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spk08: Good morning and welcome to the uCloud Link Group Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press store then two. Please note this event is being recorded. I would now like to turn the conference over to Jillian Zhang of Investor Relations. Please go ahead.
spk07: Thanks, everyone, for joining us on our first quarter and full year 2022 earnings call today. The earliest release is now available on our IR website at ir.euclolink.com, as well as our Newswire service. I will give a brief introduction to our Euclolink management team. Ji Tingpeng is our co-founder and chairman of board of directors. Chao Huichen is our co-founder, director, and chief executive officer. Yi Mengshi is our chief financial officer. Zhu Tan is our advance president of marketing and sales. Our CEO, Chao-Hui Chen, will begin with an overview of the company's recent business highlights and EuclidLink's 2023 business outlook, which will cover the earnings presentation posted on our IR website. Our CFO, Yi-Meng Xu, will then discuss company's operation highlights and financial results. Before we proceed, please note that this court may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown ways uncertain 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 the forward-looking statement. All forward-looking statements are expressly qualified in their entity by the contrary risk factors, and the 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 know that EuclidLink's earning press release And this conference call includes discussions of the non-audited gap financial information as well as non-audited non-gap measures. Euclid Link's press release contains a reconciliation of non-audited non-gap measures to the non-audited most directly comparable gap measures. I will now turn the call over to our co-founder and CEO. Mr. Cha-Hui Chen, please go ahead.
spk11: Thank you. and good morning, everyone. Thank you for joining us on our year-end 2022 earnings call today. We appreciate everyone's time. Year 2022 was truly a pivotal year for uClouding, characterized by achieving great success and overcoming tremendous challenges. we are pleased to have achieved positive operating cash flow of US dollar 4.4 million for the year and December 31st, 2022, a significant milestone for our company, as this is the first time we have done since the COVID-19 pandemic. Having overcome the difficulties we face during the COVID-19 pandemic and working to strengthen the diversity of our business, as well as increasing its resilience with new growth opportunities. We are excited about the company's long-term growth prospects and believe we are well positioned to be an industry leader. uClouding 1.0 is our international data connectivity services business, which tends to be a higher margin lines of business and the one which we believe will continue to be a key growth driver for the company. During the first quarter of year 2022, uCloud in 1.0 business revenues increased 48.2% year-over-year to U.S. dollar 7.7 million. For 2022, Ukraine 1.0 business revenues increased 29.6% year-over-year to U.S. dollar 28.1 million. This improvement is a reflection of international travelers recovering across our major markets over the course of the year. This was accompanied by an increase in average daily active terminals for uClouding 1.0 business during the fourth quarter and four years in 2022. Average daily active terminal increased 20.5% year-over-year in 2022. In 2022, we have become a leading 5G non-means solution provider in the wireless network industry and have continued to provide reliable and high quality international data connectivity services in more than 140 countries enabling single operator entry point to access more than 300 global mobile network operators available networks. uClouding 2.0 is our local data connectivity services business which has been a significant driver of revenue growth since the year 2020. Over the past two years, we have continued to strengthen our presence in markets like Japan, North America, Southeast Asia, where we have helped operators and business partners improve their data connectivity services and resolve data connection problems. through our PaaS and SaaS platforms based on our patent technology, including CloudSync and HyperCon technology solutions. Our uClouding 2.0 business reported US$7.4 million in revenues, up 55.5% in year 2022, from US$4.7 million in year 2021. On the Internet of Things IoT side, our customers were able to realize reduced operating costs and improve data connectivity experience through these cutting-edge IoT solutions, and we continue to explore opportunities where we can broaden the applications of our technologies for partners with IoT needs. covering application scenarios like Wi-Fi loader, IP camera, and electric vehicles. We continue working to close our uCloud in 1.0 business, strengthening our leading global position in the international data long-term solutions market since the beginning of the year 2023. We have observed an accelerated recovery in international travel. The United Nations World Travel Organization expects 2023 international tourist arrival number will recover about 80 to 95 percent of pre-pandemic levels, which presents a significant opportunity for us. away from the zero-COVID-19 policy and the subsequent opening of the national borders, we act quickly to establish provided data solutions coverage at many of our partner airports, airlines, and travel agents, allowing us to meet the recovering demand for UCLOUDIN 1.0 long-main business in China, Malaysia, and Singapore. We believe that improving macro environment represents a greater upside for uClouding 1.0 business in year 2023 and we will continue strengthening our leading position as a 5G domain solution provider and launch uClouding 1.0 products and solutions such as the eSIM solutions to satisfy the various needs of our customers and users in multi-industries. For the uClouding 2.0 business, we