uCloudlink Group Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Mar 2021

[Company Representatives:]

Zhiping Peng - Co-Founder, Chairman of the Board Chaohui Chen - Co-Founder, Director, Chief Executive Officer Zhigang Du - Director, Chief Operating Officer Yimeng Shi - Chief Financial Officer Xinquan Xu - Chief Sales Officer. Bob Shen - Deputy Investor Relations Director

[Operator:]

Good morning and good evening ladies and gentlemen. Thank you for standing by and welcome to uCloudlink Group Inc. Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After prepared remarks by the management team, there will be a question-and-answer session. Today's conference call is being recorded. I would now like to turn the call over to your host today, Mr. Bob Shen, Deputy Investor Relations Director of the Company. Please go ahead.

[Bob Shen:]

Thanks everyone for joining us on our fourth quarter and full year 2020 earnings call today. Our earnings release is now available on our IR website at ir.ucloudlink.com as well as via newswire services. Here, I give a brief introduction to our uCloudlink Inc. team. Zhiping Peng, is our Co-Founder and Chairman of the Board of Directors; Chaohui Chen, is our Co-Founder, Director and Chief Executive Officer; Zhigang Du, is our Director and Chief Operating Officer; Yimeng Shi, is our Chief Financial Officer; Xinquan Xu, is our Chief Sales Officer.

[Chaohui Chen:]

Okay, so I’m Chen. There are similar contents as the earnings presentation of the third quarter of year 2020. I will focus on page six, page nine, page 11, page 12 and page 13. Let’s move to page six which shows Navigation + Electronic Toll Pass concept applied to data connectivity services market. The white coverage circle on the left hand-side chart are reliable data connection areas and the shadow areas are unreliable data connection. To solve such network connection concerns, it is not enough to just construct hardware of network because network coverage requires time, resources and investment. There are always shadow areas with poor network coverage, even if mobile network operators invest in increasing infrastructure such as base stations. The right hand-side chart shows our solution for such problems via our cloud SIM technology. Through our PaaS and SaaS platform, we can help change unreliable data connection to more reliable data connection. Like installing Navigation + Electronic Toll Pass for traffic, navigation can automatically identify congestion and actively choose the better road and the electronic toll pass allows users to avoid long queues when switching among mobile networks and intelligently elevate data connectivity user experience.

[Yimeng Shi:]

Thank you, Mr. Chen.

[Operator:]

Excuse me, there seems to be an interruption. I’m not sure if your line is muted. Thank you, go ahead.

[Yimeng Shi:]

Thank you, Mr. Chen. Hello everyone. Let all turn to page 15 for our business highlights. The data for the third and the fourth quarter of 2020 shows that the impact from COVID-19 is becoming stable. The left-hand side of the slide shows Daily Active Terminals, DAT as of December 31, 2020. You can see from the middle of the slide showing DAT breakdown by uCloudlink 1.0 and 2.0 data connectivity services. In addition, our uCloudlink 2.0 Local Mobile data traffic is showing steady development and has been less impacted by COVID-19. Our uCloudlink 2.0 service accounted for around 67% of total DAT during the fourth quarter of 2020. Average daily data usage per terminal was 2.01 GB in December 2020. For the full year of 2020, average Daily Active Terminal were around 246,000, representing an increase of 31.3% from around 187,000 in 2019. We expect the launch of vaccines in 2021 will benefit to our business. 5G and IoT are both a driver for uCloudlink 1.0 as well. Let all turn to page 16 which shows global diversification of our business. Mainland China’s revenue as a percentage of total revenue continues to decrease as we diversify our global business. We continue to build our ecosystem with our business partners in various countries and regions. As of the fourth quarter 2020, we have 95% of total revenue from outside mainland China. During the fourth quarter 2020, Japan contributed to 47% of total revenue. The increase of percentage of other countries is mainly because of the expansion of our business and development in related markets such as the United States. After the investment in MVNO Huaxiang Lianxin and cooperation with MNO China Unicom Shenzhen, we believe China market will regain its growth.

[Operator:]

The first question comes from with Link Partners. Please go ahead.

[Ken Gao:]

Good morning. Can you hear me? This is Ken from Tigress Financial Partners. Thank you for taking my question. I have two questions. The first question is about the international expansion of the business. Can you provide more colors on the recent partnerships, including your core wireless in the U.S., sure access and the HKM to expand the South East Asian business? And then my second question is regarding the future revenue mix. We would love to understand how you use the churn line with the future of global geographic, the revenue mix.

[Operator:]

Excuse me, the speaker location, kindly unmute when you're ready.

[Chaohui Chen:]

Yes.

[Operator:]

Okay, please go ahead. I can see the activity, go ahead.

