uCloudlink Group Inc. ($UCL)

Thank you for standing by, and welcome to the uCloudlink Group, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Xiao Gao, Company IR. Please go ahead.

Okay. Hello, everyone, and thank you for joining us on uCloudlink's Fourth Quarter and Full Year 2024 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. Xu 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 entity 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 audited GAAP financial information and audited non-GAAP financial measures. press release contains relation of the unaudited non-GAAP measures to the most directly comparable audited GAAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel, and good morning or evening, everyone. Despite significant macroeconomic headwinds through year 2025, including tariff, we remain steadfast in strategically investing across our 3 new business lines. Against this challenging backdrop, we maintained our financial health and deliver stable performance. Net income for the year increased 38.2% year-over-year to USD 6.3 million with the net cash inflow from operations reaching USD 3.2 million. Total revenues from Mainland China surged 16.5% from last year, underscoring how our uCloudlink 1.0 international data connectivity solutions are accelerating broader consumer adoption and further solidifying our leadership in the global roaming market. This robust performance demonstrates the resilience of our core strategy and strategic impact of the investments we made in our 3 new growth engines. This new product launch has diversified our business and allow us to successfully navigate a persistently challenging macroeconomic and trade environment. Through strict operational discipline and focus, we have laid a solid foundation to build upon and accelerate growth in year 2026. Moreover, our smart hardware and data are emerging as a key gateway to AI and big data connectivity. While our heavy investment in the pet AI analyzing pet languages, health, behavior and sent data continues to strengthen our industry leadership. We remain highly focused on overcoming the world's 3 fundamental digital device through transformative connectivity solutions. We continue to dismantle the global connectivity device by breaking down international roaming barriers to ensure our users maintain seamless network access anywhere in the world. At the same time, we are tackling the single multi-network device through our prorietary, CloudSIM and HyperConn technologies, which are setting industry standards for intelligent multi-network connectivity and reliability. Lastly and most innovative, we are bridging the emotional digital device with our AI-powered pet ecosystem, creating entirely new and meaningful connections between humans and their pets. I will now review the highlights for each of our key business lines. I will start with our GlocalMe Life business, which continued to generate solid growth momentum. Average daily active terminals during the first quarter surged 897.9% year-over-year, while average daily active users, which exclude platform increased 40.1% year-over-year. Within our broader give portfolio, our industry first UniCord Plus and UniCord Pro series remain highly competitive and continue to differentiate themselves with the seamless connectivity across multiple networks, global positioning and fast charging capabilities. This is further strengthening our competitive edge in the travel, automotive and secure networking market. At the same time, PetPhone orders continue to scale and accelerate since its initial launch last quarter, reflecting strong market traction across the board. We kick off 2026 with a powerful showcase of our latest innovations at CES in Las Vegas and MWC in Barcelona. As a highlight, we outlined our vision to eliminate the pet people device through the pet ecosystem and the introduction of the all-new PetCam that complement the platform. This revolutionary AI-powered ecosystem will transform how we connect with and care for our pets and transcends basic pet tracking function by establishing a comprehensive safety awareness emotion connection loop that enable owners to see, hear and interact with their pets in real time for anywhere in the world. The market response has been exceptional, generating significant global attention and validating our product mix. Purchase orders are growing alongside strong consumer feedback, laying solid foundation for us to drive scale commercialization in year 2026. Also making it debut at CES was the MeowGo G50 Max and AI-powered connectivity hub with sky to ground 5G satellite and Wi-Fi integration that create mobile Wi-Fi hotspot anywhere. This solution provides a critical say with 2-way messaging and emerging SOS via satellite networks, ensuring connectivity even when terrestrial network are beyond reach, powered by our patent AI hyper technology, it can intelligently switch between terrestrial 5G networks and Wi-Fi networks to deliver a frictionless one device one account loading experience. At its core, it creates a reliable mobile Wi-Fi hotspot, ensuring unmatched coverages and truly seamless connection. Moving on to our GlocalMe IoT business. We maintained a robust growth trajectory with user adoption and revenue contribution increasing strongly on a year-over-year base during the quarter. In the fourth quarter, average daily active terminals recorded a year-over-year increase of 434.8%, highlighting a strategic positioning and traction we are getting in high-growth sectors such as in-car infotainment and security cameras. Having established a strong initial presence in this key sector, we plan to scale these solutions into additional industry verticals in the future to drive to further expansion of our ecosystem. Turning to our GlocalMe SIM business line. Our eSIM solution continues to gain a strong traction following its pilot programs last quarter with cumulative SIM card sales now surpassing several hundred thousand units as growth moment accelerators. This is creating a strong growth momentum with average daily active terminals increasing 180.8 year-over-year during the quarter. validating both our carrier partnership model and its market positioning as a permanent secondary SIM card for users. More importantly, our carrier core insurance program has begun pilot deployment and expanding fast, providing a highly effective low CapEx solution for operators that enhance their global roaming capabilities. This first SIM model is gaining strong traction and is welcomed by both operators and users, confirming robust product market fit. Looking ahead, 2026 will be pro years of execution and transformation for us. We closed 2025 with a streamlined organizational structure. having integrated our branding online and offline sales and e-commerce teams to better align with our evolving strategy. Building on this foundation, we kick off the new year by onboarding highly experienced leaders with deep to customer expertise to strengthen our capabilities for next phase of growth. At the same time, we are actively forging partnerships with world-renowned universities and leading global technology companies, integrating resource and laying a solid foundation for long-term success. The strong market feedback from the CES 2026 combined with accelerating sales of new solutions provides us with a multiple powerful growth engine. We are confident in our ability to scale our user base globally, further diversify our revenue streams and bridging critical digital device for cross-border connectivity to emotional distances between people and their pets. With the disc optimism in mind, we are confident that we have the right strategy in place to drive sustainable growth going forward. For the fourth quarter of year 2026, we expect total revenue to be between USD 16 million to USD 17 million, representing a decrease of 9.1% to 14.4% compared to the same period of year 2025. For year 2026, we expect total revenues to be between USD 85 million to USD 100 million, representing an increase of 4.4% to 22.9% from year 2025. I will now turn the call over to Mr. Shi.

Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the fourth quarter and full year 2025. Average daily active terminals, DAT and average monthly active terminal, MAT are important operating metrics for us of the measure customer usage trend over the period and are reflective of our business performance. In the fourth quarter of 2025, average DAT was 328,847, of which 15,636 owned by the company and 313,211 not owned by the company, representing an increase of 6.6% from the fourth quarter of 2024. During the quarter, 5.1% of DAT were from uCloudlink 1.0 international data connectivity service and 42.9% were from uCloudlink 2.0 local data connectivity service. In December 2025, the average daily data usage per terminal was 1.59 gigabytes. Average MAT in the fourth quarter were 704,393, representing an increase of 11.1% from 634,245 in the first quarter 2024. Growth was driven by strong momentum across our 3 new growth engines with average MATs for Global IoT, GlocalMe SIM and GlocalMe Life, increasing 127.5%, 133.8% and 616.9%, respectively, from the same period last year. Average MATs from GlocalMe MeowGo business, which were previously referred to as GlocalMe mobile fixed broadband business decreased slightly by 0.5% year-over-year, reflecting a relative stable user base in this segment. Average daily active user, DAU, and monthly active users, MAU represent the average number unique users engaging with our Globe service on a daily and monthly basis, respectively. Both metrics show strong growth momentum in the fourth quarter. Average DAU in the fourth quarter were 353,278, representing an increase of 10.4% from 320.37 in the fourth quarter of 2024. GlocalMe IoT, GlocalMe SIM and GlocalMe Life all delivered significant gains with average DAU up 5.7%, 49.8% and 409.1%, respectively, from the same period last year. Average DAU from GlocalMe MeowGo business declined slightly by 4% year-over-year. Average MAUs were 738, 777, represented a 9.2% increase from 676, and 610 in the fourth quarter 2024. Average MAUs from GlocalMe IoT, GlocalMe SIM, GlocalMe Life business line saw increase of 6% 53.3% and 46.2%, respectively, from the same period last year. Average MAU from GlocalMe MeowGo business decreased slightly by 2.2% year-over-year. As Phone is a newly launched business, we are beginning to see early user adoption during the quarter. In the fourth quarter, average DAT and MAT for Pone reached 257 and 571, respectively, while average DAU and MAU were 745 and 977, reflecting the initial traction of this new offering. As of December 31, 2025, the company had 206 patents 181 approved and 25 pending approved and approved SIM card from 398 MNOs globally. Total revenue for the fourth quarter 2025 were USD 22.1 million, representing a decrease of 14.6% from USD 26 million in the same period of 2024. Revenue from service were USD 15.2 million, representing a 1.1% increase from USD 15 million in the same period 2025. Revenue from service contributed 68.5% of total revenues during the fourth quarter 2025 comparing to 57.8% in the same period last year. Geographically speaking, during the fourth quarter of 2025, Japan contributed 43.6%, Mainland China contributed 26.8%. North Americas contributed 11.2% and other countries and regions contributed remaining 18.4% compared to 33.6%, 20%, 12.1% and 14.3%, respectively, in the same period of 2024. Our gross profit was [ RMB 11.4 million ] in the fourth quarter of 2025 compared to [ RMB 11.2 million ] in the same period 2024. Overall gross margin in the fourth quarter of 2025 increased to 