have gained more industry recognition and have continued to expand our PaaS and SaaS platform ecosystem, while continuing to establish a natural customer relationship for the uClouding 2.0 business in existing key markets like Japan and North America. We have gotten more industry recognition in China, which is expected to accelerate uCloud in two points of business growth. In January year 2023, our wireless marketing network Intelligent Connection Engineering Technology Research Center was approved as one of the Guangdong Province Engineering Technology Research Center by the Department of Science and Technology of Guangdong Province. We believe this recognition serves as a testament to our continued technology advancement in mobile and data connectivity technologies and brings a new momentum for uClouding to expand our presence in the mainland China market and beyond. In the IoT side, the company continues to serve existing partners with our superior, more reliable mobile network solutions, while proactively exploring opportunities in new industries and new application scenarios, including augmented reality and virtual reality VR, electric vehicles, etc. We expect to make a breakthrough in Japan market where we have a strong presence, helping business partners to further improve their data connectivity experience in the IoT field. We remain on track in the long-term development of our PaaS and SaaS platform ecosystem. which we believe is key to the success of our mobile data sharing marketplace. With that, I would like to touch on UCLOUDIN's Nielsen initiative, UCLOUDIN 3.0, to initiate a mobile data traffic sharing marketplace application based on our efforts in building a scalable user-based through our uClouding 1.0 and 2.0 models. This marketplace enables a user's device to connect to any available network anytime and anywhere utilizing the Global Meet app. The Global Meet app is designed to support various application scenarios without a limitation of the device. including top-up and goal Glocom-E terminals, active and goal eSIM, Glocom-E data application-only solution, Glocom-E theme, Glocom-E inside the third-party device, mobile Wi-Fi rental, et cetera. Backed by our cloud theme, Hypercom and Web 2.0 technologies, we aim to build a data traffic marketplace for operators, customers and users, where data traffic can be shared simply and efficiently via day-to-day market behavior. Once this marketplace application launches in the near future, we expect to continue to make investments into optimizing the system on an ongoing basis, incorporating more state-of-the-art technologies such as blockchain technology. We are committed to continuous development of innovative solutions and plan to expand our cloud and technology solutions to various application scenarios including media, video conference, outdoor live broadcasting, etc. Based on these innovative clouding and hyper-con technology solutions, we expect to launch more innovative products catering to the needs of diverse sets of enterprise and individual customers in year 2023, one of which is the one-step data connectivity solutions application I mentioned earlier, the on various smart hardware supporting various types of things. Finally, I will briefly discuss guidance for year 2023. For 2023, we expect total revenues of between US dollar 85 million and US 100 million US representing an increase of 90 percent to 40.1 percent compared to year 2022. We expect to build a more solid financial and operational position to feel better results in the future. We are pleased with our achievements in 2022, and I would like to extend a heartfelt thank you to all the uClouding team members for their efforts and delegations to strengthening our company. We feel confident in the opportunities and challenges ahead of us in 2023. leveraging our portfolio of advanced technology offerings and more mature commercial experience, and look forward to continuing to serve our customers and partners throughout our global market. uClouding remains focused on scaling our user base and constantly improving the technology and business operation model to build a mobile data traffic sharing marketplace, which will fuel the company's long-term growth. I will now turn the call over to our CFO, Yi-Meng Shi.
spk09: Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the fourth quarter and the four years of 2022. Average Daily Active Terminal, DAT, is an important operating metric for EuclidLink as it measures the customer usage trends over each period, which is reflective of our ongoing business environment. In the first quarter of 2022, average daily active terminal were 297,884, of which 2,299 owned by the company and 295,585 owned by our business partner, up 12.2 from 265,595 in the first quarter of 2021. Our EuclidLink 2.0 service accounted for around 62.1 percent of the total DAT during the fourth quarter of 2022. Average daily data usage per terminal was 1.68 gigabytes in December 2022. Total revenue for the fourth quarter of 2022 were $19.6 million, representing an increase of 11.6 percent from $17.6 million in the same period of 2021. Revenue from service in the fourth quarter of 2022 were $12.5 million, an increase of 30.3% from $9.6 million in the same period of 2021. Revenue from service as percentage total revenue was 63.9% during the fourth quarter of 2022. up from 54.8% during the same period of 2021. During the fourth quarter of 2022, Japan contributed approximately 43.7%, mainland China contributed 3%, and other countries and regions contributed 53.3% of total revenue compared to 37.4%, 3.1%, and 59.5% respectively in the same period of 2021. Overall gross margin improved to 51.3% in the fourth quarter of 2022 compared to 31.0% in the same period of 2021. And our gross margin on service increased to 59.4% in the fourth quarter of 2022 compared to 46.1%. in the same period of 2021. Excluding share-based conversations, our total operating expenses decreased to $10.4 million, or 33% of total revenue, in