In the first quarter of 2024, uCloudlink (NASDAQ: UCL) reported revenues of $18.1 million, consistent with its guidance and underscored by a net income of $0.4 million. The company's financial performance was bolstered by the recovery of international data connectivity services, particularly its Roamingman brand.
A net operating cash inflow of $1.9 million was also recorded. With a positive outlook for the year, uCloudlink anticipates revenues between $95 million and $112 million for the full year, expecting a rise in service gross margins due to improved international roaming services and revenue from newly launched products.
Key Takeaways
- Total revenues hit $18.1 million in Q1 2024, with a net income of $0.4 million.
- Revenue growth driven by recovery in international data connectivity and Roamingman services.
- uCloudlink expanded its product offerings with GuardFlex Pro and GlocalMe Life.
- The company completed soft cloud SIM technology testing for consumer IoT devices.
- Q2 2024 revenue projected to be between $22 million and $24 million.
- Full-year revenue guidance remains unchanged at $95 million to $112 million.
Company Outlook
- uCloudlink expects to see a continued uptick in service gross margins.
- The company is optimistic about revenue growth in the latter half of the year, particularly in Q3, which is expected to be the peak selling period.
Bearish Highlights
- uCloudlink's net income of $0.4 million in Q1 2024 was lower compared to $2.1 million in the same period last year.
- The company acknowledges the slower-than-expected recovery speed of global travel.
Bullish Highlights
- Gross profit rose significantly to $10 million, a 60.3% increase from Q1 2023.
- Strong balance sheet with cash and cash equivalents of $24.7 million.
- Stable growth in the traditional portable Wi-Fi business, especially in Japan and China.
Misses
- There were no specific misses mentioned in the provided context.
Q&A Highlights
- uCloudlink discussed post-COVID-19 plans, including resource allocation and sales and marketing strategies, particularly in the Chinese market.
- The company highlighted the launch of new products such as eSIM and GlocalMe Life.
- uCloudlink remains committed to its annual revenue guidance despite global travel uncertainties.
In summary, uCloudlink's Q1 2024 financial results show resilience in the face of a challenging global travel environment. The company's strategic product launches and focus on expanding its data connectivity solutions are expected to contribute to revenue growth in the upcoming quarters.
Despite a slower recovery in global travel, uCloudlink's stable growth in key markets like Japan and China, along with its strong balance sheet, positions the company to maintain its positive outlook for the year.
InvestingPro Insights
In light of uCloudlink's recent performance and strategic initiatives, several metrics and InvestingPro Tips can provide additional context for investors evaluating the company's prospects.
InvestingPro Data indicates a substantial 17.78% return over the last week, which reflects investor optimism following the company's Q1 2024 report. The P/E Ratio (Adjusted) for the last twelve months as of Q4 2023 stands at 11.63, suggesting that the stock is trading at a low valuation relative to its earnings. Moreover, the company's revenue growth of 19.75% over the last twelve months demonstrates a strong upward trajectory in sales.
Notably, uCloudlink holds more cash than debt on its balance sheet, an InvestingPro Tip that underscores the company's financial stability and ability to weather potential market uncertainties. This financial strength is further bolstered by the fact that uCloudlink's liquid assets exceed its short-term obligations, indicating a robust liquidity position.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips, including insights into the company's revenue valuation multiple and volatility in stock price movements. There are 11 more InvestingPro Tips available for uCloudlink, which can be accessed at https://www.investing.com/pro/UCL. To gain full access to these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
These InvestingPro Insights, when combined with the company's positive Q1 2024 results and outlook for the year, help paint a more detailed picture of uCloudlink's financial health and future potential.
Full transcript - Ucloudlink Group Inc (UCL) Q1 2024:
Operator: Good day, and welcome to the uCloudlink First Quarter 2024 Earnings Conference Call. All participants will be in the listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Liam Xie. Please go ahead.
