uCloudlink Group Inc. Q3 FY2025 Earnings Call

Hello, and welcome to the uCloudlink Group Inc. Third Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star and then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, please press star and then two. Please note that this event is being recorded. I would now like to turn the conference over to Daniel Gao, Investor Relations of uCloudlink Group Inc. Thank you, and over to you.

Hello, everyone. Thank you for joining us on uCloudlink's third quarter 2025 earnings call. Earnings release and our earnings presentation are now available on our IR website at ir.ucloudlink.com. Joining me on today's call are Mr. Zhiping Peng, Co-Founder and Chairman of the Board of Directors, Mr. Chaohui Chen, Co-Founder, Director, and Chief Executive Officer, and Mr. Yimeng Shi, Chief Financial Officer. Mr. Chen will begin with an overview of our recent business highlights. Mr. Shi will then discuss our financial and operational highlights for the quarter. They will all be available to take your questions in the Q&A section that follows. Before we proceed, please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations projected or included 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 revise 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 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 a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. I will now turn the call over to Mr. Chen.

Thank you, Daniel. And good morning or evening, everyone. Amid a complex macroeconomic and trade environment, we remain disciplined in our execution while maintaining operational profitability. This balanced approach allows 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 $21.1 million and net income of $9.3 million during the quarter. Our global 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 long-term sector, we remain focused on overcoming the world's first three fundamental digital divides through 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 patented Cloud Sync and HyperConn technologies, we tackle the single multi-network divide by enabling intelligent and optimized connectivity across multiple networks. Lastly, 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 expenses to accelerate innovation, enhance user experience, and speed up commercialization of our three new growth engines are yielding strong results. Our three new product lines, GlocalMe SIM, GlocalMe IoT, and GlocalMe Live, 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 solutions directly address market demand and validating our investment strategy. I will now review the highlights for each of our key business lines. We will start with our GlocalMe Live business. In 2025, the average monthly active terminal reached 3,903, representing an increase of 48.2% year-over-year. Within our broader GlocalMe Live portfolio, which includes our industry-first Unicore Plus, Unicore Pro, and Long Plug MAT, grew by 369.3% excluding platform year-over-year, reflecting strong user adoption across these innovative plans. Building on this solid foundation of product excellence, I will now highlight the significant progress we made with our flagship product, Petfone. Designed to bridge the digital divide between humans and their pets, Petfone is already gaining momentum after its initial commercial launch in September 2025 in Hong Kong and across the Middle East, where it has generated orders for approximately 40,000 units. As we continue to expand our distribution channels and partners, at the IFA 2025 in Berlin, Petfone was recognized as an honoree in the communications and connectivity category of the inaugural IFA Innovation Awards. We also received the Best of IFA Year 2025 distinctions from Yanko Design, Home Klugus, and Mercedes 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 strategic 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 our global expansion of our pet tech business. We also plan to develop PetTech as a standalone application that extends beyond smart hardware and builds a comprehensive systematic platform, integrating social entertainment, live streaming, and a comprehensive pet ecosystem. The initial version of this new app is expected to launch in 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 demand active terminal for GlocalMe IoT recorded a year-over-year increase of 580.3%. We secured orders for in-car infotainment systems, while our initiatives in the security camera sectors are now fully deployed and entering a phase of expansion to broaden partnerships across several high-growth verticals. Having established an initial presence in this key sector, we plan to expand our solutions into additional industries in the future. Turning to our GlocalMe SIM business line, over the past nine months, GlocalMe SIM has surpassed 400,000 cumulative cards sold, including OTA SIM, 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 Mark Ellis Reviews, further highlighting its innovation and market recognition. This momentum has fueled our growth, driving a 269.5% year-over-year increase in average monthly active terminals during the third quarter. The eSIM Trio solution has continued to gain strong traction following the wider spread distribution of 10,000 trial units under a pilot program. It generated positive user feedback and had 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 cost insurance program has also made significant progress. We have completed pilot negotiations with multiple operators and expect to commence joint testing and pilot initiatives in the coming quarters, laying the groundwork for future larger-scale carrier partnerships. Lastly, our GlocalMe mobile fixed broadband business remains stable, with growing order momentum expected to provide a stable foundation for our future growth. The launch of our MiFi Go G40 Pro and the cutting-edge MiFi Go G50 MAX are expected to serve as growth engines for the coming quarters. The MiFi Go 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 eFry Wi-Fi and connect SIMs across several usage scenarios such as home, airports, office, and cafes. With the MiFi Go G40 Pro, we are transforming portable connectivity from an international travel-only solution into a true multi-scenario companion. Powered by our patented 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 lays the foundation for larger-scale product iteration and future upgrades. Furthermore, we will launch the MiFi Go 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 enhances 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 our revenue streams, drive innovation across our ecosystem, and sustain a healthy financial performance. The launch of MiFi Go G40 Pro and cutting-edge MiFi Go G50 MAX, combined with the launch of Petfone, the strong validation of the eSIM Trio pilot, and 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, extend our global partnerships, and deliver growth in the coming years as we continue to innovate and bridge digital divides 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 2025, we expect total revenues to be between $22 million to $26.5 million, representing a decrease of 15.4% to an increase of 1.9% compared to the same period of 2024. For the full year of 2025, we currently expect revenue to be in a range of $81.3 million to $85.8 million. The company is revising its guidance in light of the persistent macroeconomic challenges and global trade headwinds, which have set and may continue to have a broader impact across the industry.

Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for 2025. Average daily active terminal (DAT) and average monthly active terminal (MAT) are important operating metrics for us. They measure customer usage trends over the periods and are reflective of our business performance. In 2025, our EBITDA was $332,674, of which $21,484 was owned by the company and $311,190 was not owned by the company, representing an increase of 3.8% from 2024. During 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 connectivity 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 follows similar patterns, with strong momentum. Average MAUs in the third quarter were 761,586, representing an increase of 11.9% from 680,609 in 2024. Average MAUs from GlocalMe IoT, GlocalMe Sync, and GlocalMe Live business lines saw increases of 593.3%, 188.2%, and 382.3%, respectively, from the same period last year. Average MAUs from GlocalMe mobile and fixed broadband business decreased slightly by 0.8% year-over-year. On September 30, 2025, the company had 201 patents, with 168 approved and 33 pending approval. The proof of SIM card was from 32 MNOs globally as of 09/30/2025. Total revenue for the third quarter of 2025 was $21.1 million, representing a decrease of 16% from $25.2 million in the same period of 2024. Revenue from service was $17 million in the third quarter of 2025, representing a decrease of 1.4% from $17 million in the same period of 2024. Revenue from service contributed 80.6% of the total revenue during the third quarter of 2025, compared to 68.6% in the same period last year. Geographically speaking, during the third quarter of 2025, Japan contributed 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 of 2024. Our gross profit was $11.3 million in 2025 compared to $12 million in the same period of 2024. Overall gross margins in 2025 further rose to 53.6% from 48.4% in the same period of 2024. The gross margins on service were 36.6% in 2025 compared to 60% in the same period of 2024. Excluding share-based compensation, total operating expenses were $11 million or 32% of total revenue in the third quarter of 2025, compared to $10 million or 39% of total revenue in the same period of 2024. Net income in 2025 was $9.3 million compared to $3.4 million in the same period of 2024. Adjusted EBITDA was $1.4 million in the third quarter of 2025, compared to $1 million in the same period of 2024. For the third quarter of 2025, we recorded an operating cash outflow of $0.9 million compared to an operating cash inflow of $2 million in the same period of 2024. For the third quarter of 2025, our capital expenditures were $0.5 million compared to $1.1 million in the same period of 2024. We maintained a solid balance sheet with cash and cash equivalents of $28.5 million as of 09/30/2025, compared to $30 million as of 12/31/2024. With that, operators, let's open it up for Q&A.

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble the roster. We have the first question from the line of Vivian Zhang from Diamond Equity Research. Please go ahead.

Hello? Thank you for taking my question. 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 $9 million is about $9 million of gain from the fair values of other investments. That's a change in fair values.

Okay. I see. So the next question is, can you elaborate on the reasons for the decline in product sales?

Yeah. In the third quarter, the sales product decreased by $4 million in total, and this split into two parts. One part is a $2.6 million sales decrease from the product related to data, which is a very low-margin product. So for the third quarter, for this very low-margin product, the sale amount was quite low compared with last year's. The second part is the sales terminal decreasing by $1.1 million, which is, as we mentioned, a Japanese customer delayed their two MPB's orders. One is related to the 5G portable WiFi, and one is related to the 4G mobile WiFi hotspot. We expect this order will be coming in the fourth quarter. So that's a delay in terms of periods. But as we disclosed, the MA DATs and MATs, DAU and MAUs, are all increasing compared with last year's. That means that the number of the terminal other than mobile broadband, the volumes, the new business, our GlocalMe Live, our GlocalMe IoT, and GlocalMe SIM sold are increasing dramatically compared with last year's. This operation metrics show a couple of times growth compared to the same period last year. But the revenue contributions in terms of proportions are small to account for, as we in terms of the pricing, the terminal, the live series product pricing is quite small proportions compared with 5G portable WiFi. So that's quite a much difference. So even if we see more volumes of a new product terminal to their market, but convert to the revenue, the revenue is smaller, but our users' numbers grow, as we disclosed, we overall have more than 10% of the user number in terms of the MAU increasing compared with last year's. So we believe this will contribute to our future growth in terms of service next year for this growth of user bases. Thank you.

Yes. I have some more comments because of the hardware, and I think the trading headwind. So the customer, I think, thinks more about microeconomic conditions and the decision-making process is taking longer than normal. Normally it takes about thirty days; now it may take up to two months. That's why it caused the delay, but the orders are coming. So that's first. And the second, for hardware, I think it's because of the high-value hardware, like 5G, our ship volume is delayed. That caused the impact on the total revenue number. But fortunately, we have more user numbers like for SIM, eSIM, and this live product, then we are generally even if the hardware cost is lower. So it's smaller. But I think the contribution for the data will increase in the future because after month three, they have to pay the same usage for the data.

