uCloudlink Group Inc.

Good day and welcome to the uCloud Link second quarter 2025 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 star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Daniel Gao. Please go ahead, sir.

Hello, everyone, and thank you for joining us on Euclid's second quarter 2025 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir.yokely.com. Joining me on today's call are Mr. Zhi Ping Peng, co-founder and chairman of the board of directors, Mr. Chao Hui Chen, co-founder and director and chief executive officer, and Mr. Yi Mengshi, 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 appropriate securities Litigation Reform Act of 1995. These four 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 massively different from the results, performance, or expectations implied by these four looking statements. All four looking statements are expressly qualified in their entity by the quotational statement's risk factors and the details of the component's feelings with the SEC. The component does not assume any obligation to reverse or update any four looking statements. As a result of new information, future events change in market conditions or otherwise, except as required by law. Please also note that Euclid's earnings press release and this conference call include discussions of un-audited GAP financial information and un-audited non-GAP financial methods. Euclid's press release contains a reconciliation of the un-audited non-GAP methods to their most directly comparable undoubted GAP measures. I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel, and good morning or evening, everyone. We are accelerating three transformative growth lines. GoCommune Live, lead by Pat Fong, GoCommune Sim, powered by eSIM Trail, and GoCommune IoT. through focused investment in R&D, go-to market capabilities, and brand building to drive sustainable market expansion, while simultaneously strengthening our legacy global mobile broadband business line by proactively offsetting tariff impacts through strategy supply chain adjustments. Throughout this expansion, We maintain financial health as our foundation. Ensuring disciplined investments drives sustainable profitability and laying a solid foundation for sustainable long-term value creation. Our global ecosystem continues to gain traction and growth momentum. business remains profitable and continue to generate a stable margin with total revenue of US dollar 19.4 million and net income of US dollar 0.7 million during the quarter. Our 1.0 international data connectivity services business continues to grow with full-speed 5G network coverage across 86 countries and regions. As we continue to consolidate market share, especially in mainland China, and strengthen our leadership position in the global long-term sector, our substantial strategy investments focus on R&D and marketing for our next-generation products to ensure they drive growth and improve our performance once launched. Refinement and testing of these products progressed smoothly with several major distribution partners as we built a robust pipeline and entered a final stage of commercialization. Feedback has been overwhelmingly positive, reflecting how our solutions directly address the market demand and have validated our investment strategies. This has set the stage for the launch of several groundbreaking products in the near future. In this quarter's ending release, we have introduced a new metric, Average Month Active Terminals, MAT. Our three new product lines, Glokomi Lite, Glokomi Thin, and Glokomi IoT, demonstrated remarkable MAT growth of 105.2%, 120.1%, and 789.0% year-over-year, respectively. I will now review highlights for each of our key business lines. I will start with Grow Combi Life business line. The upcoming commercial launch of the platform where we already have over 20 potential strategy partners lined up, and we launched a brand in several countries in the third quarter of year 2005. In Hong Kong, we are collaborating with a premier telecommunications service operator to launch a platform, making a significant expansion in our global market research. and the rollout of a powerful win-win cooperation model. This allows operators to monetize premium subscriptions, acquire high-value pet-owning customers, and diversify their revenue streams through our value-add services. Our technology amplifies their market research and their infrastructure We also make substantial with a leading global online pet retailer to further enhance pet phones' accessibility and market penetration within a short time. Alongside pet phones, our industry serves Unicore Plus and Unicore Plus series, which are highly competitive. innovative, and pioneering products. Integrating seamless connectivity across multiple networks, six-step global positioning, and fast charging capabilities, we are further strengthening our competitive edge in the travel, automotive, and secure networking markets. Commercial application of our Glokomi IoT solutions also continues to gain strong momentum. with user adoption growing over 10 times year-over-year after nearly three years of commercialization efforts. As revenue contribution increased, entering a new