Liam Xie: Hello everyone and thank you for joining us on uCloudlink's first quarter 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 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 able 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 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 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. Please go ahead.
Chaohui Chen: Thank you, Liam, and good morning or good evening everyone. We had a promising start to the year with total revenues of US$18.1 million, in line with guidance. With our business now healthy and back on a growth trajectory, and we maintained the profitability we regained last year, achieving a net income of US$0.4 million and generating a net operating cash inflow of US$1.9 million in the fourth quarter of year 2024. Revenue growth was primarily driven by the continuous recovery of our 1.0 international data connectivity services business, and in particular, our Roamingman brand services, which continue to rebound strongly. With coverage expanding from 55 to 60 countries and regions, our full-speed 5G roaming network solution further solidified our leading position in this sector and helped expand our market share. According to the Mobile Economy 2024 report from the Global System for Mobile Communications Association or GSMA, the global number of 5G connections is expected to rise to 5.5 billion by 2027 from 1.6 billion at the end of the year 2023. We also made significant progress in rolling out and expanding array of comprehensive data connectivity solutions during the quarter to explore opportunities beyond portable Wi-Fi terminals. Let me start with the progress we have made in our GlocalMe mobile and fixed broadband business lines. At the Mobile World Congress earlier this year in Barcelona, we showcased the GuardFlex Pro, our highly reliable dual broadband consumer premises equipment or CPE solution, which we believe will redefine industry benchmark for high level connectivity and innovation. Unlike other CPE solutions on the market, the GuardFlex Pro supports multiple mobile networks from all available major operators in addition to 10 local fixed networks. This means it is able to intelligently select and automatically switch networks to maintain the connectivity even when the fiber optic lines fail or are disrupted. Fueled by the surge in remote work, online learning, streaming platform in recent years, the demand for [indiscernible] and reliable wireless connectivity is poised for substantial growth. Second, our GlocalMe Life business made significant progress during the quarter with the initial rollout of new products that brings seamless connectivity into various high-frequency daily life application scenarios, such as tag management, item checking, as well as emergency communications. We soft-launched our first daily life product, a smart tracker, powered by our innovation solutions that offer far more accurate and reliable checking something that the other similar tag or tracker product on the market are unable to do. In addition, the smart tracker offers free local emerging Internet access to users for security. Unlike the other similar product on the market, which only supports a single network or technology such as Bluetooth to check items. Our checker is able to intelligently select and automatically switch between multiple networks and six different location technologies. Additionally, GlocalMe Life has an exciting slate of Easy Life X series products under development, which would enhance the daily life of smart device users, making them much easier and more convenient. We will unveil three GlocalMe Life products and upgraded GlocalMe App on May 23rd at Viva Technology Year 2024 in Paris. Meaningful revenue generation from the smart tracker and Easy Life X series products is anticipated to begin in the third quarter and recurring revenues from subscription and services are anticipated going forward. By offering more intelligent, convenient data life products that satisfy a wide range of user needs, we are expanding our market research and establishing a broader market presence to diversify our revenue streams and generate long-term sustainable growth. By expanding our business beyond the travel sector into various aspects of daily life and commercial life, customers will enjoy a more intelligent and convenient life through our high-quality data connections for a range of everyday scenarios. Third, our newly launched GlocalMe SIM made solid progress during the quarter, ranking highly on a number of e-commercial platforms for travelers heading to destinations such as Japan and Hong Kong. Our GlocalMe SIM solutions, including our over-the-air OTA SIM and eSIM solutions will continue to evolve into our innovative All SIM solution, allowing us to engage with a broader end-user base beyond those in the portable Wi-Fi terminals market. This pioneering All SIM solution is uniquely poised to break across carrier restrictions and empower various smartphones. According to The Mobile Economy Year 2024 report from the GSMA, SIM connection, excluding licensed cellular IoT are expected to increase from 8.6 billion in year 2023 to 9.8 billion by the end of the