51.6% from 43% in the same period of 2025. The gross margin on service was 61.7% in the fourth quarter compared to 5.6% in the same quarter 2024. Excluding share-based compensation, total operating expenses were USD 9.4 million compared with USD 13.9 million in the fourth quarter 2024. Net loss in the fourth quarter 2025 was USD 3.1 million compared with a net loss of USD 1.5 million in the same period 2024. Adjusted EBITDA was USD 3.1 million in the fourth quarter of 2025 compared with negative USD 2.3 million in the same period of 2025. For the fourth quarter of 2025, we recorded operating cash inflows of USD 4.7 million compared to USD 0.5 million in the same period 2 first quarter 2025, our capital expenditure were USD 20,000 compared to USD 0.6 million in the same period in 2024. Moving to 2025 full year financial results. Average DATs and MATs show similar patterns to those observed in the fourth quarter. For the full year, average DATs were 322,169, of which 18,449 owned the company and 3,720 owned by business, representing an increase of 1.7% from 315,688 in 2024. In 2025, 36.3 DATs was from uCloudlink 1.0 international data connectivity service and 43.7% DAT were from uCloudlink 2.0 local data connectivity service. Average MATs in 2025 were 681,672, representing an increase of 8% from 631,137 in 2024. Growth was primarily driven by our new 3 new growth engines with average MATs from GlocalMe IoT, GlocalMe SIM, GlocalMe Life increasing 360.7%, 119.8% and 356.0% year-over-year, respectively. Average DAU in 2025 were 340,036, representing an increase of 4.2% from 326,412 in 2024. This growth was supported by strong expansion in GlocalMe IoT, GlocalMe SIM and GlocalMe Life, where average DAUs increased 737.3%, 321.5% and 349.1% year-over-year, respectively. Average MAU in 2025 were 723,706, representing an increase of 8.9% from 664,815 in 2024. Average MAUs from GlocalMe IoT, GlocalMe SIM and GlocalMe Life increasing 251.2%, 167.5% and 413% year-over-year, respectively. Total revenues for 2025 reached USD 81.4 million, compared with $91.6 million in 2024. Revenue from services was USD 61.0 million in 2025, representing a 1.8% year-over-year increase from USD 60 million in 2024. Revenues from data connectivity services were USD 47.8 million, a slight increase from $47.6 million in 2024. Within this segment, international data connectivity services remained the largest contributor, rising from USD 39.5 million in 2024 to USD 41.1 million in 2025, representing a 4% year-over-year increase. Overall gross margin was 52.4% in 2025, an increase when compared with 48.4% in 2024. Gross margin for services was 58% in 2025, compared with 60.8% in 2024. For the full year 2025, excluding share-based compensation, total operating expenses were USD 40.4 million compared to USD 40.8 million in 2024. Net income was $6.3 million in 2025, compared with $4.6 million in 2024, representing a 38.2% increase from 2024. Adjusted EBITDA was USD 7.2 million in 2025, compared to $7.1 million in 2024. For the full year, our capital expenditures were USD 1.0 million, compared to USD 4 million in 2024. We generated positive operating cash inflow of USD 3.2 million, compared to USD 9.2 million in 2024. Turning to balance sheet items, our cash and cash equivalents increased to USD 32.8 million as of December 31, 2025, compared to USD 28.5 million as of September 30, 2025. We remain focused on strengthening our financial position and believe we are well positioned to drive continuous growth in our business. With operator, lets open it up for Q&A.