phase of accelerated growth. Beyond core connectivity revenue, we are also diversifying monetization through value-added services. We enable China's top manufacturers to accelerate their global expansion through customized IoT connectivity solutions. Strategy partners with more industrial leaders in battery monitoring, desk cams, vehicle infotainment, and the smart security camera sectors are accelerating our expansion into high-growth further consolidating IoT as a key pillar for our business. Turning to our global eSIM business plan, our success is an accident. It is the result of a successful business evolution. We have already sold over 300,000 OTA SIM and eSIM units. Since year 2024, outperforming competitors in these baseline segments, we achieved top-ranking market share in our outbounding travelers of mainland China, traveling to Hong Kong, Macau, Japan, Korea. These operational maturity positions are distinctly from market entrance. Building on this foundation, eSIM Trail represents our second-most advantage realized. While competitors remain focused on the legacy SIM or eSIM technologies, we have advanced to redefine industry standards through this innovation. eSIM Trail has been recognized as a transformative solution. receiving the top NWC Innovation Award from the Slash Guild. Its groundbreaking capabilities generated significant industrial attention at both Mobile World Congress Year 2025 in Barcelona and MVMO's World Congress Year 2005 in Vienna. our comprehensive marketing campaign for Eastern Trier. In a partnership with top media outlets, substantially increase its market visibility and exposure. We are synergistically addressing two critical point for the industry with this product. First, as the ultimate permanent secondary SIM for consumers. It ensures seamless global coverage by dynamically connecting to multiple networks, eliminating the need for costly international looming, and providing users with reliable high-speed connectivity across devices. Secondary, through our carrier insurance, program, we solved a critical pain point for operators, especially Tier 2, Tier 3 mobile network operators and mobile virtual operators by upgrading their network performance and global roaming capabilities without the need for infrastructure investment and funding power. With nearly 1,000 trial units distributed, strong user feedback in carrier partnership programs and the simple car production and the testing with multiple operator schedule for next quarter. We hope to begin large-scale commercial deployment during the third quarter with strong confidence. Lastly, our GoCoMe mobile fixed broadband business line, we pilot launch the upgraded MUGO G40 Pro late in the second quarter, with the supposed speed three times faster than traditional 4G devices, is the world's first enabled in-flight Wi-Fi and connects to Wi-Fi networks across several application scenarios, such as home, airport, office, and cafes. With Mirgo G40 Pro, we are transforming portable connectivity from the international travel-only solution to a true multi-scenario companion with our patented AI hyper-con technologies. Simultaneously, serving users through a single intelligent device and one account regardless of where they are. Furthermore, in the third quarter, we will launch the Mirgo G50 Max with the Sky-to-ground 5G satellite integration and AI-driven network switching, further solidifying our innovative leadership in the mobile space broadband industry. This device enhances network quality through AI power real-time congestion detection and network reselecting. In summary, we are ideally positioned to capitalize our strategy and operation momentum. Despite trade and microeconomic headwinds, we remain committed to executing our strategy R&D and marketing investment for new products. while sustaining a healthy financial performance. These three products from our core business line, Glaucoma Thin, led by Yixing Qiu, Glaucoma Light, ENCO, by Pat Fung, and Glaucoma IoT, have all achieved successful transformation in the second quarter, laying a solid foundation for future growth with the potential to each multi-million of users in the future. Our diversifying product portfolio provides multiple pathways for us to drive growth throughout the remainder of the years as we scale up our user base and build a comprehensive global market data traffic and sharing marketplace. We are confident that we have a right strategy in place to generate sustainable growth in the coming quarters. For the third quarter of year 2025, we expect total revenue to be between U.S. dollar 22.0 million to U.S. dollar 26 million, representing a decrease of 12.7 percent to an increase 3.2 compared the same period of the year 2024. The company currently expects its revenue from the four years of the year 2025 to be the range of US dollar 85 million to US dollar 95 million as compared with a range between US dollar 95 million to US dollar 130 million as previous announced. The company is revising its guidance in light of the recent microeconomic challenges and the global trade headwinds, which have had and may continue to have a broader impact across the industries. Now I will turn the call over to Mr. Si.