year 2030. Last but not least, within our IoT business line, we completed testing of our soft cloud SIM technology for consumer IoT devices, which we expect to begin commercializing in the near future. This unique technology is compatible with a broader array of mainstream chipset platform found in many IoT devices and eliminate the need from hardware redesign or redevelopment allowing global IoT manufacturers to seamlessly deploy it through software cloud installation. This turnkey solution is expected to create significant opportunities for us in the consumer IoT market by having our technology deployed in products such as walkie talkies, security camera, and the two-wheeled electric scooters, which already have a substantial end user base and can significantly contribute to data connectivity services revenue. According to The Mobile Economy Year 2024 report from the GSMA, licensed cellular IoT connections are expected to grow from 3.5 billion in year 2023 to 5.8 billion by 2030. We believe that better connection empowers best life. We recognized ourselves into four distinct business lines starting from year 2024 to leverage our existing R&D resource and cutting-edge technologies to explore business opportunities beyond portable Wi-Fi terminals and build and expanded array of comprehensive data connectivity solutions to satisfy a wide range of users' needs. By extending our business beyond the travel sector into various aspects of daily and commercial life, these solutions will allow us to engage with a broader end user base by leveraging our cloud SIM and hyper-connectivity technologies, ultimately build out our broader GlocalMe ecosystem and global leading mobile data traffic sharing marketplace. Finally, I would like to review our guidance for the second quarter of year 2024. We are optimistic about our future growth prospects. For the second quarter of year 2024, we expect total revenues to be between US$22 million and US$24 million, representing an increase 0.1% to 9.2% compared to the same period of year 2023. We maintain our outlook for the year, with total revenues expected to be between US$95 million and US$112 million, representing an increase of 11% to 30.8% for year 2023. I will now turn the call over to Mr. Shi.
Yimeng Shi: Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the first quarter of 2024. Average daily active terminals, DAT is an important operating metric for us as it measures customer usage trends over the period and is reflective of our business performance. In the first quarter of 2024, average DAT were 309,906, of which 13,622 owned by the company and 296,284 owned by our business partners, representing an increase of 1.9% from 304,121 in the first quarter of 2023. During the first quarter of 2024, 57.9% of DAT was from uCloudlink 1.0 international data connectivity service and 42.1% was attributed to uCloudlink 2.0 local data connectivity service. In March 2023, the average daily data usage per terminal was 1.56 gigabytes. As of March 31st, 2024, the company had 178 patents with 141 approved and 37 pending approval, while the pool of SIM costs up from 382 MNOs globally, as of March 31st, 2024. Total revenue for the first quarter of 2024 were US$18.1 million, representing an increase of 0.7% from US$18 million in the same period of 2013. Revenue from service in the first quarter was US$13.5 million, representing an increase of 4.8% from US$12.9 million in the same period of 2023. Revenue from service, as a percentage of total revenue was 74.7% over -- during the first quarter of 2024, up from 71.7% during the same quarter last year. Geographically speaking, during the first quarter of 2024, Japan contributed 40.9% of our total revenue; North America contributed 16.8%; Mainland China contributed 25.3%; and other country and regions contributed the remaining 17% compared to 43.1%; 33.6%; 5.1%; and 18.2%, respectively in the first quarter of 2023. Our gross profit rose to US$10 million in the first quarter of 2024, representing an increase of 60.3% from US$8.6 million in the first quarter of 2023. Overall gross margin in the first quarter of 2024 further rose to 55.2% from 47.8% in the same period of 2023. The gross margin on service increased to 65% in the first quarter from 60.5% in the same period of 2023. Excluding share-based compensation, total operating expenses were US$8.5 million or 47% of total revenue in the first quarter of 2024 compared to US$6.9 million or 38% of total revenue in the same period in 2023. Net income was US$0.4 million in the first quarter of 2024 compared to US$2.1 million in the same period of 2023. Adjusted EBITDA was US$1.7 million in the first quarter of 2024 compared to US$2.1 million for the same periods of 2023. For the first quarter 2024, we achieved an operating cash inflow of US$1.9 million, up from US$1.6 million in the same periods of 2023. For the first quarter of 2024, our capital expenditure were US$0.6 million compared to US$0.4 million in the same periods in 2023. We maintained a solid balance sheet with cash and cash equivalents increasing to US$24.7 million, as of March 31, 2024, up from US$23.4 million, as of December 31, 2023. With that, operator, let's open up for Q&A.