the first quarter of 2022, compared to $10.9 million, or 62% of total revenue, in the same period of 2021. As a result of a more variable business mix, and significantly decreased operating expenses. We report a narrow net loss of $1.1 million in the first quarter of 2022, compared to a net loss of $15.5 million in the same period of 2021. Similarly, adjusted EBITDA improved to $1.6 million during the first quarter of 2022, which compared to negative $5.1 million in the same period of 2021. We were proud to have achieved positive operating cash flow of $5.2 million during the first quarter of 2022, which compared to elective $3.2 million during the same period of 2021. Moving to 2022 financial results, total revenue for 2022 were 71.4 million U.S. dollars compared to 73.8 million U.S. dollars in 2021. The decrease was primarily due to decreases sales of certain terminals and data-related products, partially offset by an increase in international and local data connectivity service. Revenue from service for 2022 were 46.2 million U.S. dollars an increase of 22.3 percent from 37.8 million for 2021. Revenue from service as a percentage of total revenue was 64.7 percent during 2022, up from 31.2 percent during 2021. In 2022, revenue from international data connectivity service were 28.1 and the local data connectivity service were $7.4 million, increasing by 29.6 percent and 35.5 percent, respectively, year over year. This increase in revenue for data connectivity service was mainly attributable to the gradual recovery of international travel and the continuous development of our local data connectivity service. Overall growth margins improved to 45.5% in 2022 compared to 29.6% in 2021. And our service growth margin increased to 56% in 2022 compared to 43% in 2021. The increase of service gross margin during 2022 was primarily attributable to a more favorable business mix, with a larger proportion of revenue coming from international data connectivity service, which tend to have higher gross margins. During 2022, we streamlined our business operations, which led to significant reduced operating expenses, including share basis compensation, total operating expenses increased to $34.4 million or 48% of total revenue in 2022 compared to $47.1 million or 64% of total revenue in 2021. In 2022, we significantly lowered late loss, which was $19.9 million compared to $46 million in 2021. Adjust EBITDA LIRO to a negative 2.3 million US dollars during 2022 compared to negative 22.6 million US dollars in 2021. During 2022, our CAPEX was 0.4 million US dollars compared to 0.9 million US dollars in 2021. For the full year 2022, we achieved positive operating cash flow of 4.4 million US dollars compared to negative 21.7 million US dollars during 2021. Move on to balance sheet items. Our cash and cash equivalents and short-term deposits increased to 15.1 million US dollars at December 31st, 2022, compared to 8.1 million US dollars at December 31st, 2021. We're pleased to have the company financial position over the course of 2022 and are well positioned to continue growing our business in near term. With that operator, let's open it up for Q&A.
spk08: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then 2. Once again, that was star then 1 to ask a question. And at this time, we will pause momentarily to assemble the roster. And our first question will come from Theodore O'Neill of Litchfield Hills Research. Please go ahead.
spk01: Thank you very much. My first question is about the gross profit. You're showing improvement year-over-year and sequentially in gross profit margin, and I was wondering if you could give us some insight into why that's improving so nicely here.
spk09: Yeah, thank you, Phil. Yes, this image, it gives more colors on the improvement of gross profit, gross margins. Generally, the improvements came from service mixture as we disclosed in the statement and we have more international connectivity service in our total service portion and the international connectivity service have a higher gross margins than local connective service. And also, in our service mix, we have significant portions of past source revenue. So this is the highest gross margin as well. And also, we have, in the past years, we have put offers on research and developments. to control this data consumption usage. And also we put the controls on commercial side and keep this commercial pricing on some stable levels. So that's the whole year that give us improving gross margins compared with the year 2021. And the service gross margins is coming back to the history, the whole year's levels, 2019. And the service gross margins has picked up to 59 percent overall in the whole years. We expect this trend for this higher gross margins for service, we will keep this trend in this year, 2023, as we expect the revenue portions from the international connectivity service will increase materially. We have this same trend compared with last year as well.
spk01: Thank you. And my next question is about the balance sheet. you're showing a year-over-year large decline in accounts receivable. Can you explain what's going on there?
spk09: Yeah, that's correct, yes. In 2022, we put significant efforts on cash collections from account receivable from the current year's And also we put efforts on the agents' account receivables backward from the year 2021's sales. So these account receivables, the balance account receivables decrease in significance because we put quite a lot of efforts on cash collection from the customer side. And we will also keep the same efforts on selling and to collect cash quickly from the customers' side as well. And I think we have a good customer pool from the Japanese market, from the U.S. market as well. So the cash collection cycles is very important for us to have a quick cash inflow to support our operations and the business growth. Thank you.
spk01: Thank you very much.
spk02: The next question comes from Vivian Zhang of Diamond Research. Please go ahead.