[Operator Instructions] Your first question today comes from Theodore O'Neill from Litchfield Hills.

Looking at your guidance for 2026 implies a fairly strong second half of the year. And I was wondering if you could talk about that growth in terms of what product lines or geographic areas you expect to see -- participate the most in that growth.

Thanks, Neil. Yes, the outlook for the year 2026, we expect a growth robust growth trend for our overall business. The main growth driver as we disclosed in the year 2025, the 3 new business line are main growth driver, which are GlocalMe IoT, GlocalMe SIM and GlocalMe Life as well as a new business line PetPhone separated from GlocalMe Life business line. This year is a separate business line for PetPhone business. So all the 4 business lines will drive our main business growth in terms of revenue. Our legacy business, WiFi, mobile broadband WiFi, has kept stable business, which will contribute solid cash flow to support our investments on our 4 new business. So as we disclosed last year, in the year 2025, we invest massively on 4 new business lines. All these investments came from the cash inflow generated from our legacy business, mobile broadband business. So last year, in the year 2025, the operational metrics has told us the growth driver will come into revenue for the year 2026. As we disclosed the DAU, MAU metrics for these 3 new business, IoT, SIM and Life, the growth massively a couple of times more than the previous year 2024. So this will carry on this driver for our growth in year 2026. Yes.

And could you give us some more information about GlocalMe IoT? Are there particular industries that -- where you see growth for the IoT part of the business? Or is it very broad-based?

Our IoT business because we not just invest last year, we almost invested nearly 10 years. But from last year, we finished our IoT product into the industry IoT leaders. We finished all the trial. That's why we can see a largely increase because they already embed our IoT cloud SIM product solution into their, like a camera, like a car infotainment. These, even the battery monitoring because you know all the Chinese manufacturer and this smart device more and more go to the outside China and go to worldwide. So we would just enable them to cross the networks in each country easily. So this help us gain volume customer increase. All these our partner, so give us the forecast this year, their IoT products like security camera, like CarPlay, like the power monitoring and battery monitor, et cetera, and they will have a large volume deployed with our solution. Before that, we just finished the test before last year. But from the second half of last year, we see more and more these industry players embed our solution because our solution is much better than currently just practicing inside. So that's why we get -- we have more confidence in the next couple of years, we can get millions of connections and revenues from these partners.

[Operator Instructions] Your next question comes from Vivian Chang from Diamond Equity Research.

This is Vivian Zhang with Diamond Equity Research. Congratulations on the results achieved. I got several questions. Firstly, can you provide more details about the recently introduced PetPogo ecosystem and the PetCam? And how do you expect them to drive the growth of sales and profit margin?