Thank you, Mr. Chen. Hello, everyone. I will go over operational and financial highlights for the second quarter of 2025. Average daily active terminal, DAT, and average monthly active terminal, MAT, are important operating metrics for us as it measures customer usage trend over the period and it reflects our business performance. In the second quarter of 2025, Our DATs were 317,957, of which 18,863 owned by the company and 299,094 not owned by the company, representing an increase of 3.8% from 306,289 in the second quarter of 2024. During the second quarter of 2025, 55.7% of DAT were from EuclidLink 1.0 international data connectivity service, and 45.3% were from EuclidLink 2.0 local data connectivity service. In June 2025, the average daily data usage per terminal was 1.59 gigabytes. Average monthly active terminal, MAT, in the second quarter were 663,197, representing an increase of 5.6% from 628,125 in the second quarter of 2024. First average math. in the second quarter of GlobalMe IoT business was 42,095, representing an increase of 791% from 4,725 in the second quarter of 2024. Average MAT in the second quarter from GlobalMe theme business was 42,271, representing an increase of 120.1 percent from 19,208 in the second quarter of 2024. Third, average MAAT in the third quarter from global meat and live burners was 2,633, representing an increase of 105.2 percent from two hundred eighty-three in the second quarter of two hundred twenty-four. Fourth, average MAT in the second quarter from Bologna Bee mobile fixed broadband business was five hundred seventy-six thousand and one hundred ninety-eight, representing a decrease of four point four percent from six hundred two thousand and nine hundred nine in the second quarter. quarter of 2024. As of June 30, 2025, the company had 183 patents with 167 approved and 16 pending approved. The proof of SIM card was from 391 mobile led operator globally as of June 30, 2025. Total revenue for the second quarter of 2025 was $19.4 million. representing a decrease of 13.3% from $22.4 million in the same period of 2024. Revenue from service were $14.6 million in the second quarter of 2025, representing an increase of 3.3% from $14.2 million in the same period of 2024. Revenue from service contribute 75.5% of the total revenue during the second quarter of 2025, compared to 63.4% in the same period last year. Geographically speaking, during the second quarter of 2025, Japan contributed 33.6%, Mainland China contributed 33.2%, North America contributed 15.3%, and other countries and regions contributed the remaining 70.9% compared to 46.2%, 23.5%, 14.6%, and 15.7% respectively in same period, 2024. Our gross profit was $10.2 million in the second quarter, 2025, compared to $11 billion in the same period, 2025. Overall gross margin in the second quarter of 2025 further rose to 52.8% from 49.2% in same period, 2024. The gross margin on service was 56.6% in the second quarter of 2025, compared to 60.3% in the same period, 2024. Excluding share-based compensations, total operating expenses were $10.1 million or 59% of the total revenue in the second quarter of 2025 compared to $8.7 million or 39.1% of total revenue in the same period in 2024. Late income in the second quarter of 2025 was $0.7 million compared to $2.2 million in the same period of 2024. Adjusted EBITDA was $1.4 million in the second quarter of 2025, compared to $3.3 million in the same period, 2024. For the second quarter of 2025, we record operating cash outflow of $0.9 million, compared to an operating cash inflow of $4.7 million in the same period of 2024. For the second quarter of 2025, Our capital expenditure was $0.2 million compared to $1.6 million in the same period, 2024. We maintained a solid balance sheet with cash and cash equivalent, $30.2 million as of June 30, 2025, compared to $31.1 million as of March 31, 2025. With operators, let's open up for Q&A.