Operator: Certainly. Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Theodore O'Neill from Litchfield Hills Research. Please go ahead.
Theodore O'Neill: Thank you very much. And congratulations on a good quarter. My first question is about the good profit margins in the quarter. And I was wondering if you could talk about why those numbers came in so well. Is it a pricing issue? Was it mix? Give us some more detail on how you were successful in the gross profit margins in the quarter?
Yimeng Shi: Yes. Thanks, Theo. Let me answer the first question. Yes, as we disclosed that service gross margins are improving significantly in the first quarter of 2024 to -- from 64% to 65% on the service part. And the main attributions for these improvements is improving the proportion of international roaming service, as we are -- these proportions is the [indiscernible] the roaming service is more than 53%. So -- and that's the major contributions from improving the proportions of roaming service. Yes, that's a major contribution. Also, we disclosed our SaaS, SaaS revenue in the first quarter improving compared with last year as well. So there's two sectors has higher gross margins, which will contribute to our significant improvements in our gross margins on service. So looking forward to this year, we expect that as the recoveries accelerated in international roaming travels, and we are -- our roaming service revenue will be improving, as in the past couple of quarters. So we expect this higher service gross margin will be maintained in the next couple of quarters. And yes, we have more revenue from the new product service related, for example, GlocalMe SIM sales, which is a no margins service. So overall, we expect this year the driver for this performance is the main driver is the international roaming service. So that's my answer to your questions.
Theodore O'Neill: Thank you. And my next question is about GlocalMe Life. I was wondering, is there in terms of expenses to launch that product, obviously, there's going to be some expense associated with the Paris launch of it. But is there any substantial CapEx or R&D expense that we should associate with this new product line? Or is this primarily unlocking features that were already existing in the systems that you're selling?
Yimeng Shi: Yes. Let me answer these investments on these new products GlocalMe Life and now about the opportunities for this new business, I will pass this question to our CEO, Mr. Chen. So yes, as we disclosed, and we invest on this new product development. So in the first quarter of 2024, I was -- the headcount -- the head count related to R&D is 148 headcount that -- which is ultimately 10 more headcounts compared to the same periods last year's R&D. But most investment -- headcount investment is for sales and marketing departments. So for the first -- for the end of the first quarter 2024, the headcount for sales is 183 headcount, which is 50 more than the headcount of sales and marketing departments in the same periods 2023. So that we invest in headcount a lot on sales and marketing. We expect will -- which will support our somewhere our opportunity in our traditional Wi-Fi business and also the new business as well. We launched three new business line this year's on the top of the Wi-Fi dongles. So I think I'll pass the question to Mr. Chen to give more color on this opportunity for GlocalMe Life
Chaohui Chen: Yes. So for GlocalMe Life, we mentioned here, I think like the way we launch our product in the next week. So we have meeting -- we have event -- a launch event in Paris, Viva 23rd. So I think, of course, we increased R&D for the headcount, not so much, but more efficient. And also, we have used -- because majorly, our R&D. So we -- during the COVID-19, we already do the R&D in these four product lines. Now it's the time for we put a foot for the new product. So of course, I think we will continue to invest in this R&D, including the AI in the future. We already have a lot of the research and R&D for the current product, but also in the long-term product. So roundabout 10% to 50% of our R&D costs, expanding in the two or three years life of business.
Theodore O'Neill: Thank you very much.