Okay. Last quarter, so year 2000, the first quarter, we are in the last October, we newly launched our PetPogo product in Asia area then to U.S. area. I think that we already started, I think the solution and the PetPogo solution, bridging the digital gap between the people and pets. And also we get a very popular during the CES exhibition and also MWC in Barcelona. So like CBS, like, Reuters and even Chinese Xinhua, they all give a very focused report about our new product. And also last CES, we also launched a new pet chem and also the pet camera shoot, I think, is integrated and PetPhone and the PetCam. So now we can provide not only just the voice connection with the people and the pet, but also we can provide the camera, I think the video connection with the pet. That means we can provide the connection through the pet, the pet view, we call it for FPV. Also, we can use this PetCam as a CCTV to monitor to understand the, the pet, the mood, the behavior and their security, et cetera. So that's why we are not only just starting on the voice for PetPhone, but we have more device and more function coming like PetCam. This is first PetCam can, I think can do the live broadcast live video also can be add as a CCTV. So it's very useful to improve the safety and the communication effect with the pet -- and also we -- our PetPogo, this is hardware pet camera and the PetPhone. Our ecosystem, our app, we call the pet and digital world is our PetPogo. So in the international version, we call the PetPogo, for Chinese version, we call it PetWoof. It's separated because of data security arrangement. So I think for this PetPogo, we can provide, we can solve it. I think the first is the communication between the pet and the people. We can provide the AI translation for the AI translation for the multi languages. That's the first part. And the second, we can sort it end-to-end for pet safety, including the tracking and the training. Also, we can provide in the health care for the pet is end-to-end. So we can see that once the PetPogo launch end of this month, we can see the PetPhone significantly apply different with the current tracker and the current pet training device. We -- the PetPhone, finally, we understand it can sort it in 3 major anxieties. First is about the communication. The second is about the safety and the third is about the health. So it compares the last just a single function device and PetPhone and PetPogo can provide more effective and pinpoint anxiety solutoins. So PetPogo, I think we mentioned PetPogo will include not only just PetPhone. PetPhone, we believe it will be like iPhone with app inside first. And the second, PetPogo with community and with more functional and even AI agent inside, so like translation, like a video camera, healthy AI, et cetera, all put into here. And also we have a community with all the people and the pet, they live together and they check together and they talk together. So that's like pet worlds like WeChat that we call Pet WeChat and Pet TikTok. So we integrate more and more functions in the PetPogo. The initial version is quite different because we have now a community for pet these owners. We are more understanding each other. And I believe in the future, PetPogo will grow up become a digital society for pets and the people. That's all. Thank you.

Okay. Got it. My next question will be about the R&D expenses declining a lot in the fourth quarter. So we would like to know if this will impact the company's ability of researching and developing new products.

Now, the figures, the expenditures related to R&D figures, tell us we improve our R&D's efficiency via investment in more efficiency in program management and also AI tools. Some like AI coding, AI-coded program. All this improves our company R&D's efficiency improving. We invest R&D resources more on new business line as we say more R&D resource invest on PetPhone business. And that investment in R&D is not enough. So this year, we will carry on investments in R&D for new business. As we filed the 6-K in the last year, I think in October, we spin off PetPhone business as a separate subsidiary. So we have start to a new financings, a risk finance for PetPhone business -- so the PetPhone business will have -- I believe we have a new fundraising deal in this year sometime. So we will invest this new fund on new business like platform business typical. So we will still invest increased investment on R&D for new business, invest on our new features.

We are more spending on rather than just traditional business.

Okay. Got it. Got it. My last question is that, can you elaborate on the reasons for the decline in product sales? Do you think this decline will continue?

Sorry, which one?

Yes. Can you elaborate on the reasons for the decline in product sales? Do you think this decline will continue?

Mobile broadband business decline or which business are you?

Decline in product sales. Yes.

Sorry, can you say again?

Can you explain why the product sales declined? Like, do you think this decline will continue?

We disclosed a little bit the revenues generated from the mobile broadband hardware deliveries was a little bit decline last year. But the revenue -- the service revenues was increasing a little bit over the year 2024. As we disclosed, the MAUs, the metrics was increased about 10% over the last year, which will show our revenue -- service revenue related to this active user will come back to our account on recurring basis in the year 2026 and over. So and as I will say, we -- the new growth engines came from the 3 -- the 4 new business lines, as I mentioned, IoT, PetPhone, SIM, Life service. So the mobile WiFi, the legacy business as a contributor of cash flow for us to invest on our new business. So that's...

More comment because our current legacy product from international part is heavily impacted by the, I think the economic tariff. For example, last year, so you can see in the last summer, it's our -- I think the travel is good season. But at the moment, we suffer from the earthquake rumors in Japan. So that impact the first. The second and also we can see the Sino-U.S. trade war during the last -- middle of last year around June. So you can see the fourth quarter, we suffered from the China and the Sino and U.S. and Sino and Japan relationship, and this year it is the same. So the fourth quarter, we suffer from the Middle East war. So all this have an impact about the traveler this part. But for the domestic part, it will see a stable growth. So we have to overcome the traveler business. That's very heavy by the economic and the situation, the political situation worldwide. So if the worldwide situation getting better, I think this will regain the benefit we will regain from this part.

There are no further questions at this time. I'll now hand back for any closing remarks.

Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact your colleagues, Investor Relations through the contact information provided on our website or speak to our Investor Relations firm, Christensen Advisory. We look forward to speaking with you again on our next quarterly call. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.