And here 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. At any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The next question is from Theodore O'Neill, Lickfield Hills Research.

Thank you. My first question is about the GlocalMe ecosystem. You're seeing strong growth in the quarter, and I was wondering how much you expect that to continue in terms of growth?

I put some callers first and then I see the CEO has more comment on that. In this second quarter, we just statements in this ER call, our three new business says IoT business and SIEM business and also live business. These three business have shown strong and rapid growth in terms average monthly active terminal. Using this as a figure here as the IoT business, the MAT increased nearly eight times. year-over-year basis, and it seems MATs grows more than 100 percent compared with the same period last year. The live business in terms of MAT grows 105 percent year-over-year basis. Even the revenue generated from the three new business. are small proportionally, but the growth trend is massive. So we expect the new business IoT theme and life will scale our use basis to a multi-million basis. So that gives us a future strong growth potential to 10 million use basis. in the next couple of years.

Yeah, I'm Jeff. I have some more comments about this. Because we put a lot on the resource and the branding and marketing, so investment in these three new products, we already have nearly more than one year. For IoT, we already invested here for three years. So we can see IoT part. So it's now go to a new stage because we already finished the testing period with the major leader in the industry for IoT. So now it's starting to launch the product. So we can see the faster growth from revenue side and the MIT side. Because you can see some, for example, like the major matter, maybe every month just a So MIT can more reflect the IoT growth. So we can see now it's on the right track and we believe the trend of every month we can see the data is fast growing. So we believe IoT will be the fourth one to make a positive profit after three years investment. That's the first. And second, from a sim card. We already sold a sim card for 300 pieces. So we get the experience. We know how to play the game in this industry. So in some travel land, for example, like China, travel to Hong Kong, travel to Macau, travel to Japan, we already go to the tier one sector in this SIM card service in China. So now we are more confident because we have new product for Eastern Trail, this innovative super SIM card come up. And we just launched end of June. So I think we do the promotion for the leaf advertisement, so it gets a very fast growth as well. So finally, you can see our Brocon V9 product. Currently, the smaller revenue, we start to launch our Glocomy live product end of last year. So it's for cable. It's our Unicore. It's a fourth product and a long plug. And in the second quarter, end of second quarter, we have new and a second generation of the live product come out, like Unicore Plus, like this new Unicore Pro. This new product come out. It's more stronger capability, more high performance. It will be with more market share. But more important, I just emphasize here is our platform product. I think we already finished many trials. And also we try to improve our product better and better. We keep in our R&D and we just let our product to reach our requirement. So that's why we delay the launch of the commercial launch. Our preview is a launch, we supposed to launch in the second quarter, but now we postponed to August. As middle of this August, we will launch the global widely of our platform. I think currently the feedback and the try is very positive for our new version. So we believe this will lead fast growth and up our heavy investing in the branding and the marketing. I just give a brief about our three new product line growth. Although we have some impact from the tariff, as I mentioned, for tariff impact for our traditional product, but I think we can see the fast growth for new product.

Thank you very much. My next and my last question is about... sales of products were below expectations, and I was wondering if you could give us some more detail on that. Was that tariff related? Is it particular geographies?

Yeah, as discussed, there's only for the second quarters. There's a quarter of revenues is achieved below the guidance. The main reason for this low revenue achievement is the legacy of mobile broadband business. The order from Japan was delayed. It was a couple of million U.S. dollars. This order will be placed in this quarter, the third quarter. This is the main reason for the second quarter's revenues to be below the guidance. The second reason is microeconomics and trade headwinds. Our sales on the U.S. market have not reached the expectations. So the major geography reasons is that Japan's markets delay orders. The second is the trade headwinds. So that's a little bit impact our sales in U.S. market.

Thank you very much.

Next question is from Vivian Zhang, Diamond Equity Research.

Hello and good morning and evening everyone. Thank you for taking my questions. So my question is regarding the company's upcoming products such as the platform. Do you think this upcoming product will be affected by the industry headwinds and result in lower than expected sales?

Because this new product, I think it's a new concept, a new innovation in the industry. So we already have hundreds of pieces already commercial trial. All the feedback is very positive. Also, we adopt some consumer's opinion that this product is better and more competitive in the industry. So because it's a new product, a new concept, From currently, we can see the feedback from the users, feedback from investment, feedback from our channel, feedback from the mobile operator, all is very positive, very, all believe this product will be very successful, and that's why we are now having, we are very confident we will have, we already have invested in our design, and also the way we are more, invest in the branding. So you can see from this month, we start to launch a product. So in Hong Kong, U.S., and with this big channel, and we have 10 countries in our plan, country by country, with our local big channel partner, we start to launch this product. But we haven't placed a big forecast in our plan. because I believe this is from the concept to the bigger volume, need two or three quarters. That's our current believing. So the product, we haven't placed a big order here. But we believe in the future, this will bring us very successful product. We believe so, and our partner also believes so.

Okay, I see. Thank you for answering my question. That's all my questions. Thank you.

This concludes our Q&A session. I would like to turn the conference back to Mr. Gao for any closing remarks.

Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact your client's investor relations through the contact information provided on our website or speak to our investor relations form, Chris Simpson Adversary. We look forward to speaking to you all again on our next quarterly call. Thank you.

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