[Ken Gao:]

Okay, good morning. This is Ken from Tigress Financial Partners. Thank you for taking my question. I have two questions. The first question is about the international expansion of the business. Can you provide more colors on the recent partnerships, including new core wireless, sure access and the HKM, and the metrics, maybe you can provide like DHE or maybe usage growth. My second question is regarding the future revenue mix. We would love to understand how you see the churn line for the future of global geographic revenue mix. Thank you.

[Chaohui Chen:]

Certainly! I’m Chen. So let me answer your first question about our business expansion globally. So for Japan, so I think in Japan in the most countries because of pandemic COVID-19, so 1.0 business it doesn’t matter. Our business and the partner business are all impacted by COVID-19. I think like in Japan, a lot of our local partner, they turn to local business, so you can see we can see our business growth, so that’s the one effect. So like in Japan, so we traditionally we are 1.0 international business. We are majorly working with the and business travel WiFi rental and now we – for local business we are now working with a local partner like a multi-watch operator and operator and a multi-national operator and multi-watch operator together, so you can see our local business, it’s gross. We believe with COVID-19 recovery in the future, we will – in Japan we will recover for international business and local business, so that’s for Japanese. And for U.S., just because U.S. is similar, U.S. now we move to the local business with our partner and also we had really recently with working with the local rural area operators and some channel together for local business, like for education, remote education, you know for access, for video access similar solutions. So we can see the close both in the online side and the offside side, so that’s in U.S. In the South East Asia, it’s similar and like in Indonesia, we expand our business with local partners for local business. And in Asia, it’s the same with our partner and ourselves and for the local business. And we are now working with the local partner, that’s the operate and the multi-watch operator. And also like in Europe, it’s a similar situation. So most of our cases now is turned to the local business. Also we are now prepared for the international business, local business and we believe end of this year and after COVID-19. So from Q3, international business we have gradual recovery. So next year will be much more a recovery. So this year from the quarter three we started our recovery, that’s for the business in our traditional path. Also we had new business like you know IoT business. We started in China and in Japan. We start IoT business with the local partner we have. Our major is focused on the local business like with local mobile broadband and the local, like a vehicle company, this part of the business.

[Yimeng Shi:]

So for the second question regarding the revenue mixture, I’ll answer the second question. To break down the revenue mixtures in the fourth quarter 2020, the total revenue was US$17 million, revenue from service was US$9.0 million, including this US$9.0 million, US$5.8 million from international data connectivity service and a US$1.2 million from local data connectivity service and also we have had US$1.9 million from PaaS / SaaS platform service. So for the whole years 2020 revenue mixtures and the total, the wholes years revenues was US$89.6 million. As wish US$46.2 million from service. Within this US$46.2 million, the US$30.8 million revenue came from international data connected service, US$9.2 million from local data connectivity service and also $5.7 million from the PaaS and SaaS platform service. Also we generated $43.4 million for sales of products.

[Bob Shen:]

Okay, hi. This is Bob Shen, I would add some points for your two questions. First one regarding you first question is our international expansion. Yes, you are right. We are an international company and that we are dedicated to diversify our revenue with our global business partners. So as we did before, in order to elevate our local service trend, we are enhancing our e-commerce efforts in strategic key markets such as the United States, Europe, etc., and we did a lot of efforts such as to elevate and optimizing our websites and also streamlining our sales function and teams in local markets. In order to continue to improve the overall user experience and overall satisfaction globally, for South east Asia, yeah you are right, you named the some of our business partners we already had. We actually extended our cooperation and alliance with these business partners and also we are dedicated to collaborate with more new business partners. Therefore we have any new cooperation or alliance, we will release in our official IR news. Regarding your second question, yes, as our CFO mentioned, we will have this diversification in our global expansion, but I want to mentioned that you can see from the chart that during the fourth quarter of 2020 our China, Mainland China revenue takes around 5% of the overall revenue, which is the same with our third quarter of 2020, but with our collaboration, such as our collaboration with China Huaxiang Lianxin actually we are exploring more new business models and collaborations with MNO and mobile phone manufacturers and we want to put all business partners such as MNOs and mobile phone manufacturers, all to our ecosystem globally. Okay, so with this strategic alliance and collaboration in Mainland China, we expect that this year 2021 our China revenue will improve. Thank you.

[Ken Gao:]

Thank you.

[Operator:]

As there are no further questions now, I'd like to turn the call back over to management for closing remarks.

[Bob Shen:]

Thank you once again for joining us today. If you have any – have further questions, please feel free to contact uCloudlink Inc., Investor Relations through the contact information provided on our website or TPG Investor Relations.

[Operator:]

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