spk06: Good morning. This is Vivian Zhang from Diamond Equity. Thanks for taking my question and congrats on achievement you made last year. So my first question is that China lifted its zero COVID policy and pandemic travel restrictions in December last year. It's expected that international travel will further recover and rebound as well. So how do you think this will affect your company's business and revenue in 2023 and beyond.
spk11: I'm Chao-Hui Chen, CEO of uCloud Link. So we can see the whole world, including China, to open the border. So we can see a smaller rebound from the Chinese to a Chinese New Year. But I think the fourth wave of rebound from the COVID-19, I think will be the Labor Day in May 1st. This May 1st, we have the fourth wave of rebounds from COVID-19. So the whole years, we think, in China, because every recovery needs some period, including the passport, visa, everything is ready. We believe that this year, maybe, in China, only around 40% recovery. And the next year, year 2014, I think full recovery of China will happen. So this year around 40 percent. So that's our forecast based on this and our year 2023 forecast is based on this assumption. And we believe maybe the things will go better. So if things go better, we will get better results. So that's from China. And Southeast Asia, like Japan and Korea, they are not open as early as, like, in Europe, in the United States. But I think this year, major from East Asia and China, we get at least 40%, 50% recovery. And this year, we are fully recovered. That's our expectation.
spk06: Okay. Thank you, Mr. Chen. My next question will be about the products. Are there any products the company plans to launch or update in 2023? If so, can you briefly introduce them?
spk11: Yes. So we have, even last year, we faced a challenging year for our R&D field, heavy investment in the R&D side. So you can see these years, We will not only launch the 5G product that's leading in industry. Currently, almost it's the only one product can nominate all the 5G network in the world. This will be our leading position for commercial business travel. So we believe that's the best connection experience for international market. That's one side. Another side, we will in near term, We will, in next month, we will launch a world's smallest product, just smallest creative product. So we call it TechFly. So this will be launched in near term. So that's another creative product. It's very, it's smaller than just a credit card. So it's very, it's smallest in the world. So that's another creative product. It's easy for carrying for the international and the local, you know, improvement for the network and roaming. Also, we have some other new product for mobile broadband and fixed broadband convergence product and the 5G and the CPE and the HiCat CPE. This will get another, you know, more reliable network for fixed and mobile convergence. we will launch, you know, one app, you know, marketplace 1.0 solution, marketplace our app for 1.0 app. And this app will launch in near term also. Then we can meet the different requirement of the user for learning, not only just for cloud theme, e-theme, So we can meet almost various, all kinds of customer needs for travelers. So then we can attract more customers and provide more, you know, attach more customers catalog and segment. So this will increase our customer appointment and also our influence for the long-term solution. That's another, you know, new product we will launch. That's for software and hardware as well. So basically, also we have some other new product we'll launch at the end of the year. So that's a near-term I can show to you for the product we'll launch in the year 2023. Yeah, by the way, so for the IoT, we also, yeah, IoT side, we have a lot of new products launched, like, you know, IP Camera. like an industrial rotor, and also more product embed into like a power supply, like a solar power system, et cetera. The more and more IoT-themed product will embed our cloud-themed solution, which can provide the better coverage and reliable network connection. You save the cost and save the main cost and also launch cost and also the maintenance cost. That's our advantage. And also can enhance the reliability of the IoT network. So that's some, indeed that's quite a lot of, you know, the new solution, especially our marketplace. And we have, again, you know, some software, you know, launched in these years.
spk06: Okay, got it. Thank you. Thank you for detailed information. Just make sure these products and hardware updates will be launched to global markets, right? Not just some certain markets like Japan or USA or something, right?
spk11: Yeah. So, yeah, I think, yeah, by the way, our technology will be more recognition by Chinese governments. So, and also by more application like in Japan market, I think more and more users and partners, they recognize our technology for IoT, for this new product. We believe we can get, I think, you know, more wider, you know, and the growth of year 2023.
spk00: Okay, I think that helps.
spk09: Go ahead. Yeah, you asked a question as to whether the new product will will launch to the global market. Yes, it will launch to global markets. But it will deliver to the Japanese market and U.S. market as well. So that's a target for the global market.
spk06: Okay, okay. Thank you. That helps. So that's all my questions. That's all. Thank you.
spk08: This concludes our question and answer session. I would like to turn the conference back over to Jillian Zhang for any closing remarks.
spk07: Thank you once again for joining us today. If you have further questions, please feel free to contact Euclid Link Investor Relations through the contact information provided on our website or contact our investor relations firm, the APT Group. We look forward to speaking to you again on our next quarterly call. Thank you.
spk04: Thank you.
spk08: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
spk05: Thank you. Thank you.
spk03: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. you you Thank you. you Thank you.
