the line of Vivian Zhang from Diamond Equity Research.

So firstly, could you share with us the sources of this $9 million in other income and how it was identified? Was it a one-time payment?

Yes. As we disclosed, the 8 million gain from the fair values of other investments. That's a change fair values in account, yes.

So second question is that can you elaborate on the reasons for the decline in product sales?

Yes. In the third quarter, the sales of product decreased by USD 4 million in total. This split into 2 parts. One part is USD 2.6 million sales decreasing from the product-related debtors, which is very low margin product. So this -- for the third quarter, for this very low margin product, the amount -- so amount quite low compared with last year. And the second part is the sales terminals decreasing USD 1.1 million something, which we mentioned is a Japanese customer delay the 2 MBBs orders. One is related to the 5G portable WiFi, one is related to the 4G's mobile WiFi hotspot. This order will be -- we expect will be coming in the fourth quarter. So that's a delay, a little bit delay in terms of period. But as we disclosed, the DATs and MAT DAU and MAUs all increasing compared with last year. That means the number of the terminal other than mobile broadband, the volumes of the new business, our GlocalMe Life, our GlocalMe IoT, and GlocalMe SIM sold increasing dramatically compared with last year. As this operation metric shows a couple of times growth compared to the same period last year. But the revenue contributions in terms of proportions are small to account as we -- in terms of the pricing terminal, the live service product pricing is quite small proportion compared with 5G portable Wi-Fi. So that's quite much difference. So even we sell more volumes of a new product terminal to the market. But compared to the revenue, the revenue is smaller, but our users numbers growth as we disclosed, we overall more than 10% of the user number in terms of the MAU increasing compared with last year. So we believe this will contribute our future growth in terms of service next year for this growth of user basis.

Yes. I had some more comments because that means the hardware because of tax, and I think the trading headwind. So the customer, I think more say about the macroeconomic and the decision will be -- the decision period will be longer than normal. Normally, about 30 days now goes to maybe 2 months. That's what caused the delay, but the orders coming. So that's first. And the second, hardware, I think because the high-value hardware like 5G, our ship volume is delayed, that caused the impact of the total revenue number. But unfortunately, we have more user number like for eSIM and the Life products, they will generate -- even the hardware cost is lower, is smaller. But I think the contribution for the data, so will increase in the future because monthly and yearly, they have to pay the same usage for the data.

My next question is that the Mainland China, the revenue from Mainland China has increased a lot and become the largest market. So what are the main drivers behind that?

Yes. As we disclosed, the uCloudlink 1.0 revenue in the national data connected service is increasing over this year. The main driven is from the Chinese outbound traveler to use our roaming branding service. So that's the main driven for our uCloudlink 1.0 business growth in this year. So since the pandemic COVID-19, the Chinese outbound travel business is in the recovery over the past couple of years. So our revenue related this part is on the recovery trend. So we believe this growth from this traveling sectors will have -- is on the growth track in the future as well.

More comments about the Chinese revenue increase, there are 3 reasons. The first is our 5G market share higher and 5G, our revenue, including the total revenue in China, our percentage is much higher than last year. That means our 5G quality and leadership was recognized by the users. So here increased because in China, 5G is more popular. Once the people use the 5G, they don't want to use the 4G, and we are leading. We cover 91 countries and it's far more advanced than the other carrier and speed side also we are far more fast and the coverage is much better. So that's the market share for 5G. We are higher growth fast. That's the first. Second, we have more products available in China. We first launched our traditional 5G. We are in the leading to get more market share and more good technology for 5G. But we have more products like Life and like our SIM card and our eSIM TRIO, this new product. So we can cover more business. In the history, we haven't entered this part. Like for the roaming market, we only occupy the Wi-Fi. Currently, we have eSIM, we have OTA SIM, we have eSIM TRIO. This part, I think we are now -- we have more product and more convenient product, not only just high quality, but also more convenient products available, and we enter this new segment. So here it's 80% of the new market we never touched before. So we believe in the future, I think our market share in China will keep increasing and our SIM card and eSIM TRIO will gain more market share in the 1-person or 2-person in outbound travel market. And finally, I think the last point is about -- in China, I think we should be more market share and more revenue in the quarter 3, without I think the total, I think the Chinese people travel outside in this summer still suffer from like in the Japan earthquake and also like some unstable economic situation. So still in the September -- still in July and June is the most difficult period I know the trade war with the U.S., all this impact. So I think once this economic situation becomes more stable, I think we will get more market share in this part.

That answers my last question. I want to ask about the trade tensions that appear to have eased recently. So what other like potential impacts do you anticipate on the market and the company? Is it likely to contribute to a recovery in sales?