Operator: Thank you. The next question comes from the line of Vivian Zhang from Diamond Equity Research. Please go ahead.
Vivian Zhang: Hello. This is Vivian with Diamond Equity Research. Congratulations on the quarter. Most of my questions have been answered. I think of one regarding the selling expenses. So we see the company's S&M expenses increased over 38% in the quarter, while the product sales were down about 10%. So I'd like to know how you are allocating like resources to drive the product sales? Thanks.
Yimeng Shi: Okay. Let me further explain this expenditures related to the sales. Yes. As I just mentioned in the previous questions, the sales expenses increase due to the headcount, 50 more headcount increase compared with the same periods of last year. And the [indiscernible] is that we invest additional US$0.7 million on promotions and marketing like exhibitions, we mentioned Barcelona exhibitions and CES n America and also the marketing events and promotions on e-commerce platform. So we believe these promotions is beneficial to awareness our branding named GlocalMe. And also, we prepared for launching the new products. We mentioned we have four business line, and three business line will be expanding and launch and commercialize in the near future. So we expect our revenue guidance for this year is we maintain this guidance for the whole year, as mentioned by our CEO, Mr. Chen. So when our revenues increase in the next couple of quarters, I believe the OpEx margin will be lower and improving compared with the first quarter of this year. Thank you.
Chaohui Chen: Let me add some color. So I think that totally it's three points. The first point, our spending in the marketing and sales side had increased just because with recovery in the worldwide, our sales team and market team worldwide for different countries after COVID-19, the first. Second, we are prepared on the resource and the campaign for the headcount and in China market for the sales and marketing because the summer season is coming. We need a quarter early to prepare for all these resource and preparation. Number three is, we prepare for the new product and for the event and spending also. This is a new product like eSIM, SIM card and GlocalMe Life is a more to a more safe business to consumer business, and that's totally new for us in some regions. So we need to prepare for this marketing campaign. Yes. Thank you.
Vivian Zhang: Okay guys. That's all. Thank you.
Operator: Thank you. [Operator Instructions] The next question is from the line of Xuan Liu [ph] from China Great Wall Securities.
Unidentified Analyst: Yes. This is Xuan Liu ] from China Great Wall Securities. And many questions have also been answered before. I have a question and want to get more details because we got like US$18 million in the first quarter, and we expect it to have like the revenue between US$22 million to US$24 million. And for the whole year, we also have a very like positive expectation. So I want to know, do you have any like foreseeable or stable sales orders for the -- like our new products?
Yimeng Shi: For the -- let me answer a bit first, for this the guidance for the second quarter of US$22 million to US$24 million. Yes, we -- this -- the range of outlook for the second quarter is, will show a small growth compared with the same period of last years, not very significant. But we -- but the peak selling time is the summertime, which is the third quarters. And so -- and also, we have launch -- launches new product in this May. We have an event in Paris, where we'll launch these new products, GlocalMe Life related products in Paris this month. So we expect all the new product sales will generate into revenue account in third quarter and fourth quarter as well. So we maintained this overall -- the whole year's, this guidance, which is US$95 million to US$112 million.
Chaohui Chen: Yes. So some -- add some more comments. Our traditional portable Wi-Fi business is very stable growth because we can see that in the first half years, Japan and China are major market. So I think the travel, the global travel is no growth, as we expected. It's a slightly growth. It's the continued growth, but the recovery speed is lower than our expectation. So that's one of the reasons. And for the new product, so we just launched in the second quarter, and we generated revenue from the Q3, Q4, majorly, I think come from Q4. Because of this new product, they are a big potential. So that's why we -- also, there has some uncertainty, so that's why we still keep the same forecast.
Unidentified Analyst: Okay. Thanks for answering. I have no questions. Thank you.
Operator: Thank you. Ladies and gentlemen, there are no further questions at this time. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Liam Xie: 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 to you all again on our next quarterly call. Thank you.
Operator: Thank you.
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