spk08: Good morning and welcome to the uCloud Link Group Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press store then two. Please note this event is being recorded. I would now like to turn the conference over to Jillian Zhang of Investor Relations. Please go ahead.
spk07: Thanks, everyone, for joining us on our first quarter and full year 2022 earnings call today. The earliest release is now available on our IR website at ir.euclolink.com, as well as our Newswire service. I will give a brief introduction to our Euclolink management team. Ji Pingpeng is our co-founder and chairman of board of directors. Chao Huichen is our co-founder, director, and chief executive officer. Yi Mengshi is our chief financial officer. Zhu Tan is our Vance President of Marketing and Sales. Our CEO, Chao-Hui Chen, will begin with an overview of the company's recent business highlights and EuclidLink's 2023 business outlook, which will cover the earnings presentation posted on our IR website. Our CFO, Yi-Meng Xu, will then discuss company's operation highlights and financial results. Before we proceed, please note that this court may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown ways uncertain 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 the forward-looking statement. All forward-looking statements are expressly qualified in their entity by the contrary risk factors, and the 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, chance in ruptured conditions, or otherwise, except as required by law. Please also know that EuclidLink's earning press release And this conference call includes discussions of the non-audited gap financial information as well as non-audited non-gap measures. Euclid Link's press release contains a reconciliation of non-audited non-gap measures to the non-audited most directly comparable gap measures. I will now turn the call over to our co-founder and CEO. Mr. Cha-Hui Chen, please go ahead.
spk11: Thank you. and good morning everyone. Thank you for joining us on our year-end 2022 earnings call today. We appreciate everyone's time. Year 2022 was truly a pivotal year for uCloudLink, characterized by achieving great success and overcoming tremendous challenges. we are pleased to have achieved positive operating cash flow of US dollar 4.4 million for the year and December 31st, 2022, a significant milestone for our company, as this is the first time we have done since the COVID-19 pandemic. Having overcome the difficulties we face during the COVID-19 pandemic and working to strengthen the diversity of our business, as well as increasing its resilience with new growth opportunities. We are excited about the company's long-term growth prospects and believe we are well positioned to be an industry leader. U-Clouding 1.0 is our international data connectivity services business, which tends to be a higher margin lines of business and the one which we believe will continue to be a key growth driver for the company. During the first quarter of year 2022, uCloud in 1.0 business revenues increased 48.2% year over year to US dollar, 7.7 million. For 2022, Ukraine 1.0 business revenues increased 29.6% year-over-year to U.S. dollar 28.1 million. This improvement is a reflection of international travelers recovering across our major markets over the course of the year. This was accompanied by an increase in average daily active terminals for uClouding 1.0 business during the fourth quarter and four years in 2022. Average daily active terminal increased 20.5% year-over-year in 2022. In 2022, we have become a leading 5G non-means solution provider in the wireless network industry and have continued to provide reliable and high quality international data connectivity services in more than 140 countries, enabling single operator entry point to access more than 300 global mobile network operators available networks. uClouding 2.0 is our local data connectivity services business, which has been a significant driver of revenue growth since the year 2020. Over the past two years, we have continued to strengthen our presence in markets like Japan, North America, Southeast Asia, where we have helped operators and business partners improve their data connectivity services and resolve data connection problems. through our PaaS and SaaS platform based on our patent technology, including CloudSync and HyperCon technology solutions. Our uClouding 2.0 business reported US$7.4 million in revenues, up 55.5% in year 2022, from US$4.7 million in year 2021. On the Internet of Things IoT side, our customers were able to realize reduced operating costs and improve data connectivity experience through these cutting-edge IoT solutions, and we continue to explore opportunities where we can broaden the applications of our technologies for partners with IoT needs. covering application scenarios like Wi-Fi loader, IP camera, and electric vehicles. We continue working to close our uCloud in 1.0 business, strengthening our leading global position in the international data long-term solutions market since the beginning of the year 2023. We have observed an accelerated recovery in international travel. The United Nations World Travel Organization expects 2023 international tourist arrival number will recover about 80 to 95 percent of pre-pandemic levels, which presents a significant opportunity for us. away from the zero-COVID-19 policy and the subsequent opening of the national borders, we act quickly to establish provided data solution coverage at many of our partner airports, airlines, and travel agents, allowing us to meet the recovering demand for UCLOUDIN 1.0 long-main business in China, Malaysia, and Singapore. We believe that improving macro environment represents a greater upside for uClouding 1.0 business in year 2023, and we will continue strengthening our leading position as a 5G domain solution provider and launch uClouding 1.0 products and solutions, such as the eSIM solutions to satisfy the various needs of our customers and users in