We -- if you look at this trade war, I think it will -- we believe there is some limited impact for our business as especially for our new business, say, paid phone, new launch we have a new launch in U.S. market, cooperation with a leading paid online retailer. The name we know is a big name, Chewy. So we are new product solutions has entered into U.S. big channel, say, Walmart and other famous channels as well. So with more and more the Tier 1 channels has our product on the shelf. I believe the U.S. market shares, we sold more products into U.S. market. And the U.S. market revenue contribution will gain and growth in the future. And that we -- our belief that U.S. markets will be growing in the future.

Yes. So more comment about these questions. The first, our traditional mobile broadband business. So I think we can see it is suffering from the macroeconomic and also the trade war. But I think now is stable, and we see the customer now is I think our customer in Japan, in China, so for the mobile broadband business, now the order is coming in the fourth quarter. So we can see now the best period is over from the current situation, we believe it will go better. That's from our traditional mobile business. For the new business, it's going very well. So most of our new product launched in the Q3, for example, our platform launched in September -- in September, and our G40, our device multipurpose and multi-scenario device, also the new function we launched also end of the end of the third quarter. So majorly in the third quarter, our new product new solution launched in this quarter. So -- but I think the feedback from the end user and from channel is quite positive, as I mentioned disclosure in the information. So we get a big order for PetPhone. So the fourth order is 40,000 units. So it's much bigger than our expectations. So that's first. Our SIM card get feedback from the end user is quite very positive. I just mentioned, we -- about 10,000 pilot. We get a very good feedback for the quality and the convenience -- and in technology, we are in a leading position. This is innovation super for the people for a permanent second thing. We proved this concept. And also, we get a very positive operation data. The resist rate is about more than 75, and the active rate is about more than 30%. That means this very high percentage of the user in our -- increase in our future DAT MAU will add more value to our business. So I think also IoT, you can see we have faster growth. Even the smaller -- the foundation is smaller, but every month, we have more than 30% increase every month, it is not less. So now for the car play market and the camera market. So we almost cover all the big Tier 1 players. So we believe we will get more fast growth in the coming months. So I think for the platform for SIM and for our live product and IoT, all these new 3 new products get a very good potential. So I believe in the coming quarter, we will get a better revenue than Q3 and Q2. And this year, we believe once we -- because we have an investment in the marketing and R&D, we spend -- that's why you can see this year compared with last year, we spent more than USD 3 million more than last year in the marketing campaign and R&D. And this will generate, I think, the good increase in the future.

We have the next question from the line of Theodore O'Neill from Litchfield Hills Research.

I just want to follow up on the PetPhone. The 40,000-unit order, is that going to the U.S.?

No. As we disclosed in the PR a month ago, one Mid East Tier 1 channel who order 30 million -- sorry, 30,000 units PetPhone into the Middle East market. That's account for 70% something of the 40,000 units. Yes, the remaining was sold to the U.S. market. But I believe more PetPhone units will be sold to U.S. market when we launch campaigns with Chewy and Walmart, these Tier 1 channels in the near future.

We believe -- sorry, we believe the U.S. is the biggest pet market. And we also believe I think we -- I think we're bridging the digital gap between the people and the pets. This concept, I think is far more than just a tracker, just CCTV, just a single direction to monitor and manage the pet. So we provide a mutual call and mutual communication between the people and pets. But the programs we need to, I think, more education for this opportunity like iPhone many years ago. We believe iPhone changed the mobile Internet in the world. And now people to convince people and let people know the dog and pet can use the phone and the social like people. So -- and we will -- we are very confident about that, but we need to get more campaign and more marketing spending in the U.S. and the rest of the world. That's why we will try to separate this business to try continue because the initial data for more than 1 month get this about 40,000 orders. I think 38 comes from the Middle East and another 10,000 come from U.S. All this data, I think, give us confidence we want to more and heavy invest in the R&D side and also in the marketing campaign in the U.S. and worldwide.

My next question is about the in-car infotainment system. In your press release, you say you've secured orders for that. And I was wondering if you could give us any more details on those orders and what the future might hold for your business there?

Yes. So in-car infotainment, so majorly, I think for traditional car, this in-car infotainment majorly come from the Chinese providers. We almost cover all the providers. That means the new generation all use our solution. We already integrated our solution into this provider. They majorly provide in the North American, Latin American, and also the Middle East and the Europe market. So I think we almost cover all the provider from the #1, #2, almost 17. So we already see this initial presence and embed with them. So we can see the fast growth for in-car like in-car tenant. I think this will give us a huge increase and huge revenue in the future.

This concludes our question-and-answer session. I would now like to turn the conference back to Daniel Gao for any closing remarks.

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, Critizen Advisory. We look forward to speaking with you all again on our next quarterly call. Thank you.

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

Thank you. Bye-bye.