Okay. Got it. Thank you. That makes sense. And my last question is that the Mainland China revenue from Mainland China has grown a lot and become the largest market. So what are the main drivers behind that?

Yes. As we disclosed, in the uCloudlink 1.0 revenue in the International Data Connectivity Service, it is increasing this year. The main driver is from the Chinese outbound traveler contributing to using our roaming brand service. So that's the main driver for our uCloudlink 1.0 business growth this year. Since the COVID-19 pandemic, the Chinese outbound travel business is recovering over the past couple of years. So our revenue related to this part is on the recovery trend. We believe this growth from this traveling sector is on the growth track in the future as well.

Comment. So about the increase in Chinese revenue, there are three reasons. The first is our 5G market share is higher, and in 5G, our revenue including the total revenue in China is much higher than last year. That means our 5G quality and leadership were recognized by the users. In China, 5G is more popular. Once people use the 5G, they don't want to use the 4G. We cover 91 countries, and it's far more advanced than the other carriers, and the speed and coverage are much better. So that's the much here for 5G; we are experiencing a higher growth rate. The second, we have more products available in China. We were the first to launch our traditional 5G. We are leading to get more market share and more good technology for 5G. We have more products like live and our SIM card and our eSIM Trio. This new product allows us to cover more business. Historically, we have not entered this market. We only occupied the WiFi sector. Currently, we have 80% of the new market we never touched before. So we believe in the future, we will continue to increase our market share in China with our SIM card and eSIM Trio, which have gained more shares among one or two persons in the outbound travel market. Finally, I think the last point is that we should be more mature and have more revenue in quarter three if it weren't for some of the recent unstable economic situations and trade issues. Once this economic situation stabilizes, I think we will gain more market share in this part.

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

Yeah. If you look at this trade war, I think it will have some limited impact on our business. Especially for our new business, say, Petfone and new launches. We will have a new launch in the U.S. market cooperating with a leading pet online retailer. The land we know is a big player, Chewy. So our new product solutions have entered into these significant channels like Walmart, and others as well. When more and more Tier 1 channels have our products on their shelves, I believe we will see an increase in market share and sales in the U.S. thus, we believe the U.S. market will grow in the future.

Yes. So regarding the traditional mobile broadband business, I think we can see it is tougher due to the macroeconomic environment and trade tensions. However, now it appears stable, and we see our customers in Japan and China. For the mobile broadband business, we expect the orders to come in the fourth quarter. So we can see that the hardest period is over. From the current situation, we believe it will improve. That's regarding our traditional mobile business. For the new business, it's going very well. Our major products launched in Q3, for example, our Petfone launched in September. And our G40 account, which serves market purposes, also launched at the end of the third quarter. The feedback from the end user and the channels has been quite positive. As mentioned, we secured a significant order for Petfone; approximately 40,000 units, which exceeds our expectations. Our SIM card has also received good feedback from end users. We see a high registration and engagement rate, which indicates we are growing our DAT and MAU, adding value to our business. I believe with our innovations and the marketing campaigns, we will achieve better revenue this year than in Q3 and Q2.

Okay. I see. Thank you for the detailed information. That's all my questions.

Okay. Thank you.

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

Thank you. Thank you very much. I just want to follow up on Petfone. The 40,000 unit order, is that going to the U.S.?

No. As we disclosed in the PR, of the total sales, 30,000 units of Petfone are going to the Middle East market from Tier 1 channels. That's approximately 70% of the 40,000 units. The remaining units are also for the U.S. market. I believe more Petfone units will be sold to the U.S. market when we co-launch a campaign with Chewy and Walmart, these Tier 1 channels, in the near future.

Yes. We believe that is the biggest pet market. And we also believe that we have bridged the digital gap between people and pets. This concept is far more than just a tracker or simple monitoring device; we provide mutual interaction capabilities. But we need to think more on education to create awareness for this opportunity, much like how the iPhone revolutionized mobile internet. We believe our product can fundamentally change the landscape, and we will invest more into R&D and marketing in the U.S. and worldwide.

Thank you.

Thank you.

My next question is about the in-car infotainment system. It's in your press release. You say you've secured orders for that. Was wondering if you could give us any more detail on those orders and what the future might hold for your business there.

Yes. So in-car infotainment, so majorly I think for traditional oil cars, this in-car infotainment primarily comes from Chinese providers. We cover almost all these providers, meaning their new generation cars all incorporate our solution. They primarily provide services in the North American, Latin American, Middle Eastern, and European markets. We almost cover all the providers ranging from the number one to number seventeen. We've established an initial presence. As a result, we expect to see fast growth for in-car solutions like CarPlay and for in-car infotainment. This will significantly lead to future revenue growth.

Thank you very much.

Thank you.

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

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

Thank you. The conference has now concluded. Thank you for attending the presentation. You may now disconnect.

Thank you. Thank you. Bye-bye.