multi-industries. For the uCloud in 2.0 business, we have gained more industry recognition and have continued to expand our PaaS and SaaS platform ecosystem, while continuing to establish a nature customer relationship for the uCloud in 2.0 business in existing key markets like Japan and North America. We have gotten more industry recognition in China, which is expected to accelerate new cloud 2.0 business growth. In January 2023, our wireless marketing network Intelligent Connection Engineering Technology Research Center was approved as one of the Guangdong Province Engineering Technology Research Center by the Department of Science and Technology of Guangdong Province. We believe this recognition serves as a testament to our continued technology advancement in mobile and data connectivity technologies and brings a new momentum for uClouding to expand our presence in the mainland China market and beyond. In the IoT side, the company continues to serve existing partners with our superior, more reliable mobile network solutions, while proactively exploring opportunities in new industries and new application scenarios, including augmented reality AR and virtual reality VR, electric vehicles, et cetera. We expect to make a breakthrough in Japan market where we have a strong presence, helping business partners to further improve their data connectivity experience in the IoT field. We remain on track in a long-term development of our PaaS and SaaS platform ecosystem. which we believe is key to the success of our mobile data sharing marketplace. With that, I would like to touch on uCloud Link's near-term initiative, uCloud Link 3.0, to initiate a mobile data traffic sharing marketplace application based on our efforts in building a scalable, user-based through our uClouding 1.0 and 2.0 models. This marketplace enables a user's device to connect to any available network anytime and anywhere utilizing the Global Meet app. The Global Meet app is designed to support various application scenarios without a limitation of the device. including top-up and goal Glocom-E terminals, active and goal eSIM, Glocom-E data application-only solution, Glocom-E theme, Glocom-E inside the third-party device, mobile Wi-Fi rental, et cetera. Backed by our cloud theme, Hypercom and Web 2.0 technologies, we aim to build a data traffic marketplace for operators, customers and users where data traffic can be shared simply and efficiently via day-to-day market behavior. Once this marketplace application launches in the near future, we expect to continue to make investments into optimizing the system on an ongoing basis, incorporating more state-of-the-art technologies such as blockchain technology. We are committed to continuous development of innovative solutions and plan to expand our cloud and technology solutions to various application scenarios, including media, video conference, outdoor live broadcasting, et cetera. innovative clouding and hyper-power technology solutions, we expect to launch more innovative products catering to the needs of a diverse set of enterprise and individual customers in year 2023. One of which is the one-step data connectivity solutions application I mentioned earlier, on various smart hardware supporting various types of things. Finally, I will briefly discuss guidance for year 2023. For 2023, we expected total revenues of between U.S. dollar 85 million and U.S. hundred million U.S. dollar representing an increase of 90 percent to 40.1 percent compared to year 2022. We expect to build a more solid financial and operational position to feel better results in the future. We are pleased with our achievements in 2022 and I would like to extend a heartfelt thank you to all the uClouding team members for their efforts and delegations to strengthening our company. We feel confident in the opportunities and challenges ahead of us in 2023. leveraging our portfolio of advanced technology offerings and more mature commercial experience and look forward to continuing to serve our customers and partners throughout our global market. uClouding remains focused on scaling our user base and constantly improving the technology. and business operation model to build a mobile data traffic sharing marketplace, which will fuel the company's long-term growth. I will now turn the call over to our CFO, Yi-Meng Shi.
spk09: Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the fourth quarter and full year of 2022. Average Daily Active Terminal, DAT, is an important operating matrix for EuclidLink as it measures the customer usage trends over each period, which is reflective of our ongoing business environment. In the fourth quarter of 2022, average daily active terminal were 297,884, of which 2,299 owned by the company and 295,585 owned by our business partner, up 12.2 from 265,595 in the first quarter of 2021. Our EuclidLink 2.0 service accounted for around 62.1 percent of the total DAT during the fourth quarter of 2022. Average daily data usage per terminal was 1.68 gigabytes in December 2022. Total revenue for the fourth quarter of 2022 were $19.6 million, representing an increase of 11.6 percent from $17.6 million in the same period of 2021. Revenue from surveys in the first quarter of 2022 were $12.5 million, an increase of 30.3% from $9.6 million in the same period of 2021. Revenue from surveys as percentage total revenue was 63.9% during the first quarter of 2022. up from 54.8 percent during the same period of 2021. During the fourth quarter of 2022, Japan contributed approximately 43.7 percent, mainland China contributed 3 percent, and other countries and regions contributed 53.3 percent of total revenue compared to 37.4 percent, 3.1 percent, and 59.5%, respectively, in the same period of 2021. Overall gross margin improved to 51.3% in the fourth quarter of 2022, compared to 31.0% in the same period of 2021. And our gross margin on service increased to 59.4% in the fourth quarter of 2022, compared to 46.1%. in the same period of 2021. Excluding share-based conversations, our total operating expenses decreased to $10.4 million, or 33% of total revenue, in the first quarter of 2022, compared to $10.9 million, or 62% of total revenue, in the same period of 2021. As a result of a more variable business mix, and significantly decreased operating expenses. We report a narrow net loss of $1.1 million in the first quarter of 2022, compared to a net loss of $15.5 million in the same period of 2021. Similarly, adjusted EBITDA improved to $1.6 million during the first quarter of 2022, which compared to negative $5.1 million in the same period of 2021. We were proud to have achieved positive operating cash flow of $5.2 million during the fourth quarter of 2022, which compared to elective $3.2 million during the same period of 2021. Moving to 2022 financial results, total revenue for 2022 were 71.4 million U.S. dollars compared to 73.8 million U.S. dollars in 2021. The decrease was primarily due to decreases in sales of certain terminals and data-related products, partially offset by an increase in international and local data connectivity service. Revenue from service for 2022 were 46.2 million U.S. dollars an increase of 22.3 percent from 37.8 million for 2021. Revenue from service as a percentage of total revenue was 64.7 percent during 2022, up from 31.2 percent during 2021. In 2022, revenue from international data connectivity service was 28.1 and the local data connectivity service was $7.4 million, increasing by 29.6 percent and 35.5 percent, respectively, year over year. This increase in revenue for data connectivity service was mainly attributable to the gradual recovery of international travel and the continuous development of our local data connectivity service. Overall growth margins improved to 45.5% in 2022 compared to 29.6% in 2021. And our service growth margin increased to 56% in 2022 compared to 43% in 2021. The increase of service gross margin during 2022 was primarily attributable to a more favorable business mix, with a larger proportion of revenue coming from international data connectivity service, which tend to have higher gross margins. During 2022, we streamlined our business operations, which led to significant reduced operating expenses, including share basis compensation, total operating expenses increased to $34.4 million or 48% of total revenue in 2022 compared to $47.1 million or 64% of total revenue in 2021. In 2022, we significantly lowered late loss, which was $19.9 million compared to $46 million in 2021. Adjust EBITDA LIRO to a negative 2.3 million US dollars during 2022 compared to negative 22.6 million US dollars in 2021. During 2022, our CAPEX was 0.4 million US dollars compared to 0.9 million US dollars in 2021. For the full year 2022, we achieved positive operating cash flow of 4.4 million US dollars compared to negative 21.7 million U.S. dollars during 2021. Move on to balance sheet items. Our cash and cash equivalents and short-term deposits increased to 15.1 million U.S. dollars at December 31, 2022, compared to 8.1 million U.S. dollars at December 31, 2021. We're pleased to have the company financial position over the course of 2022 and are well positioned to continue growing our business in near term. With that operator, let's open it up for Q&A.
spk08: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, press star then 2. Once again, that was star then 1 to ask a question. And at this time, we will pause momentarily to assemble the roster. And our first question will come from Theodore O'Neill of Litchfield Hills Research. Please go ahead.
spk01: Thank you very much. My first question is about the gross profit. You're showing improvement year-over-year and sequentially in gross profit margin, and I was wondering if you could give us some insight into why that's improving so nicely here.
spk09: Yeah, thank you, Phil. Yes, this image gives more colors on the improvement of gross profit, gross margins. Generally the improvements came from service mixture as we disclosed in the statement and we have more international connectivity service in our total service portion and the international connectivity service have a higher gross margins than local service. And also, in our service mix, we have significant portions of past source revenue. So this is the highest gross margin as well. And also, we have in the past years, we have put offers on research and developments. to control this data consumption usage. And also we put the controls on commercial side and keep this commercial pricing on some stable levels. So that's the whole year that give us improvements cross-margin compared with the year 2021. And the service gross margins is coming back to the history, the whole year's levels, 2019. And the service gross margins has picked up to 59 percent overall in the whole years. We expect this trend for this higher gross margins for service, we will keep this trend in this year, 2023, as we expect the revenue portions from the International Connectivity Service will increase materially. We have this same trend compared with last year as well.
spk01: Thank you. And my next question is about the balance sheet. you're showing a year-over-year large decline in accounts receivable. Can you explain what's going on there?
spk09: Yeah, that's correct, yes. In 2022, we put significant efforts on cash collections from account receivable from the current year's And also we put efforts on the agents' account receivables backward from the year 2021's sales. So these account receivables, the balance account receivables decrease in significance because we put quite a lot of efforts on cash collection from the customer side. And we will also keep the same efforts on selling and to collect cash quickly from the customer's side as well. And I think we have good customer pools from the Japanese market, from the U.S. market as well. So the cash collection cycles is very important for us to have a quick cash inflow to support our operations and the business growth. Thank you.
spk10: Thank you very much.
spk02: The next question comes from Vivian Zhang of Diamond Research. Please go ahead.
spk06: Good morning. This is Vivian Zhang from Diamond Equity. Thanks for taking my question and congrats on the achievement you made last year. So my first question is that China lifted its zero COVID policy and pandemic travel restrictions in December last year. It's expected that international travel will further recover and rebound as well. So how do you think this will affect your company's business and revenue in 2023 and beyond.
spk11: I'm Cao Huichen, CEO of UCloud Link. So we can see the whole world, including China, you know, to open the border. So we can see a smaller rebound from the Chinese to a Chinese New Year. But I think the fourth wave of rebound from COVID-19 I think will be the Labor Day in May 1st. This May 1st we have the fourth wave of rebounds from COVID-19. So the whole years, we think, in China, because every recovery needs some period, including the passport, visa, everything is ready. We believe that this year, maybe, in China, only around 40% recovery. And the next year, year 2014, I think full recovery of China will happen. So this year around 40 percent. So that's our forecast based on this and our year 2023 forecast is based on this assumption. And we believe maybe things will go better. So if things go better, we will get better results. So that's from China. And Southeast Asia, like Japan and Korea, they are not open as early as, like, in Europe, in the United States. But I think this year major from East Asia and China will get at least 40 to 50 percent recovery. And this year we are fully recovering. That's our expectation.
spk06: Okay. Thank you, Mr. Chen. My next question will be about the products. Are there any products the company plans to launch or update in 2023? If so, can you briefly introduce them?
spk11: Yes. So we have, even last year, we faced challenging years for our R&D field, heavy investment in the R&D side. So you can see these years, We will not only launch the 5G product that's leading in industry. Currently, almost it's the only one product can nominate all the 5G network in the world. This will be our leading position for commercial business travel. So we believe that's the best connection experience for international market. That's one side. Another side, we will in near term In next month we will launch a world's smallest creative product. So we call it TechFly. So this will be launched in the near term. So that's another creative product. It's smaller than just a credit card. So it's the smallest in the world. So that's another creative product. It's easy for carrying for the international and the local, you know, improvement for the network and roaming. Also, we have some other new product for mobile broadband and fixed broadband convergence product and the 5G and the CPE and the HiCat CPE. This will get another, you know, more reliable network for fixed and mobile convergence. we will launch, you know, one app, you know, marketplace 1.0 solution, marketplace our app for 1.0 app. And this app will launch in near term also. Then we can meet the different requirement of the user for lonely, not only just for cloud theme, e-theme. So also we find So we can meet almost all kinds of customer needs for travelers. So then we can attract more customers and attach more customers catalog and segment. So this will increase our customer appointment and also our influence for the long-meet solution. That's another new product we will launch. That's for software and hardware as well. So basically, also we have some other new product we'll launch at the end of the year. So that's a near-term I can show to you for the product we'll launch in the year 2023. Yeah, by the way, so for the IoT, we also, yeah, IoT side, we have a lot of new products launched, like IP Camera. like an industrial rotor, and also more product embed into like a power supply, like a solar power system, etc. Then more and more IoT-themed products will embed our cloud-themed solution, which can provide the better coverage and reliable network connection. save the calls and save the main calls and also launch calls and also the maintenance calls. That's our advantage. And also can enhance the reliability of the IoT network. So that's some, indeed that's quite a lot of, you know, the new solution. Especially our marketplace, we gained, you know, some software, you know, launch in these years.
spk06: Okay, got it. Thank you. Thank you for detailed information. Just make sure these products and hardware updates will be launched to global markets, right? Not just some certain markets like Japan or USA or something, right?
spk11: Yeah. So, yeah. By the way, our technology will be more recognized by the Chinese government. So, and also by more application like in Japan market, I think more and more user and partner recognition our technology for IoT, for this new product. We believe we can get, I think, you know, more wider, you know, and the growth of year 2023. Okay, I think that helps.
spk00: Go ahead.
spk09: Yeah, you asked a question as to whether the new product will will launch to the global market. Yes, it will launch to the global market. But it will deliver to the Japanese market and U.S. market as well. So that's a target for the global market.
spk06: Okay, okay. Thank you. That helps. So that's all my questions. That's all. Thank you.
spk08: This concludes our question and answer session. I would like to turn the conference back over to Jillian Zhang for any closing remarks.
spk07: Thank you once again for joining us today. If you have further questions, please feel free to contact Euclid Link Investor Relations through the contact information provided on our website or contact our investor relations firm, the AFT Group. We look forward to speaking to you again on our next quarterly call. Thank you.
spk04: Thank you.
spk08: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
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